LOREX Reports Q3 Financial Results



    TORONTO, Aug. 13 /CNW/ - LOREX Technology Inc. (TSX: LOX), a global
developer of digital video and security surveillance products, today announced
its financial results for the three and nine months ended June 30, 2007.
    Highlights of the three and nine month operating results are as follows:

    
    -------------------------------------------------------------------------
                              Three months ended           Nine months ended
                                    June 30                     June 30
    -------------------------------------------------------------------------
                             2007          2006          2007          2006
                          (US$,000)     (US$,000)     (US$,000)     (US$,000)
    -------------------------------------------------------------------------
    Revenue                 12,149        12,513        32,995        36,635
    -------------------------------------------------------------------------
    Earnings (loss) before
     interest, taxes,
     amortization(*)           316        (1,838)         (480)         (685)
    -------------------------------------------------------------------------
    Net Earnings
     (Loss)                   (123)       (3,048)       (1,566)       (2,581)
    -------------------------------------------------------------------------
    Net Earnings (Loss)
     per common share
     (basic)                ($0.00)       ($0.11)       ($0.06)       ($0.10)
    -------------------------------------------------------------------------
    Weighted average
     number of shares
     outstanding        26,954,083    26,819,094    26,954,083    26,710,805
    -------------------------------------------------------------------------

    (*) It is important to note that EBITDA is not a measure of performance
        under Canadian GAAP. EBITDA should not be considered in isolation or
        as a substitute for Net Earnings prepared in accordance with Canadian
        GAAP nor as a measure of operating performance or profitability
    

    Henry Schnurbach, Chairman and CEO commented: "Revenues in the current
quarter were modestly lower as compared to the same period one year ago. We
have replaced the majority of the sales reported lost in the first three
quarters of 2006 with new accounts, and by increasing our product presence
with our existing customers.
    As we move toward 2008, we believe that the Company should continue to
realize considerable growth and profit improvement. The superior quality of
the greatly enhanced product range including IP cameras, and LCD/DVR
surveillance systems, now being offered to an expanded customer base, should
enable Lorex to reach these goals."

    Q3 '07 CONFERENCE CALL

    LOREX will be holding a conference call for investors and analysts to
discuss its financial results at 4:00 PM ET on Tuesday, August 14, 2007.

    
        Please dial 1-800-590-1508 to access the call.

    For those unable to participate in the conference call at the scheduled
time, a replay of the conference call will be available beginning on Tuesday,
August 14, 2007 at 6:00 PM until Tuesday, August 21, 2007 at 11:59 PM ET:

        Replay Access No.: 416-640-1917
        Passcode: 21243300 followed by the number sign.

        Replay Access No.: 1-877-289-8525
        Passcode: 21243300 followed by the number sign.
    

    About LOREX Technology Inc.:

    LOREX Technology Inc. (TSX: LOX) global brands empower consumers and
professionals with leading-edge security video solutions delivering advanced
technology and innovative performance.

    The TSX has not reviewed and does not accept responsibility for the
    adequacy or accuracy of this release.

    Certain information included in this news release contains statements
that are forward-looking, such as statements relating to anticipated future
revenues of the Company and the success of product offerings. Such
forward-looking information involves important risks and uncertainties that
could significantly affect anticipated results in the future, and,
accordingly, such results may differ materially from those expressed in any
forward-looking statements made by or on behalf of the Company.



    LOREX TECHNOLOGY INC.

    Interim Consolidated Financial Statements

    For the Third Quarter Ended June 30, 2007

    (these consolidated financial statements have not been
    reviewed by an independent firm of chartered accountants)


    LOREX Technology Inc.
    300 Alden Road
    Markham, Ontario L3R 4C1

    website: www.lorextechnology.com

    Tel: (905) 946-8589
    Fax: (905) 947-0138

    Stock Symbol: TSX - LOX



    
    LOREX TECHNOLOGY INC.
    CONSOLIDATED BALANCE SHEETS
    (in United States dollars -unaudited)
    -------------------------------------------------------------------------

                                                       June 30  September 30
                                                          2007          2006

    Assets

    Current assets:
    Cash and cash equivalents                     $    804,767  $    874,095
    Restricted cash (note 3)                           336,579       400,000
    Accounts receivable                              6,962,524     5,170,950
    Inventory (note 4)                              10,860,624    13,546,788
    Prepaid expenses and deposits                      965,405       609,324
    Future income taxes                                 56,644        49,972
    -------------------------------------------------------------------------
                                                    19,986,543    20,651,129
    Capital assets                                     791,005     1,122,626
    Intangible assets                                  179,086       230,134
    Future income taxes                                205,257       201,398
    Goodwill                                           718,242       682,813
    -------------------------------------------------------------------------
                                                  $ 21,880,133  $ 22,888,100
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Shareholders' Equity

    Current liabilities:
    Bank indebtedness - current portion           $  7,718,031  $  7,062,773
    Accounts payable and accrued liabilities         6,569,086     8,331,041
    Income taxes payable                               329,111       464,224
    -------------------------------------------------------------------------
                                                    14,616,228    15,858,038

    Future income taxes                                 32,275        30,828
    Bank indebtedness - long term portion            1,277,777             -

    Shareholders' Equity

    Capital stock (note 6)                           9,746,310     9,746,310
    Contributed surplus                                838,487       326,217
    Deficit                                         (6,056,680)   (4,491,007)
    Accumulated other comprehensive income
     (note 2)                                        1,425,736     1,417,714
    -------------------------------------------------------------------------
                                                     5,953,853     6,999,234

    -------------------------------------------------------------------------

                                                  $ 21,880,133  $ 22,888,100
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements



    LOREX TECHNOLOGY INC.
    CONSOLIDATED STATEMENTS OF LOSS AND OTHER COMPREHENSIVE INCOME (LOSS)
    (in United States dollars -unaudited)
    -------------------------------------------------------------------------

                              3 Months Ended              9 Months Ended
                                June 30                     June 30
                           2007          2006          2007          2006
                      ------------- ------------- ------------- -------------

    Revenue           $ 12,148,983  $ 12,512,785  $ 32,994,627  $ 36,634,926

    Cost of sales        8,334,439     9,389,633    22,534,188    24,865,515
                      ------------- ------------- ------------- -------------

    Gross profit         3,814,544     3,123,152    10,460,439    11,769,411

    Expenses:
    Marketing and
     selling             2,561,947     2,815,720     7,822,219     8,155,605
    Administration         896,525       878,641     2,545,386     2,265,867
    Research and
     development           113,531       397,791       683,332       991,289
    Interest               270,130        97,842       569,021       322,349
    Amortization           168,475       224,705       516,984       591,826
    Loss on foreign
     exchange              141,037        86,354       103,542        56,949
    Restructuring
     costs (recovery)     (214,372)      670,000      (214,372)      670,000
                      ------------- ------------- ------------- -------------
                         3,937,273     5,171,053    12,026,112    13,053,885

    Earnings (loss)
     from continuing
     operations before
     income taxes         (122,729)   (2,047,901)   (1,565,673)   (1,284,474)

    Income taxes                 -       842,607             -     1,062,210
                      ------------- ------------- ------------- -------------

    Net loss from
     continuing
     operations           (122,729)   (2,890,508)   (1,565,673)   (2,346,684)

    Discontinued
     operations
     (net of tax)     $          -  $   (157,388) $          -  $   (234,557)
                      ------------- ------------- ------------- -------------
    Net loss          $   (122,729) $ (3,047,896) $ (1,565,673) $ (2,581,241)

    Other comprehensive
     income (loss)
     (note 2)
    Unrealized income
     (loss) on
     translation of
     self sustaining
     operations       $     22,738  $     27,842  $      8,022  $       (720)
                      ------------- ------------- ------------- -------------

    Total comprehensive
     income (loss)    $    (99,991) $ (3,020,054) $ (1,557,651) $ (2,581,961)
                      ------------- ------------- ------------- -------------

    Basic loss per
     common share     $      (0.00) $      (0.11) $      (0.06) $      (0.10)
                      ------------- ------------- ------------- -------------
                      ------------- ------------- ------------- -------------

    Diluted loss per
     common share     $      (0.00) $      (0.11) $      (0.06) $      (0.10)
                      ------------- ------------- ------------- -------------
                      ------------- ------------- ------------- -------------

    Number of common
     shares
    Weighted average
     basic              26,954,083    26,819,094    26,954,083    26,710,805
    Weighted average
     diluted            27,006,941    26,879,145    27,348,062    26,815,940
    Total outstanding   26,954,083    26,905,083    26,954,083    26,905,083

    See accompanying notes to consolidated financial statements



    LOREX TECHNOLOGY INC.
    CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
    (in United States dollars - unaudited)
    -------------------------------------------------------------------------

                                           Accumu-
                                             lated
                                             other
                               Contri-     compre-    Retained
                      Common     buted     hensive    earnings
                      shares   surplus      income    (deficit)        Total
    -------------------------------------------------------------------------
                           $         $           $           $             $
    Balance as at
     October 1,
     2005          9,608,363   143,117   1,330,607     344,018    11,426,105
    -------------------------------------------------------------------------

    Net loss               -         -           -  (2,581,241)   (2,581,241)
    Unrealized
     losses on
     translation
     of self
     sustaining
     operations            -         -        (720)          -          (720)
    -------------------------------------------------------------------------
    Comprehensive
     income                -         -        (720) (2,581,241)   (2,581,961)
    -------------------------------------------------------------------------

    Stock issued on
     exercise of
     stock options
     or pursuant to
     stock purchase
     plan            114,266         -           -           -       114,266
    Options granted        -   107,806           -           -       107,806
    Options cancelled      -   (12,246)          -           -       (12,246)

    -------------------------------------------------------------------------
    Balance as at
     June 30,
     2006          9,722,629   238,677   1,329,887  (2,237,223)    9,053,970
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (Unaudited)

    Balance as at
     October 1,
     2006          9,746,310   326,217   1,417,714  (4,491,007)    6,999,234
    -------------------------------------------------------------------------

    Net loss               -         -           -  (1,565,673)   (1,565,673)
    Unrealized gains
     on translation
     of self
     sustaining
     operations            -         -       8,022           -         8,022
    -------------------------------------------------------------------------
    Comprehensive
     income                -         -       8,022  (1,565,673)   (1,557,651)
    -------------------------------------------------------------------------

    Options
     granted/modified      -   384,425           -           -       384,425
    Options cancelled      -         -           -           -             -
    Warrants issued        -   127,845           -           -       127,845

    -------------------------------------------------------------------------
    Balance as at
     June 30,
     2007          9,746,310   838,487   1,425,736  (6,056,680)    5,953,853
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements



    LOREX TECHNOLOGY INC.
    CONSOLIDATED STATEMENTS OF CASH FLOW
    (in United States dollars - unaudited)
    -------------------------------------------------------------------------

                              3 Months Ended              9 Months Ended
                                June 30                     June 30
                           2007          2006          2007          2006
                      ------------- ------------- ------------- -------------

    Cash provided by
     (used in):

    Operating
     activities
    Net earnings
     (loss)           $   (122,729) $ (3,047,896) $ (1,565,673) $ (2,581,241)
    Items not
     involving cash:
    Amortization of
     capital assets
     and intangible
     assets                275,087       227,125       623,484       591,137
    Mark-to-market of
     interest rate swap     42,000             -        42,000             -
    Stock option expense
     and stock based
     compensation          135,883        37,473       333,921       104,116
    Future income taxes      1,268       862,563         1,422       991,360
    Writedown of
     investment in joint
     venture                     -       175,000             -       175,000
    Accrual for severance
     liabilities          (214,372)      495,000      (214,372)      495,000

    Change in non-cash
     operating working
     capital:
    Accounts receivable   (244,106)     (211,062)   (1,778,217)    1,180,439
    Inventory            1,222,148      (499,290)    2,760,253     1,620,461
    Prepaid expenses
     and deposits           26,849      (188,888)     (346,093)     (307,048)
    Accounts payable
     and accrued
     liabilities        (2,206,181)    1,735,096    (1,667,029)      212,424
    Income taxes
     payable                 6,557       (10,050)     (135,268)       70,743
                      ------------- ------------- ------------- -------------
                        (1,077,596)     (424,929)   (1,945,572)    2,552,391

    Financing
     activities:
    Issue of share
     capital                     -        33,077             -       114,266
    Increase
     (decrease) in bank
     indebtedness        1,901,454       400,498     2,103,585    (2,465,424)
                      ------------- ------------- ------------- -------------
                         1,901,454       433,575     2,103,585    (2,351,158)

    Investing activities:
    Purchase
     (disposition) of
     capital and
     intangible assets    (100,000)     (232,165)     (204,109)     (385,045)

    Effect of foreign
     currency
     translation on
     cash balances         292,030       115,922       313,347        75,000
                      ------------- ------------- ------------- -------------

    Increase (decrease)
     in cash and cash
     equivalents         1,015,888      (107,597)      267,251      (108,812)

    Cash and cash
     equivalents,
     beginning of
     period                125,458       978,558       874,095       979,773
                      ------------- ------------- ------------- -------------

    Cash and cash
     equivalents, end
     of period        $  1,141,346  $    870,961  $  1,141,346  $    870,961
                      ------------- ------------- ------------- -------------
                      ------------- ------------- ------------- -------------

    Supplemental cash
     flow information:
    Interest paid     $    223,930  $     97,842  $    522,822  $    322,349
    Income taxes paid $          -  $     13,884  $          -  $     13,884

    See accompanying notes to consolidated financial statements



    LOREX Technology Inc.

    Notes to Interim Consolidated Financial Statements
    June 30, 2007
    (in United States dollars - unaudited)

    1.  Basis of presentation:

    The accompanying unaudited consolidated financial statements have been
    prepared in accordance with Canadian generally accepted accounting
    principles for interim financial statements and, accordingly, certain
    information and footnote disclosure normally included in financial
    statements prepared in accordance with Canadian generally accepted
    accounting principles have been condensed, or omitted. These financial
    statements have been prepared using the same accounting principles as
    used in the annual audited consolidated financial statements and should
    be read in conjunction with the audited consolidated financial statements
    of the Company for the year ended September 30, 2006. The results of
    operations of any interim period are not necessarily indicative of the
    results of operations for any other interim period or for a full fiscal
    year.

    The future ability of the Company to operate in the normal course is
    dependant on the Company's ability to meet quarterly covenant
    requirements established with its primary lender or obtain waivers of
    same. The Company may be required to obtain additional debt or equity
    financing to support business initiatives including investments in
    technology or working capital for substantial revenue growth.

    2.  Change in Accounting Policy and Recent Accounting Pronouncements:

    Effective October 1, 2006, the Company adopted Section 1530 of the CICA
    Handbook, Comprehensive Income. The accounting guidelines requires
    separate presentation of changes in the Company's net assets that result
    from transactions, events and circumstances from sources other than the
    Company's shareholders. Adoption of the accounting standard by the
    Company resulted in the changes in the currency translation adjustment
    relating to the Company's self-sustaining foreign operations, being
    recorded in Other Comprehensive Income. The impact of this standard on
    the Company's financial operations was an increase in other comprehensive
    income of $26,068 in the third quarter of fiscal 2007 ($27,842 in 2006)
    and a reclassification of previously accumulated unrealized foreign
    exchange gains/losses to accumulated other comprehensive income on the
    balance sheet.

    (a) Change in Accounting Policy

    In December 2006, the CICA issued Handbook Sections 3862, Financial
    Statements - Disclosures, and 3863, Financial Instruments - Presentation.
    Section 3862 modifies the disclosure requirements of Section 3861,
    Financial Instruments - Disclosure and Presentation, including required
    disclosure for the assessment of the significance of financial
    instruments for an entity's financial position and performance and of the
    extent of risks arising from financial instruments to which the Company
    is exposed and how the Company manages those risks, whereas Section 3863
    carries forward the presentation related requirements of Section 3861.
    The new standards will become effective on January 1, 2008 for the
    Company. The Company is currently evaluating the impact of the adoption
    of Section 3862 on the consolidated financial statements.

    Under the new standards, financial instruments must be classified into
    one of five categories: held-for-trading, held-to-maturity, loans and
    receivables, available-for-sale financial assets or other financial
    liabilities. All financial instruments are initially recorded on the
    balance sheet at fair value. After initial recognition, the financial
    instruments are measured at their fair values, except for held-to-
    maturity investments, loans and receivables and other financial
    liabilities, which are measured at amortized cost. The effective interest
    related to the financial liabilities and the gain or loss arising from
    the change in the fair value of a financial asset or liability classified
    as held-for-trading is included in net income for the period in which it
    arises. If a financial asset is classified as available-for-sale, the
    gain or loss is recognized in other comprehensive income until the
    financial asset is de-recognized and all cumulative gain or loss is then
    recognized in net income.

    In the third quarter of 2007, the Company entered into a three-year
    interest rate swap contract for $3 million of its outstanding debt
    (note 5). The contract is a floating to fixed rate swap whereby the
    interest rate is fixed at 9.68%. The Company has not designated the
    interest rate swap as a hedge and as a result, for the three and nine
    months ended June 30, 2007 the Company recognized $42,000 in mark-to-
    market provision for the unrealized loss due to change in interest rate
    between the date the swap was booked and June 30, 2007. The offset to the
    provision was recorded under accounts payable and accrued liabilities in
    the balance sheet.

    (b) Recent Accounting Pronouncements

    In March 2007, the CICA issued Handbook Section 3031, Inventories, which
    replaces Section 3030, Inventories. Under the new section, inventories
    are required to be measured at the "lower of cost and net realizable
    value", which is different from the existing guidance of the "lower of
    cost and market". The new section contains guidance on the determination
    of cost and also requires the reversal of any write-downs previously
    recognized. Certain minimum disclosures are required, including the
    accounting policies used, carrying amounts, amounts recognized as an
    expense, and write-downs. The new standard will become effective on
    January 1, 2008 for the Company. The Company is currently evaluating the
    impact of the adoption of this new section on the consolidated financial
    statements.

    3. 	Restricted cash:

    During the third quarter of 2007, the Company posted cash to support
    letters of credit with a prior lender which was restricted until
    settlement.

    4.  Inventory:

                                                      June 30   September 30
                                                        2007        2006
                                                  ---------------------------

        Goods on hand                             $  8,410,785  $ 11,714,984
        Goods in transit                          $  1,988,416  $  1,331,646
        Other inventory                                461,423       500,158
                                                  ---------------------------
                                                  $ 10,860,624    13,546,788
                                                  ---------------------------

    5.  Bank indebtedness:

    During the third quarter of 2007, the Company entered into a
    US$13,000,000 credit facility with a new lender for revolving credit
    loans that bore interest at the lender's prime rate plus 1.0%. The credit
    line is secured by the accounts receivable and inventory of three of the
    Company's subsidiaries.

    In addition, a separate credit facility of US$2,000,000 has been
    established by the Company with the same lender that bears interest at
    the bank's prime rate plus 4%. The US$2,000,000 facility has a term of
    36 months and is amortized evenly over that period.

    In relation to the new credit facilities, the Company issued 500,000
    warrants during the third quarter at a strike price of CAD$0.3025. Using
    the Black-Scholes model, the fair value of the warrants of US$128,000 and
    the finance costs of US$296,000 related to the loan were deferred and
    offset against the initial loan advance, and are accounted for using the
    effective interest method over 36 months. The fair value of the warrants
    was recorded to contributed surplus.

    6.  Capital stock and financial instruments:

    Authorized:
        150,000 Class B special shares with an
        8% cumulative dividend accruing from
        January 1, 1998, redeemable by the
        Company at $1 per share.
    Unlimited common shares

    Issued:                                           June 30   September 30
                                                        2007        2006
                                                  ---------------------------
    150,000 Class B special shares                $    104,895  $    104,895
    26,954,083 common shares (2006 - 26,905,083)     9,641,415     9,641,415
                                                  ---------------------------
                                                  $  9,746,310  $  9,746,310
                                                  ---------------------------

    At June 30, 2007 there were no changes to the number of common shares and
    there were 3,050,000 unexercised stock options outstanding. During the
    nine months ended June 30, 2007, 1,710,000 stock options were modified
    and 1,340,000 new options were granted. Using the Black-Scholes option
    pricing model, the fair value of the modified stock options was compared
    to the fair value of the options immediately before their terms were
    modified. For the nine months ended June 30, 2007, the incremental value
    of $249,000 was recorded as stock-based compensation. All outstanding
    options expire in 2011 and were issued at a strike price of CAD$0.31.

    7.  Research and development costs:

    During the third quarter of 2007, the Company reduced an accrual of
    approximately $189,000 for a conditional government agency grant that had
    been previously recorded as a liability after receiving written
    confirmation that the conditions to the repayment of the grant were
    forgiven.

    8.  Restructuring costs (recovery):

    During the third quarter of 2007, the Company determined that actual
    restructuring costs were lower than original estimates and reduced its
    accrual by approximately $214,000.

    9.  Income taxes:

    The Company did not recognize any future tax benefits for the three and
    nine months of 2007.

    As of June 30, 2007, the Company has determined that it is more likely
    than not that certain future income tax assets, which were offset by a
    valuation allowance, will be realized through a combination of future
    reversals of temporary differences and taxable income.

    10. Related party transactions:

    During the three and nine months ended June 30, 2007, the Company had the
    following transactions with parties related through the estate of a late
    director which held an equity interest which was subject to a voting
    trust holding significant influence over the shares of the Company. The
    transactions were in the normal course of business and were measured at
    the exchange amount, which is the amount of consideration established and
    agreed to by the related parties:

                             Three months ended          Nine months ended
                                  June 30                     June 30
                             2007          2006          2007          2006
                      --------------------------- ---------------------------
    Office rent and
     overhead expenses
     in respect of
     shared facility  $    (24,017) $      8,160  $    (69,779) $     41,749
    Software
     development
     and design             43,000        82,500        93,000       232,500
                      --------------------------- ---------------------------
                      $     18,983  $     90,660  $     23,221  $    274,249

    11. Segmented information:

    The Company operates in a single business segment being the security
    surveillance and observation market and derives substantially all of its
    revenue from the sale of its products in the North American market.

    For the three months ended June 30, 2007, the Company had one customer
    (2006 - two customers) contributing greater than 10% of the consolidated
    revenue. This customer accounted for approximately 36% of consolidated
    revenue (2006 - two customers accounted for 49% of consolidated revenue).

    On a geographic basis, the Company's revenue was from the following
    countries:

                             Three months ended          Nine months ended
                                  June 30                     June 30
                             2007          2006          2007          2006
                      --------------------------- ---------------------------

    United States     $ 10,959,438  $ 11,248,477  $ 29,899,113  $ 32,998,992
    Canada                 850,328     1,069,546     1,908,478     2,707,047
    Other countries        339,217       194,762     1,187,035       928,887
                      --------------------------- ---------------------------
                      $ 12,148,983  $ 12,512,785  $ 32,994,626  $ 36,634,926
                      --------------------------- ---------------------------

    




For further information:

For further information: Jordan Schwartz, Chief Financial Officer, LOREX
Technology Inc., Phone: (905) 946-8589 ext 168, jordan.schwartz@lorexcorp.com,
www.lorextechnology.com


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