Victoria, British Columbia, Canada – Monday, May 14, 2007 – Carmanah Technologies Corporation (TSX: CMH) will be restating its financial statements for the year ended December 31, 2006 to adjust for inventory errors.
The result of the correction is an increase in cost of goods sold by $753,000, a reduction in inventory of $385,000 and an increase in accounts payable of $368,000. The correction also reduces net income by $499,000, resulting in a net loss of $365,000 ($0.01 loss per share) for the year ended December 31, 2006.
Cause of Restatement
In the process of preparing its Q1 2007 financial statements, the Company’s review procedures around inventory-related adjustments indicated that a significant number of these adjustments were connected to Carmanah’s 2006 year end inventory count.
Two causes have been identified for the errors:
- Goods physically received near year end were not recorded in the Company’s ERP system. These goods were included in the physical count but no corresponding liability was identified. Identification of this error was delayed because (1) the original invoice was misdirected to a former company location and (2) there was a 90 day settlement period with the vendor.
- Inventory count errors related to improper item identification during the physical count. These errors resulted in a difference in the value of items being counted as compared to their actual value. In addition, mislabeling of carton quantities by one of the Company’s suppliers caused a discrepancy in quantity.
The errors above were detected in part due to enhanced cycle counting of inventory instituted in the first quarter of 2007. In addition to ongoing cycle count activity, management recently performed a count of key inventory items which did not indicate any additional material errors.
The company will file its restated financial statements as soon as possible.
The following financial data present the line items affected by the restatement on Carmanah’s previously issued consolidated financial statements for the year ended December 31, 2006.
As at December 31, 2006:
| Consolidated Balance Sheet | |||
| Previously Reported | Adjustments | As Restated | |
| Inventories | $ 20,737,841 | (385,000) | 20,352,841 |
| Future income taxes | 1,473,484 | 94,831 | 1,568,315 |
| Accounts payable and accrued liabilities | 7,963,883 | 368,000 | 8,331,883 |
| Income taxes payable | 389,097 | (158,658) | 230,439 |
| Retained earnings | $ 493,064 | (499,511) | (6,447) |
| Consolidated Statement of Operations | |||
| Previously Reported |
Adjustments | As Restated | |
| Cost of sales | $ 41,147,512 | 753,000 | 41,900,512 |
| Gross profit | 21,298,348 | (753,000) | 20,545,348 |
| Operating income | 1,154,576 | (753,000) | 401,576 |
| Earnings before income taxes | 1,338,503 | (753,000) | 585,503 |
| Income tax expense | 1,204,017 | (253,489) | 950,528 |
| Net earnings | $ 134,486 | (499,511) | (365,025) |
| Consolidated Statement of Cash Flows | |||
| Previously Reported | Adjustments | As Restated | |
| Net earnings | $ 134,486 | (499,511) | (365,025) |
| Future income taxes (recovery) | (516,133) | (94,831) | (610,964) |
| Net changes in non-cash working capital | $ (10,298,589) | 594,342 | (9,704,247) |
There were no changes to investing or financing cash flows.
About Carmanah Technologies Corporation
With more than 250,000 installations worldwide, Carmanah is one of the world’s premier suppliers of renewable and energy-efficient technologies, including solar-powered LED lighting, solar power systems & equipment and LED illuminated signage.
Carmanah is headquartered in Victoria, British Columbia, Canada and has branch offices and/or sales representation in 11 cities across Canada, the United States and the United Kingdom. The Company is publicly traded with common shares listed on the Toronto Stock 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”
Praveen Varshney, Director
For further information, please contact:
Investor Relations:
Mark Komonoski
Manager of Investor Relations
Carmanah Technologies Corporation
Tel: (403) 470-8384
Toll-Free: 1-877-255-8483
Media:
David Davies
Public Relations
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 Carmanah’s Annual Report for the fiscal year ended December 31, 2006, as filed with the U.S. Securities and Exchange 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.