Zongshen PEM Power Systems Inc. Continues to Generate Sales and Gross Profit in Second Quarter of 2007

    RICHMOND, BC, Aug. 21 /CNW/ - Zongshen PEM Power Systems Inc. (TSXV: ZPP;
"Zongshen PEM" or the "Company") is pleased to announce its unaudited
financial results for the quarter ended June 30, 2007. The unaudited financial
statements for the quarter ended June 30, 2007 can be viewed at www.sedar.com.
    The following table provides a summary of selected financial information
for the Company's eight most recent interim periods:


                                       Net Loss
                                        Before                     Net Loss
                                        Foreign                    per Share
                                       Exchange                   (Basic and
    Period Ended         Revenue      Gain (Loss)    Net Loss       Diluted)

    September 30, 2005 $         -   $  (193,393)  $  (300,324)  $     (0.01)
    December 31, 2005            -      (209,206)     (200,362)        (0.01)
    March 31, 2006               -      (150,499)     (144,838)        (0.00)
    June 30, 2006                -      (136,573)     (205,422)        (0.01)
    September 30, 2006           -      (119,419)     (111,806)        (0.00)
    December 31, 2006            -      (323,766)     (295,264)        (0.01)
    March 31, 2007       1,815,507      (135,802)     (139,014)        (0.00)
    June 30, 2007      $ 1,673,979   $  (327,463)  $  (360,453)  $     (0.01)

    The Company has two operating segments: electric motorcycles and electric
bicycles manufacturing and fuel cell research. In this quarter, the Company
continued to generate sales in the amount of $1,673,979, contributed by its
wholly owned subsidiary, Zongshen PEM Electric Vehicle Co. Ltd. ("ZPP-E
Vehicle"), in Wuxi, Jiangsu, China.
    The gross profit for the second quarter and six months ended June 30,
2007 was $140,666 and $219,122 respectively, compared to $nil for the same
periods of 2006. Electric bicycles and motorcycles contributed $70,428 and
motorcycle parts contributed $70,238 to the gross profit for this quarter.
    Compared to the first quarter in 2007, the gross profit of this quarter
increased by $62,210 (79%) primarily because the sales mix generated a higher
proportion of electric bicycle and motorcycle sales, which have a higher gross
profit margin than processing motorcycle parts. The electric bicycle and
motorcycle gross profit margin increased from 2% to 10%, due to the Company
reaching a higher level of production; meanwhile, the gross profit of
motorcycle parts increased from 5% to 7%, due to a higher selling price; as a
result, the combined gross profit margin increased from 4% to 8%.
    Also in the second quarter of 2007, the Company's net loss significantly
increased primarily due to $234,942 in stock-based compensation expenses that
was partially offset by net income contributed by ZPP-E Vehicle.
    In January, 2007, the Company received a production permit from Chinese
government authorizing the Company to manufacture electric motorcycles and
electric bicycles under the brand name of "Zongshen". To date, ZPP-E Vehicle
has installed two production lines with a capacity of producing up to 100,000
electric motorcycles and electric bicycles annually. The plant is currently
operating one shift, but will increase to two shifts when demand warrants.
Currently, ZPP-E Vehicle employs 100 people. For the second quarter and
six months ended June 30, 2007, the Company sold out 3,046 and 4,474 electric
bicycles and electric motorcycles respectively.
    To date, the Company's electric motorcycles and electric bicycles have
been launched in nine Chinese provinces: Shandong, Jiangsu, Henan, Hubei,
Anhui, Gansu, Inner Mongolia, Hebei and Shanxi. The Company has engaged
74 dealers in the above mentioned nine provinces.

    This press release may contain forward-looking statements including
management's assessment of future plans and operations and expectations of
future production, cash flow and earnings. These statements are based on
current expectations that involve a number of risks and uncertainties, which
could cause actual results to differ materially from those anticipated. These
risks include, but are not limited to: the risks associated with the electric
vehicles manufacturing industry (e.g. operational risks in development and
production; delays or changes in plans with respect to development projects or
capital expenditures; the uncertainty of estimates and projections relating to
production, costs and expenses and safety and environmental risks), the risks
associated with research and development of a new technology, and exchange
rate fluctuation and uncertainties resulting from potential delays or changes
in plans with respect to development projects or capital expenditures.

For further information:

For further information: Zongshen PEM Power Systems Inc., Mary Ma,
Controller, (604) 233-1115, info@zongshenpem.com

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