Third Quarter Results

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Third Quarter Results

posted on Jan 01, 2009 12:27PM

December 31, 2008

Cantronic Reports Third Quarter Results

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Dec. 31, 2008) - Cantronic Systems Inc. ("Cantronic" or "the Company") (TSX VENTURE:CTS) today announced its financial results for the three-month and nine-month periods ended October 31, 2008. All currency amounts referred to in this news release are in Canadian dollars unless stated otherwise.

----------------------------------------------------------------------------
($000s except amounts per share)         Q3       Q3  First Nine  First Nine
                                                          Months      Months
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Year end: January 31st                F2009    F2008       F2009       F2008
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Operating results
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Revenues                             $1,049   $1,373      $4,189      $4,228
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Adjusted EBITDA for stock-based
 compensation costs                   $(986)    $140     $(1,442)       $528
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Net earnings (loss)                 $(1,184)     $99     $(1,442)       $223
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Earnings per share - Basic          $(0.015)  $0.002     $(0.019)     $0.004
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Earnings per share - Fully diluted  $(0.014)  $0.002     $(0.018)     $0.004
----------------------------------------------------------------------------

For the three-month period ended October 31, 2008 the Company reported third quarter revenues of $1.0 million versus $1.4 million in the corresponding quarter last year, representing a 24% decrease in sales. The uncertainty with the worldwide economy has caused many of our clients to delay or postpone orders, resulting in lower than expected international sales. Gross profit during the quarter amounted to $365,210 or 35% of revenues versus $631,397 or 46% of revenues during the same period last year. Net loss during the three-month period amounted to $1,184,080 or $0.015 per share versus net income of $99,762 or $0.002 per share. The decreased profitability in the quarter is directly linked to fixed cost being absorbed by lower sales, higher SG&A expenses pertaining to our efforts in entering the Chinese market through acquisitions, increases in R&D spending and in non-cash stock based compensation expenses, and $300,000 in provisions for doubtful accounts which were taken in the quarter.

EBITDA (a non GAAP financial measure), excluding the $42,434 impact of stock based compensation amounted to a loss of $985,949 versus a gain of $140,189 during the third quarter of 2008.

For the nine-month period ended October 31, 2008 Cantronic reported revenues of $4.2 million versus $4.2 million during the same period in 2007. Gross profit during the first nine months of 2008 amounted to $1.8 million or 46% of revenues compared to $2.0 million or 47% of revenues during the first nine months of last year. During the nine-month period net loss amounted to $1,442,189 or $0.019 per share versus net income of $223,078 or $0.004 per share in 2008.

"While our third quarter results have fallen short of our expectations due to unexpected delays in client orders related primarily to the global economic environment, we remain confident in the mid to long term growth and profitability prospects of Cantronic," noted Mr. James Zahn, president and chief executive officer of Cantronic Systems Inc. "We continue to invest in R&D and remain focused on new product development and the tremendous market opportunity which is available to us in China."

At October 31, 2008, the Company had cash and cash equivalents amounting to $4.2 million, compared to $1.4 million at January 31, 2008. The increase in cash position is the result of completing a brokered private placement of 16,428,570 common shares at a price of $0.35 per share, resulting in gross proceeds of $5,750,000 on July 10, 2008. Net proceeds of the offering in the amount of $5,347,500 will be used for the strategic acquisition in China, commercialization and general working capital purposes.

Cash flow from operating activities during the quarter amounted to a deficit of $685,949 versus a surplus of $180,410 during the corresponding quarter in 2007.

The financial statements are available for review on SEDAR at www.sedar.com and on the Company's website at www.cantronics.com.

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