SOURCE: Carmanah Technologies Corporation

July 11, 2005 20:03 ET

Carmanah Announces Record Financial Results for Q2 2005

Revenues Increase 87% to $6.5 Million

Profit of $387,000

VICTORIA, BC -- (MARKET WIRE) -- July 11, 2005 -- Carmanah Technologies Corporation (TSX-V: CMH) is pleased to announce its results for the three and six months ended June 30, 2005 and 2004.

Highlights for the Quarter:

* Record Q2 2005 revenues of $6,542,507, representing an 87% increase over Q2 2004;

* 2005 year-to-date revenues at record $11,392,049, representing a 50% increase over the same six-month period in 2004;

* Sales order backlog of $1.64 million at close of quarter;

* Net income for the quarter of $387,217 (6% of sales) as compared to a net loss of $156,189 in 2004;

* Year-to-date net earnings of $650,639 (6% of sales) as compared to $213,303 (3% of sales) in 2004.

"We are very pleased with Carmanah's performance for the first six months of 2005," states Carmanah's CEO, Art Aylesworth. "We are on target with management's expectations, and all vertical markets are now contributing significantly to the Company's revenues. In particular, we are seeing a breakout year in the sales of our transit shelter and bus stop lighting products with more than $1.8 million in sales in Q2 2005 alone."

It should be noted that Carmanah's results for the first six months of 2005 do not include revenues from the Company's acquisition of Soltek Powersource Ltd. which closed effective July 1, 2005. Combined revenues will be reflected in the Company's third quarter results.

Summary of Results

Revenues

Carmanah's revenues for the three months ended June 30, 2005 were $6,542,507 as compared to $3,504,092 for the same period in 2004, representing an 87% increase. Revenues for the six months ended June 30, 2005 were $11,392,049, as compared to $7,617,793 for the same period in 2004, representing a 50% increase.

Revenues were derived from the sale of solar-powered LED lighting illumination products to the marine, aviation, transit and roadway markets, as well as from the sale of LED edge-lit signs for point-of-purchase, branding, wayfinding and architectural applications. Sales were realized through both a worldwide distribution network and direct sales efforts.

Carmanah's Transit Division achieved record sales for Q2 2005 in the amount of $1,864,003, representing 28% of Carmanah's total sales for the period. This amount is equivalent to the total transit sales achieved during all of 2004. Carmanah is pleased to see another one of its emerging vertical markets increase its contribution to revenues, providing a more balanced source of revenues to the Company.

Gross Profit Margin

Carmanah's gross profit margin in Q2 was 46%, compared to 57% for the same period in 2004 and compared to a 52% annual average for 2004. For the six months ended June 30, 2005 gross profit margin was 49%, compared with 55% for the same period in 2004. The decrease in gross profit margin is primarily attributed to the increased contribution from the Company's Transit Division. Although the Transit Division contributed the highest percentage to overall sales, it did so at a lower gross profit margin than all of the Company's other divisions. In particular, the Company delivered orders to some key transit customers at significantly lower margins for strategic purposes. As this market vertical matures, Carmanah anticipates that it can strengthen its gross margin through improved manufacturing processes and more efficient materials purchasing.

Wages and Benefits

Wages and benefit expenses for the three months ended June 30, 2005, increased 16% to $1,202,770, compared with $1,039,298 for the same period in 2004. For the six months ended June 30, 2005, wages and benefits expense increased 21% to $2,233,269, compared with $1,844,239 for the same period in 2004. In support of planned growth and expansion, the Company has broadened and strengthened its executive and middle management teams, resulting in increased senior staffing levels in 2005 over 2004. Furthermore, the Company has invested in staffing its UK office and continues to hire administrative staff in support of increased volumes and sales growth. As a percentage of sales, total wages and benefits for the six months ended June 30, 2005 were 20%, down from 24% for the same period in 2004.

Office and Administration

Office and administration expenses in first quarter 2005 were $453,658, representing a 77% increase over same period in 2004 of $256,083. For the first six months of 2005, office and administration expenses were $904,548, an 80% increase over $502,885 for the same period on 2004. The increase through first and second quarters is due primarily to overall growth and expansion in facilities and resources. The Company expanded its Victoria facility to include an additional 6,000 square feet for LED illuminated roadway sign manufacturing and opened an office in London, England (in late 2004). These expansions resulted in increased rent and facility costs as well as general office, administration and information technology in support of new hires for these facilities.

Research and Development

During Q2 2005, research and development expenses of $486,787 represented a 35% increase over $360,078 in the comparative quarter for 2004. For the six months ended June 30, 2005, research and development expenses of $850,012 represented a 22% increase over the same period in 2004.

The Company continues to invest in research and development in support of all verticals. In the marine sector, the Company is completing development of a re-modeled 700 series lantern that provides lighting to up to four nautical miles. In the roadways sector, the development team continues to work towards improvements to the design and manufacturing specifications of its roadway signs. In the transit sector, the engineering team is developing new, lower-cost design solutions for the Company's i-SHELTER™ solar illuminated bus shelter product.

As a percentage of sales for the six months ended June 30, 2005, research and development expenses decreased to 7% of sales, compared with 9% of sales for the same period in 2004.

Sales and Marketing

Sales and marketing expenses in Q2 2005 were $418,478, representing a 13% increase over same period in 2004 of $369,772, and for the six months ended June 30, 2005 was $776,103, representing a 17% increase over $663,545 in the same period for 2004. The Company continued to increase sales and marketing activities for new and existing product lines throughout its worldwide marketplace. Sales and marketing expense for the six months ended June 30, 2005 is 7% of total sales, down from 9% for the same period 2004.

Income Tax

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.

Earnings

Earnings before interest, taxes, depreciation and amortization ("EBITDA") were $476,243 for the three months ended June 30, 2005 as compared to $(31,123) for the same period in 2004, and for the six months ended June 30, 2005, EBITDA was $801,433 as compared to $452,012 for the same period in 2004.

Net earnings for the three months ended June 30, 2005 were $387,217 (6% of sales), compared to a net loss of $156,189 in 2004. Net earnings for the six months ended 2005 were $650,639 (6% of sales) compared with $213,303 (3% of sales) in 2004.

Carmanah is starting to see some of its general operating expenses grow at a slower rate than its sales, resulting in total operating expenses declining as a percentage of sales. Total operating costs in Q2 2005 represented 41% of total sales, down from 48% in Q1 2005. In addition, for the six months ended June 30, 2005, operating costs represented 44% of total sales compared to 52% for the same period in 2004.

Balance Sheet Highlights

Carmanah's cash, cash equivalents, and short-term investments at June 30, 2005 were $8,592,174, compared to $7,751,411 at December 31, 2004. Net cash usage from operations and investing activities was $809,061, which included over $300,000 in leasehold improvements and equipment for the new roadways sign manufacturing facility. During the six months ended June 30, 2005, the Company raised $1,193,693 from the exercise of warrants and stock options. Net working capital for the six months ended June 30, 2005 was $13,241,671, with a current ratio of 5:1 and $7,798 of non-current debt obligations.

Subsequent Events

Subsequent to June 30, 2005, effective July 1, 2005, the Company acquired all of the issued and outstanding shares of Soltek Powersource Ltd. ("SPS"), a leading manufacturer/supplier of solar power systems for industrial, government, residential and retail applications. Carmanah paid $6 million in cash from existing funds and 1,503,756 in common shares at $2.66 per share. An additional contingent payment of up to $2 million worth of common shares at $2.66 may also be payable if SPS reaches specified revenue targets (prorated between $9 million and $12 million) and an EBITDA in excess of 5.5% of revenue for the six-month period ending December 31, 2005. Principal vendors have been issued 300,000 performance warrants with an exercise price of $2.79 (being the weighted average trading price on the closing date of June 30, 2005, conditional upon SPS reaching increased revenue targets (prorated between $12 million and $14 million) and an EBITDA in excess of 5.5% of revenue for the six months ending December 31, 2005. The shares issued to the principal vendors will be held in a pooling agreement providing for the pro rata release of the shares over a two-year period after closing.

About Carmanah Technologies Corporation

Carmanah is an award-winning manufacturer specializing in energy-efficient technologies that fundamentally change the way its customers operate. The Company is currently focused on three technology groups: solar power systems & equipment, solar-powered LED lighting 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. With more than 250,000 installations worldwide, Carmanah is one of the world's premier suppliers of energy-efficient products.

The shares of Carmanah Technologies Corporation 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 "

Praveen Varshney, Director

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, 2004, 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.


CARMANAH TECHNOLOGIES CORPORATION
Consolidated Interim Balance Sheets
(Expressed in Canadian dollars)

June 30, 2005 and December 31, 2004
(Unaudited - Prepared by Management)

=========================================================================
                                                  June 30,    December 31,
                                                    2005           2004
=========================================================================
                                                 (unaudited)     (audited)

Assets
Current Assets:
  Cash and Cash equivalents                   $  1,242,174   $    901,411
  Short term investments                         7,350,000      6,850,000
  Accounts receivable, net                       3,869,179      2,385,728
  Inventories                                    3,242,537      2,758,250
  Receivable from forward foreign exchange
   contract                                        623,750      1,834,350
  Prepaid expenses and deposits                    162,959        271,337
 ------------------------------------------------------------------------
                                                16,490,599     15,001,076
Equipment and leasehold improvements, net        1,544,552      1,072,434
Patents and intangible assets, net                 183,280        170,484
Goodwill                                         3,072,173      3,072,173
Future income taxes                                550,000        550,000
-------------------------------------------------------------------------
Total Assets                                  $ 21,840,604   $ 19,866,167
-------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current Liabilities:
   Accounts payable and accrued liabilities   $  2,576,775   $  1,327,693
   Payable under forward foreign exchange
    contract                                       614,260      1,803,300
   Deferred revenue                                  -             45,421
   Future income taxes                              44,000         44,000
   Current portion of obligation under
    capital lease                                   13,893         21,573
 ------------------------------------------------------------------------
                                                 3,248,928      3,241,987
Obligation under capital lease                       7,798         13,755
-------------------------------------------------------------------------
                                                 3,256,726      3,255,742


Shareholders' Equity:
   Share capital                                17,513,325     16,322,119
   Contributed surplus                             742,298        610,690
   Retained Earnings (Deficit)                     328,255       (322,384)
-------------------------------------------------------------------------
                                                18,583,878     16,610,425
-------------------------------------------------------------------------
                                               $21,840,604   $ 19,866,167
=========================================================================



CARMANAH TECHNOLOGIES CORPORATION
Consolidated Interim Statements of Operations and Retained
 Earnings (Deficit)
(Expressed in Canadian dollars)
For the three and six months ended June 30, 2005 and 2004
(Unaudited - Prepared by Management)
=========================================================================
                         Three months ended          Six months ended
                              June 30,                    June 30,
                           2005       2004           2005         2004
=========================================================================
 Sales                 $6,542,507  $3,504,092    $11,392,049   $7,617,793
 Cost of Sales          3,504,571   1,509,984      5,826,684    3,457,131
-------------------------------------------------------------------------
                        3,037,936   1,994,108      5,565,365    4,160,662

Operating Expenses
    Wages and
     benefits           1,202,770   1,039,298      2,233,269    1,844,239
    Office and
     administration       453,658     256,083        904,548      502,885
    Sales and
     marketing            418,478     369,772        776,103      663,545
    Research and
     development          486,787     360,078        850,012      697,981
    Bank charges and
     interest              28,772      26,612         47,390       56,139
    Amortization of:         -
      Equipment and
       leaseholds          92,501      96,463        167,192      175,502
      Intangible
       assets              11,252      10,128         22,121       19,753
    ---------------------------------------------------------------------
                        2,694,218   2,158,434      5,000,635    3,960,044


Operating income (loss)   343,718    (164,326)       564,730      200,618


Other income
     Interest and other
      income               43,499       8,137         85,909       12,685
   ----------------------------------------------------------------------
                          387,217    (156,189)       650,639      213,303


Income tax expense
 (recovery)
     Current income
      taxes               184,000      64,000        248,000      270,000
     Future income
      taxes              (184,000)    (64,000)      (248,000)    (270,000)
-------------------------------------------------------------------------
Net earnings (loss)       387,217    (156,189)       650,639      213,303

Retained Earnings (Deficit),
beginning of period,
as previously reported    (58,962)   (545,715)      (322,384)    (741,505)
Adjustment for stock
compensation expense          -          -              -        (173,702)

--------------------------------------------------------------------------
Retained Earnings
 (Deficit), beginning
 of period,
 restated                 (58,962)   (545,715)      (322,384)    (915,207)
--------------------------------------------------------------------------

--------------------------------------------------------------------------
Retained Earnings
 (Deficit),
 end of period       $    328,255  $ (701,904)       328,255     (701,904)
--------------------------------------------------------------------------
Earnings (loss)
 per share -
 basic and
 fully diluted       $      0.012  $   (0.005)    $    0.020   $    0.007
==========================================================================

Weighted average number of
 shares outstanding:
       Basic           32,603,372  30,313,249     32,422,442   29,268,704
       Diluted         34,464,714  30,313,249     34,283,784   31,729,335
==========================================================================





CARMANAH TECHNOLOGIES CORPORATION
Consolidated Interim Statements of Cashflows
(Expressed in Canadian dollars)

For the three and six months ended June 30, 2005 and 2004
(Unaudited - Prepared by Management)

 ========================================================================

                            Three months ended       Six months ended
                                 June 30,                June 30,
                             2005       2004          2005        2004

 ------------------------------------------------------------------------
Cash provided by (used in):

Operations:
   Net earnings          $ 387,217   $ (156,189)    $650,639    $ 213,303
      Items not
       involving cash:
        Amortization       103,753      106,591      189,313      195,255
        Loss on disposal
        of capital
         assets              -             -           -            2,727
        Stock
         compensation
         Expense            96,578       93,127      159,353       98,218
Changes in non-cash
working capital
        Accounts
         receivable       (888,436)   2,086,585   (1,483,451)     836,193
        Inventories       (581,026)    (392,404)    (484,287)    (353,374)
        Prepaid expenses
        and deposits        99,650      (35,691)     108,379     (101,796)
        Accounts payable
        and accrued
        liabilities        983,503     (866,147)   1,249,081     (530,976)
        Foreign exchange
         Contracts          (9,490)       -           21,560         -
        Deferred
         revenue               -          -          (45,421)         760
-------------------------------------------------------------------------
                           191,749      835,872      365,166      360,310
-------------------------------------------------------------------------

Investing:
    Short term
     investments          (500,000)      -          (500,000)  (6,250,000)
    Purchase of equipment
     and
     leasehold
     improvements         (425,036)    (174,939)    (639,310)    (411,263)
    Purchase of intangible
    Assets                 (14,716)      (9,030)     (34,917)     (12,828)
-------------------------------------------------------------------------
                          (939,752)    (183,969)  (1,174,227)  (6,674,091)
-------------------------------------------------------------------------
Financing:
    Proceeds on share
    Issuance               108,073      200,750    1,193,693    6,137,498
    Share issuance costs   (30,232)       6,617      (30,232)    (503,154)
    Bank loan                 -        (310,000)        -        (383,332)
    Repayment of
    long-term debt            -         (49,698)        -         (55,139)
    Principal payments of
    obligations under
    capital lease           (7,326)      (8,843)     (13,637)     (76,805)
-------------------------------------------------------------------------
                            70,515     (161,174)   1,149,824    5,119,068
-------------------------------------------------------------------------
 Increase in cash and
 cash equivalents         (677,488)     490,729      340,763   (1,194,713)

 Cash and cash
  equivalents,
  beginning of period    1,919,662        7,627      901,411    1,693,069
-------------------------------------------------------------------------
Cash and cash
 equivalents,
 end of period         $ 1,242,174    $ 498,356  $ 1,242,174  $   498,356
=========================================================================

Contact Information

  • For further information, please contact:

    Investor Relations:

    Mr. Mark Komonoski, Director
    Investor Relations
    Tel: (403) 861-8384
    Toll-Free: 1-800-665-3749
    mkomonoski@carmanah.com

    Media:

    Mr. David Davies
    Tel: (250) 382-4332
    ddavies@carmanah.com