Firan Technology Group Corporation
TSX : FTG

Firan Technology Group Corporation

June 29, 2005 18:00 ET

Firan Technology Group Announces a Return to Pre-Tax Profitability in Second Quarter 2005

TORONTO, ONTARIO--(CCNMatthews - June 29, 2005) - Firan Technology Group Corporation (TSX:FTG) today announced the second quarter results for the period ending May 27, 2005.

The Company had operating earnings before tax of $166,000, a substantial improvement from the pre-tax operating loss of $931,000 in the first quarter of 2005. The performance for the quarter resulted from strong sales and margin performance in FTG Circuits Chatsworth and improved results for FTG Circuits Toronto compared to the first quarter of 2005. FTG Aerospace continues to achieve consistent positive performance.



Second Quarter Results (three months ended May 27, 2005
---------------------- compared with three months ended
May 28, 2004)

Q2 2005 Q2 2004
------------ ------------
Sales $14,162,000 $13,338,000
Operating Earnings Before Tax $166,000 $1,138,000
Net Earnings (Loss) ($183,000) $1,138,000
(Loss) Earnings per share - basic ($0.01) $0.07
(Loss) Earnings per share - diluted ($0.01) $0.06

Year to Date Results (six months ended May 27, 2005
-------------------- compared with six months ended May 28, 2004)

YTD 2005 YTD 2004
------------ -----------
Sales $26,193,000 $22,816,000
Operating Loss Before Tax ($765,000) ($922,000)
Net Loss ($1,164,000) ($922,000)
Loss per share
- basic & diluted ($0.07) ($0.06)


Net sales for the second quarter of 2005 were $14,162,000, an increase of 6% compared with $13,338,000 for the second quarter of 2004 and a 17% increase over the first quarter of 2005. The strength in the Canadian dollar versus the prior year reduced reported sales for the quarter by more than $900,000. On a year-to-date basis, net sales were $26,193,000, an increase of $3,377,000 or 15% over the comparable period in 2004.

The combined Circuits businesses' net sales for the quarter were $11,722,000, an increase of $516,000 or 4% over the prior year. Chatsworth had another outstanding quarter, with net sales of $3,951,000. At the Toronto operation, the quality issues identified in the first quarter continued to impact on results for the early part of the quarter. These issues were gradually resolved throughout the quarter, resulting in stronger sales and margins as the quarter progressed, and resulted in the Company being profitable for the final month of the quarter. On a year-to-date basis, net sales for the Circuits segment were $21,696,000, an increase of $2,696,000 or 14% over the comparable period in 2004.

Aerospace sales for the current quarter at $2,440,000 increased 14% over last year or were $308,000 higher than sales for the same quarter last year. Aerospace continues to perform well and maintains a strong order backlog. The book to bill ratio for Aerospace was 1.16 to 1 during the second quarter of 2005. On a year to date basis, net sales for Aerospace were $4,497,000 compared to $3,816,000 for the comparable period in 2004. The business made significant progress in the second quarter towards penetrating the market for higher value-added sub assemblies. The business has also increased the operations and quality management capabilities in 2005 to support the increasing product complexity and volume of business.

Net loss for the second quarter was $183,000 or a loss of $0.01 per share ($0.01 loss per diluted share) as compared with net earnings of $1,138,000 or $0.07 per share ($0.06 earnings per diluted share) in the same period in 2004. Included in the 2004 earnings are Scientific Research and Experimental Development ("SR&ED") claims of $386,000. We have filed but have not yet recognized the benefit of over $600,000 of SR&ED claims in the current year. Also included in 2004 results was a $313,000 recovery from the sale of redundant assets.

The balance sheet remained strong at the end of the second quarter. Net working capital at May 27, 2005 was $7,455,000 as compared to $6,026,000 at November 30, 2004. In addition, the Company had a strong cash position at the end of the quarter with cash on hand of $1,253,000, and was undrawn on all of its' operating lines.

"I am encouraged by the improvement in results from the first quarter. Our Chatsworth operation continued to perform ahead of expectations. Our Aerospace business continues to perform well and provides many exciting growth opportunities. While we continue to see less than adequate results from the Toronto Circuits' operation, operational issues from the first quarter have been identified and corrected", stated Mr. Bradley Bourne, President and Chief Executive Officer.

The Company will host a live conference call on Thursday June 30, 2005 at 8:30am (EDT) to discuss the results of the second quarter of 2005.

Anyone wishing to participate in the call should dial 416-695-9722 or 1-888-333-4519 and identify that you are calling into the FTG conference call. The Chairperson is Bradley Bourne. A replay of the call will be available until July 7, 2005. The number to call for a rebroadcast is 416-695-5275 or 1-866-518-1010.

ABOUT FIRAN TECHNOLOGY GROUP CORPORATION

FTG is an aerospace and defence electronics product and subsystem supplier to the North American marketplace. FTG has two operating units.

FTG Circuits is a manufacturer of high technology/high reliability printed circuit boards. Our customers are leaders in the aviation, defence, and high technology industries. FTG Circuits has operations in Toronto, Ontario and Chatsworth, California.

FTG Aerospace manufactures illuminated cockpit panels, keyboards and sub-assemblies for original equipment manufacturers of avionics products as well as airframe manufacturers.

The Company's shares are traded on the Toronto Stock Exchange under the symbol FTG.

This news release may contain certain forward-looking statements. Such statements are based on the current expectations of management of the Company and inherently involve numerous risks and uncertainties, known and unknown, including economic factors and the Company's industry, generally. The preceding list is not exhaustive of all possible factors. Such forward-looking statements are not guarantees of future performance and actual events and results could differ materially from those expressed or implied by forward-looking statements made by the Company. The reader is cautioned to consider these and other factors carefully when making decisions with respect to the Company and not place undue reliance on forward-looking statements. The Company does not undertake and has no specific intention to update any forward-looking statements, written or oral that may be made from time to time by or on its behalf whether as a result of new information, future events or otherwise.



FIRAN TECHNOLOGY GROUP CORPORATION
Interim Consolidated Balance Sheets
(in thousands of dollars)
---------------------------------------------------------------------
---------------------------------------------------------------------

27-May-05 28-May-04 30-Nov-04
----------- ----------- ---------
ASSETS (unaudited) (unaudited) (audited)

CURRENT
Cash $ 1,253 $ 1,185 $ 2,870
Accounts receivable 9,064 9,377 6,867
Inventories 7,328 4,966 4,363
Promissory note 1,500 - 1,500
Prepaid expenses 397 245 396
---------------------------------------------------------------------
19,542 15,773 15,996

PLANT AND EQUIPMENT 9,332 10,972 9,923
FUTURE INCOME TAXES 3,684 3,515 3,684
PROMISSORY NOTE - 1,500 -
GOODWILL (Note 3) 4,214 896 1,039
OTHER ASSETS 188 111 177
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$ 36,960 $ 32,767 $ 30,819
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---------------------------------------------------------------------

LIABILITIES

CURRENT
Accounts payable and accrued
liabilities $ 8,204 $ 8,027 $ 7,059
Accrued restructuring and severance
(Note 6 and 7) 280 1,563 663
Current portion of long-term debt
and capitalized leases (Note 4) 3,037 1,510 2,248
Income taxes payable 566 208 -
---------------------------------------------------------------------
12,087 11,308 9,970

LONG-TERM DEBT AND CAPITALIZED
LEASES (Note 4) 5,156 4,097 2,756

---------------------------------------------------------------------
17,243 15,405 12,726
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SHAREHOLDERS' EQUITY

SHARE CAPITAL - COMMON SHARES
(Note 5(a)) 12,681 10,347 10,347
SHARE CAPITAL - PREFERRED SHARES
(Note 5(b)) 2,218 2,218 2,218
CONTRIBUTED SURPLUS (Note 5(C)) 7,540 6,798 6,798
CUMULATIVE TRANSLATION ADJUSTMENT (1) - -
DEFICIT (2,721) (2,001) (1,270)
---------------------------------------------------------------------
19,717 17,362 18,093
---------------------------------------------------------------------
$ 36,960 $ 32,767 $ 30,819
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FIRAN TECHNOLOGY GROUP CORPORATION
Interim Consolidated Statements of Operations
(in thousands of dollars except per share amounts)
---------------------------------------------------------------------
---------------------------------------------------------------------
Three Months Ended Year to Date
27-May-05 28-May-04 27-May-05 28-May-04
----------- ----------- ----------- -----------
(unaudited) (unaudited) (unaudited) (unaudited)
SALES $ 14,162 $ 13,338 $ 26,193 $ 22,816

COST OF SALES 11,313 9,387 21,261 17,462
---------------------------------------------------------------------
2,849 3,951 4,932 5,354
---------------------------------------------------------------------

EXPENSES
Selling, general and
administrative 1,685 2,156 3,400 3,478
Amortization of plant and
equipment 872 887 1,777 1,775
Interest expense on
long-term debt 126 83 244 136
---------------------------------------------------------------------
2,683 3,126 5,421 5,389
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OPERATING EARNINGS (LOSS)
BEFORE UNDERNOTED 166 825 (489) (35)
---------------------------------------------------------------------

RESTRUCTURING COSTS - (313) - (313)

SEVERANCE COSTS (Note7) - - 276 1,200

---------------------------------------------------------------------
OPERATING EARNINGS (LOSS)
BEFORE TAX 166 1,138 (765) (922)
---------------------------------------------------------------------

INCOME TAX PROVISION 349 - 399 -
---------------------------------------------------------------------
NET (LOSS) EARNINGS $ (183) $ 1,138 $ (1,164) $ (922)
---------------------------------------------------------------------

(LOSS) EARNINGS PER SHARE
Basic $ (0.01) $ 0.07 $ (0.07) $ (0.06)
Diluted $ (0.01) $ 0.06 $ (0.07) $ (0.06)
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---------------------------------------------------------------------



FIRAN TECHNOLOGY GROUP CORPORATION
Interim Consolidated Statements of Deficit
(in thousands of dollars)
---------------------------------------------------------------------
---------------------------------------------------------------------
Three Months Ended Year to Date
27-May-05 28-May-04 27-May-05 28-May-04
----------- ----------- ----------- -----------
(unaudited) (unaudited) (unaudited) (unaudited)

Deficit, beginning of
period $ (2,538) $ (3,139) $ (1,270) $ (1,079)
Change in accounting
policy (Note 2) - (287) -
Deficit, beginning of
period, as restated (2,538) (3,139) (1,557) (1,079)
Net (loss) earnings for
the period (183) 1,138 (1,164) (922)
---------------------------------------------------------------------
Deficit, end of period $ (2,721) $ (2,001) $ (2,721) $ (2,001)
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FIRAN TECHNOLOGY GROUP CORPORATION
Interim Consolidated Statements of Cash Flows
(in thousands of dollars)
---------------------------------------------------------------------
---------------------------------------------------------------------
Three Months Ended Year to Date
27-May-05 28-May-04 27-May-05 28-May-04
----------- ----------- ----------- -----------
(unaudited) (unaudited) (unaudited) (unaudited)
NET INFLOW (OUTFLOW)
OF CASH RELATED TO
THE FOLLOWING
ACTIVITIES

OPERATING
Net (loss) earnings $ (183) $ 1,138 $ (1,164) $ (922)
Items not affecting cash
Stock based compensation
expense 31 - 79 -
Issuance of warrants - 45 - 45
Amortization of other
assets 16 143 25 155
Amortization of plant
and equipment 872 887 1,777 1,775
---------------------------------------------------------------------
736 2,213 717 1,053

Changes in non-cash
operating working capital (903) (2,680) (1,227) (1,274)
---------------------------------------------------------------------
(167) (467) (510) (221)
---------------------------------------------------------------------

INVESTING
Acquisition of Young
Electronics (Note 3) - - (6,202) -
Additions to plant and
equipment (380) (206) (739) (505)
---------------------------------------------------------------------
(380) (206) (6,941) (505)
---------------------------------------------------------------------

Issuance of share capital (13) - 2,710 -
New term loan financing - 3,612 3,526 3,612
Bank borrowings (76) - - -
Increase in deferred
financing cost - - (35) -
Repayment of long-term
debt and capitalized
leases (236) (1,330) (360) (1,740)
---------------------------------------------------------------------
(325) 2,282 5,841 1,872
---------------------------------------------------------------------
Effects of exchange rate
changes on cash (1) - (7) -
---------------------------------------------------------------------

(DECREASE) INCREASE IN CASH (873) 1,609 (1,617) 1,146

CASH , BEGINNING OF PERIOD 2,126 (424) 2,870 39

---------------------------------------------------------------------
CASH, END OF PERIOD $ 1,253 $ 1,185 $ 1,253 $ 1,185
---------------------------------------------------------------------
---------------------------------------------------------------------

DISCLOSURE OF CASH PAYMENTS
Interest $ 125 $ 69 $ 223 $ 122
Payment of income tax $ - $ - $ - $ -


NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. Accounting Policies

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles on a basis consistent with those followed in the 2004 audited financial statements of Firan Technology Group Corporation. These unaudited interim consolidated financial statements do not include all the information and note disclosures required by Canadian generally accepted accounting principles for annual financial statements and therefore should be read in conjunction with the said audited financial statements and the notes below.

2. Change in Accounting Policy

Effective December 1, 2004, the Company adopted the amended recommendations in CICA Handbook Section 3870 ("Section 3870"), "Stock Based Compensation and Other Stock-Based Payments" which require fair value accounting for employee awards granted on or after February 1, 2002. As a result, the Company has recorded stock-based compensation of $ 31,000 in the consolidated results of operations for the second quarter, and $79,000 for the six months ending May 27, 2005. Stock-based compensation has been included in selling, general and administrative costs.

Based on the transitional provisions of Section 3870, the Company restated the opening deficit for employee awards that was previously included in the Canadian GAAP pro forma note disclosures for 2004, 2003 and 2002 amounting to $287,000.

3. Acquisition Of Young Electronics ("Chatsworth")

On December 10, 2004, the Company acquired from Ambitech International Inc. all of the shares of SnS Enterprises Inc. (operating as Young Electronics), a U.S. printed circuit board manufacturer based in Los Angeles, California. FTG financed the cash purchase price of US$5,000,000 by a combination of a private placement of units of FTG consisting of common shares and warrants, and secured bank debt.

To facilitate the financing of the transaction, the Company completed a private placement and obtained new secured bank debt. The private placement offering consisting of 2,142,600 units for gross proceeds of approximately C$3,000,000 (C$1.40 per unit). Each unit is comprised of one common share in the capital of FTG and one-half common share purchase warrant. Each whole warrant entitles the holder to purchase one common share at a price of C$1.75 until December 10, 2006.

The secured bank debt consists of a US$3,000,000 term facility and a US$1,000,000 revolving operating facility made available to SnS Enterprises on normal commercial terms and guaranteed by FTG (See Note 4).

The preliminary allocation of the purchase price is as follows:



Fair value of identifiable net assets:

Accounts receivable $ 2,116,000
Inventory 1,975,000
Plant and equipment 440,000
Prepaids 89,000
Accounts payable (1,571,000)
Capital lease (22,000)
Goodwill 3,175,000
------------
Purchase price $6,202,000
------------


Chatsworth is considered a self sustaining subsidiary. Accordingly, the assets and liabilities are translated at exchange rates in effect at the balance sheet date. Revenues and expenses are translated at average exchange rates prevailing during the year. The resulting translation adjustment is accumulated as a separate component of shareholders' equity until there is a realized reduction in the net investment.

4. Long-Term Debt



27-May-05 30-Nov-04
---------- ---------
(000's)
Promissory notes, interest free, repayable at
$100,000 annually to acquire certain assets $ 100 $ 200

Term loan secured by a first charge on certain
property, with interest at bank prime plus
2.00%, payable in monthly payments of interest
only at $ 7,200 to July 30, 2005 1,500 1,500

Term loan in U.S. dollars secured by a first charge
on certain property, with interest at bank prime
plus 2.35%, payable in monthly payments of
interest and principal payments of U.S. $50,000
due November 30, 2006. 3,448 -

Capital leases in U.S. dollars for certain
manufacturing equipment, with interest at 6.0%,
payable in blended monthly interest and principal
payments of U.S. $58,712 to July 19, 2006. 3,145 3,304
---------------------------------------------------------------------

8,193 5,004
Less amounts due within one year 3,037 2,248
---------------------------------------------------------------------
$ 5,156 $ 2,756
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---------------------------------------------------------------------


Machinery and equipment includes assets under capital lease with a cost of $8,292,000 and accumulated amortization of $5,548,000 at May 27, 2005.

In addition to the bank term loans above (subject to a maximum borrowing limit of the lesser of $5,750,000 and a portion of accounts receivable and inventory), the Company has available an authorized line of credit of $5,000,000 at a rate of prime plus 0.5%, renewable in July, 2005, which was undrawn at May 27, 2005. The line of credit is secured by a first charge on certain property. Negotiations are currently underway to renew this facility.

The Company entered into a new U.S credit facility to help facilitate the acquisition and support the ongoing operations of Chatsworth. The US$4,000,000 facility is made up of both operating and term facilities. The term loan is in the amount US$3,000,000 and is for a term of two years, expiring November 30, 2006, with a five-year loan amortization at bank rate plus 2.35%. The US$1,000,000 operating line is for a term of one year, expiring November 30, 2005 and is at bank rate plus 0.5%. The operating line was undrawn at May 27, 2005. All current and future borrowings are secured by a first charge on all assets of the U.S wholly owned subsidiary of the Company, as well as a guarantee by the Company.

Principal payments required on long-term debt in each of the next two years are as follows:



(thousands of dollars)
---------------------------------------------------------------------
2005 $ 3,037
2006 5,156
---------------------------------------------------------------------
$ 8,193
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5. Share Capital

(a) Common Shares

2005
------------------------
Number of Stated
Shares Capital
------------------------
(000's)

Balance, beginning of year 15,657,627 $ 10,347
Issuance of new shares 2,142,600 2,334
---------------------------------------------------------------------
Balance, as at May 27, 2005 17,800,227 $ 12,681
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---------------------------------------------------------------------


In connection with the purchase of Chatsworth (see Note 3), the Company completed a private placement offering consisting of 2,142,600 units for gross and net proceeds of $3,000,000 ($1.40 per unit) and $2,709,000 respectively. Each unit is comprised of one common share in the capital of FTG and one-half common share purchase warrant. Each whole warrant entitles the holder to purchase one common share at a price of $1.75 until December 10, 2006. The fair value of the warrants issued was estimated at the date of the grant using the Black-Scholes valuation model with the following assumptions: risk-free rate of 5%; expected life of two years; volatility of 55% and a dividend yield of nil. The fair value of the warrants was determined to be $0.35 per warrant resulting in a fair value of $376,000. This amount was recorded to contributed surplus and a reduction of share capital.

(b) Preferred Shares

The Company has 1,775,000 voting convertible preferred shares outstanding. The voting convertible preferred shares have the same voting rights as common shares, will pay no dividends and are convertible into common shares of the Company on a one for one basis for no additional proceeds.

(C) Contributed Surplus



(in thousands of dollars) May 27, November 30,
2005 2004
-------------------------
Balance, beginning of period 6,798 6,753
Change in accounting policy (Note 2) 287 -
Stock option expense - year to date 79 -
Issuance of warrants 376 45
---------------------------------------------------------------------
Balance, end of period 7,540 6,798
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---------------------------------------------------------------------


6. Restructuring

The Company recorded a $2,567,000 restructuring charge in the third quarter of 2003 related to the integration of Firan Technology Group Corporation Inc. with Circuit World Corporation. The restructuring costs are comprised of workforce reduction costs of $1,205,000 related to employee severances and benefits; charges of $884,000 related to redundant assets; $250,000 for relocation costs and $228,000 for data migration.

A continuity of the restructuring accrual is as follows:



Severance
and Redundant Relocation Data Total
(000's) benefits assets costs migration
-----------------------------------------------------
Initial Charge
August 2003 $1,205 $884 $250 $228 $2,567
Payments or draw
down during
the period (85) (884) (53) (77) ($1,099)
-----------------------------------------------------
November 30,
2003 1,120 - 197 151 $1,468
Payments or draw
down during the
first quarter
of 2004 (249) (30) (159) (438)
Revision to
previous estimates - (313) (45) 45 (313)
Payments or draw
down the last nine
months of 2004 (568) 313 (102) (37) (394)
-----------------------------------------------------

November 30,
2004 $303 - $20 - $323
-----------------------------------------------------
Payments or draw
down during
the period (130) - (5) - (135)
February 25,
2005 173 - 15 - 188
-----------------------------------------------------
Payments or draw
down during
the period (101) - - - (101)
Revision to
previous estimates 15 - (15) - -
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May 27, 2005 $87 - - - $87
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7. Severance Costs

During the first quarter of 2004 Firan Technology Group Corporation terminated the employment of several individuals. The cost of these terminations was $1,200,000 with $898,000 paid out in 2004 and the remaining $302,000 settled in 2005. These costs relate to the merger occurring in 2003. In addition, $38,000 of severance liabilities unrelated to the merger was outstanding at the end of 2004, and settled in the first half of 2005. As well, the Company incurred additional severance costs of $276,000 during the first quarter of 2005. The total severance obligation outstanding at May 27, 2005 is $193,000 ($340,000 at November 30, 2004).


8. Segmented Information

The Company reports segmented information based on the two operating segments within the Corporation.



(in thousands of dollars) Operating Segments
------------------------------------------------------
Three Months Ended 27-May-05 28-May-04
------------------------------------------------------

Circuits Aerospace Total Circuits Aerospace Total
------------------------------------------------------

Sales $ 11,722 $ 2,440 $14,162 $ 11,206 $ 2,132 $13,338
Amortization of
plant and
equipment 808 64 872 799 88 887
Interest expense on
long-term debt 126 - 126 83 - 83
Income tax provision
/(recovery) 349 - 349 - - 0
Net (loss)/earnings(411) 228 (183) 821 317 1,138

Segment assets 30,795 6,165 36,960 27,717 5,050 32,767
Goodwill 4,214 - 4,214 896 - 896
Additions to plant
and equipment 278 102 380 204 2 206

------------------------------------------------------
Six Months Ended 27-May-05 28-May-04
------------------------------------------------------
Circuits Aerospace Total Circuits Aerospace Total
------------------------------------------------------
Sales $ 21,696 $ 4,497 $26,193 $ 19,000 $ 3,816 $22,816
Amortization of
plant and
equipment 1,633 144 1,777 1,599 176 1,775
Interest expense
on long-term debt 244 0 244 136 0 136
Income tax
provision
/(recovery) 449 (50) 399 0 0 0
Net (loss)
/earnings (1,466) 302 (1,164) (1,328) 406 (922)

Segment assets 30,795 6,165 36,960 27,717 5,050 32,767
Goodwill 4,214 0 4,214 896 0 896
Additions to plant
and equipment 579 160 739 492 13 505

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Geographic Location 27-May-05 28-May-04
------------------------------------------------------
(in thousands of dollars)
Three Months Ended United United
Canada States Total Canada States Total
------------------------------------------------------
Sales (by
location of
customer) 1,627 12,535 14,162 1,480 11,858 13,338
Goodwill (by
location of
division) 1,039 3,175 4,214 896 - 896
Segment Assets
(by location
of division) 28,582 8,378 36,960 32,767 - 32,767
---------------------------------------------------------------------
27-May-05 28-May-04
------------------------------------------------------
Six Months Ended
United United
Canada States Total Canada States Total
------------------------------------------------------
Sales (by
location of
customer) 2,877 23,316 26,193 2,783 20,033 22,816
Goodwill (by
location of
division) 1,039 3,175 4,214 896 - 896
Segment Assets
(by location
of division) 28,582 8,378 36,960 32,767 - 32,767
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9. Stock Based Compensation

The Company recognized a compensation expense in the consolidated statement of operations of approximately $ 31,000 in the second quarter of 2005, and $79,000 for the six months ended May 27, 2005. Of these amounts, $1,000 for the quarter and $2,000 year to date relates to 30,000 options granted during the first quarter of 2005. The remainder of the amount relates to amortization of compensation expense for options granted in 2004 and 2003. This amount was expensed in the current period and credited to contributed surplus. The fair value of options granted was estimated at the date of the grant using the Black-Scholes valuation model with the following assumptions: risk-free rate of 5%; expected life of three years; volatility of 55% and a dividend yield of nil. During the first quarter of 2005, 30,000 options were granted with a fair value of $0.55 per option.


10. Foreign Currency Risk

As at May 27, 2005, the Company had entered into U.S. dollar forward sales contracts maturing in the third quarter of 2005 of U.S.$2,000,000 at rates between $1.2323 and $1.2550. The fair value and unrealized loss of the contracts was $27,000 and was recorded in the consolidated statement of operations as an increase in selling, general and administration costs.

11. Scientific Research and Experimental Development ("SR&ED") Tax Credits
The Company has filed but not recorded the benefit of SR&ED tax credits in the amount of $606,000.

12. Comparative Figures

Certain comparative figures have been reclassified to conform to the current period's presentation.












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