CES lost a average of $2M a year
Third Quarter 2007
Revenue for the third quarter totaled $ 5,768 compared with $2,335 in 2006. The lack of sales of goods
was largely due to the inability of the Company to fund the production, especially since $138,000 of debts
had not been paid by the Australian distributor. The cost of goods sold was $Nil (2006: $Nil)
Operation costs for the second quarter were $42,040 (2006:$52,836). This drop was primarily because of
the reduction of design and production costs from $18,564 to $Nil as no design or production was carried
out. Legal fees fell from $10,437 to $Nil because with more stable supplier relationships there was no
need for legal fees. Office supplies and communication fell from $11,337 to $1,939 as economies were
put into place. Travel was much higher in the quarter at $14,105 from ($2,840) largely as a result of the
adjustment to costs in 2006. Consulting fees were up from $15,338 to $26,015 as there are more
operations staff in China now than a year ago.
Sales and marketing costs fell considerably from $152,916 in 2006 to $10,310 in 2007. Of this reduction,
$101,034 was amortization of deferred marketing costs which have now been fully amortized, $15,282 as
a result of the decrease in travel to $Nil as there was little sales activity in the quarter and a reduction in
consulting fees from $34,017 to $10,310 as sales staff were halved.
Overall the general and administration costs fell from $554,863 to $269,930. This considerable reduction
was because of the fall in stock based compensation from $241,372 to $3,088 as no options were issued
in the quarter, a fall in consulting fees from $64,866 to $4,500 as fewer consultants were engaged and a
reduction in management and administration services from $70,217 to $45,529 primarily as a result of the
reduction in employee costs. In addition, shareholder and marketing cost fell from $79,016 to ($19,032)
as no annual general meeting took place in the third quarter of 2007, a settlement of an outstanding bill
which led to a reversal in communication costs and a significant reduction in consulting costs. These
reductions were offset by a rise in professional fees, which rose from $6,095 in 2006 to $38,284 in 2007.
The 2006 figure was lower because of negative legal fees whereas 2007 was higher because of a
payment of $22,324 for the 2006 audit and an accrual of $15,000 for the 2007 audit. In addition the bad
debt provision of $138,000 increased office costs from $57,701 to $175,578.
Research and Development costs fell from $16,632 to $7,362 as there were no consulting costs and
