Jose, as I posted earlier, the TSE listing and the release of the $13M financing proceeds are good news. The financial for 1998 has also been released. Is it good news? You judge, but please check my figures and calculations.
REVENUE (annual)
1998 $16.304M vs $1.055M for the 9 months ending Dec.31, 1997
NET INCOME (annual)
1998 LOSS $10.772M ($0.36/share) vs LOSS $11.3M ($0.41/share) for all of 1997. Not a great deal improvement even though revenues are growing rapidly.
1998 REVENUE (quarterly comparison)
Q4 $5.442M vs Q3 $5.023M, a growth of $419,000 or 8.34%
1998 NET INCOME (quarterly comparison)
Q4 LOSS $2.993M ($0.10/share) vs Q3 LOSS $2.043M ($0.07/share), an increase in LOSS of $950,000 or $0.03/ share from Q3 to Q4, or 46.5%.
QUESTIONS
1. When revenues grew by only 8.3%, why did the loss increase by 46.5%?
2 When revenues and cost of sales for Q4 and Q3 were relatively flat, why did marketing and general administration rise to $4.4M in Q4 from $3.36M in Q3, an increase of approximately $1.04M or 31%?
Are our administrative costs spiraling out of control without a commensurate increase in revenue and gross profit?
3. Will this trend continue in Q1 of 1999? In the past, the explanation that I have heard about the high administrative costs is that we are training many new reps to sell our products and this is expensive. Because we didn't see a significant return if such expenditures were made, I have to watch the administrative expenses for Q1 very carefully.
4. With our rapid growth in sales, will we need to expand our Irvine manufacturing facility? If so, do we end up with more costs that will create further losses?
I have major concerns about what is happening. I am comfortable with the Irvine operation. However, the actual management of the company, in my opinion, is now in question. I would like to examine, in detail, the expenditures under the heading Marketing, general and administrative. Unfortunately, I expect that the AGM will not be held in Vancouver and, therefore, I will not be able to attend. Yes, we are penetrating the market, but at what cost?
Hopefully, I will be able to get some satisfaction from IR. I will post any explanations etc.
Regards, Ed
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