Extreme CCTV Inc.
TSX : EXC

Extreme CCTV Inc.

December 14, 2006 07:00 ET

Extreme CCTV Reports Fiscal 2006 Results

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Dec. 14, 2006) - Extreme CCTV Inc. ("Extreme" or "the Company") (TSX:EXC), a global leader in active-infrared night vision surveillance equipment, today reported record revenues and a 68% increase in earnings for its fiscal year ended September 30, 2006.

For the fourth quarter, the Company achieved record quarterly revenues of $8.8 million, a 35% increase from $6.5 million for the same period last year. Extreme reported increased net income of $596,000, or $0.04 per share, compared to $434,000, or $0.03 per share last year.

"We continue to improve our operations, and deliver healthy gross margins and a strong balance sheet," stated Jack Gin, President and CEO of Extreme. "Fiscal 2006 was Extreme's seventh consecutive year of growth and profitability."

For the year ended September 30, 2006, revenues increased 13% to $27.0 million, as compared to $23.9 million in the prior year, and net income increased 68% to $1.8 million, or $0.11 per share, as compared to net income of $1.1 million, or $0.07 per share in fiscal 2005.

The increase in revenues was the result of organic growth and the Company's acquisition of Forward Vision, effective July 31, 2006. The acquisition of Forward Vision contributed $2.2 million in sales in the fourth quarter and the year, due in part to the shipment of the largest order in Forward Vision's history.

Extreme has continued to deliver revenue growth in spite of the negative impact of the Canadian dollar relative to the US dollar and UK pound, in which a predominant portion of the Company's sales is denominated. Fiscal 2006 revenues would have been approximately $2.2 million higher had the fiscal 2005 foreign exchange rates prevailed in fiscal 2006.

Gross margins for fiscal 2006 increased to 49.3%, from 48.2%, despite the strengthening of the Canadian dollar. The strong gross margins were achieved through a combination of pricing and cost strategies, including improved productivity and product management. Gross margin was, however, impacted in the fourth quarter by a reassessment for customs duties and inventory write-downs at Derwent in the UK, together totaling $395,000. This reduced gross margin to 45.6% for the fourth quarter, compared to 49.2% in fourth quarter of the prior year.

Sales and marketing expenses increased to $4.8 million in fiscal 2006 from $4.3 million in 2005 due to additional salaries and benefits and increased tradeshow and marketing activity. General and administrative expenses increased $457,000 but remained constant relative to sales. Research and development increased by $199,000 to $1.4 million. The acquisition of Forward Vision added $542,000 to additional expenses and $438,000 to net income in the fourth quarter and for the year.

The Company's cash position at September 30, 2006 was $5.1 million compared to $ 7.3 million at September 30, 2005, with the decrease resulting primarily from cash paid out on closing the Forward Vision acquisition. Working capital decreased to $7.7 million from $11.1 million at the end of the prior year, the decrease resulting primarily from issuance of notes payable on closing of the Forward Vision acquisition.

During the fourth quarter, Extreme completed the acquisition of Forward Vision, a leading UK provider of high performance pan-tilt-zoom cameras. The consideration paid on closing was $8.5 million with additional contingent share consideration, represented by 921,600 shares of Extreme, being payable upon the completion of certain milestones. In addition to acquiring Forward Vision's brand and technology portfolio, the Company has also gained a dedicated staff and their wealth of CCTV knowledge and experience. Management believes that the Forward Vision products and technology will be attractive to many of Extreme's existing customers and Extreme will also leverage Forward Vision's customer base.

During fiscal 2006, Obzerv Technologies Inc. was awarded a three-unit contract for its ARGC2400 active imager for use at key strategic locations in an undisclosed country in Asia. Obzerv's active-imaging technology was chosen over thermal imaging technology to achieve detailed identification of ships at long ranges beyond ten kilometers. Unlike thermal imaging devices which sense heat differentials, the ARGC2400, a ruggedized version of the ATV2000i, illuminates through darkness and airborne obscurities to capture irrefutable images, including those of identifying markings and lettering.

Research and product development remained a strategic priority at Extreme in fiscal 2006 and continues into fiscal 2007. The Company's engineering teams in Canada and the United Kingdom completed the introduction of new products during the year, including the GVS1000, a long range day-nite surveillance system. In addition, Extreme was awarded a United States patent for its original REG license plate capture camera. The Company is also integrating other technologies such as radar and thermal sensing to operate with its core products. Additional patent applications have recently been filed and new product developments are planned for release in 2007.

Conference Call

A conference call to review the results will take place on December 14, 2006 at 2:00pm EDT (11:00am PDT). Jack Gin, President & CEO and Jonathan Jackson, Chief Financial Officer, will speak on behalf of the Company. A question-and-answer forum will follow a review of the financial results and an update on the Company's growth strategies and progress within its target markets.

To participate, please dial 416-695-5259, or toll-free 1-877-888-3490, approximately 10 minutes before the conference call. A live Webcast of this conference call will also be available on the Extreme CCTV Website at http://www.extremecctv.com. The Webcast will be archived there for later reviewing.

A recording of the conference call will also be available through December 21, 2006. If you wish to listen to the rebroadcast by telephone, please dial 416-695-5275 or 1-888-509-0081 and enter pass code 637066.

Based in Burnaby, British Columbia, Extreme CCTV Inc. (www.ExtremeCCTV.com) specializes in the design, development, and manufacturing of advanced infrared illuminators and precision-engineered video surveillance products. The Company's common shares trade on The Toronto Stock Exchange under the trading symbol "EXC", with approximately 16.3 million outstanding.

Note: Certain of the statements contained in this news release may contain forward-looking statements which involve known and unknown risk, uncertainties and other factors which may cause the actual results, performance or achievements of Extreme, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Extreme does not expect to update forward-looking statements continually as conditions change and you are referred to the full discussion of Extreme's business and the risk factors associated with Extreme's business contained in Extreme's Annual Information Form, filed with the securities regulatory authorities in British Columbia and Alberta.



EXTREME CCTV INC.
Interim Consolidated Statements of Operations and Retained Earnings
(Unaudited)
(CURRENCY IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

---------------------------------------------------------------------------
Three months ended Years ended
September 30 September 30
------------------------------------------------------
2006 2005 2006 2005
------------------------------------------------------
REVENUE $ 8,796 $ 6,517 $ 27,031 $ 23,903
COST OF SALES 4,782 3,312 13,708 12,391
---------------------------------------------------------------------------
GROSS MARGIN 4,014 3,205 13,323 11,512
---------------------------------------------------------------------------
EXPENSES
Sales and marketing 1,416 1,105 4,819 4,311
General and administrative 1,189 1,044 4,148 3,691
Research and development 324 241 1,381 1,182
Amortization of
property, plant and
equipment 151 121 583 466
Amortization of
intangible assets 105 - 105 -
Financing (41) (15) (125) (19)
---------------------------------------------------------------------------
3,144 2,496 10,911 9,631
---------------------------------------------------------------------------
INCOME BEFORE THE FOLLOWING 870 709 2,412 1,881
Equity in loss of
investment (173) (155) (484) (607)
Interest income on
debentures 88 76 328 300
Accretion of
discount on notes
payable (40) - (40) -
---------------------------------------------------------------------------
INCOME BEFORE INCOME
TAXES 745 630 2,216 1,574
---------------------------------------------------------------------------
INCOME TAXES
Current 192 167 571 328
Future (43) 29 (150) 178
---------------------------------------------------------------------------
149 196 421 506
---------------------------------------------------------------------------
NET INCOME $ 596 $ 434 $ 1,795 $ 1,068

RETAINED EARNINGS,
BEGINNING OF PERIOD 7,360 5,727 6,161 5,093

---------------------------------------------------------------------------
RETAINED EARNINGS,
END OF PERIOD $ 7,956 $ 6,161 $ 7,956 $ 6,161
---------------------------------------------------------------------------

BASIC EARNINGS PER
SHARE $ 0.04 $ 0.03 $ 0.11 $ 0.07
---------------------------------------------------------------------------

WEIGHTED AVERAGE
NUMBER OF SHARES
OUTSTANDING, BASIC 16,275,612 16,087,498 16,190,713 15,913,389
---------------------------------------------------------------------------
DILUTED EARNINGS PER
SHARE $ 0.04 $ 0.03 $ 0.11 $ 0.07
---------------------------------------------------------------------------
WEIGHTED AVERAGE
NUMBER OF SHARES
OUTSTANDING, DILUTED 16,695,344 16,593,172 16,654,013 16,396,957
---------------------------------------------------------------------------


EXTREME CCTV INC.
Interim Consolidated Balance Sheets
(Unaudited)
(CURRENCY IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
---------------------------------------------------------------------------
September 30 September 30
2006 2005
---------------------------------

ASSETS
CURRENT
Cash $ 5,084 $ 7,292
Accounts receivable 7,289 4,348
Inventories 5,136 2,776
Prepaid expenses and other 333 199
---------------------------------------------------------------------------
17,842 14,615

INVESTMENT IN OBZERV TECHNOLOGIES INC. 3,772 3,673
PROPERTY, PLANT AND EQUIPMENT 1,508 1,529
INTANGIBLE ASSETS 4,734 -
GOODWILL 3,697 732
FUTURE INCOME TAXES - 60
---------------------------------------------------------------------------
$ 31,553 $ 20,609
---------------------------------------------------------------------------
---------------------------------------------------------------------------

LIABILITIES
CURRENT
Accounts payable and accrued liabilities $ 6,101 $ 3,106
Income taxes payable 996 364
Notes payable - current portion 3,038 -
---------------------------------------------------------------------------
10,135 3,470
NOTES PAYABLE 925 -
FUTURE INCOME TAXES 1,098 -
---------------------------------------------------------------------------
$ 12,158 $ 3,470
---------------------------------------------------------------------------
---------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
SHARE CAPITAL 11,773 11,462
CONTRIBUTED SURPLUS 517 390
CUMULATIVE TRANSLATION ADJUSTMENT (851) (874)
RETAINED EARNINGS 7,956 6,161
---------------------------------------------------------------------------
19,395 17,139
---------------------------------------------------------------------------
$ 31,553 $ 20,609
---------------------------------------------------------------------------
---------------------------------------------------------------------------


EXTREME CCTV INC.
Interim Consolidated Statements of Cash Flows
(Unaudited)
(CURRENCY IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
---------------------------------------------------------------------------
Three months ended Years ended
September 30 September 30
--------------------------------------------
OPERATING ACTIVITIES 2006 2005 2006 2005
--------------------------------------------
Net income $ 596 $ 434 $ 1,795 $ 1,068
Items not affecting cash:
Equity in loss of investment 173 155 484 607
Interest accrued on debenture (88) (76) (328) (300)
Stock based compensation 68 (7) 127 99
Amortization of property,
plant and equipment 151 121 583 466
Amortization of intangible
assets 105 - 105 -
Accretion of discount on
notes payable 40 - 40 -
Future income taxes (43) 27 (150) 178
---------------------------------------------------------------------------
1,002 654 2,656 2,118
Changes in non-cash working
capital 239 794 (470) 1,236
---------------------------------------------------------------------------
1,241 1,448 2,186 3,354
---------------------------------------------------------------------------

INVESTING ACTIVITIES
Investment in Obzerv
Technologies Inc. (255) - (255) -
Purchase of property, plant and
equipment (113) (29) (484) (322)
Acquisition of Forward Vision,
net of cash acquired (3,681) - (3,681) -
---------------------------------------------------------------------------
(4,049) (29) (4,420) (322)

FINANCING ACTIVITIES
Warrants exercised - 266 - 266
Options exercised 23 26 45 251
---------------------------------------------------------------------------
23 292 45 517
---------------------------------------------------------------------------
CASH (OUTFLOW) INFLOW (2,785) 1,711 (2,189) 3,549
---------------------------------------------------------------------------
EFFECT OF FOREIGN EXCHANGE ON
CASH HELD IN FOREIGN CURRENCY (1) (155) (19) (206)
CASH, BEGINNING OF PERIOD 7,870 5,736 7,292 3,949
---------------------------------------------------------------------------
CASH, END OF PERIOD $ 5,084 $ 7,292 $ 5,084 $ 7,292
---------------------------------------------------------------------------
---------------------------------------------------------------------------

NON-CASH INVESTING AND
FINANCING ITEMS NOT INCLUDED
IN CASH FLOWS
Notes payable issued to
acquire Forward Vision, net $ 3,973 - $ 3,973 -
Shares issued to acquire
Forward Vision $ 266 - $ 266 -
SUPPLEMENTAL CASH FLOW
INFORMATION:
Interest paid $ 1 $ 4 $ 4 $ 12
Income taxes paid (refunded) $ (379) $ 352 $ 304 $ (132)


Extreme CCTV International Inc.
Extreme CCTV UK Ltd.
Extreme CCTV Inc.
www.ExtremeCCTV.com
USA/Canada: T.1.604.420.7711
UK/Europe: T.+44.1670.730.187
Toll Free (N.A.) 1.877.657.5276
Extreme CCTV Reports Fiscal 2006 Results

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