Extreme CCTV Swings to Q4 $434K Profit, Ponders Possible Merger, Partnerships

VANCOUVER (CP) - Shares of surveillance hardware maker Extreme CCTV Inc. gained nearly 18 per cent Monday as the company swung to a fourth-quarter profit of $433,579 and is looking at a possible merger or other ''strategic alternative.''

Extreme (TSX:EXC), which designs and makes infrared and other video surveillance equipment, said it hired Cannacord Capital Corp. as a financial adviser as it evaluates ''potential business combinations, financings and other strategic alternatives.''

''We are in a vibrant industry that is consolidating and I've have said before I've always had my eyes on the right technology companies that would fit our company,'' Jack Gin, Extreme's president and chief executive, told a conference call with analysts.

Gin said an independent committee of the board of directors has been formed to review the alternatives, but that this was not in response to any specific offer or opportunity.

''I get expressions of interest all the time and they can go both ways, so I get asked to go for coffee by buyers and sellers every time I go to a trade show,'' Gin said.

''So the right thing to do was set up an independent committee to address these. ''

Shares in Extreme (TSX:EXC) jumped 40 cents, a gain of 17.78 per cent, to $2.65 on the Toronto Stock Exchange.

The Burnaby, B.C.-based firm said its profit amounted to three cents per share diluted for the three months ended Sept. 30, compared with a loss in the year-earlier period of $252,098, or two cents per share.

Revenue for the period was $6.5 million, up from a year-ago $5.5 million.

For its 2005 financial year, Extreme said it earned $1.07 million, or seven cents per share, on sales of $23.9 million, up from $559,000, or four cents per share, on sales of $23.2 million a year earlier.

Part of the improvement came from lower sales and marketing spending.

Terry Krepiakevich, chief financial officer, said in 2006 the company expected to increase spending on sales and marketing, but hoped to maintain it at about 18 per cent of revenue.

Extreme holds an investment in Obzerv Technologies Inc., developer of a long-range night-vision technology that works in complete darkness and in poor weather such as rain, fog and snow.

Extreme said Monday it has agreed with Obzerv that it would not increase its stake in the Quebec company under the terms of its $4-million investment in Obzerv in September 2003 that gave it a 31 per cent voting interest.

Under the terms of that deal, Extreme had a right to invest an additional 13 per cent in Obzerv in exchange for a $3 million investment and an option to buy the rest of th company at a predetermined price for a period of five years from its initial investment.