|
Empower Technologies Second Quarter Report Ended June 30, 2004
-New distribution agreement and joint development agreement mark second quarter achievements-
Richmond, BC - August 20, 2004 - Empower Technologies Corporation (“The Company or Empower”) has filed the second quarter report ended June 30, 2004.
Empower Technologies Corporation is a provider of Linux-based embedded system technologies and solutions for the consumer electronics industry and the intelligent appliance market. The Company was incorporated under the Company Act (British Columbia) on February 21, 2003. The Company operates through its wholly-owned Washington State subsidiary Empower Technologies, Inc. (“Empower US”), and indirectly; Empower Technologies (Canada) Inc. (“Empower Canada”) and Linux DA (Shanghai) Inc. (“Empower Shanghai”). The Company trades on the TSX Venture Exchange under the symbol EPT.
Highlights of the Quarter
- Empower US signs strategic licensing agreement with Spherex Inc., Licensed Manufacturer of Xbox® 5.1 surround sound system.
- Empower US has entered into a sales agreement with Experience Wireless Fidelity (India), a Company incorporated in India. This agreement grants Experience Wireless Fidelity (India) exclusive sales, distribution and service responsibility for marketing of Empower’s PowerPlay series of PDAs and future mobile smart communication devices through their distribution sales channels in India.
- The Company also has two ongoing significant projects:
New Model to replace PowerPlay Vs
The Company has developed an embedded LinuxDA O/S personal handheld device ("PowerPlay Vs"), which is sold through Best Buy Canada. The Company plans to phase out PowerPlay Vs and phases in the new model when available later this year. Currently, the Company is working on finishing the product development of the new model and the Company expects production to begin in the Fourth Quarter.
Best Buy Canada's Future Shop and Best Buy Store buyers have agreed with the new PowerPlay PDA model change scheme in their respective stores.
Joint development with Spherex Inc.
Empower US and Spherex Inc. are jointly working on a confidential development project. The Company plans to introduce the confidential product by the 4th quarter of this year. The confidential product is to have the licensed LinuxDA Embedded Operating System on board and will also contain the licensed Spherex Optimized Surround Sound technology.
Results of Operations
Revenues generated for the six months ended June 30, 2004 were $56,943 compared with the revenues for the six month period ended June 30, 2003 of $846. This significant increase was attributed to the continued sales of PowerPlay Vs to Best Buy Canada through Empower US's Canadian subsidiary, Empower Technologies (Canada) Inc., ("Empower Canada") in the period.
However, the revenue is decreased 68% from the previous quarter due to the Company's plan for phasing out Powerplay Vs and introducing the new model when it is available later this year. This has been communicated to Best Buy Canada's Future Shop and Best Buy Store buyers and they have agreed with the new PowerPlay PDA model change scheme in their respective stores. The Company anticipates the revenue to be improved when the new PowerPlay PDA starts shipping. Consumer electronics usually slow down after Christmas and then ramp up again with back to school sales in late August.
The gross margin for 2nd quarter is lower than the 1st quarter due to the higher quantity of products returned. Overall, the gross margin for the six months ended June 30, 2004 has improved over 2003 due to the elimination of some of the startup costs to meet Best Buy Canada's vendor requirements.
General and administrative expenses for the six month period ended June 30, 2004 increased to $1,600,738 (2003 - $364,151). Of this increase, Research and Development expenses increased due to the Company accelerating its effort to develop new products; Wages and benefits and office expense increased to $130,611 (2003 - $67,894), reflecting staff additions within all areas of the Company; Advertising and promotion increased to $60,639 (2003 - $4,906) and traveling expenses increased to $28,672 (2003 - $5,445) due to management's effort to promote and market its products.
There are also new expenses of $30,000 for directors' fees for services rendered by the directors.
Management believes that future quarterly 2004 costs will be much higher than 2003 levels due to addition of staff and the re-opening of the Shanghai office.
Research and Development costs ("R&D costs") relating to the development of Linux-based embedded system technologies are expensed as incurred unless they meet Canadian generally accepted accounting principles for deferral and amortization. R&D costs for the six month period ended June 30, 2004 were $262,425.
Deferred development costs are recorded at cost and are amortized upon commencement of commercial sales on a straight line basis over a period not exceeding three years. The Company reassesses whether it has met the relevant criteria for deferral and amortization and whether there is any impairment in value at each reporting date. As at June 30, 2004, there was a balance of $1,425,090.
Outlook
With the expectation of new equity capital of $3,315,308 raised from the warrants being exercised, the management believes the working capital should meet the planned cash flow. The strong cash position forecasted for the next quarter should enable the Company to accelerate its effort to develop new products and to promote the commercialization of its technologies.
In this quarter, Empower focuses on accelerating the new product development and expands its management and engineering group to accelerate the time, effort and ability to commercialize the LinuxDA Embedded O/S technologies. Empower will continue to develop new products and the LinuxDA Embedded O/S technologies for its targeted licensing and customer groups such as consumer electronics manufacturers, developers, retailers and end users and to promote its two brands - "PowerPlay" and "LinuxDA" as the premium household names in smart consumer electronic products and Linux-based embedded operating systems respectively.
About Empower Technologies
Founded in 2000, Empower Technologies is a provider of Linux-based embedded system technologies and solutions for the consumer electronics industry and the intelligent appliance market.
Empower is an innovative company that introduced to the world Linux DA O/S, the first and only complete Palm® Handheld compatible Linux Operating System scaled down for the Motorola Dragonball CPU platform. By uniting top professionals from within the computer industry and developing quality partnerships and strategic alliances, Empower is committed to being the leading provider of Linux-based embedded system technologies and solutions for consumer electronics manufacturers.
Empower’s brands are “LinuxDA” (www.linuxda.com) a Linux-based embedded operating system and “PowerPlay” (www.powerplaydevices.com) smart consumer electronics.
Contact Information:
Media Enquiries:
Paul Leung - Chairman, President and CEO: pcleung@empowertechnologies.com
or via Tel @ (604) 278-3100
Investor Relation:
David Flynn - Principal: dflynn787@rogers.com or via Tel @ (416) 346-7725
More Information on Empower Technologies: www.empowertechnologies.com
LEOs ® Sales Enquiries:
sales@empowertechnologies.com or via Telephone @ 604-278-3100
Paul Leung
Chairman, President and CEO
Empower Technologies Corporation
The statements contained in this news release that are not historical facts are forward looking statements. Such statements are based on management's estimates, assumptions and projections using available information. The company cautions that actual financial results could differ materially from the current expectations due to a number of factors.
The TSX Venture Exchange has in no way passed upon the merits of the proposed transactions and has neither approved nor disapproved the contents of this press release.
LEOs , PowerPlay and LinuxDA are the trademarks of Empower Technologies, Inc. All other brands are trademarks of their respective owners. |
