Vancouver, BC, Canada – (October 21, 2004) – Carmanah Technologies Corporation (TSX VE: CMH; Berlin and Frankfurt Stock Exchanges: QCX), is pleased to announce its second quarter results for the 3 month periods ended June 30, 2003 and 2002.
Carmanah’s total revenues for the three months ended June 30, 2003 increased to $1,608,024, compared to $1,513,733 for the same period in 2002. Due to sales timing, the Company also possessed a production backlog of $186,000 at the end of the quarter. Net income for the quarter was $(82,887) compared to $31,140 for the same period in 2002.
“This has been an interesting and challenging quarter for the Company”, states Art Aylesworth, Carmanah’s CEO. “On one hand the sales of our marine products were excellent and continue to meet or exceed forecasts. Sales in the secondary markets for our navigation and hazard markers, such as aviation, were also very positive. Interest in our technology in general continues to rise.
Three issues, however, have had an effect on our overall revenue growth and profitability for the quarter. First, the 11% upward shift in the Canadian dollar relative to the US dollar has cost the Company an equivalent reduction in top line revenues as most sales are in US dollars. Second, the general state of the US economy has delayed many significant deals in our pipeline, as capital purchases are pushed back due to tightened US budgets. Finally, we underestimated the time required to develop substantial ‘roll-out’ type sales in the transit market for our i-STOP(tm) and i-SHELTER(tm) product lines. Our targeted timelines for roll-out sales were based on how rapidly our transit clients were accepting field trial units.
To compensate for the upswing in the Canadian dollar, we have adjusted our pricing scheme and have focused attention at reducing our overall manufacturing costs. Regardless of US economic issues, we are confident that the overall opportunities for our technology in North America will outweigh the soft economy and sales will continue to grow. To assist our transit clients with purchase timing for their large-scale orders, we are working to provide financing alternatives that accommodate their budgetary constraints. We are optimistic that our significant investment into the transit market will be rewarded.”
It is important to note that Carmanah’s sales prospect pipeline remains at its highest level in the Company’s history. “There are a number of significant projects underway that should complete before the end of the year that will contribute to strong 2003 financial results. Carmanah has done a good job of introducing itself to several market sectors on a global scale and the space we’ve identified as ‘solar-powered LED lighting’ is clearly a rising star. The opportunities continue to expand and we are pleased with our development to-date”, states Aylesworth.
SUMMARY OF RESULTS FOR 2003
3 Months Ended June 30
Carmanah’s total revenues for the three months ended June 30, 2003 increased 6% to $1,608,024, compared to $1,513,733 for the same period in 2002. Revenues are derived from the sale of solar-powered LED (light emitting diode) hazard, safety and navigation lights. Sales are sourced through a worldwide distribution network and direct sales efforts in key market segments and territories.
Net income was $(82,887) compared to $31,140 for the same period in 2002. Earnings before interest, taxes, depreciation and amortization (EBITDA) was $(14,174) compared with $143,158 for the same period in 2002.
Carmanah’s gross profit margin was 56% of sales, a 1% reduction over previous year’s 57% gross profit margin for the second quarter. This decrease was primarily the result of the decline of the US dollar, relative to the Canadian dollar, as the Company’s product pricing was pegged in US dollars. It is important to note that the 56% represented a 3.5% gain in gross margin over the 52.5% recorded during the first three months ended March 31, 2003. This gain was primarily due to adjustments made to the Company’s purchasing practices.
6 Months Ended June 30
Carmanah recorded a record $3,514,502 in revenues. This was an increase of 21% over the same period in 2002 at $2,894,777.
Direct cost of goods totaled $1,608,631 as compared to $1,248,166 for the six months ended June 30, 2002. Gross profit as a percentage of sales was 54% as compared to 56% during the same period in 2002.
Sales and marketing expenses in 2003 were $296,967, representing a 13% increase or $34,285 over 2002 at $262,682. Carmanah continues sales and marketing activities for new and existing product lines throughout its worldwide marketplace. It is important to note that much of the Company’s sales and marketing resources are invested in emerging markets, such as transit, aviation and roadways. These markets are expected to realize significant future revenues, but offer minimal contribution to the budget for 2003.
During the first half of 2003, research and development expenses of $344,722 represented an 8% increase over the previous year’s $319,693. The $344,722 research and development expense incurred to June 30, 2003 is net of eligible expenses recovered under a grant awarded to the Company by Sustainable Development Technology Canada. Under the terms of the agreement, the Company will be reimbursed for certain research and development costs incurred to develop and commercialize specific projects to a maximum contribution of $500,000. As at June 30, 2003, eligible research and development expenses in the amount of $124,690 were recovered. As a percentage of sales, research and development expenses for the six months ended June 30, 2003 were 13% (before grant recovery), whereas they were 11% for the same period in 2002.
Wages and benefits expense increased 34% to $878,169, compared with $655,972 for the same period in 2002. This increase is the result of an increase in sales and administrative staff in support of planned sales growth. The Company also hired a Vice President of Sales and Marketing in July 2002, whose wage cost is not reflected in the June 30, 2002 comparative figures.
Office and administration expenses were $345,265, representing a 32% increase over 2002 at $262,185. During the first half of 2002, Carmanah was operating out of one building. It has since expanded into an adjacent building, resulting in increased rent, utilities and general office costs.
Net income was $(69,972) compared to $6,560 for the same period in 2002. Earnings before interest, taxes, depreciation and amortization (EBITDA) was $49,709, compared with $191,738 for the same period in 2002.
Carmanah’s cash and cash equivalents at June 30, 2003 were $1,561,375, compared to $679,100 at December 31, 2002. The increase is due primarily to receipt of funds raised on the issuance of 2,000,000 shares at $0.74, resulting in net proceeds of $1,264,519. Approximately $557,000 of the cash usage is the result of increased inventory levels, acquisition of capital equipment and leasehold improvements, and paying down the Company’s line of credit. The Company’s net working capital at June 30, 2003 is $3,399,648 (current ratio of 6.10:1) as compared to $2,006,148 (current ratio of 2.71:1) at December 31, 2002.
About Carmanah Technologies Inc.
Carmanah is an award winning alternative energy manufacturer specializing in patented solar-powered LED lighting solutions for the marine, transit, roadway, railway, aviation and mining markets. The company has more than 50,000 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
For further information, please contact:
Corporate Contacts:
Mr. Praveen Varshney, Director
Tel: (604)629-0264
Toll-Free: 1-866-629-0264
Media Contact:Mr. David Davies
Harbourwerks Communications
Tel: (250)382-4332
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 our Annual Report for the fiscal year ended December 31, 2001, 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 our Annual Information Form dated December 31, 2001, as filed with the British Columbia Securities Commission and which are incorporated herein by reference. We do not assume any obligation to update the forward-looking information contained in this press release.
CARMANAH TECHNOLOGIES CORPORATION
Consolidated Balance Sheets
June 30, 2003 and December 31, 2002
(Unaudited – Prepared by Management)
| June 30, 2003 |
December, 2002 |
||
| Assets | |||
| Current assets: | |||
| Cash and cash equivalents | $ 1,561,375 | $ 679,100 | |
| Accounts receivable | 1,027,955 | 1,366,780 | |
| Inventories | 1,396,825 | 1,057,666 | |
| Prepaid expenses and deposits | 55,950 | 43,513 | |
| Current portion of advances receivable |
23,000 | 26,844 | |
| 4,065,105 | 3,173,903 | ||
| Advances receivable | 90,502 | 111,500 | |
| Equipment and leasehold improvements | 502,528 | 471,079 | |
| Patents | 37,443 | 34,154 | |
| $ 4,695,578 | $ 3,790,636 | ||
| Liabilities and Shareholders’ Equity | |||
| Current liabilities: | |||
| Accounts payable and accrued liabilities |
597,445 | 947,014 | |
| Bank loan | 30,000 | 140,000 | |
| Deferred revenue | – | 11,042 | |
| Current portion of long-term debt |
10,858 | 21,684 | |
| Current portion of obligations under capital lease | 25,014 | 48,015 | |
| Due to related parties | 2,140 | – | |
| 665,457 | 1,167,755 | ||
| Long-term debt | 55,139 | 55,139 | |
| Obligations under capital leases | 49,566 | 49,566 | |
| Shareholders’ equity: | |||
| Share capital | 4,695,350 | 3,256,336 | |
| Contributed surplus | 64,386 | 26,188 | |
| Deficit | (834,320) | (764,348) | |
| 3,925,416 | 2,518,176 | ||
| $ 4,695,578 | $ 3,790,636 | ||
CARMANAH TECHNOLOGIES CORPORATION
Consolidated Statements of Operations and Deficit
For the six months ended June 30, 2003 and 2002
(Unaudited – Prepared by Management)
| For the six months ended, June 30, |
|||
| 2003 | 2002 | ||
| Sales | $ 3,514,502 | $ 2,894,777 | |
| Cost of Sales | 1,608,631 | 1,248,166 | |
| 1,905,871 | 1,646,611 | ||
| Operating Expenses: | |||
| Wages and benefits | 878,169 | 655,972 | |
| Office and administration | 345,265 | 262,185 | |
| Research and development | 344,722 | 319,693 | |
| Sales and marketing | 296,967 | 262,682 | |
| Bank charges and interest | 39,049 | 21,060 | |
| Amoritization of: | |||
| Equipment and leasehold improvements | 75,859 | 48,714 | |
| Deferred development costs | – | 111,249 | |
| Patents and other intangible assets | 4,773 | 4,155 | |
| $ 1,984,804 | $ 1,685,710 | ||
| Operating loss | (78,933) | (39,099) | |
| Interest and other income | 8,961 | 45,659 | |
| Net earnings (loss) for the period | (69,972) | 6,560 | |
| Deficit, beginning of period | (764,348) | (800,741) | |
| Deficit, end period | (834,320) | (794,181) | |
| Earning (loss) per share – basic and diluted |
$ (0.03) | $ 0.000 | |
| Weighted average number of shares outstanding |
21,793,688 | 20,480,113 | |