QuStream Corporation
TSX VENTURE : QVC

QuStream Corporation

November 14, 2006 16:05 ET

QuStream Corporation Announces Third Quarter Fiscal 2006 Results

TORONTO, ONTARIO--(CCNMatthews - Nov. 14, 2006) - QuStream Corporation ("QuStream") (TSX VENTURE:QVC) announces its third quarter fiscal 2006 results.

The following chart highlights our revenue performance and backlog in United States ("US") dollars for the three and nine months ended September 30:



Revenue and backlog performance (In US$000s):
---------------------------------------------

Q3 Q3 Increase Q3 YTD Q3 YTD Increase
Fiscal 06 Fiscal 05 (Decrease) Fiscal 06 Fiscal 05 (Decrease)

Government 2,707 2,717 0% 4,517 8,423 -46%
Commercial 3,011 2,028 48% 8,989 5,824 54%
--------------------- ----------------------
5,718 4,745 21% 13,506 14,247 -5%
--------------------- ----------------------
--------------------- ----------------------

Backlog at
the end of Q3 5,632 848
----------------------
Total 19,138 15,095
----------------------
----------------------


In United States ("US") dollars, revenues were US$5.7 million for the third quarter of fiscal 2006 compared to US$4.7 million in the same period last year. Revenues for the nine month period ended September 30, 2006 were US$13.5 million compared to US$14.2 million for the same period last year.

With backlog (note 1) at the end of the third quarter at US$5.6 million compared to US$0.9 million at the same time last year we are going into the fourth quarter already poised to exceed last years full year revenue of US$18.5 million.

Including the effects of translation to the Canadian dollar, sales for the third quarter of fiscal 2006 were $6.4 million, compared to $5.7 million in the same period last year. Sales for the nine month period ended September 30, 2006 were $15.2 million compared to $17.5 million for the same period last year.

The Company has recorded commercial revenue of $3.4 million in the quarter, up 42% from the same period last year. Commercial revenues for the first nine months of fiscal 2006 total $10.1 million, up 42% from the $7.1 million generated in the same period last year. Government revenues totaled $3.0 million for the third quarter down 9% from the $3.3 million recorded in the same period last year. Government revenues were $5.1 million for the nine months ended September 30, 2006, down 50% from the $10.3 million during the same period last year.

The Company experienced the strongest bookings (note 1) quarter in its history. The following chart highlights our bookings performance for the three and nine months ended September 30:



Bookings performance (In US$000s):
----------------------------------

Q3 Q3 Increase Q3 YTD Q3 YTD Increase
Fiscal 06 Fiscal 05 (Decrease) Fiscal 06 Fiscal 05 (Decrease)

Government 2,986 1,107 170% 4,587 5,875 -22%
Commercial 5,918 1,301 355% 13,912 6,230 123%
--------------------- ----------------------
8,904 2,408 270% 18,499 12,105 53%
--------------------- ----------------------
--------------------- ----------------------


Bookings totaled US$8.9 million in the third quarter of fiscal 2006, up 270% from the same period last year. The Company has booked orders totaling US$18.5 million during the nine month period ended September 30, 2006, this compares to US$12.1 million during the same period last year, an increase of 53%.

Commercial bookings were US$5.9 million in the third quarter, and US$13.9 million for the nine months ended September 30, 2006. This is an increase of 355% and 123% respectively over the US$1.3 million and US$6.2 million done in the same periods last year. US Government bookings were US$3.0 million in the third quarter, and US$4.6 million for the nine months ended September 30, 2006. This represents an increase of 170% and a decrease of 22% respectively compared to the US$1.1 million and US$5.9 million done in the same periods last year.



The following chart highlights the business mix of our bookings:

Business mix (In US$000s):
--------------------------

Q3 Q3 Q3 YTD Q3 YTD
Fiscal 06 Mix Fiscal 05 Mix Fiscal 06 Mix Fiscal 05 Mix

Government 2,986 34% 1,107 46% 4,587 25% 5,875 49%
Commercial 5,918 66% 1,301 54% 13,912 75% 6,230 51%
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8,904 100% 2,408 100% 18,499 100% 12,105 100%
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We have previously stated that we are focusing our efforts on increasing the commercial aspect of our business. While the significant decrease in government revenues during the first half of the year has exaggerated the shift, we believe that our results indicate a successful penetration of our products in the commercial marketplace.

Gross margin for the third quarter was 56% compared to 49% in the same period last year. Gross margin for the nine month period ended September 30, 2006 was 55% compared to 47% in the same period last year.

Net income for the third quarter of fiscal 2006 was $0.3 million or $0.02 per share compared with $0.1 million or $0.01 per share for the same period last year. Net income (loss) for the nine months ended September 30, 2006 was $(0.9) million or $(0.04) per share, compared with $0.0 million or $0.00 per share for the same period last year.

"I am pleased with the record bookings that were generated this quarter" said Frederick L. Godard, Chairman, President and Chief Executive Officer of QuStream. "Despite a very challenging year for government sales, we are making tremendous advances in the commercial markets. This is a testament to the strength of our new products and the solid relationships we have built with our customers."

Significant achievements made in the third quarter included:

1. On July 6, 2006 we announced an order for over US$500,000 from a major international oil company.

2. On August 22 and September 29, 2006 we announced significant government orders valued at US$400,000 and US$600,000 respectively.

3. On August 30, 2006 we announced the opening of our sales office in the United Kingdom and the hiring of a local Director of International Sales to help us better pursue international growth.

4. On September 18, 2006 we announced the continued expansion of our sales force with the addition of a Director of Canadian Sales who will provide a point of presence in Canada to better access Canadian professional video customers.

5. In the last week of September and early October we announced three sales orders with a combined value of over US$3.2 million. While the Company enjoyed a previous relationship with Daystar, this was the first time that we had won a substantive mandate to provide equipment to NEP and NMT, two of the largest mobile production companies in the US. Our new 864XR router, the largest router in a single rack, was instrumental in helping us win the NMT order.

Note 1:

The Company uses terms such as bookings, shipments and backlog. These terms are not defined by generally accepted accounting principles (GAAP). Our usage of these terms may vary from the usage adopted by other companies. We believe that the combination of bookings (purchase orders received by the company), shipments (orders shipped by the company and invoiced) and closing backlog (opening backlog, plus bookings less shipments) provides a useful indictor for determining how our products are being received by the market and the economic health of the market as it relates to demand for our products. Closing backlog is not a guarantee of future revenues and provides no information about the timing on which future revenue may be recorded. We report our bookings, shipments and backlog in US dollars to reflect the underlying currency of the majority of such contracts and, therefore, reduce the volatility that would result from converting the measure to Canadian dollars.

Forward-Looking Statements

The statements made in this press release that are not historical facts contain forward-looking information that involves risk and uncertainties. All statements, other than statements of historical facts, which address QuStream's expectations, should be considered forward-looking statements. Such statements are based on management's exercise of business judgment as well as assumptions made by and information currently available to management. When used in this document, the words "may", "will", "anticipate", "believe", "estimate", "expect", "intend" and words of similar import, are intended to identify any forward-looking statements. You should not place undue reliance on these forward-looking statements. These statements reflect our current view of future events and are subject to certain risks and uncertainties as contained in the Company's filings with Canadian securities regulatory authorities, which in relation to this press release include, but are not limited to, our expected fiscal 2006 revenue growth rate of at least 25%, our expected future design wins, and our expected market share across various customers and product segments. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, our actual results could differ materially from those anticipated in these forward-looking statements. We undertake no obligation, and do not intend, to update, revise or otherwise publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof, or to reflect the occurrence of any unanticipated events. Although we believe that our expectations are based on reasonable assumptions, we can give no assurance that our expectations will materialize.



QuStream Corporation
Condensed Consolidated Balance Sheets
(In thousands of Canadian dollars)
Unaudited

September 30, December 31,
2006 2005

Assets

Current assets:
Cash and cash equivalents $ 7,708 $ 2,510
Accounts receivable 4,653 3,900
Inventories 4,913 4,690
Future income taxes 126 131
Prepaid expenses & other current assets 316 427
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17,716 11,658

Property, plant and equipment, net 1,679 1,742
Licences, net 26 45
Deferred financing costs 40 104
Future income taxes 1,383 565
Intangible assets, net 4,024 6,010
Goodwill 559 866
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$ 25,427 $ 20,990
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Liabilities and Shareholders' Equity

Current liabilities:

Accounts payable $ 1,234 $ 1,840
Accrued liabilities 1,885 2,388
Deferred revenue 45 -
Warranty reserve 410 680
Future income taxes 235 267
Accrued pension obligation 1,441 -
Current portion of obligations under capital lease 7 14
Current portion of notes payable 3,219 227
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8,476 5,416

Notes payable, net of current portion 83 3,206
Future income taxes 514 1,226
Accrued pension obligation - 2,794
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9,073 12,642
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Shareholders' equity:
Share capital 17,043 8,367
Retained earnings (deficit) (627) 251
Contributed surplus 723 162
Cumulative translation account (785) (432)
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16,354 8,348

Commitments and contingencies

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$ 25,427 $ 20,990
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The accompanying notes form an integral part of these condensed
consolidated financial statements.



QuStream Corporation
Condensed Consolidated Statements of Earnings
(In thousands of Canadian dollars, except share and per share amounts)
Unaudited

Three months Three months Nine months Nine months
ended ended ended ended
September 30, September 30, September 30, September 30,
2006 2005 2006 2005

Revenues $ 6,394 $ 5,707 $ 15,215 $ 17,455
Cost of goods sold 2,840 2,923 6,898 9,230
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Gross profit 3,554 2,784 8,317 8,225
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Operating expenses:
Research and
development 882 669 2,991 1,955
Selling and
marketing 1,168 1,054 3,621 3,730
General and
administrative 649 543 2,088 1,662
Amortization of
intangibles 170 238 722 589
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Total operating
expenses 2,869 2,504 9,422 7,936
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Earnings (loss) from
operations before the
following 685 280 (1,105) 289
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Other income (expense):
Interest income 69 15 143 46
Interest expense
- notes payable (98) (79) (300) (236)
Interest expense
- capital lease (5) (1) (11) (3)
Foreign exchange gain
(loss) (47) (9) (56) (6)
Other - - - (1)
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(81) (74) (224) (200)
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Earnings (loss) from
operations before
income taxes 604 206 (1,329) 89
Provision for (recovery
of) income taxes 255 93 (451) 72
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Net earnings (loss) $ 349 $ 113 $ (878) $ 17
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Earnings (loss)
per share:
Basic $ 0.02 $ 0.01 $ (0.04) $ 0.00
Diluted $ 0.02 $ 0.01 $ (0.04) $ 0.00

Weighted average
number of shares
outstanding
(000s):
Basic 23,477 19,159 21,508 17,317
Diluted 23,960 19,760 21,508 17,880

The accompanying notes form an integral part of these condensed
consolidated financial statements.


QuStream Corporation
Condensed Consolidated
Statements of Retained Earnings
(In thousands of Canadian dollars)
Unaudited

September 30, September 30,
2006 2005

Retained earnings, beginning of period $ 251 $ 139
Net earnings (loss) (878) 17
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Retained earnings (deficit), end of period $ (627) $ 156
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The accompanying notes form an integral part of these condensed
consolidated financial statements.


QuStream Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands of Canadian dollars)
Unaudited

Three months Three months Nine months Nine months
ended ended ended ended
September 30, September 30, September 30, September 30,
2006 2005 2006 2005

Cash flows
provided by
(used in):

Operating
activities:
Net earnings
(loss) for
the period $ 349 $ 113 $ (878) $ 17
Add (deduct)
items not
affecting cash:
Depreciation
and
amortization
of property
plant and
equipment 137 104 430 347
Amortization
of licences 6 9 18 27
Amortization
of
intangible
assets 170 238 722 589
Stock-based
compensation 41 32 105 64
Future income
taxes (186) (136) (444) (37)
Loss on disposal
of capital assets - - - 5
Net change in
non-cash working
capital balances
related to
operations (2,017) 73 (3,281) (375)
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Cash flows (used in)
provided by
operating
activities (1,500) 433 (3,328) 637
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Investing activities:

Purchase of property,
plant and equipment (211) (114) (423) (683)
Adjustment to Fortel
acquisition price - - 54 -
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Cash flows
provided by
(used in)
investing
activities (211) (114) (369) (683)
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Financing activities:
Capital lease
payments (29) (7) (57) (22)
Issuance of common
shares in
connection with
Maklyn reverse
takeover, net of
issuance costs - - - 1,365
Repayment of notes
payable (51) - (154) -
Issuance of common
shares, net
of issuance costs - - 9,131 239
Exercise of
options for cash - 1 - 71
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Cash flows
provided by
(used in)
financing
activities (80) (6) 8,920 1,653
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Effect of exchange
ate changes on cash (1) (169) (25) (133)
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Increase (decrease)
in cash & cash
equivalents (1,792) 144 5,198 1,474

Cash & cash
equivalents,
beginning of
period 9,500 5,026 2,510 3,696
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Cash & cash
equivalents,
end of period $ 7,708 $ 5,170 $ 7,708 $ 5,170
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Supplementary
cash flow
information:
Taxes paid - - - -

Property, plant
and equipment
acquired by
capital lease - - 94 -
Interest paid 79 1 239 2
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The accompanying notes form an integral part of these condensed
consolidated financial statements.


QuStream Corporation
Notes to the Condensed Consolidated Financial Statements
(Tabular amounts in thousands of Canadian dollars, except per share amounts
- Unaudited)


September 30, 2006

1. Significant accounting policies

These condensed consolidated financial statements have been prepared in accordance with The Canadian Institute of Chartered Accountants ("CICA") standards for interim financial statements. These condensed consolidated financial statements follow the same accounting policies and methods of their application as the most recent annual financial statements, however, they do not include all of the disclosure requirements for annual financial statements. For a full description of accounting policies, refer to QuStream Corporation's ("QuStream" or the "Company") 2005 Consolidated Annual Financial Statements. These condensed consolidated financial statements should be read in conjunction with the Company's 2005 Consolidated Annual Financial Statements.

The results of operations for the three and nine month periods ended September 30, 2006 are not necessarily indicative of those to be expected for the entire year ending December 31, 2006.

2. Business acquisitions

Fiscal 2005

Maklyn Venture Capital Corp.:

Effective April 1, 2005, the Company completed a reverse takeover of Maklyn Venture Capital Corp. ("Maklyn"), a Capital Pool Corporation. This transaction resulted in QuStream becoming listed on the Toronto Venture Exchange.

Shareholders of QuStream received 13,904,000 common shares and the shareholders of Maklyn received 5,115,000 shares in the amalgamated entity; accordingly, this transaction was accounted for as a reverse takeover of Maklyn by QuStream. The shares issued in the amalgamation reflect a 2:1 consolidation for the shares that were previously issued and outstanding for both companies.

In accordance with CICA Emerging Issues Committee Abstract 10, "Reverse Takeover Accounting", ("EIC-10") this transaction did not constitute a business combination and has been accounted for as a capital transaction which resulted in share capital increasing by $1,365,000 (gross proceeds of $1,710,000 less costs of $345,000).

Fortel DTV, Inc.:

Effective December 14, 2005, the Company aquired all of the outstanding shares of Fortel DTV, Inc. ("Fortel"). Fortel is involved in the design, manufacture, and distribution of signal processing equipment for the professional video/audio industry. This purchase was funded through the Company's cash resources. The purchase consideration totalled $1,756,000 including acquisition costs of $137,000.



Details of the acquisition are summarized as follows:
$
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Net working capital, excluding cash acquired (385)
Property, plant and equipment 50
Future tax assets - long-term 335
Notes payable (419)
Acquired intangible assets 2,176
Goodwill 545
Future tax liability related to acquired intangible assets (564)
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1,738
Cash acquired 18
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Total cost of acquisition 1,756

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The identified acquired intangible assets include in-process research and development ("IPR&D"), patents, and trade names. The IPR&D will be amortized over three years, the patents will be amortized over their remaining lives which is 15 years, and the trade names will be amortized over a 10 year period. In accordance with CICA Handbook ("CICA HB") Section 3465, "Income Taxes", the Company has established a future tax liability related to the acquired intangible Assets. The future income tax liability will be amortized over the life of the related acquired intangible asset as a reduction in the future income tax provision.

In addition, the Company is obligated to pay up to US$1,000,000 in contingent consideration if Fortel achieves a defined revenue level of US$3,200,000 in the 12-month period following the acquisition. Any payment of contingent consideration will be recorded as goodwill. The goodwill is not deductible for tax purposes.

As part of the acquisition, the Company established a severance liability of $110,000. As at June 30, 2006 all severance accruals had been paid out. In addition, the Company finalized the purchase equation during the second quarter of fiscal 2006.

This acquisition has been accounted for using the purchase method and accordingly, the results of operations have been included in these condensed consolidated financial statements from the date of acquisition.

Fiscal 2004

PESA Switching Systems, Inc.:

Effective December 9, 2004, the Company through its wholly owned subsidiary, QuStream U.S. Holdings, Inc., acquired all of the outstanding shares of PESA Switching Systems, Inc. ("PESA") along with a U.S. $2,000,000 note receivable from PESA held by Pesa Inc., the parent company of PESA. PESA is involved in the design, manufacture, and distribution of routing and control equipment for the professional video/audio industry. The purchase was funded through the Company's cash resources. The purchase consideration totalled $8,348,000 including acquisition costs of $131,000.



Details of the acquisition are summarized as follows:

$
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Net working capital, excluding cash acquired 4,284
Property, plant and equipment 787
Future tax assets - long-term 1,423
Pension obligations (3,432)
Acquired intangible assets 3,905
Future tax liability related to acquired intangible assets (1,012)
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5,955
Cash acquired 2,393
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Total cost of acquisition 8,348
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The identified acquired intangible assets include existing technology, in-process research and development ("IPR&D") and trade names. The existing technology will be amortized over six year, the IPR&D will be amortized over three years, and the trade names will be amortized over a 10 year period. In accordance with CICA HB Section 3465, "Income Taxes", the Company has established a future tax liability related to the acquired intangible assets. The future income tax liability will be amortized over the life of the related acquired intangible asset as a reduction in the future income tax provision.

As part of the acquisition, the Company established a severance liability of $380,000. As at September 30, 2006 the remaining accrual was $Nil.

At the end of the first quarter of fiscal 2006, the Company determined that it was more likely than not that it would be able to recognize the tax benefit of certain future tax assets related to the defined benefit pension plan that previously had a valuation allowance applied to them. The Company has recognized an increase in future tax assets of approximately $957,000. In accordance with CICA HB Section 3465, the Company has applied this amount to first reduce goodwill related to the PESA acquisition to $Nil and applied the remaining amount as a reduction of acquired intangible assets. In addition, the Company has decreased the future tax asset liability related to the acquired intangible assets.

This acquisition has been accounted for using the purchase method and accordingly, the results of operations have been included in these condensed consolidated financial statements from the date of acquisition.



3. Accounts receivable

Details of accounts receivable balances are as follows:

September 30, December 31,
2006 2005

Trade receivables 4,682 4,386
Taxes receivable - -
Other receivables 15 35
Provision for doubtful accounts (44) (521)
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4,653 3,900
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4. Inventories

Details of inventories are as follows:

September 30, December 31,
2006 2005

Raw materials 1,454 1,471
Work in process 2,998 2,374
Finished goods 461 845
-------------------------------------------------------------------
4,913 4,690
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5. Property, plant and equipment

Details of property, plant and equipment are as follows:

September 30, December 31,
2006 2005

Building 365 365
Machinery and equipment 2,011 1,341
Furniture and fixtures 498 417
Leasehold improvements 19 18
Equipment under capital lease 149 57
Accumulated depreciation / amortization (1,363) (456)
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1,679 1,742
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6. Accrued liabilities

Details of accrued liabilities are as follows:

September 30, December 31,
2006 2005

Payroll and vacation pay 299 190
Accrued severance costs - 347
Trade payables 1,135 1,400
Income and sales taxes 329 381
Other accruals 122 70
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1,885 2,388
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7. Share capital

The Company has authorizd share capital consisting of an unlimited number of common shares. As at June 30, 2006 the Company has 23,477,000 common shares issued and outstanding, compared with 19,277,000 common shares issued and outstanding at December 31, 2005.

On May 8, 2006, the Company issued 4,200,000 shares and 2,100,000 common share purchase warrants for gross proceeds of $10,080,000 (less issuance costs of $949,000). In accordance with CICA HB Section 3861, "Financial Instruments", the Company has allocated $287,000 of the net proceeds to the common share purchase warrants which is included in Contributed Surplus.

The common share purchase warrants expire 18 months from the date of issue and allow the holder to acquire a common share in the Company for $3.00 at any time during that period.

In addition, the Company has assigned a value of $169,000 to the compensation options issued to the underwriters in connection with the above noted financing. The compensation options allow the underwriters to acquire one common share and a half common share purchase warrant any time in the next 18 months at a price of $2.40 each.

Fully diluted per share information for the three months ended September 30, 2006 does not reflect approximately 450,000 stock options as well as the common share purchase warrants disclosed above as they are considered anti-dilutive. For the nine months ended September 30, 2006 fully diluted loss per share is same as the basic loss per share as the effect of all potential common shares is anti-dilutive.

8. Stock-based compensation

The Company has established a stock option plan (the "Option Plan") to encourage ownership in the Company's shares by directors, officers and employees of the Company and its subsidiaries.

The maximum number of shares which may be issued under the Option Plan is equal to 10% of the outstanding shares of the Company. The outstanding options granted to a participant on their grant date will vest ratably every three months over five years. Unexercised options will expire 5 years from the date of grant.

Activity under the Company's Option Plan is summarized as follows:



Weighted
average
exercise
Number price
# $

Outstanding, December 31, 2005 1,447,650 1.24
Granted - -
Exercised - -
Forfeited (41,875) 1.71
Expired - -
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Outstanding, March 31, 2006 1,405,775 1.23

Granted 273,000 1.85
Exercised - -
Forfeited (59,850) 1.37
Expired - -
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Outstanding, June 30, 2006 1,618,925 1.33

Granted - -
Exercised - -
Forfeited (38,075) 1.17
Expired - -
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Outstanding, September 30, 2006 1,580,850 1.33
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Options exercisable, September 30, 2006 382,700 1.11
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During the third quarter, the Company recognized compensation expense of $41,000 for stock-based compensation, $105,000 year-to-date. The corresponding amounts for fiscal 2005 were $32,000 and $64,000 respectively. The same amount has been credited to contributed surplus.

The compensation expense was determined on the grant date by applying the Black-Scholes option pricing model, based on the following weighted average assumptions:



Three months Three months Nine months Nine months
ended ended ended ended
September 30, September 30, September 30, September 30,
2006 2005 2006 2005
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Risk-free interest rate 3.1% 3.7% 3.7% 3.7%
Dividend yield 0.0% 0.0% 0.0% 0.0%
Expected life 5 years 5 years 5 years 5 years
Expected volatility 50.0% 37.0% 37.0% 37.0%
Weighted average grant
date fair value of
options granted at
market price N/A $ 0.62 $ 0.62 $ 0.47
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The estimated fair value of the options is being amortized over their expected life on a straight-line basis.

The Black-Scholes option valuation model requires highly subjective assumptions including expected time until exercise, which greatly affect the calculated values. Accordingly, management believes that the model does not necessarily provide a reliable single measure of the fair value of the Company's stock option awards. The Company plans to grant additional stock options each year. As a result, the compensation expense recognized in the current period is not likely to be representative of the stock-based compensation expense for future periods.



9. Contributed Surplus

Details of the contributed surplus are as follows:

September 30, December 31,
2006 2005

Stock based compensation 192 87
Issuance of warrants related to refinancing
of notes payable 75 75
Common share purchase warrants issued in financing 287 -
Compensation options issued to underwriters 169 -
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723 162
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10. Defined benefit pension plan

The Company previously maintained a non-contributory defined benefit pension plan (the "Plan") covering substantially all full-time employees of a subsidiary of the Company.

Effective June 1, 2005, the Company froze the Plan and began the process of terminating and winding up the pension plan. It is anticipated that the termination and windup process will be completed in the fourth quarter of fiscal 2006 and accordingly, during the third quarter, the Company reclassified its pension liability as a current asset. During fiscal 2006, the Company had pension expense of $Nil (2005 - $210,000).

The amount recorded as accrued pension obligation represents the Company's best estimate of the amount that will ultimately be paid to Plan members less assets currently available in the pension plan. As at September 30, 2006 the actual payment is not determinable as there are several variables that will affect the amount of the actual final liability. These variables include but are not limited to the interest rate in effect at the time of final payment as well as whether Plan members elect to receive a lump sum payment or an annuity. Any difference between the actual final payment amount and the amount accrued will be charged to profit and loss at the time the termination payment is made to Plan members.

Each reporting period, the Company will determine its experience gains or losses relative to the termination assumptions made. Any difference will be charged to earnings over the average remaining life expectancy of the employees.
As at September 30, 2006 the Company had an unamortized after tax actuarial gain of $419,000, (December 31, 2005 - $166,000).

Subsequent to September 30, 2006 the Company received a preliminary indication of the final settlement amount. It is anticipated that upon final windup, the Company will record an after tax gain of approximately $682,000.

11. Commitments and contingencies

In the normal course of operations, the Company enters into purchase commitments for inventory with third party contract manufacturers. As at September 30, 2006, the Company had committed to purchasing approximately $2,143,000 (December 31, 2005 - $1,500,000) of inventory from various suppliers.

12. Segmented information

Operating segments

The Company operates in one business segment, that being the design, development, and distribution of routing, switching, interface conversion and distribution products to the global professional video/audio markets. Since the products have the same manufacturing process and distribution based, the Company has determined that it does not have separately reportable operating segments.

Geographic segments

The Company's external revenues by geographic region is based on the region in which the customer is located, property, plant and equipment, other identifiable assets and intangible assets data is based on the geographic areas in which the Company operates.



As at and for the
three months ended
September 30, 2006 Canada USA International Total
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Revenues 88 5,526 780 6,394
Property, plant and equipment 380 1,299 - 1,679
Other identifiable assets 9,448 11,396 - 20,844
Goodwill and intangible assets - 4,583 - 4,583
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As at and for the
nine months ended
September 30, 2006 Canada USA International Total
---------------------------------------------------------------------------

Revenues 526 12,365 2,324 15,215
Property, plant and equipment 380 1,299 - 1,679
Other identifiable assets 9,448 11,396 - 20,844
Goodwill and intangible assets - 4,583 - 4,583
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As at and for the
three months ended
September 30, 2005 Canada USA International Total
---------------------------------------------------------------------------

Revenues 21 4,576 1,110 5,707
Property, plant and equipment 395 702 - 1,097
Other identifiable assets 2,347 12,694 - 15,041
Goodwill and intangible assets - 4,409 - 4,409
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As at and for the
nine months ended
September 30, 2005 Canada USA International Total
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Revenues 35 15,746 1,674 17,455
Property, plant and equipment 395 702 - 1,097
Other identifiable assets 2,347 12,694 - 15,041
Goodwill and intangible assets - 4,409 - 4,409
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The TSX Venture Exchange Inc. has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • QuStream Investor Contact:
    Paul Haber
    Chief Financial Officer
    (416) 385-2323 x 201
    Email: phaber@qustream.com