Interview with: James Zahn, President and CEO - featuring: their infrared night vision technology, 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 applications.and has also been approved by Health Canada as a Medical Device manufacturer and is working on using imaging as a diagnostic tool for breast cancer screening.

Cantronic Systems Inc. (CTS-TSXV)

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Cantronic Systems is in the right place at the right time as infrared cameras are no longer just a military marketplace, but growing commercial applications include homeland defense, boarder protection, transit, industrial monitoring, housing, automobiles and medical

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Security Technology
Infrared Night Vision
(CTS-TSXV)


Cantronic Systems Inc.

63A Clipper Street
Coquitlam, BC V3K 6X2 Canada

Phone: 604-516-6667 x 228

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James Zahn
President and CEO

Interview conducted by:
Lynn Fosse, Senior Editor
CEOCFOinterviews.com
Published – March 1, 2007

BIO:
James Zahn, President and Chief Executive Officer and Director
Mr. Zahn, the founder of Cantronic Systems Inc., has a proven track record as an engineer and manager. Mr. Zahn has guided all Cantronic’s activities since inception and will continue to lead its efforts in the future. Mr. Zahn received his Master of Science Degree from University of British Columbia in 1989.

Mr. Zahn is the year 2003 recipient of the Queen’s Golden Jubilee Medal. This medal commemorated the fiftieth anniversary of Her Majesty’s reign as Queen of Canada and is awarded to Canadians who have made a significant contribution to their fellow citizens, their community, or to Canada.

Company Profile:

Cantronic is a leader in infrared night vision technology, 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 applications. Cantronic has also been approved by Health Canada as a Medical Device manufacturer and is working on using imaging as a diagnostic tool for breast cancer screening. Cantronic’s technology has been widely featured by national and local media.

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.  This technology, developed by the renowned NASA Jet Propulsion Laboratory in Pasadena, California, has many applications in defense as well as in the field of security and surveillance. To date, in excess of US $15 million has been spent on developing the technology, which, in April 2001, was inducted into the NASA Space Technology Hall of Fame. QWIPTECH is currently developing an aerial land mine detection system for the US Army Research Laboratory. It has also been contracted by SELEX (formerly BAE Systems), a world-renowned leader in infrared systems, to supply infrared detectors for their Sigma Hunter large format infrared camera.

Cantronic is a Tier 1 issuer on the TSXV trading under the symbol CTS.

CEOCFO
: Mr. Zahn, what was your vision when you founded Cantronic and where are you today?
Mr. Zahn: “I was involved in the technology business and wanted to make some products and see where we could go with the technology, so I founded Cantronic. After several years in business, we want to really build our business. We went public in 2005 and in 2006, we did an acquisition through merger with a United States company that has a very unique nice technology that will provide vertical consolidation among our products and their products; there is synergy. The company is called QWIP Systems Inc., they were traded on the TSXV, ticker symbol QWP; they and their subsidiary QWIPTECH have a worldwide license from Caltech (California Institute of Technology) to produce and sell infrared detectors and sensors based on Caltech’s Quantum Well Infrared Photodetector technology.”

CEOCFO: Will you tell us about your principle products and how they are going to change with the acquisition?
Mr. Zahn: “Cantronic Systems manufactures infrared imaging cameras that can be used for homeland security, medical applications and for some industrial applications to detect hotspots. Cantronic designs electronics and make systems so we were classified as a system builder, but we did not have the sensors, which in this sector people call detectors. In the past, we would have to buy detectors from third parties, but with the acquisition of QWIPTECH, which has been in business for several years, we acquired their third generation infrared detector called the QWIP Based Detector. Therefore, this gives us an internal source for the core portion of the camera, which is the detector. That allows Cantronic and QWIPTECH together to produce cameras with a better performance and with special features that fit our customers’ requirements.”

CEOCFO: Will you tell us about the infrared industry in general?
Mr. Zahn: “The infrared industry is growing; it used to be military use only and 10 to 20 years ago, the cost to produce was very expensive, so people could not find commercial applications for it. Recently with technology advancement, the costs for these products are coming down significantly, so people are starting to look for commercial applications. Today the commercial side of the business is more booming than military applications, which is primarily dependent on military budget. Therefore, the growth is really coming from the commercial applications including homeland security, border protection, seaports, as well as industrial monitoring for substations, and also including applications hunting for marijuana grow-up operations, which has been growing fast too. People can use infrared cameras to do roof surveys to find leaks in a building. Another application we are finding interest in is the driver vision system, which Cadillac started with an infrared camera mounted in that car to let you see nighttime images and that application is growing as well.”

CEOCFO: How do you market your products?
Mr. Zahn: “We market our products through a network of business partners, distributors, and OEM customers as well. In some applications with the government, we do direct biddings our self. We are also in the GSA supplier, which is the US government service supplier. Most of our products can be found on the GSA network as well.”

CEOCFO: Do you need to maintain an inventory of your products or do you produce based on orders?
Mr. Zahn: “For our standard cameras we maintain inventory and for some of the high-end, expensive items, we build to order. For our QWIPTECH products, it is primarily still military based projects, so it is more of a project-based business.”

CEOCFO: You had a very recent order for cameras for the subway in the United States, will you tell me about that?
Mr. Zahn: “Our personal participation is for infrared illuminators. That device generates and illuminates infrared light in a dark area, so cameras equipped with a night vision capability can see into the darkness. That project is done through our business partner, Videolarm Inc., a closed circuit television (CCTV) camera and accessory manufacturer based in Atlanta, Georgia. The integrator who got the project is Lockheed Martin (NYSE: LMT); it is for the Northeastern US subway system and the quantity they ordered is the single largest one that the company has received. It is over several hundred units. The infrared illuminator itself is not a high value item, so the value is reasonable. We have channeled the business through our business partner, so our portion is smaller compared to the complete project, but it is still a sizeable order. That also reflects our philosophy that we want to work with our business partners. In this particular case, Lockheed Martin approached us, they want us to supply directly and since it is our business partner, Videolarm who started the project, we had to tell Lockheed Martin that this project had already been bid through Videolarm and they are ok with that.”

CEOCFO: What is it about a Cantronic product that makes a company like Lockheed Martin want Cantronic for the project?
Mr. Zahn: “It is the unique design and capability. In this particular case, the infrared illuminator is a patented technology and we have a US patent on it. The particular unit that is chosen by Lockheed Martin in this case is one of the top end and a covert application product. It is an infrared illuminator, which is like an infrared lamp, but when it is on, you can not see it. Therefore, the covert application means that you do not know if it is on or not by your naked eye; you have to see it through a camera, so for security applications in fighting terrorism it is perfect, as well as the subway systems that are very dark. You want to be able to see yourself, but you do not want terrorists or potential suspects to know that they are being watched.”

CEOCFO: Do you do much in research and development?
Mr. Zahn: “We spend a lot of time and effort in R&D and product development. It is an ongoing process with Cantronic as well was QWIP Systems. Our QWIPTECH subsidiary so far has spent a lot of time and money developing the technology, so they are continuously improving on the technology. With Cantronic Systems as camera builder, we have been spending a lot of time and effort in developing new products. Every year we probably have a few new products released for the market.”

CEOCFO: You are a public company; what is the financial picture like for the company?
Mr. Zahn: “Right now we are still small; a few million-dollar company, but we do through our new acquisition plan to grow the company quite fast. Of course, organically we will have a moderate growth rate, but it is through mergers and acquisitions that we really want to grow the company.”

CEOCFO: Why is this a good time for potential investors to be interested and what might people miss when they first look at Cantronic?
Mr. Zahn: “Cantronic is still a small and early-stage company, so stock prices are lower. Therefore, the cost of ownership is much lower now and it is the time where we are on a plan for faster growth in the future, so this is a good time to get in and own some Cantronic stock.”

CEOCFO: Final thoughts for our readers?
Mr. Zahn: “We are aggressive and have a good team of management in-place right now. We have been public for more than a year and in the last year management has been learning the public side of the business and we now have enough experience that we know what to do to grow the company and meet shareholder expectations in the future.”


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“Cantronic Systems manufactures infrared imaging cameras that can be used for homeland security, medical applications and for some industrial applications to detect hotspots. Cantronic designs electronics and make systems so we were classified as a system builder, but we did not have the sensors, which in this sector people call detectors. In the past, we would have to buy detectors from third parties, but with the acquisition of QWIPTECH, which has been in business for several years, we acquired their third generation infrared detector called the QWIP Based Detector. Therefore, this gives us an internal source for the core portion of the camera, which is the detector. That allows Cantronic and QWIPTECH together to produce cameras with a better performance and with special features that fit our customers’ requirements.” - James Zahn

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