Tranzcom China Security Networks Inc.
TSX VENTURE : TSN

Tranzcom China Security Networks Inc.

August 31, 2005 13:19 ET

Tranzcom Announces 2005 Second Quarter Results

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Aug. 31, 2005) - Tranzcom China Security Networks Inc. (TSX VENTURE:TSN) ("Tranzcom" or the "Company") is pleased to announce significantly improved quarterly revenue results for the second quarter of 2005 compared to the same period of last year. The Company's revenues increased from $625,000 during the second quarter of 2004 to $1,488,000 in the same period of 2005, representing a 138% increase. This increase was mainly due to the Tranzcom's subsidiary, Beijing Tranzcom Technology Co., Ltd. ("BTT") who had installation sales of $128,000 and equipment sales of $1,213,000. The Company's expenses increased from $281,000 in the second quarter of 2004 to $488,000 in the second quarter of 2005. Excluding BTT's overhead of $139,000 and bad debt provision of $149,000, expenses for the Company's existing operations (Huaxun and Tranzcom's head office) decreased from $281,000 to $200,000 as the Company streamlined staff and more closely monitored costs.

The Company's operations have undergone a significant shift in the source of revenues following the acquisition of the 51% interest in BTT in November of 2004. The Company attributes the improvement in the financial results to; the successful acquisition and integration of BTT in late 2004, cost reduction efforts company wide, and the growing Chinese security industry. BTT again represents the predominant revenue share in the second quarter.

For the six months ended June 30, 2005, the Company generated total revenue of $3,931,000, which included BTT's total revenue of $3,352,000, compared to the total revenue of $880,000 in the same period of 2004. During the first two quarters of 2005, the Company recorded total cost of sales $3,387,000, including BTT's cost of sales $2,913,000. The total cost of sales in the same period of 2004 was $694,000.

Total operating expenses increased from $559,000 in the first six months of 2004 to $825,000 in 2005, which was mainly due to the new sub BTT's operating expenses and the increase in the provision of bad debt $149,000 in BTT. The increase in operating expenses was also due to additional consultants engaged in the first six months of 2005, resulting in an $11,000 increase in consulting fees. The Company generated net losses of $106,000 in the first two quarters of 2005 compared to $344,000 in the same period of 2004.

In the second quarter the Company's subsidiary Beijing Huaxun Datacom Co. Ltd. ("Huaxun") undertook a detailed review of all non profitable relationships, processes and divisions. Accordingly, substantial internal operational process improvement and restructuring occurred, this resulted in a termination of some monitoring relationships as well as reassessment of the method of monitoring revenue calculation. This resulted in a reduction of Huaxun's gross profit of $59,000, from $129,000 in the second quarter of 2004 compared to $70,000 in the second quarter of 2005. Huaxun's traditional security systems demand continues to be favorable, as the Chinese middle class is becoming more affluent and security conscious, which it is anticipated to yield more stable long-term recurring alarm monitoring revenues, in addition to security systems sales.

Tranzcom's Chairman, Dr. Ken Cai comments "Our management team continues to increase revenues, increase gross profit and proportionally reduce costs. We have doubled last year's entire revenue in only the first half of 2005 due to the dedicated efforts of our entire staff and their ability to manage our growth in the booming Chinese business climate."

About Tranzcom

Tranzcom China Security Networks Inc. is a Vancouver based Canadian company, trading on the TSX Venture Exchange under the symbol TSN. Tranzcom is a leading Security Network Service Provider in China, and operating a state of the art security dispatch centre in Beijing. Tranzcom's subsidiaries, Beijing Tranzcom Technology Co. and Beijing Huaxun Datacom Co. Ltd. design and manufacture security products and provide Integrated Security Service Solutions throughout China.

ON BEHALF OF THE BOARD

Barry McGowan, Vice President, Corporate Development

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this News Release.

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