CON-SPACE Communications Ltd. To Purchase Search Systems, Inc. US$9.9 Million, Including Adjustments

CON-SPACE Communications Ltd. (TSX-V:CCB), today announced that it has concluded negotiations to acquire all of the outstanding shares of Search Systems, Inc. (“Search Systems”) of Bakersfield, CA, a leading manufacturer and supplier of enhanced search and inspection systems using video, sound and vibration technology.

CON-SPACE expects the combination of the two companies to increase both sales and earnings to the benefit of its shareholders. The combined 2008 annual sales are expected to exceed $17M with annual earnings in excess of $2.5M.

“We are very pleased with this transaction,” said CON-SPACE Chairman, James L. Swanson. “The owners and management of Search Systems are to be commended for having built such a fine company. Their products are second-to-none and we look forward to carrying on their legacy with pride.”

The acquisition of Search Systems is for a purchase price of US$9.9 million plus adjustments for working capital and certain recent product development expenses. The purchase price is payable in cash on closing, subject to vendor take-back financing to the owners of US$1.5 million payable with interest at 6% per annum over a 7-year term. The vendor financing is to be secured by a charge on the assets of Search Systems, subject to senior debt.

Financing for the acquisition includes a proposed loan from an international company (the “Lender”) of Cdn$6 million with a five year term and interest at the rate of 18% per annum payable quarterly. Principal on the loan is due at maturity and is subject to certain rights of prepayment. The Lender is to receive warrants for 300,000 shares of CON-SPACE exercisable over five years at a price of $1.00 per share during the first three years, $1.10 per share during the fourth year and $1.22 per share during the fifth year. The loan is to be secured by all of the assets of CON-SPACE and its subsidiaries subject to security with respect to bank credit facilities with the Bank of Montreal.

As further financing for the acquisition, CON-SPACE is to complete a private placement of 4,000,000 units totaling Cdn$4 million, including 1,500,000 units to the Lender. Each unit is priced at Cdn$1.00 per unit and consists of one common share of CON-SPACE and one-quarter of one common share purchase warrant, with each whole warrant exercisable into one common share on payment of $1.00 per share if exercised during the first three years, $1.10 per share if exercised during the fourth year and $1.22 per share if exercised in the fifth year.

The acquisition of Search Systems and the financings, which are to close concurrently, are anticipated to be completed next week and are subject to finalization of documentation and to regulatory approval.