Cygnal Reports Second Quarter Financial Results.MARKHAM, Ontario Markham (2006 Population 261,573[0]) is located in York Region, directly north of Toronto, and is part of Toronto's CMA. It is larger than many Canadian cities. Despite its qualifications regarding population, it has not had the title of city conferred upon it by the -- Company Appoints New Chief Executive Officer Cygnal Technologies Corporation (TSX TSX Toronto Stock Exchange (TSE before April, 2002) TSX Transfer from Stack Pointer to Index TSX True Space Extension :CYN CYN Canyon )("Cygnal" or "the Company"), a Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. leading provider of network communication solutions, today reported its second quarter financial results for the period ended June June: see month. 30, 2004. For the three-month period ended June 30, 2004, the Company reported revenues of $29.7 million versus revenues of $36.6 million for the same period in 2003. Gross profit amounted to $5.6 million or 18.8 percent of revenues for the period compared to $8.9 million or 24.3 percent of revenues for the same period last year. The Company's net loss for the quarter was $2.7 million or $0.12 per share, compared to a net loss of $46,039 or $0.00 per share during the same period in 2003. For the six-month period ended June 30, 2004, the Company reported revenues of $65.4 million versus revenues of $70.3 million for the same period in 2003. Gross profit amounted to $11.8 million or 18.1 percent of revenues for the period compared to $17.1 million or 24.4 percent for the same period last year. The Company's net loss for the six-month period was $4.4 million or $0.19 per share, compared to a net loss of $1.0 million or $0.06 per share during the same period in 2003. The decrease in revenue during the second quarter versus the comparable quarter in 2003, was primarily due to a decline in revenue for the Company's Network Operations business from $21.9 million in the second quarter of 2003 to $14.6 million in the second quarter of 2004. Communications Services business segment revenue of $15.1 million was approximately equal to revenue generated in the second quarter of 2003. The decrease in Network Operations revenue in the second quarter mainly reflects, among other things, the disruption disruption /dis·rup·tion/ (dis-rup´shun) a morphologic defect resulting from the extrinsic breakdown of, or interference with, a developmental process. to the Network Operations selling organisation due to the transition from a multi-divisional structure to a single business unit that was initiated in 2003. During the second quarter, the productivity of the new Network Operations sales organisation improved and orders received increased. As a result of this higher level of bookings, Cygnal expects Network Operations revenue in the third quarter of 2004 to be in the range of $22 million to $24 million and total company revenue to be approximately $40 million. Gross profit as a percentage of revenues remained weak in the quarter as the Company maintained the operational infrastructure in its Network Operations business to execute the increased volume of projects expected in the third quarter. The Company expects gross profit margin Gross profit margin Gross profit divided by sales, which is equal to each sales dollar left over after paying for the cost of goods sold. gross profit margin A measure calculated by dividing gross profit by net sales. for its total business to exceed 20 percent in the third quarter. Selling, general and administrative (SG&A) expenses increased to $8.8 million from $8.3 million in the previous quarter. This increase was primarily due to expenses related to the completion of the implementation of the Company's J.D. Edwards (J.D. Edwards & Company, Denver, CO, www.jdedwards.com) A developer of multinational, integrated enterprise software for distribution, finance, human resources, manufacturing and supply chain management. enterprise resource planning See ERP. (application, business) Enterprise Resource Planning - (ERP) Any software system designed to support and automate the business processes of medium and large businesses. (ERP (Enterprise Resource Planning) An integrated information system that serves all departments within an enterprise. Evolving out of the manufacturing industry, ERP implies the use of packaged software rather than proprietary software written by or for one customer. ) system in Network Operations. The ERP system mainly supports the Network Operations segment and now that the system is in place, the Company is better positioned to continue to streamline this business. As of August 13, 2004, Cygnal eliminated 50 positions in the Network Operations business. The Company expects this initiative to generate approximately $2 million of annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. savings at a one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. cost in the range of $1 to $1.2 million. The severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when cost will be expensed in the third quarter with a $0.2 million lump sum Lump sum A large one-time payment of money. payment in the third quarter and the balance as salary continuance The adjournment or postponement of an action pending in a court to a later date of the same or another session of the court, granted by a court in response to a motion made by a party to a lawsuit. over subsequent quarters. Effective August 13, 2004, at the request of the Board of Directors, Kieron Dowling Dowling is a surname, and may refer to
Excluding costs relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the streamlining of the Network Operations segment and the change in Chief Executive Officer, management expects SG&A expenses for the third quarter to be in the range of $7.8 million to $8.2 million. For the last six months of 2004, management expects total Company revenue to be in a range of $74 to $79 million. "My immediate focus will be on ensuring that the streamlining of the Network Operations business is completed on a timely basis and improvements in executional capability are accelerated," said Gerald Hurlow, Chairman and Chief Executive Officer. Significant Business Activities Significant activities that occurred during the second quarter of 2004 were as follows: Niagara Niagara, river, United States and Canada Niagara (nīăg`rə), river, 34 mi (55 km) long, issuing from Lake Erie between Buffalo, N.Y., and Fort Erie, Ont., Canada. Regional Broadband broadband Term describing the radiation from a source that produces a broad, continuous spectrum of frequencies (contrasted with a laser, which produces a single frequency or very narrow range of frequencies). Network Limited. In May 2004 the Company announced that it had been awarded a $10.2 million contract to build the fibre optics fibre optics Thin transparent fibres of glass or plastic that transmit light through their length by internal reflections, used for transmitting data, voice, and images. infrastructure for Niagara Regional Broadband Network Limited ("NRBN"). The Company also announced that it signed a 10-year CygnalCare managed services An umbrella term for third-party monitoring and maintaining of computers, networks and software. The actual equipment may be inhouse or at the third-party's facilities, but the "managed" implies an ongoing effort; for example, making sure the equipment is running at a certain quality contract valued at $1.6 million to manage the network. Over the course of 18 months Cygnal will design and install a super-fast, high capacity fibre optics network that will provide services of 10/100/1000 Mbps to the Niagara Region for the Regional Municipality A Regional Municipality (or Region) is a type of Canadian municipal government similar to and at the same municipal government level as a county, although the specific structure and servicing responsibilities may vary from place to place. of Niagara, the school boards, hospitals, and main libraries in the region as well as Niagara College Niagara College is a College of Applied Arts and Technology within the Niagara Region of Southern Ontario. The college has three campuses: the main campus in Welland, the Glendale campus in Niagara-on-the-Lake, and the Maid of the Mist Campus in Niagara Falls, home of the Tourism . Acquisitions In June 2004, the Company announced that it had completed the acquisitions of the shares of Mississauga Mississauga (mĭsĭsaw`gə), city (1991 pop. 463,388), S Ont., Canada, 12 mi (20 km) W of Toronto on Lake Ontario. A residential suburb of Toronto and a growing transportation and industrial center, it is one of Canada's fastest-growing based Single Point of Contact (SPOC SPOC Single Point Of Contact SPOC Sydney Paralympic Organising Committee SPOC Single Point Of Control SPOC Search and Rescue Point of Contact SPOC Space Operations Center SPOC Saturn Performance Owners Club SPOC State Police Officers Council ), a Nortel See Nortel Networks. voice systems integrator An individual or organization that builds systems from a variety of diverse components. With increasing complexity of technology, more customers want complete solutions to information problems, requiring hardware, software and networking expertise in a multivendor environment. , and the assets of Belcom Services Inc. ("Belcom"), which provides service and support to many Nortel enterprise customers in the Greater Vancouver Vancouver, city, Canada Vancouver, city (1991 pop. 471,844), SW British Columbia, Canada, on Burrard Inlet of the Strait of Georgia, opposite Vancouver Island and just N of the Wash. border. Area. The $1.0 million acquisition of SPOC's privately held shares by Cygnal was satisfied with a cash payment of approximately $0.5 million, and the issuance of 275,000 Cygnal shares at a price of $1.75 per share. SPOC provides voice and IP telephony The two-way transmission of voice over a packet-switched IP network, which is part of the TCP/IP protocol suite. The terms "IP telephony" and "voice over IP" (VoIP) are synonymous. solutions to customers in the Greater Toronto Area The Greater Toronto Area (widely abbreviated as the GTA) is the most populous metropolitan area in Canada. The GTA is a provincial planning area with a population of 5,555,912 at the 2006 Canadian Census. through the design, integration and maintenance of communication networks. SPOC's authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: product partners include Nortel, Avaya Avaya Inc. (NYSE: AV) is a S&P 500, global telecommunications company which specializes in enterprise telephony and call center technology. Formerly the Business Communications unit of Lucent Technologies, it was spun off on October 1, 2000. Inc. ("Avaya"), and NEC (NEC Corporation, Tokyo, www.nec.com, www.necus.com) An electronics conglomerate known in the U.S. for its monitors. In Japan, it had the lion's share of the PC market until the late 1990s (see PC 98). NEC was founded in Tokyo in 1899 as Nippon Electric Company, Ltd. Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of Inc. The purchase of the assets of Belcom was completed for net cash of $75,000. Belcom, based in Richmond, British Columbia This page is for the city of Richmond, British Columbia. For the federal electoral district in this locality see Richmond (electoral district); for the provincial electoral district see Richmond (provincial electoral district). , provides a full complement of support including design, implementation and extended warranty The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. maintenance to many Nortel enterprise customers. Subsequent to the second quarter ended June 30, 2004, the Company eliminated 50 positions in Network Operations. The Company expects to generate in excess of $2.0 million of annualized savings beginning in the later half of the third quarter at a one-time severance cost in the range of $1.0 million to $1.2 million. The severance cost will be expensed in the third quarter with a $0.2 million lump sum payment in the third quarter and the balance as salary continuance over subsequent quarters. Effective August 13, 2004, at the request of the Board of Directors, Kieron Dowling, President and Chief Executive Officer of Cygnal Technologies resigned as a director and officer of the Company. The Board of Directors has appointed Gerald Hurlow, the Company's Chairman to the additional position of Chief Executive Officer. The Company will incur To become subject to and liable for; to have liabilities imposed by act or operation of law. Expenses are incurred, for example, when the legal obligation to pay them arises. An individual incurs a liability when a money judgment is rendered against him or her by a court. additional severance costs in the amount of approximately $0.3 million in the third quarter of 2004. Results of Operations Revenue For the three months ended June 30, 2004, revenues decreased by $6.9 million or 18.9%, to $29.7 million from $36.6 million for the same period a year ago. This decrease was comprised of an increase in Communications Services of $0.4 million, offset by a decline in Network Operations of $7.3million. The $0.4 million increase in Communications Services was primarily the result of increased sales volume in wireless products. The $7.3 million decline in Network Operations was primarily a result of exiting business lines during 2003, the delay of customer projects, an overall slowness in the receipt of new orders and the disruption to the Network Operations selling organisation due to the transition from a multi-divisional structure to a single unit that was initiated in 2003. As a result, the Company experienced negative internal revenue growth in the quarter. Revenues from Network Operations represented 49.2% of the Company's total revenues for the three months ended June 30, 2004, compared to 59.8% for the three months ended June 30, 2003, while revenues for Communications Services represented 50.8% for the three months ended June 30, 2004, compared to 40.2% for the three months ended June 30, 2004. Inter-segment sales have been eliminated in the above analysis. The change in percentage is a result of Network Operations sales declining by $7.3 million and Communications Services sales increasing by $0.4 million in the second quarter for the reasons stated above. For the six months ended June 30, 2004, revenues decreased by $4.9 million or 7.0 %, to $65.4 million from $70.3 million for the same period a year ago. This decrease was comprised of an increase in Communications Services of $6.1 million, offset by a decline in Network Operations of $11.0 million. Revenues from Network Operations represented 47.4% of the Company's total revenues for the six months ended June 30, 2004, compared to 59.7% for the six months ended June 30, 2003, while revenues for Communications Services represented 52.6% for the six months ended June 30, 2004, compared to 40.3% for the six months ended June 30, 2003. Inter-segment sales have been eliminated in the above analysis. Gross Profit For the quarter ended June 30, 2004, gross profit decreased $ 3.3 million to $5.6 million from $8.9 million for the same period in the prior year. Gross profit, expressed as a percentage of revenue, decreased from 24.3% in the second quarter 2003 to 18.9% for the second quarter of 2004. This decrease was primarily the result of lower sales in the Network Operations segment and the fixed expenses of the segment at a level intended to support higher business volume. For the six months ended June 30, 2004, gross profit decreased $ 5.3 million to $11.8 million from $17.1 million for the same period in the prior year. Gross profit, expressed as a percentage of revenue, decreased from 24.3% in the second quarter of 2003 to 18.0% for the second quarter of 2004. Selling, General and Administrative Expenses SG&A expenses increased $0.6 million or 7.0% to $8.8 million in the second quarter ended June 30, 2004 from $8.2 million in the same period of 2003. This amount is higher that the $8.5 million the Company forecasted it would incur in the quarter. The increase was mainly due to an increase in expenditures related to implementing the ERP in the Network Operations segment and increased expenses related to promoting CygnalCare and Nortel products. For the six months ended June 30, 2004 SG&A expenses increased $0.3 million or 1.8% to $17.1 million from $16.8 million in the same period of 2003. EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become EBITDA for the second quarter ended June 30, 2004 decreased approximately $3.9 million to a loss of $3.2 million from a profit of $0.7 million in the second quarter of 2003. The decline primarily resulted from the decrease in gross margin of $3.3 million, and an increase in SG&A costs of $0.6 million for the reasons discussed above. See "Key Performance Drivers" above for a description of EBITDA For the six months ended June 30, 2004 EBITDA decreased $5.5 million to a loss of $5.2 million from a profit of $0.3 million in the same period of 2003. See "Key Performance Drivers" above for a description of EBITDA. Restructuring Charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. In the second quarter of 2003, the Company recorded restructuring charges of $0.1 million primarily related to workforce reduction charges. The charge was a continuation of the restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). plan approved by the Company in the fourth quarter of 2002 and was in addition to the charge of $1.6 million taken during the fourth quarter of 2002. There was no restructuring charge in the second quarter of 2004. The only action remaining from the 2002-restructuring plan was to sublet sub·let tr.v. sub·let, sub·let·ting, sub·lets 1. To rent (property one holds by lease) to another. 2. To subcontract (work). n. the Scarborough, Ontario This article is about the Toronto borough and former Canadian municipality. For other places, see Scarborough. Scarborough is the area that forms the eastern part of the City of Toronto, Ontario, Canada. location. This action was completed in the second quarter of 2004. For the six months ended June 30, 2003 the Company recorded restructuring charges of $0.6 million primarily related to workforce reduction charges. There was no restructuring charge in the six month period ended June 30, 2004. Subsequent Events Subsequent to the second quarter ended June 30, 2004, the Company eliminated 50 positions in Network Operations. The Company expects to generate approximately $2.0 million of annualized savings at a one-time severance cost in the range of $1.0 million to $1.2 million. The severance cost will be expensed in the third quarter with a $0.2 million lump sum payment in the third quarter and the balance as salary continuance over subsequent quarters. Effective August 13, 2004, at the request of the Board of Directors, Kieron Dowling, President and Chief Executive Officer of Cygnal Technologies has resigned as a director and officer of the Company. The Board of Directors has appointed Gerald Hurlow, the Company's Chairman to the additional position of Chief Executive Officer. The Company will incur additional severance costs in the amount of approximately $0.3 million in the third quarter of 2004. Interest Expense Interest expense for the three months ended June 30, 2004 was $0.3 million, compared with $0.4 million from the same period the previous year. For the six months ended June 30, 2004 interest expense was $0.5 million, compared with $0.7 million from the same period the previous year. Amortization of Capital and Intangible Assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. Amortization of capital and intangible assets for second quarter ended June 30, 2004 was $0.5 million, compared with $0.4 million from the same period the previous year. For the six months ended June 30, 2004 capital and intangible assets amortization was $0.9 million compared with $0.7 million from the same period the previous year. The increase resulted from the capital assets capital assets n. equipment, property, and funds owned by a business. (See: capital, capital account) purchased in 2003. Net Loss Net loss for the second quarter of 2004 was $2.7 million, an increase of $2.6 million from a loss of $0.1 million in the second quarter of 2003. The loss was primarily due to lower gross profit margins and increased SG&A costs as compared to the same period the previous year. The loss per share, basic and diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. , for the second quarter of 2004 was $0.12, compared to a breakeven breakeven 1. The level of output or sales necessary to cover fixed expenses. Companies in industries that have high fixed costs and, consequently, high breakevens, such as automobile and steel manufacturing, are likely to exhibit large fluctuations in the second quarter of 2003. The weighted average basic shares outstanding for the quarter ended June 30, 2004 was 23,559,424 compared to 16,542,090 for the quarter ended June 30, 2003. The net loss for the six months ended June 30, 2004 was $4.4 million, an increase of $3.3 million from a loss of $1.1 million in the same period of 2003. The loss per share, basic and diluted, for the six months ended June 30, 2004 was $0.19, compared to a loss of $0.06 for the same period of 2003. The weighted average basic shares outstanding for six months ended June 30, 2004 was 22,979,232 compared to 16,525,122 for the same period the previous year. Summary of Cash Flows The table below is a summary of the cash flows for the periods ended June 30, 2004 as compared to those for the same period the prior year. (Amounts in millions)
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Three months Six months
ended June 30 ended June 30
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2004 2003 2004 2003
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Net earnings adjusted
for non-cash items ($3.7) ($0.4) ($5.8) ($0.7)
Non-cash working capital items (0.1) 1.7 0.2 (1.2)
Net cash (used)/provided for
operating activities (3.8) 1.3 (5.6) (1.9)
Cash used for investing activities (0.8) 0.0 (1.1) (0.1)
Cash provided/(used) by
financing activities 4.6 (1.3) 6.7 2.1
Net increase in cash $0.0 $0.0 $0.0 $0.0
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Operating Activities Cash used for operating activities in the second quarter ended June 30, 2004 totalled $3.8 million compared to cash provided of $1.3 million for the same period in 2003. During the second quarter of 2004 the Company had a net loss adjusted for non-cash items of $3.7 million and non-cash working capital items of $(0.1) million, resulting in net cash used for operating activities of $3.8 million. Non-cash working capital used $0.5 million primarily related to the decrease in accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying of $1.1 million, an increase in inventory of $9.3 million and an increase in accounts payable of $7.5 million. The increase in inventory and accounts payable is mainly related to increased inventory in each of Communication Services and Network Operations. Communication Services took possession of additional inventory to take advantage of an opportunity to acquire products from certain manufacturers at reduced prices. Network Operations acquired additional inventory for a large installation to be completed in the third quarter. During the second quarter of 2003, the Company generated a net loss adjusted for non-cash items of $0.4 million and received $1.7 million from non-cash working capital items resulting in net cash used for operating activities of $1.3 million. Cash used for operating activities in the six months ended June 30, 2004 totalled $5.6 million compared to cash used of $1.9 million for the same period in 2003. During the six months ended June 30, 2004 the Company had a net loss adjusted for non-cash items of $5.8 million and non-cash working capital items of $0.2 million, resulting in net cash used for operating activities of $5.6 million. During the same period in 2003 the Company had a net loss adjusted for non-cash items of $0.7 million and non-cash working capital items of $(1.2) million, resulting in net cash used for operating activities of $1.9 million. Investing Activities During the quarter ended June 30, 2004 cash used for investing activities was $0.8 million, as compared with $0.0 million for the same period the previous year. The Company purchased capital assets, primarily ERP system related, of $0.8 million, two businesses for $0.5 million and sold real estate assets for proceeds of $0.5 million. During the six months ended June 30, 2004, the Company used cash for investing activities of $1.1 million, as compared with $0.1 million for the same period the previous year. Financing Activities Cash provided by financing activities during the three months ended June 30, 2004 totalled $4.6 million, compared with cash used of $1.3 million from the same period in 2003. The Company's financing activities during the quarter ended June 30, 2004 included the receipt of approximately $0.2 million in capital lease financing and increasing its operating credit line by $5.2 million for cash inflow in·flow n. 1. The act or process of flowing in or into: an inflow of water; an inflow of information. 2. of $5.4 million. The Company repaid $0.8 million of long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. , resulting in net cash provided by financing activities in the second quarter of 2004 in the amount of $4.6 million. The financing activities during the quarter ended June 30, 2003 included reducing the operating credit line by $0.7 million and repayment of long term debt of $0.6 million for a total cash outflow of $1.3 million. For the six months ended June 30, 2004 Cash provided by financing activities totalled $6.7 million, compared with cash provided of $2.1 million from the same period in 2003. The Company's financing activities during the six months ended June 30, 2004 included receiving approximately $0.4 million in capital lease financing and receiving $8.8 million from the issuance of common shares and the exercise of broker warrants for total cash inflow of $ 9.2 million. The Company repaid $1.5 million of long-term debt and decreased its operating line of credit by $1.0 million for a total cash outflow of $2.5 million, resulting in net cash provided by financing activities in the six months of 2004 in the amount of $6.7million. The financing activities during the six months ended June 30, 2003 included increasing the operating credit line by $3.2 million and receiving approximately $0.1 million from the issuance of common share shares for a total inflow of $3.3 million and repayment of long-term debt of $1.2 million for a total cash inflow of $2.1 million.
CYGNAL TECHNOLOGIES CORPORATION
Consolidated Statements of Loss and Deficit
for the periods ended June 30, 2004 and 2003
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Three months ended Six months ended
June 30 June 30
2004 2003 2004 2003
(Unaudited) (Unaudited)
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$ $ $ $
Revenue 29,703,773 36,561,033 65,370,695 70,330,910
Cost of sales 24,130,984 27,663,866 53,522,412 53,186,616
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5,572,789 8,897,167 11,848,283 17,144,294
Selling, general
and
administrative
expenses 8,778,089 8,194,258 17,068,873 16,800,960
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(Loss) earnings
before the
following (3,205,300) 702,909 (5,220,590) 343,334
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Interest expense 259,412 363,011 531,352 677,097
Amortization of
capital assets
and intangible
assets 481,737 351,150 895,582 718,674
Restructuring
charges - 56,091 - 598,875
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741,149 770,252 1,426,934 1,994,646
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Loss before
income taxes (3,946,449) (67,343) (6,647,524) (1,651,312)
Recovery of
income taxes (1,207,820) (21,304) (2,209,490) (603,424)
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Net loss (2,738,629) (46,039) (4,438,034) (1,047,888)
Deficit,
beginning of
period (12,733,502) (11,071,716) (11,034,097) (10,069,867)
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Deficit, end of
period (15,472,131) (11,117,755) (15,472,131) (11,117,755)
---------------------------------------------------------------------
---------------------------------------------------------------------
Basic loss per
share ($0.12) $0.00 ($0.19) ($0.06)
---------------------------------------------------------------------
---------------------------------------------------------------------
Diluted loss per
share ($0.12) $0.00 ($0.19) ($0.06)
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CYGNAL TECHNOLOGIES CORPORATION
Consolidated Balance Sheets
--------------------------------------------------------------------
As at As at
June 30 December 31
2004 2003
--------------------------------------------------------------------
$ $
(Unaudited) (Audited)
Assets
Current assets
Accounts receivable 25,774,024 27,439,826
Inventory 26,867,452 24,797,451
Income taxes recoverable 1,223,416 1,300,012
Prepaid expenses and deposits 1,734,635 1,211,432
Future income taxes 570,478 1,443,839
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56,170,005 56,192,560
Future income taxes 4,592,745 879,668
Capital assets 5,309,863 5,373,601
Goodwill and other intangible
assets 29,534,934 29,136,808
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95,607,547 91,582,637
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--------------------------------------------------------------------
Liabilities
Current liabilities
Bank indebtedness 10,176,205 11,185,122
Accounts payable and accrued
liabilities 28,157,422 28,467,383
Current portion of long-term
debt 2,332,976 2,510,077
Deferred revenue 2,560,659 1,535,993
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43,227,262 43,698,575
Long-term debt 648,021 1,595,467
Deferred revenue 1,289,984 1,364,202
--------------------------------------------------------------------
45,165,267 46,658,244
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Shareholders' equity
Share capital 64,700,633 55,238,532
Warrants 734,820 450,000
Contributed surplus 478,958 269,958
Deficit (15,472,131) (11,034,097)
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50,442,280 44,924,393
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95,607,547 91,582,637
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CYGNAL TECHNOLOGIES CORPORATION
Consolidated Statements of Cash Flows
for the periods ended June 30, 2004 and 2003
---------------------------------------------------------------------
---------------------------------------------------------------------
Three months ended Six months ended
June 30 June 30
2004 2003 2004 2003
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(Unaudited) (Unaudited)
$ $ $ $
Operating activities
Net loss (2,738,629) (46,039) (4,438,034) (1,047,888)
Adjustment for
non-cash items:
Amortization of
capital assets and
intangible assets 481,737 351,150 895,582 718,674
(Gain) loss on sale
of capital assets (8,406) 1,850 (8,406) 10,772
Stock compensation
expense 105,000 - 209,000 -
Restructuring
charges - 56,091 - 598,875
Future income
taxes (1,474,412) (763,128) (2,397,716) (953,778)
Amortization of
deferred revenue (37,108) (37,108) (74,216) (74,216)
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(3,671,818) (437,184) (5,813,790) (747,561)
Changes in non-cash
working capital
items (146,821) 1,776,940 213,460 (1,163,815)
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Cash (used for)
provided by
operating
activities (3,818,639) 1,339,756 (5,600,330) (1,911,376)
---------------------------------------------------------------------
Investing activities
Acquisition of
capital assets, net (793,940) (289,458) (1,148,449) (389,163)
Business acquisitions
(net of cash
acquired) (466,241) - (466,241) -
Proceeds on sale
of assets 505,563 - 505,563 -
Proceeds on sale
of assets related
to restructuring - 244,780 - 244,780
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Cash used for
investing
activities (754,618) (44,678) (1,109,127) (144,383)
---------------------------------------------------------------------
Financing activities
Capital lease
financing 170,149 53,148 358,994 53,148
Repayment of
long-term debt (848,361) (630,857) (1,483,541) (1,263,546)
Issuance of common
shares, special
warrants and
broker purchase
warrants 22,458 7,500 8,842,921 61,822
Increase (decrease)
in operating line
of credit 5,229,011 (724,869) (1,008,917) 3,204,335
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Cash provided by
(used for) financing
activities 4,573,257 (1,295,078) 6,709,457 2,055,759
---------------------------------------------------------------------
Net increase in cash
position - - - -
Cash position, beginning
of period - - - -
---------------------------------------------------------------------
Cash position, end
of period - - - -
---------------------------------------------------------------------
---------------------------------------------------------------------
Company Background Cygnal Technologies Corporation is a Canadian leading provider of network communication solutions including the design, installation, maintenance and management of wired and wireless communication networks. The Company offers a full range of technologies and solutions for service providers and enterprise customers. Cygnal has expertise in voice, video and data solutions over traditional and next generation converged technologies. Cygnal Technologies Corporation is headquartered in Markham, Ontario and supports end-user (job) end-user - The person who uses a computer application, as opposed to those who developed or support it. The end-user may or may not know anything about computers, how they work, or what to do if something goes wrong. customers and business partners through 15 offices across Canada Across Canada was an afternoon program that formerly aired on The Weather Network. The segment ran from early 1999 until mid 2002. The show ran from 3:00PM ET until 7:00 PM ET. , including Vancouver, Edmonton Edmonton (ĕd`məntən), city (1991 pop. 616,741), provincial capital, central Alta., Canada, on the North Saskatchewan River. The center of the largest metropolitan area in Alberta, Edmonton, known as the "Gateway to the North," is located , Calgary Calgary (kăl`gərē), city (1991 pop. 710,677), S Alta., Canada, at the confluence of the Bow and Elbow rivers. The largest city in Alberta and the fastest-growing major city in Canada, Calgary is a corporate, transportation, and financial , Winnipeg Winnipeg, city, Canada Winnipeg (wĭn`ĭpĕg), city (1991 pop. 616,790), provincial capital, SE Man., Canada, at the confluence of the Red and Assiniboine rivers. , London London, city, Canada London, city (1991 pop. 303,165), SE Ont., Canada, on the Thames River. The site was chosen in 1792 by Governor Simcoe to be the capital of Upper Canada, but York was made capital instead. London was settled in 1826. , Burlington Burlington, town, Canada Burlington, town (1991 pop. 129,575), SE Ont., Canada, on Lake Ontario. First settled (1798) by Mohawk Loyalist Joseph Brandt, Burlington's economy was built on the shipment of wheat, lumber, and quarried rock by waterway. , Brampton Brampton, city (1991 pop. 234,445), S Ont., Canada, NW of Toronto. Incorporated as a village (1852), a town (1873), and then a city (1976), it is noted for its greenhouses and flowers. Automobiles, shoes, lumber, optical goods, and other products are made. , Mississauga, Toronto Toronto (tərŏn`tō), city (1998 est pop. 2,400,000), provincial capital, S Ont., Canada, on Lake Ontario. Toronto is the largest city in Canada and since the 1970s has been one of the fastest-changing cities in North America, experiencing , Sudbury Sudbury, city, Canada Sudbury, city (1991 pop. 92,884), central Ont., Canada. It is the center of Canada's largest mining region, which produces much of the world's nickel and large quantities of copper, platinum, gold, silver, cobalt, and sulfur. , Ottawa Ottawa, city, Canada Ottawa (ŏt`əwə), city (1991 pop. 313,987), capital of Canada, SE Ont., at the confluence of the Ottawa and Rideau rivers. Hull, Que. , Montreal Montreal (mŏn'trēôl`), Fr. Montréal (môNrāäl`), city (1991 pop. 1,017,666), S Que., Canada, on Montreal island, surrounded by St. Lawrence River and Rivière des Prairies. , Quebec Quebec, city, Canada Quebec, Fr. Québec, city (1991 pop. 167,517), provincial capital, S Que., Canada, at the confluence of the St. Lawrence and St. Charles rivers. City and Halifax Halifax, city, Canada Halifax, city (1991 pop. 114,455), provincial capital, S central N.S., Canada, on the Atlantic Ocean. It is the largest city in the Maritime Provinces and is one of Canada's principal ice-free Atlantic ports. . Cygnal common shares are listed on the Toronto Stock Exchange Toronto Stock Exchange (TSE) Canada's largest stock exchange, trading approximately 1,200 company stocks and 33 options. under the symbol CYN. No stock exchange or regulatory authority Noun 1. regulatory authority - a governmental agency that regulates businesses in the public interest regulatory agency administrative body, administrative unit - a unit with administrative responsibilities has approved or disapproved of information contained herein. Certain information included in this news release is forward-looking and is subject to important risks and uncertainties. When used in this news release, the words "believe", "intend", "estimate", "expect", "plan" and similar expressions are intended to identify forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. , although not all forward-looking statements contain such words. These forward-looking statements are based on current expectations. The results or events predicted in these statements may differ materially from actual results or events. Factors which could cause results or events to differ from current expectations include, among other things, the impact of price and product competition, the ability of the Corporation to make acquisitions and/or integrate the operations and technologies of acquired businesses in an effective manner, general industry and market conditions and growth rates Growth Rates The compounded annualized rate of growth of a company's revenues, earnings, dividends, or other figures. Notes: Remember, historically high growth rates don't always mean a high rate of growth looking into the future. , the impact of consolidations in the telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. industry and stock market volatility. For additional information with respect to certain of these and other factors, see the reports filed by Cygnal Technologies with applicable Canadian securities administrators Canadian Securities Administrators(CSA) is a forum for the 13 securities regulators of Canada's provinces and territories to coordinate and harmonize regulation of the Canadian capital markets. . Cygnal Technologies disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. |
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