Carmanah Announces Financial Results for Q2 2004

Vancouver, BC, Canada - (July 27, 2004) - Carmanah Technologies Corporation (TSX VE:
CMH) is pleased to announce its second quarter results for the six months ended June 30, 2004 and 2003.

Highlights for the Quarter:

  • Record Q2 2004 revenues of $3,504,092, representing a 117% increase over Q2 2003;
  • 2004 year-to-date revenues at record $7,617,793, representing a 116% increase over the same six-month period in 2003;
  • Net loss for the quarter of $156,189, as compared to $82,887 for the same period in 2003;
  • Year-to-date net earnings of $213,303, as compared to a loss of $69,972 for the same period in 2003;
  • Gross profit margin increasing to 57% in Q2 2004, from 52% for Q1 2004.

"The Company continued to make good progress in Q2 2004," states Carmanah's CEO, Mr. Art Aylesworth. "Our primary operating company, Carmanah Technologies Inc., continued to perform very well and is ahead of projections to the end of June. The integration and development of our second operating company, AVVA Light Corporation, has taken longer to integrate and gain momentum than we had hoped, but we are starting to see positive trending."

The Company's revenues are up 116% over the first six months of last year, which is consistent with our expectations for 2004. The net loss of $156,189 for the quarter can be primarily attributed to three factors: (1) lower than expected revenues from AVVA, (2) related severance expenses, and (3) a stockbased compensation expense based on recent changes to regulatory requirements.

Our year-to-date profits for 2004 are $213,303, which is $283,275 ahead of net profit results for the same period in 2003."

Revenues

Carmanah's total revenues for the three months ended June 30, 2004 increased to $3,504,092, compared to $1,608,024 for the same period in 2003, representing a 117% increase. Total revenues for the six months ended June 30, 2004 increased to $7,617,793, compared to $3,514,502 for the six months ended 2003, representing a 116% increase.

Revenues are derived from the sale of its product lines of solar-powered LED lighting and illumination products to the marine, aviation, transit and roadway markets, as well as from the sale of edge-lit signs through AVVA Light Corporation.

Contribution from Carmanah Technologies Inc.

Carmanah Technologies Inc. ("CTI") contributed $6,617,438 to the Company's overall revenues for the first six months of 2004, as compared to $3,514,871 for the same period in 2003. This increase in revenues is attributed primarily to sales growth in aviation and transit market sectors. These two market sectors combined, contributed approximately $3,500,000 in revenue during the first half of 2004, compared to $800,000 in revenue in the first half of 2003.

Contribution from AVVA Light Corporation

AVVA Light Corporation ("AVVA") contributed $1,000,355 to the Company's overall revenues for the first six months of 2004. The Company has no AVVA comparatives for the first half of 2003, however, the AVVA revenue represents a shortfall on sales targets for the current year. This is due to a longer than expected integration of the two companies and slower sale cycles than anticipated. The Company has taken significant measures to fully capitalize on AVVA's potential and to correct the slow start to 2004, including a change in its leadership.

Over the past quarter, AVVA has shown positive trending with the month of June alone contributing onethird of AVVA's total revenues for the six months ended June 30, 2004.

Cost of Sales and Gross Profit

Cost of sales were $1,509,984 (43% of revenue) for the three months ended June 30, 2004, resulting in a
gross profit margin of 57%. Cost of sales for the six months ended June 30, 2004 were $3,457,131 (45% of revenue), resulting in a 55% gross profit margin for that period. Cost of sales includes labor, material,material burden and other manufacturing costs.

There are a number of factors that affect the Company's gross profit levels. These factors include the ratio of sales sold direct versus through distribution channels, purchasing volumes and practices, and foreign exchange fluctuations. All of these factors are monitored closely in an effort to protect or enhance the Company's ongoing profit margins.

Wages and Benefits

Wages and benefits expense for the three months ended June 30, 2004 increased 118% to $946,171, compared with $434,823 for the same period in 2003. For the six months ended June 30, 2004, wages and benefits expense increased 99% to $1,746,021, compared with $878,169 for the same period in 2003. The increase of approximately $867,852 for the six months ended June 30, 2004 over the same period in 2003 is the result of a $340,000 additional wage expense from AVVA staff, a $83,000 severance expense for the termination of some AVVA executive and sales personnel, and an increase in sales and administrative staff in support of overall sales growth.

Including both operating companies, staffing levels for the entire Company at June 30, 2004 were 97 full time employees.. As a percentage of sales, total wages and benefits for the six months ended June 30, 2004 represented 23% of total sales.

For the first time, based on new regulatory requirements, the Company booked a stock-based compensation expense for the three months ended June 30, 2004 in the amount of $93,127, and for the six months ended June 30, 2004 in the amount of $98,218. This new policy stipulates that stock options be expensed direct on the income statement. In prior periods, this was reported on a pro forma basis within the notes to the financial statements.

Office and Administration

Office and administration expenses for the three months ended June 30, 2004 were $256,083, representing a 37% increase over 2003 at $186,652. For the six months ended June 30, 2004, they were $502,885, representing a 46% increase over 2003 at $345,265. The increase for the three and six month periods is primarily due to the addition of AVVA's office and administration costs as a result of the acquisition. Office and administration expenses are not expected to grow at a level consistent with revenue growth.

Research and Development

Research and development expenses consist of engineering labor and material expenses in support of product development and research activities. During the first half of 2004, research and development expenses of $697,981 represented a 103% increase over the previous year's $344,722 (net of a $125,000 recovery under a Sustainable Development Technology Canada grant). This increase was the result of increased investment in development of new product offerings into new market sectors, as well as enhancements to current products that enable increased sales into other market sectors. This focus through much of 2003 and 2004 to-date has resulted in release of new products, including solar-powered LED bus stops, shelters and crosswalks. It also resulted in the release of the aviation light, which is a modified version of CTI's marine light.

Sales and Marketing

Sales and marketing expenses for the three months ended June 30, 2004 was $369,772, compared to $154,398 for the same period in 2003. For the six months ended June 30, 2004, sales and marking expenses were $663,545, compared to $296,967 in 2003. The increased expenses are primarily due to the acquisition of AVVA, and its sales and marketing efforts. Much of the Company's sales and marketing resources have been and continue to be invested in emerging markets, such as transit, roadways and LED edge-lit signage. These markets have begun to realize significant revenues for 2004, and are anticipated to grow substantially in the future.

Net Earnings (Loss)

Net earnings (loss) for the three months ended June 30, 2004 was $(156,189) compared to $(82,887) for the same period in 2003. Earnings before interest, taxes, depreciation and amortization (EBITDA) was $(31,123) compared with $(20,356) for the same three month period in 2003. The loss shown for the quarter ended June 30, 2004 is the direct result of a $93,127 stock-based compensation adjustment, and $83,000 in AVVA termination expenses. For the six months ended June 30, 2004, EBITDA was $452,012 compared to $40,748 for the same comparative period and the Company's net earnings were $213,303, compared to a loss of $69,972 for the same period in 2003.

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.

Cash and Liquidity

Carmanah's cash and cash equivalents at June 30, 2004 were $6,748,356, compared to $1,693,069 at December 31, 2003. This $5,055,287 increase in cash is primarily the result of net inflows of cash provided from net income in the amount of $213,303, accounts receivable of $836,193, completion of a private placement for the issuance of 3,484,848 units at a price of $1.65 per unit for gross proceeds of $5,750,000, and $269,725 raised from the exercise of stock options, less cash used for accounts payable of $531,364, inventory of $353,374, capital assets of $411,263, and repayment of bank line of credit and long-term debts in the amount of $515,276.

The company's net working capital at June 30, 2004 was $9,817,957 (current ratio of 9.10:1), compared to $4,168,728 (current ratio of 2.91:1) at December 31, 2003.

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

June 30, 2004 and December 31, 2003

(Unaudited - Prepared by Management)

    June 30, December 31,
2004 2003
(unaudited) (audited)
Assets
Current assets:
Cash and cash equivalents $ 6,748,356 $ 1,693,069
Accounts receivable, net 1,861,868 2,698,061
Inventories 2,258,246 1,904,872
Prepaid expenses and deposits 155,172 53,376
11,023,642 6,349,378
Equipment and leasehold improvements, net 1,104,339 871,683
Intangible assets, net 183,387 190,320
Goodwill 3,072,173 3,072,173
Future Income taxes 190,114 190,114
$15,573,655 $10,673,668
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and
  accrued liabilities
1,117,477 1,648,841
Bank loan - 383,332
Deferred Revenue 71,988 71,228
Current portion of
  long-term debt
- 21,848
Current portion of obligations
  under capital lease
22,220 55,435
1,211,6850 2,180,650
Long-term debt - 33,325
Obligations under capital lease 28,067 71,656
1,239,752 2,285,631
Shareholders' equity:
Share capital 14,491,878 8,831,345
Contributed surplus 543,929 471,899
Deficit (701,904) (915,207)
14,333,903 8,388,037
$15,573,655 $10,673,668

CARMANAH TECHNOLOGIES CORPORATION

Consolidated Interim Statements of Operations and Deficit

For the three months and six months ended June 30, 2004 and 2003

(Unaudited - Prepared by Management)

  3 months ended 6 months ended
  June 30 June 30
    2004 2003 2004 2003
Sales 3,504,092 1,608,024 7,617,793 3,514,502
Cost of sales 1,509,984 704,449 3,457,131 1,608,631
  1,994,108 903,575 4,160,662 1,905,871
Operating expenses:
Wages and
     benefits
946,171 434,823 1,746,021 878,169
Stock-based
    compensation
    expense
93,127 - 93,127 -
Office and
     administration
256,083 186,652 502,885 345,265
Research and
     development
360,078 148,058 697,981 344,722
Sales and
     marketing
369,772 154,398 663,545 296,967
Bank charges and
     interest
26,612 24,871 56,139 39,049
Amortization of:
   Equipment and
      leasehold
      improvements
96,463 41,297 175,502 75,859
   Patents and
     other intang-
     ible assets
10,128 2,545 19,753 4,773
2,158,434 992,644 3,960,044 1,984,804
Operating income
     (loss) for the
     period
(164,326) (89,069) 200,618 (78,933)
Interest and other
     income
8,137 6,182 12,685 8,961
Net earnings (loss)
     before income
     taxes
(156,189) (82,887) 213,303 (69,972)
Income tax expense
     (recovery):
       
  Current income
     taxes
64,000 - 270,000 -
  Future income taxes (64,000) - (270,000) -
Net earnings (loss)
     for period
(156,189) (82,887) 213,303 (69,972)
Deficit, beginning
     of period
(741,505) (764,348) (741,505) (764,348)
Adjustment to reflect
     change in
     accounting for
     employee stock
     options
(173,702) (24,465) (173,702) (24,465)
Deficit, beginning
     of period,
     restated
(915,207) (788,813) (915,207) (788,813)
Deficit, end of period (1,071,396) (871,700) (701,904) (858,785)
Earnings (loss) per share        
  Basic $(0.005) $(0.004) $0.007 $(0.003)
  Diluted $(0.005) $(0.004) $0.007 $(0.003)
Weighted average
     # of shares
     outstanding
22,897,055 20,652,710 22,832,186 20,652,710
  Basic 30,313,249 20,808,266 29,268,704 20,808,266
  Diluted 30,313,249 21,247,693 31,729,335 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.