Develcon Electronics Ltd. Announces Audited Year End Results.

SASKATOON, SASKATCHEWAN--(BUSINESS WIRE)--Dec. 18, 1996-- Develcon Electronics(TSE  DLC. ) Develcon Electronics Ltd. today announced its audited results for the year ended August 31, 1996 as follows (Canadian funds): -0-

                        Year Ended       Year Ended
                     August 31, 1996   August 31, 1995

Sales                   $17,968,000      $13,955,000
Net Income (Loss)       $(8,554,000)     $  (899,000)
Income (Loss) Per Share $     (0.25)     $     (0.04)

Audited results for the year ended August 31, 1996 reflect a net loss of $8,554,000 or $0.25 per share, compared with a net loss of $899,000 or $0.04 per share a year earlier.

Sales of product and support service revenues for the twelve months ended August 31, 1996 were $17,968,000 compared with revenues of $13,955,000 in the same period of fiscal 1995. Revenues for the quarter ended August 31, 1996 were $4,445,000 compared with $3,552,000 in the fourth quarter of fiscal 1995.

In the three months ended August 31, 1996 the net loss was $6,346,000 versus a net loss of $79,000 in the comparable quarter a year earlier.

The weighted average number of shares outstanding was 34,909,238 and 44,694,106 during the year and three months ended August 31, 1996 and 20,279,046 during the year and three months ended August 31, 1995.

The full year and fourth quarter loss included $4,041,000 of unusual items and other one-time costs related to the re- positioning and restructuring of the Company's operations. The loss includes $2,092,000 of severance and reorganization costs associated with the previously announced elimination of 37 functional positions, primarily in the areas of manufacturing support and administration. The loss also includes a $494,000 writedown in the value of goodwill related to the Company's contract manufacturing operation and $525,000 of goodwill amortization which relates to the February, 1996 acquisition of EDA Instruments Inc.

"Fiscal year 1996 was a period of dramatic change for our Company and the disappointing financial results do not accurately reflect the fundamental changes in the scope of the Company's operations and the possibilities for future growth which now exist," stated Mr. Geoffrey H. Bennett, President and Chief Executive Officer.

"Through internal product development and the acquisition of EDA, Develcon now markets, on an international basis, an expanded range of inter-operable LAN equipment supporting leased lines, ISDN and Frame Relay services in addition to an extensive portfolio of WAN data communications equipment providing network infrastructure and multi-protocol access solutions."

"Delays in the introduction of connection management and interoperability features across the bridge router LAN product line were the principal reasons for the disappointing revenues realized throughout the 1996 fiscal year," added Mr. Bennett. "The major objectives for the Company in the 1997 fiscal year are first, to return the Company to a cash flow breakeven and profitability and second, to integrate the operations and product lines of Develcon and EDA in order to provide one seamless range of product and support services."

Develcon announced in November, 1996, the completion of a $3.75 million Special Warrant financing with certain of its institutional shareholders.

Develcon is a leading Canadian designer, manufacturer and supplier of dependable, easy to use, standards-based computer networking equipment with special emphasis on remote LAN access, using ISDN and Frame Relay WAN services. Products include switches, hubs, bridges and routers. It markets all its products through Business Partners in over 80 countries.

The Common Shares of Develcon Electronics Ltd. are listed on The Toronto Stock Exchange (symbol DLC).

CONTACT: Develcon Electronics Ltd.

Geoffrey H. Bennett, 416/ 425-7800

www.Develcon.com

or

Develcon Electronics Ltd.

R. Scott Merrell, 306/ 933-3300

306/ 931-1370 (FAX)

www.Develcon.com