Gatekeeper Achieves 81% Revenue and 107% Gross Profit Increase in Second Quarter

INVESTORS NEWS

FOR IMMEDIATE RELEASE

Gatekeeper Achieves 81% Revenue and 107% Gross Profit Increase in Second Quarter

Abbotsford, BCApril 12^th, 2015 – Gatekeeper Systems Inc. (‘Gatekeeper’ or the ‘Company’) (TSX.V:GSI; OTC: GKPRF; FSE: 1GK) announces that it has filed its financial statements and management’s discussion and analysis for the three and six months ended February 29, 2016, available for viewing on www.sedar.com.  All figures are expressed in Canadian dollars unless otherwise stated.

Financial Highlights

• • • • • Revenue during the three months ended February 29, 2016 increased by 81% and improved to $1,726,008 as compared to $955,574 during the three months ended November 30, 2015
        • Revenue during the six months ended February 29, 2016 increased by 33% and improved to $2,681,582 from $2,019,027 during the six months ended February 28, 2015
        • Total backorder as of February 29, 2016 was approximately $2.12 Million
        • Gross profit during the three months ended February 29, 2016 increased by 107% and improved to $1,339,663 from $436,967 during the three months ended November 30, 2015
        • Gross margins during the six months ended February 29, 2016 improved to 50%, compared to 45% during the six months ended February 28, 2015, representing a 5% gross profit margin increase
        • As of February 29, 2016, the Company had cash and cash equivalents of $828,838 and working capital of $1,978,343
        • Net income for the three months ended February 29, 2016 was $66,024, compared to a loss of $237,439 during the three months ended February 28, 2015
        • EBITDA for the three months ended February 29, 2016 was $73,014
        • EBITDA for the six months ended February 29, 2016 was ($498,541)

BUSINESS UPDATE

During the second quarter, the following notable events occurred:

• • • • • Achieved a record backorder of $2.7 million CDN during the month of February 2016, ending in a total backorder of approximately $2.12 million CDN at the end of the second quarter
        • Finalized launch plans of revenue sharing project in Jones County, GA
        • Increased total number of cameras shipped by 126% 
        • Increased total number of mobile digital recorders shipped by 65%
        • Stop-arm camera evaluation sites increased to 16
        • Completed engineering of new high-definition airborne recorder
        • Released high-definition in-car camera for law enforcement

The Company’s base business continued to drive sales in the second fiscal quarter with a record backorder climbing to an all-time high of approximately $2.7 million CDN. The backorder is primarily due to an increase in camera sales and mobile digital recorders of 126% and 65%, respectively, as compared to the same period in fiscal 2015.

Stop-arm camera evaluation sites increased from fourteen to sixteen over the last quarter, representing 1,083 buses owned by various school districts. Gatekeeper is in the process of working with school districts, law enforcement, and judicial systems in an effort to close evaluation sites, moving to shared revenue contracts.

The Company is in the final stages of executing on its first five-year revenue sharing contract (the “Contract”) in the stop-arm camera business with Jones County School District in Georgia.  Equipment is scheduled to be installed April 16^th and 17^th, 2016 with a Press Day scheduled for April 27^th, 2016. Pursuant to the Contract, Gatekeeper will receive 50% of the revenue from each citation issued with 25% shared with the school district and 25% shared with Jones County.  Stop-arm violation fines in Georgia are $300 USD for first time offence, $750 USD for second time offence and $1,000 USD for third time offence.  The Company anticipates receiving proceeds from ticket citations prior to the end of the current fiscal year.

There is an estimated 13 to 15 million stop-arm violations in the United States with legislations now passed in thirteen States that allow video enforcement technology to be used to issue citations.     

PRODUCT NEWS

During the second quarter, the Company continued product development activity, completing a number of new products including the release of its new airborne high-definition recorder to meet requirements for a new contract received from defense contractor Stirling Computers Corporation for use on United States Air Force AC-130 Gunships.  The Company also released its MX12 miniature sized high-definition forward facing camera designed for law enforcement as well as other vehicles.  The new MX12 measures only two inches in length which is ideal for mobile applications where space is a premium. 

MOVING AHEAD

The Company continues to plan for expanding sales in multiple markets including the transition of analog cameras to high-definition, stop arm camera market and body cameras. To date, Gatekeeper has been working towards the following initiatives:

• • • • • Working with strategic software and alliance partners to build Gatekeeper brands in law enforcement as well as other mobile markets
        • Executing on revenue sharing programs with Gatekeeper’s stop arm cameras and Ticket Infraction Management software
        • Transitioning stop arm camera evaluation projects to revenue sharing contracts
        • Expanding distribution of Gatekeeper’s high-definition products in the Company’s base business
        • Continuing analysis on revolving lines of credit options for inventory and general operating capital

Doug Dyment, President and CEO commented, “The second quarter revenue increase and profitability are indicators that we are successfully executing on our business strategy.  During the second quarter we allocated more resources to our base business in an effort to achieve profitability while at the same time we continued to move forward finalizing software features for our Jones County revenue sharing contract in Georgia.  The Jones County project is our first five-year revenue project.  Our plan is to begin issuing citations in the third quarter this fiscal year. We have 16 other stop arm camera projects in the evaluation phase all of which are in various stages.  We are in the process of negotiating revenue sharing contracts and hope to land several more contracts in the coming months.  We also continue to move forward with our Sungard integration which was slowed because of technical requirements and resources required to complete and continue to work with Sungard to adjust the development schedule.  We are bullish on our strategy to bring new capabilities to the law enforcement market with unique integration of body cameras, in-car video systems and Computer Aided Dispatch (“CAD”) software.” 

Dyment also added, “During the second quarter, we set a new record backorder of close to $3 million in purchase orders.  As of February 29, 2016 we reduced the backorder to $2.12 million which gives us positive momentum going into the third fiscal quarter.  We are in the process of analysing various non-dilutive financing options including lines of credit to assist with inventory and general operating expenses.“

 

Summary of Financial Results and Information

	Three months ended		% change	Six months ended		% change
	February 29, 2016	February 28, 2015		February 29, 2016	February 28, 2015
Revenue	$   1,726,008	$     1,087,172	59%	$   2,681,582	$      2,019,027	33%
Cost of Sales	$      823,312	$        553,039	49%	$   1,341,919	$      1,119,048	20%
Gross Profit	$      902,696	$        534,133	69%	$   1,339,663	$         899,979	49%
Expenses	$      881,126	$        808,920	9%	$   1,915,715	$      1,637,778	17%
Operating Income (Loss)	$         21,570	$       (274,787)	(109%)	$     (576,052)	$        (737,799)	(22%)
Net Income (Loss) for the period	$         66,024	$       (237,439)	(128%)	$     (511,223)	$        (673,319)	(24%)
Earnings (Loss) per share –
Basic	$             0.00	$             (0.01)		$           (0.01)	$              (0.02)
Diluted	$             0.00	$             (0.01)		$           (0.01)	$              (0.02)
	February 29,	February 28,		February 29,	February 28,
	2016	2015		2016	2015
Total Assets	$   3,003,596	$     1,473,609		$   3,003,596	$      1,473,609
Total Liabilities	$      886,164	$        697,495		$      886,164	$         697,495
Total Shareholders’ Equity	$   2,117,432	$        776,114		$   2,117,432	$         776,114

Financial Reports

Full details of the financial reports and operating results for the three and six months ended February 29, 2016 are described in the Company’s condensed interim consolidated financial statements with accompanying notes and related Management’s Discussion and Analysis.  These documents and additional information on Gatekeeper are available on SEDAR at www.sedar.com

About Gatekeeper Systems Inc.

A TSX-V Company since 2013, Gatekeeper Systems Inc. has provided total mobile video security solutions to over 3,500 customers and has installations in every state and province in North America. Customers include school districts, public transit, law enforcement and military. 

For more information visit: www.gatekeeper-systems.com.

On behalf of the Board,

Douglas Dyment

President & CEO

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Cautionary Note Regarding Forward-Looking Statements: Certain statements made in this press release that are not historical facts are forward-looking statements and are subject to important risks, uncertainties and assumptions, both general and specific, which give rise to the possibility that actual results or events could differ materially from our expectations expressed in or implied by such forward-looking statements. As a result, we cannot guarantee that any forward-looking statement will materialize and readers are cautioned not to place undue reliance on these forward looking statements. For more exhaustive information on these risks and uncertainties, the reader should refer to the risk factors described in the management’s discussion and analysis for the period ended February 29, 2016. The forward-looking statements contained in this press release represent our expectations as of the date hereof. We disclaim any intention and assume no obligation to update or revise any forward-looking statements. Forward-looking statements are presented for the purpose of providing information about management’s current expectations and plans and allowing investors and others to obtain a better understanding of our anticipated operating environment. Readers are cautioned that such information may not be appropriate for other purposes. The Company undertakes no obligations to update or revise such statements to reflect new circumstances or unanticipated events as they occur, unless required by applicable law.

2016-04-12 -NR – Gatekeeper Achieves 81% Revenue and 107% Gross Profit Increase in Second Quarter