Vancouver, BC, Canada – (October 21, 2004) – Carmanah Technologies Corporation (TSX VE: CMH; Berlin and Frankfurt Stock Exchanges: QCX), is pleased to announce its first quarter results for the three months ended March 31, 2004 and 2003.
Highlights for the quarter:
- Record revenues of $4,113,701, representing a 115% increase over Q1 2003 and a 24% increase over the prior Company record achieved in Q4 2003;
- Earnings before income tax, depreciation and amortization (EBITDA) was $458,156;
- Net earnings of $369,492 for the quarter, as compared to $12,915 for Q1 2003;
- Gross profit margin increasing to 52% from an average of 51% for fiscal 2003.
“This has been a very strong quarter for Carmanah, consistent with our financial objectives for 2004.” stated Art Aylesworth, Carmanah’s CEO. “Building on the significant momentum of Q4 2003, we are now making excellent headway in all strategic areas of our business. Although we achieved record revenues and profitability for Q1 2004, it is important to note that the first half of our fiscal year is historically slower than the last half, and Q1 2004 provides an excellent foundation for the remainder of the year.”
SUMMARY OF RESULTS
Carmanah’s total revenues for the three months ended March 31, 2004 increased 115% to $4,113,701 compared with $1,906,478 for the same period in 2003. Revenues were derived from the sale of its existing product line of solar powered light-emitting diode hazard and safety lights to marine, roadway and aviation markets, from the sale of new products primarily consisting of the illuminated bus shelters and bus stops to transit markets, and from the sale of edge-lit signs through its newly acquired subsidiary AVVA Light Corporation. Sales were sourced through a worldwide distribution network and direct sales efforts in these key market segments and territories.
Carmanah’s gross profit margin achieved in Q1 was 52% of sales, slightly higher than the annual profit margin achieved in fiscal 2003 of 51%.
Wages and benefits expense for the three months ended March 31, 2004, increased 82% to $804,941, compared with $443,346 in 2003. This increase was the result of an increase in sales and administrative staff in support of planned sales growth, as well as the increase in staffing levels resulting from the acquisition of AVVA in October 2003. As a percentage of sales, wages and benefits expense represents 20% of sales in Q1 2004, compared with 23% of sales in Q1 2003.
Office and administration expenses in first quarter 2004 were $246,802, representing a 56% increase over same period in 2003 at $158,613. Most of the increase in office and administration expense is the result of the acquisition of AVVA, which comprises $77,598 (88%) of the total increase for the period. The total office and administration expenses in Q1 2004 decreased as a percentage of sales to 6% of total sales in, as compared to 8% of total sales in Q1 2003.
During first quarter 2004, research and development expenses of $337,903 represented a 72% increase over $196,664 in the comparative quarter. The continued investment in (1) research for existing product enhancements and (2) new product development has enabled Carmanah to turn out prototypes and products at a faster rate. This ability to keep up with market demands for technology enhancements and new product offerings has rewarded the Company with its current sales momentum. Carmanah will continue to be aggressive with its investment in research and development as the Company works with key market segments on new opportunities. As a percentage of sales, research and development expenses decreased in Q1 2004 to 8% of sales, compared with Q1 2003 at 10% of total sales.
Sales and marketing expenses in first quarter 2004 were $293,773, representing a 106% increase over same period in 2003 at $142,569. The Company continued to increase sales and marketing activities for new and existing product lines throughout its worldwide marketplace. In addition, a significant portion of the overall sales and marketing investment was allocated to markets and products where the Company has identified significant future revenue opportunity. Sales and marketing expense continued to grow as a percentage of sales at a consistent level, with sales and marketing expense representing 7% of total sales for both 2004 and 2003 quarters.
The Company utilized a portion of its carry forward investment tax credits, tax losses and SRED pools in order to minimize any current tax expense. The future income tax effect arising from the use of these items has been offset against available tax losses not previously recognized.
Net earnings for Q1 2004 were $369,492 compared with $12,915 in Q1 2003, and net earnings before income tax, depreciation and amortization (EBITDA) was $458,156, compared with $49,705 for Q1 2003. The net earnings for this quarter at 9% of total sales represent a significant milestone for Carmanah, compared with previous net earnings which been closer to a breakeven point.
Carmanah’s cash and cash equivalents at March 31, 2004 was $6,257,627, compared to $1,693,069 at December 31, 2003. Net cash usage from operations and investing activities was $720,774. During the quarter, the Company closed a private placement financing for gross proceeds of $5,750,000. Net working capital at the end Q1 2004 was $9,772,493, with a current ratio of 5:1 and $55,917 of non-current debt obligations.
About Carmanah
Carmanah is an award winning alternative energy manufacturer specializing in patented solar-powered LED lighting solutions for the marine, aviation, transit, roadway, railway and mining markets. The Company currently has more than 90,000 units installed in 110 countries. The shares of Carmanah Technologies Corporation (parent company) are publicly traded on the TSX Venture Exchange under the symbol “CMH” and on the Berlin and Frankfurt Stock Exchanges under the symbol “QCX”. For more information, please visit www.carmanah.com.
On Behalf of the Board of Directors
Carmanah Technologies Corporation
Praveen Varshney, Director
CARMANAH TECHNOLOGIES CORPORATION
Consolidated Interim Balance Sheets
March 31, 2004 and December 31, 2003
(Unaudited – Prepared by Management)
| March 31, | December 31, | ||
| 2004 | 2003 | ||
| (unaudited) | (audited) | ||
| Assets | |||
| Current assets: | |||
| Cash and cash equivalents | $ 6,257,627 | $ 1,693,069 | |
| Accounts receivable, net | 3,948,453 | 2,698,061 | |
| Inventories | 1,865,842 | 1,904,872 | |
| Prepaid expenses and deposits | 119,481 | 53,376 | |
| 12,191,403 | 6,349,378 | ||
| Equipment and leasehold improvements, net | 1,026,242 | 871,683 | |
| Intangible assets, net | 184,493 | 190,320 | |
| Goodwill | 3,072,173 | 3,072,173 | |
| Future Income taxes | 190,114 | 190,114 | |
| $16,664,425 | $10,673,668 | ||
| Liabilities and Shareholders’ Equity | |||
| Current liabilities: | |||
| Accounts payable and accrued liabilities |
1,984,012 | 1,648,841 | |
| Bank loan | 310,000 | 383,332 | |
| Deferred Revenue | 71,988 | 71,228 | |
| Current portion of long-term debt |
21,848 | 21,848 | |
| Current portion of obligations under capital lease |
31,062 | 55,435 | |
| 2,418,910 | 2,180,650 | ||
| Long-term debt | 27,850 | 33,325 | |
| Obligations under capital lease | 28,067 | 71,656 | |
| 2,474,827 | 2,285,631 | ||
| Shareholders’ equity: | |||
| Share capital | 14,258,323 | 8,831,345 | |
| Contributed surplus | 476,990 | 471,899 | |
| Deficit | (545,715) | (915,207) | |
| 14,189,598 | 8,388,037 | ||
| $16,664,425 | $10,673,668 | ||
CARMANAH TECHNOLOGIES CORPORATION
Consolidated Interim Statements of Operations and Deficit
For the three months ended March 31, 2004 and 2003
(Unaudited – Prepared by Management)
| 2004 | 2003 | ||
| Sales | $ 4,113,701 | $ 1,906,478 | |
| Cost of Sales | 1,947,147 | 904,182 | |
| 2,166,554 | 1,002,296 | ||
| Operating Expenses: | |||
| Wages and benefits | 804,941 | 443,346 | |
| Office and administration | 246,802 | 158,613 | |
| Research and development | 337,903 | 196,664 | |
| Sales and marketing | 293,773 | 142,569 | |
| Bank charges and interest | 29,527 | 14,178 | |
| Amoritization of: | |||
| Capital Assests | 79,039 | 34,562 | |
| Patents and other intangible assets | 9,625 | 2,228 | |
| $ 1,801,610 | $ 992,160 | ||
| Operating income for the period | 364,944 | 10,136 | |
| Interest and other income | 4,548 | 2,779 | |
| Earnings before income taxes | 369,492 | 12,915 | |
| Income tax expense (recovery): | |||
| Current income taxes | 206, 000 | – | |
| Future | (206,000) | – | |
| Net earnings (loss) | 369,492 | 12,915 | |
| Retained earnings (deficit), beginning of year, as previously reported |
(741,505) | (764,348) | |
| Adjustment to reflect change in accounting for employee stock options |
(173,702) | (24,465) | |
| Deficit, beginning of period | (915,207) | (788,813) | |
| Deficit, end of period | (545,715) | (775,898) | |
| Earnings per share | |||
| Basic | $ 0.013 | $ 0.001 | |
| Fully diluted | $ 0.012 | $ 0.001 | |
| Weighted average number of shares outstanding |
|||
| Basic | 27,307,882 | 20,808,266 | |
| Diluted | 29,459,672 | 21,247,693 | |
This release contains forward-looking statements within the meaning of the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements are based on management’s current expectations and beliefs and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties are described under the caption “Note Regarding Forward-looking Statements” and “Key Information – Risk Factors” and elsewhere in Carmanah’s Annual Report for the fiscal year ended December 31, 2003, as filed with the U.S. Securities and Exchange Commission and which are incorporated herein by reference. These risks and uncertainties are also described under the caption “Risk Factors” in Carmanah’s Annual Information Form dated December 31, 2003, as filed with the British Columbia Securities Commission and which are incorporated herein by reference. Carmanah does not assume any obligation to update the forward-looking information contained in this press release.