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Message: Executes Binding Agreement to Acquire Shenzhen Huanghe Digital Technology Co.

Executes Binding Agreement to Acquire Shenzhen Huanghe Digital Technology Co.

posted on May 13, 2009 07:00AM
May 13, 2009
Cantronic Systems Inc. Executes Binding Agreement to Acquire Shenzhen Huanghe Digital Technology Co. Ltd.

Cantronic to pay RMB 6.2 million for a 51.0 percent stake

VANCOUVER, BRITISH COLUMBIA--(Marketwire - May 13, 2009) - Cantronic Systems Inc., ("Cantronic" or the "Company") (TSX VENTURE:CTS) announced today that it has entered into a binding purchase and sale agreement (the "agreement")for the acquisition of a 51.0 percent interest in Shenzhen Huanghe Digital Technology Co. Ltd. ("Yellow River") in China. Subject to satisfaction of customary conditions precedents, this acquisition is expected to be completed during the second quarter of calendar 2009.

Established in 2005, Yellow River is a profitable leading digital IP-based video surveillance camera and high definition camera manufacturer in China. This strategic acquisition will significantly broaden Cantronic's existing product portfolio, revenue growth potential and complements the networked video management software and equipment products offered by AVINFO, Cantronic's first acquisition in the rapidly growing Chinese security and surveillance market. (See press release dated March 9, 2009)

Yellow River is a profitable company with recorded unaudited revenues of RMB 15.0 million (approximately CDN$2.7 million) in 2008. Further information on Yellow River can be found on their website www.histream.com.cn.

Under the terms of the agreement, Cantronic will pay a total of RMB 3.72 million (approximately CDN$0.68 million) in cash for the acquisition of its 51.0 percent interest in Yellow River. Cantronic has also committed to pay RMB 2.5 million (approximately CDN$0.45 million) worth of Cantronic common shares to Yellow River management under an earn-out performance based arrangement. All Cantronic common shares issued under such arrangement will be issued one year later with the price to be calculated based on market price at the time of issuance and will have a two-year lock-up period after issuance. All of Yellow River's management will remain working for either Yellow River or Cantronic China to ensure the smooth and successful integration of the acquisition.

"The addition of Yellow River will allow Cantronic to complete a basic end-to-end solution to serve the lucrative Chinese networked video surveillance market," stated James Zahn, president and CEO of Cantronic. "We remain focused on identifying leading security and surveillance technologies with a strong record of revenue growth and profitability to accelerate Cantronic's market share growth."

Given management and the Board of Directors' view on the Company's current share price not reflecting the true intrinsic value of the Company, Cantronic expects to satisfy all of its funding requirements for the completion of the Yellow River acquisition through a credit facility to avoid dilution to its current shareholder base.

About Cantronic

Cantronic manufactures, distributes, and provides training and services in the fields of infrared vision and video security surveillance technologies, specializing in passive and active infrared cameras, infrared illuminators, low light infrared sensitive CCD cameras and long-range night vision surveillance systems for demanding homeland security and surveillance application.

Cantronic, through its US subsidiary QWIP Technologies, Inc. ("QWIPTECH"), holds a worldwide, exclusive license from the California Institute of Technology ("Caltech") to produce and sell infrared detectors and sensors based on Caltech's Quantum Well Infrared Photodetector technology.
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