Friday, September 24, 2004 4:15:07 PM
from PWLX 10Q filed 8/16/04
OVERVIEW
For the three months ended June 30, 2004, the Company was able to report its
eighth consecutive quarter of comparative sales growth along with several
noteworthy achievements in its quest to execute its business plan which is
focused on growth, profitability, and technological innovation.
Net Revenue increased 103% for the three months ended June 30, 2004 compared to
the three months ended June 30, 2003. It marks the 8th consecutive quarterly
sales increase on a quarterly comparative basis; and for the trailing four
comparable quarters net revenue has increased 59%.
Gross profit increased 211% for the three months ended June 30, 2004 compared to
the three months ended June 30, 2003. It continues the effects of an improved
cost structure generated from the Company's overseas sourcing. The Company has
continued expanding the sourcing of its products beyond China to include Hong
Kong, Taiwan, and Korea. The ability to source product overseas should continue
to be a major strength of the Company in an effort to improve gross profit
margins in future reporting periods.
The Company's patented power-line SecureView(TM) "Camera in a light bulb"
continues to be the primary product sold in the consumer market of our security
segment. The product is aired on a regular basis on Shop At Home Network, LLC
and Home Shopping Network. The airings maintain Secure View's initial success in
the direct television retailing arena and the exposure should provide a
continuing opportunity to educate consumers on the advantages of SecureView and
power-line technology in general. In addition, SecureView continues to be sold
via Internet and catalog retailers. In April 2004, the Company announced a
comprehensive collaboration with Cenuco, Inc. of Boca Raton, Fla., to deploy the
first integrated CCTV solution utilizing PowerLinx power line video transmission
technologies and camera systems, combined with Cenuco's mobile software
technology to transmit live CCTV video onto cellular phones, Pocket PC devices,
and remote computers. With an estimated annual $39 billion global security and
CCTV market, the PowerLinx and Cenuco combined offerings will be available for
the residential, small to large enterprise, and Homeland Security/Government
sectors. As part of this relationship, PowerLinx ordered 4,500 licenses of
Cenuco's mobile remote video viewing software, which are inserted into the
PowerLinx SecureView(TM) "Camera in a light bulb" systems. Distribution of this
combined offering will include selected internet, catalog and direct response
retailers. The Cenuco software package includes gateway access from anywhere in
the world to view live video, unlimited off-site digital video recording (48
hour increments), and unlimited access to previously recorded video, for a
monthly service fee of $19.95. PowerLinx will share in revenues derived from the
monthly monitoring fees collected by Cenuco. The revenue sharing arrangement
covers PowerLinx-Cenuco bundled products sold by either PowerLinx or Cenuco in
their respective market segments.
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The Company continued development of its new mid-ware security solution for the
SOHO (Small Office Home Office) market in the quarter. This product, the PLVS
Plus Pro System(TM) and PLVS Plus System(TM) will focus on the
multi-camera/alarm/recording market which according to market research expects
products priced lower than one thousand dollars for a 3-4 node system. This
product will start at a basic system price of approximately $149.00 and will
allow the customer to purchase component system devices such as baby monitors,
sensors, alarms, and outdoor video cameras with recording capabilities all
priced from $49.00 - $199.00. This product will be focused on two levels of
application; the home DIY installation and the professionally installed systems.
The professionally installed system will come with many enhanced settings,
connectivity solutions, and attachment devices while the home DIY installed
units will focus on ease of installation. As previously reported
the research and development began in July 2003 and the initial design drawings
were accomplished in the 1st quarter. The final printed circuit board and
software development was completed in the quarter. The product housing design
and packaging design phase also began in the quarter. In addition, product
sourcing, tooling, dies, and prototype testing have begun and are expected to be
completed in the 3rd quarter along with initial presentations to customers for
the product. Initial deliveries are expected to begin in the 4th quarter.
As previously discussed in the Company's 2003 10-KSB, the Company has
successfully completed the installation and deployment of its first digital
security system. This system comprises 21 total cameras, both fixed and
pan-tilt-zoom (PTZ), operating over power line, twisted pair, and coaxial
wiring. The monitoring-control-storage component allows the user to
simultaneously view, record, and control each of the 21 cameras. The system's
capacity allows storage of up to 30 days of digital recording for each camera.
To move the project forward, the customer has requested that the Company
collaborate with their current digital security provider to provide an interface
to the hard wire digital systems currently deployed to allow for seamless
installations and to eliminate the need for loss prevention personnel training
on new viewing software. The software development to accomplish this
specification began in the quarter. In addition, the Company continued its
research and development of digital products to incorporate coding and decoding
(codec) technology licensed from On2 Technologies Inc. utilizing the license
agreement completed and announced in the fourth quarter of 2003.
Sales and installations of the Company's PowerLine Vision Systems (PLVS) (TM)
continued to grow and gain traction throughout the quarter ended June 30, 2004.
The product is proving to be extremely reliable as there have been no failures
in any Company installed systems to date and loss savings have been significant
as there has not been a back-up accident reported to the Company on any vehicle
with a PLVS system installed since the initial installations began in September
2003. Initially, as communicated in previous filings, truck fleets including
Ryder, Sysco Foods, McKenzie Tank Lines, and McLane Trucking purchased and
installed test units for evaluation of performance and property loss savings. Of
these fleets, Ryder and Sysco have ordered and installed additional units while
the remaining fleets and new customers continue to purchase and evaluate the
systems. In addition to Ryder and Sysco, the Company now has approximately 26
fleet customers who have purchased and installed systems which include McLean
Trucking, US Foods, E-One, McKinsey, Integris, and Perdue. The Company also
expanded selling systems in the recreational vehicle market. Forest River, Inc.
has begun offering the PLVS systems as an option on two of their 2005 Class B/C
models. In addition to approximately 12 dealers, the PLVS system is also being
sold through the following RV wholesale distributors: Aralax (Canada),
Stagparkway, WinnTron Technologies, and RadarBusters.
However, in order to meet increasing demand, the Company enlisted the services
of Velociti, www.velociti.us, to serve as a nationwide installer of our
PowerLine Vision Systems(TM) (PLVS) in the Transportation market segment. Since
1975, Velociti has been a market leader in Transportation and Logistics by
providing mobile installation service throughout the United States. Velociti has
extensive experience in the installation of transportation technology systems
and solutions for large, medium and small fleets. The program to be implemented
by Velociti will initially focus on PLVS installations on mid-to-large size
fleets. Velociti began initial installations in late May for several fleet
customers after completing the necessary installation time studies in late
April. With the addition of Velociti to the PowerLinx Team, PowerLinx is now
poised to accomplish scalability of sales for our PowerLine Vision Systems(TM)
(PLVS) product line. Alcalde & Fay, the Company government relations firm
continues to work on the implementation of a formal study of the rear vision
safety solution. The Company is also seeking preferred vendor status with
several fleets along with continuing sales development with OEM's, distributors
and dealers.
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Also during the quarter ended June 30, 2004, the Company launched the newly
redesigned Web site at www.power-linx.com. The Company's recent name change from
Seaview to PowerLinx, as well as its redesigned Web site, reflects on its
emphasis to continually develop new powerline products for the consumer,
transportation, and commercial security markets. The Web site is very customer
focused, and is expected to greatly facilitate converting visitors to customers.
The Company's products are grouped into six product lines with animated
illustrations to communicate more details about its products. For instance, each
product line has a unique URL that appears as a separate Web site. The customer
can access the product line of interest directly, without navigating to the
corporate home page and layers of menus. At the same time, a visitor can
navigate to any part of the Web site from any product URL. This makes it easier
and faster for visitors to get the information they are looking for and purchase
the product they want. The products are segmented as follows:
o Home Monitoring
o Transportation
o Commercial Security
o Home Networking
o Hotel Connectivity
o SeaView Marine
The investor or potential investor will continue to be able to access PWLX stock
quotes, up-to-date Company news, and our SEC filings. In the future, we expect
to provide access to our annual report and investor registration for our
shareholder database and investor package requests. The architecture makes the
site much more flexible allowing PowerLinx to display new products in
development. The Company expects to introduce several new products and new
product lines this year, and the Web site will easily integrate new products
with existing products. The site will be capable of highlighting new
introductions while fitting them into the overall site in a way that is very
intuitive for users. The new site will add online product registration with a
feature for e-mail capture, supplying PowerLinx with a direct customer care and
marketing program. The Company will be able to communicate with its customers to
increase customer satisfaction and to sell product line additions as well as new
product lines. Additional enhancements planned for the future are expected to
provide easy access and improved service for our dealers and commercial
customers.
The Company launched its Hotel and Multiple Dwelling Unit business segment in
May 2004 with the announcement of the strategic alliance agreement with Choice
Hotels International, one of the largest hotel franchise companies in the world
with more than 5,000 hotels, inns, all-suite hotels and resorts open and under
development in 44 countries under the Comfort Inn, Comfort Suites, Quality,
Clarion, Sleep Inn, Rodeway Inn, Econo Lodge and MainStay Suites brand names.
The launch and agreement were facilitated through the hiring of certain
employees of Guest ISP LLC.
The Business: High Speed Internet Access (HSIA) & Video On Demand (VOD)delivery
systems for Hotels and Multi Dwelling Units (MDU's) market.
The Company has developed and designed High Speed Internet Access (HSIA) & Video
On Demand (VOD) delivery systems for the Hospitality and Multi Dwelling Units
(MDU) markets which utilize powerline communications (PLC), Cat 3 & Cat 5 ADSL,
wireless along with hybrids and combinations of these technologies. The Company
also expects to develop a coaxial cable application for our products later this
year.
Principal Products: Hotel & MDU Segment
The Company specializes in providing the most technologically advanced and fully
integrated network (HSIA) solutions for hotels and (MDU's). Power-Linx product
line is as follows:
o Powerline PLC: This system utilizes the existing electrical grid in a
hotel for total high speed Internet (HSI) coverage, anywhere there is
an electrical outlet you can have (HSIA). This can also be used as
backbone for wireless install.
o Cat 3 & Cat 5 ADSL: This system utilizes the existing telephone lines
in a hotel or MDU and uses the two free pairs to deliver ten Mbps to
each room with RJ45 connection in each room. This can also be used for
the backbone for a wireless install.
o Wireless 802.11b and 802.11g: Power-Linx can cover an entire building
with wireless signals including all guest rooms, lobby, common areas,
meeting rooms and administration offices. We use our ADSL or PLC
technology to use existing wiring for the backbone for the wireless
systems to keep our systems very affordable.
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o Hybrid Systems: We can provide wireless and hardwired solutions and
can provide wireless to a hardwired connection by using our (WiFi)
bridges in the rooms that pick up wireless signals and have a RJ45
connection for hard-wired connections.
o Video On Demand (VOD): Power-Linx can provide VOD via the Internet
which until required the hotels to rely on cable providers for this
service. There is no expensive equipment to install. Now hotel
customers can purchase and watch a movie on their laptop in their
rooms. Customers can download movies on computer and watch for a
twenty-four hour period. Set top boxes for in room television are
expected to be available later this year.
The Company entered into a marketing and distribution agreement with
B2 Networks LLC to distribute the new B2 Digital Services Product
Line. The agreement also provides the Company the ability to market
and distribute the Pay-Per-View and Digital Satellite Services of
Telecommunication Products, Inc. ("Telpro") who is a strategic partner
and minority shareholder of B2 Networks LLC. The distribution
agreement complements and enhances the product offerings of high-speed
internet and connectivity to the Hotel & MDU market segment. The
agreement provides for recurring revenue sharing by all participants,
including the hotel & MDU property owner, on the services used and
purchased by customers.
Pursuant to the agreement, B2 Networks and Telpro will be supplying
Point-to-Point Wireless Local Loop internet connectivity in each hotel
room through the B2 Wireless Access Point (B2WAP) which will connect
to the in-room Hotellinktv.com for laptop users and the B2 Digital TV
set top box and handheld remote control for in-room television. These
products allow Powerlinx to market a large variety of in-room digital
services, which include making airline reservations, ordering pizza,
event ticketing, and transportation services, along with delivery of
Hollywood movies, sports and live events, and distinct genres of
Pay-Per-View content. The Company will actively market the B2Wap
service and the B2 Digital TV Broadband Set Top Television System with
our complete Hotel & MDU Connectivity products later this month
through our business-to-business marketing partner, Winn Technology
Group, Inc. These products may be viewed at the web site:
www.hotellinktv.com.
o 24/7 Call Center and Technical Support; The Company bills each
property a monthly maintenance fee on a per day per room and/or unit
basis through a system service agreement. For hotel properties, Tent
Cards are provided in each room with a toll free number for the guest
to use. The Company also utilizes its 24/7 online monitoring system to
check and maintain installed hotel/MDU systems. Franchises like
Holiday Inn, Hampton and Choice Hotels have mandated that hotels
maintain 24/7 support for their guests. This provides recurring
revenues for the Company.
o Internet Service Providers: The Company has negotiated agreements with
these (ISP's) that provide the HSI connections to the hotels to
promote their products such as DSL, cable, T1, wireless point to point
and satellite. Through these agreements the Company earns a percentage
of the monthly ISP charges to the hotel or MDU. This creates
recurring revenue for the Company on a per installation basis. The
Company is in the process of evaluating the creation of a wholly owned
subsidiary to act as an agent for these ISP providers to maximize
income opportunities for the Company. In addition, this would improve
customer service to the property owner or management company since the
Company currently provides the HSI connection specifications with a
referral to several ISP providers for the hotel/MDU to negotiate and
facilitate installation. Having a one-stop shop for the customer
should also improve the entire sales and installation process.
The Company also expects to sell and market PowerLine Security systems which
integrate into the HSI systems the Company installs as it provides a value added
product to the property owners. Further, the Company expects to develop an
installation network similar to that developed in our Transportation segment.
Principle Markets: Hotel & MDU Market
One of the most requested services in hotels today is (HSIA) and there are over
sixty five thousand hotels and nearly 30 millons units in the MDU market in the
United States plus government installations throughout the world. Over fifty
percent of all travel plans will be booked online this year and over 35% of all
travelers
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carry laptop computers. In the next five years most of these hotels will have
(HSIA) in their hotel rooms and meeting areas. Ninety two percent of travelers
who use laptops base their stay on availability of (HSIA) in the rooms. The
Hotel Franchises such as Hampton Inn, Holiday Inn have already mandated their
hotels to have (HSIA) installed in the rooms by January 2005. The Company is a
Choice Hotels Preferred Vendor, which means Choice Hotels International has
certified and recommends that its franchisees do business with PowerLinx. Choice
Hotels will release their mandate to their 4,400 hotels on or about August 16,
2004. Clarion, Comfort Suites, and Sleep Inns will be mandated to have (HSIA) by
December 31, 2004 and Comfort Inns, Quality Inns, Quality Inns Suites and
Mainstay Suites will be mandated by May 31, 2004.
The Company's principal markets are Hospitality, Multi Dwelling Units,
Hospitals, Schools and Government Facilities:
o Hospitality market is excellent because HSI is the number one amenity
asked for by hotel guests. The market is also driven by competition
between hotels and franchise mandates that require hotels to install
systems by a certain date.
o Multi Dwelling Units: This covers apartments, condos, and tenant
housing. Many apartments do not have coax cable or a method to have
HSIA to individual apartments. Half the world's population lives in
apartments. PowerLinx PLC and ADSL technologies using existing wiring
provide a viable economical and secure solution for this market.
o Hospital: Hospitals are budgeting to put in Intranet systems for
maintaining patient's records and more reliable operating systems in
addition to providing HSIA and digital services to patient rooms.
o Schools: As the Internet grows there is a growing demand for school
systems to provide HSIA to the children their school environment.
Using the existing wiring in schools is a viable, economical and
secure solution.
o Government Facilities: The Company expects to develop this market with
the aid of our government relations group, Alcalde & Fay. The United
States government is the largest owner of property in North America.
Distribution Methods: Hotel & MDU Segment
o Direct sales through a highly trained in house sales force that sells
(HSIA) & (VOD) to hoteliers on daily basis.
o Strategic partners such as Winn Technologies that tele-markets to
hotels nationwide and set qualified appointments for the HSIA & VOD
sales force. The process provides for hot leads to be directly
transferred to our in house sales force.
o Choice Hotels International provides in-house marketing that promotes
PowerLinx as a preferred vendor and also transfers those leads to the
Company. We are also listed at Choice.com, Primary Source and all
promotional materials provided by Choice Hotels International.
o The Company entered into a strategic alliance agreement with Choice
Hotels International, one of the largest hotel franchise companies in
the world with more than 5,000 hotels, inns, all-suite hotels and
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resorts open and under development in 44 countries under the Comfort
Inn, Comfort Suites, Quality, Clarion, Sleep Inn, Rodeway Inn, Econo
Lodge and MainStay Suites brand names in May 2004.
The PowerLinx-Choice Hotels International agreement is an annual,
renewable contract which appoints PowerLinx as a Choice Endorsed
Vendor offering PowerLinx's high speed internet access and
connectivity to Choice Hotels' United States franchisees. PowerLinx
becomes one of only four Choice Endorsed Vendors offering these
products which have been mandated for enterprise wide deployment by
the end of 2007. In addition, PowerLinx and Choice Hotels
International began cooperative efforts for the marketing, advertising
and promotion of PowerLinx's internet access solution to their
franchisees prior to and through the Choice Hotels national
convention, May 12-14, 2004 in San Diego, CA.
o Outside sales partners and agents: The Company is hiring agents across
the country to sell and promote its HSIA & VOD products. We are also
partnering with companies that sell other products to the hotel market
and have previous business relationships with hoteliers such as
communication providers.
Competitive Business Conditions: Hotel & MDU Segment
The hospitality and MDU markets provide the Company a unique opportunity to
create revenues through the sales and marketing of HSIA and reoccurring revenue
from 24/7 technical support, VOD and ISP access to hotels and MDU's. Although
there is significant competition with many companies providing HSI to the
hospitality market through wireless, coax and other hardwired solutions, the
Company is positioned to garner market share. Through use of the Company
patented technologies, ADSL & PLC using existing wiring allows PowerLinx HSIA
products to be very competitive, reliable and economical for the property owner.
Also PowerLinx alliance with Choice Hotels International provides
standardization for the market along with certification of the PowerLinx product
line. The Company is actively soliciting and negotiating similar alliances with
other hotel chains to further solidify a strong market presence and to provide
stable future revenue growth for the Company.
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The Company also continues to hire associates primarily in sales and engineering
to support future sales growth and expanding research and development projects.
The Company now employs a total of 26 employees which includes 13 employees
dedicated to sales. Of these 16, 3 serve as Sales Directors while the remaining
are Account Sales Executives compensated on a straight commission or draw versus
commission pay plan. The Company also continues to add manufacture sales
representatives. To provide the expanding sales team with qualified leads,
enlisted the services of Winn Technology Group, Inc., www.winntech.net, to serve
as the marketing resource to provide business-to-business marketing campaigns,
inbound sales management, first level tech support service, dealer database
management and competitive intelligence research. WTGI has extensive experience
in fielding and processing all types of inbound response to various client
marketing campaigns which includes inbound programs similar in nature to the
program being launched by PowerLinx. WTGI has provided lead qualification
services that included inbound response for clients such as Palm, Gartner,
TruSecure, McDATA, Cisco, PeopleSoft, Siemens CN and MercuryMD. The PowerLinx
program implemented by the Winn Technology Group initially focused on
business-to-business marketing campaigns in our home monitoring, transportation,
marine and recently launched hotel connectivity/MDU business segments. We expect
to generate qualified sales leads for the sales team. WTGI will take
responsibility for managing the daily sales orders to our toll-free order
number, 1-800-POWERLX along with the initial contact for product tech support
questions. In addition, WTGI has the ability to provide PowerLinx with extensive
marketing feedback and competitive intelligence research to continually improve
the process and provide maximum sales productivity.
OVERVIEW
For the three months ended June 30, 2004, the Company was able to report its
eighth consecutive quarter of comparative sales growth along with several
noteworthy achievements in its quest to execute its business plan which is
focused on growth, profitability, and technological innovation.
Net Revenue increased 103% for the three months ended June 30, 2004 compared to
the three months ended June 30, 2003. It marks the 8th consecutive quarterly
sales increase on a quarterly comparative basis; and for the trailing four
comparable quarters net revenue has increased 59%.
Gross profit increased 211% for the three months ended June 30, 2004 compared to
the three months ended June 30, 2003. It continues the effects of an improved
cost structure generated from the Company's overseas sourcing. The Company has
continued expanding the sourcing of its products beyond China to include Hong
Kong, Taiwan, and Korea. The ability to source product overseas should continue
to be a major strength of the Company in an effort to improve gross profit
margins in future reporting periods.
The Company's patented power-line SecureView(TM) "Camera in a light bulb"
continues to be the primary product sold in the consumer market of our security
segment. The product is aired on a regular basis on Shop At Home Network, LLC
and Home Shopping Network. The airings maintain Secure View's initial success in
the direct television retailing arena and the exposure should provide a
continuing opportunity to educate consumers on the advantages of SecureView and
power-line technology in general. In addition, SecureView continues to be sold
via Internet and catalog retailers. In April 2004, the Company announced a
comprehensive collaboration with Cenuco, Inc. of Boca Raton, Fla., to deploy the
first integrated CCTV solution utilizing PowerLinx power line video transmission
technologies and camera systems, combined with Cenuco's mobile software
technology to transmit live CCTV video onto cellular phones, Pocket PC devices,
and remote computers. With an estimated annual $39 billion global security and
CCTV market, the PowerLinx and Cenuco combined offerings will be available for
the residential, small to large enterprise, and Homeland Security/Government
sectors. As part of this relationship, PowerLinx ordered 4,500 licenses of
Cenuco's mobile remote video viewing software, which are inserted into the
PowerLinx SecureView(TM) "Camera in a light bulb" systems. Distribution of this
combined offering will include selected internet, catalog and direct response
retailers. The Cenuco software package includes gateway access from anywhere in
the world to view live video, unlimited off-site digital video recording (48
hour increments), and unlimited access to previously recorded video, for a
monthly service fee of $19.95. PowerLinx will share in revenues derived from the
monthly monitoring fees collected by Cenuco. The revenue sharing arrangement
covers PowerLinx-Cenuco bundled products sold by either PowerLinx or Cenuco in
their respective market segments.
3
<PAGE>
The Company continued development of its new mid-ware security solution for the
SOHO (Small Office Home Office) market in the quarter. This product, the PLVS
Plus Pro System(TM) and PLVS Plus System(TM) will focus on the
multi-camera/alarm/recording market which according to market research expects
products priced lower than one thousand dollars for a 3-4 node system. This
product will start at a basic system price of approximately $149.00 and will
allow the customer to purchase component system devices such as baby monitors,
sensors, alarms, and outdoor video cameras with recording capabilities all
priced from $49.00 - $199.00. This product will be focused on two levels of
application; the home DIY installation and the professionally installed systems.
The professionally installed system will come with many enhanced settings,
connectivity solutions, and attachment devices while the home DIY installed
units will focus on ease of installation. As previously reported
the research and development began in July 2003 and the initial design drawings
were accomplished in the 1st quarter. The final printed circuit board and
software development was completed in the quarter. The product housing design
and packaging design phase also began in the quarter. In addition, product
sourcing, tooling, dies, and prototype testing have begun and are expected to be
completed in the 3rd quarter along with initial presentations to customers for
the product. Initial deliveries are expected to begin in the 4th quarter.
As previously discussed in the Company's 2003 10-KSB, the Company has
successfully completed the installation and deployment of its first digital
security system. This system comprises 21 total cameras, both fixed and
pan-tilt-zoom (PTZ), operating over power line, twisted pair, and coaxial
wiring. The monitoring-control-storage component allows the user to
simultaneously view, record, and control each of the 21 cameras. The system's
capacity allows storage of up to 30 days of digital recording for each camera.
To move the project forward, the customer has requested that the Company
collaborate with their current digital security provider to provide an interface
to the hard wire digital systems currently deployed to allow for seamless
installations and to eliminate the need for loss prevention personnel training
on new viewing software. The software development to accomplish this
specification began in the quarter. In addition, the Company continued its
research and development of digital products to incorporate coding and decoding
(codec) technology licensed from On2 Technologies Inc. utilizing the license
agreement completed and announced in the fourth quarter of 2003.
Sales and installations of the Company's PowerLine Vision Systems (PLVS) (TM)
continued to grow and gain traction throughout the quarter ended June 30, 2004.
The product is proving to be extremely reliable as there have been no failures
in any Company installed systems to date and loss savings have been significant
as there has not been a back-up accident reported to the Company on any vehicle
with a PLVS system installed since the initial installations began in September
2003. Initially, as communicated in previous filings, truck fleets including
Ryder, Sysco Foods, McKenzie Tank Lines, and McLane Trucking purchased and
installed test units for evaluation of performance and property loss savings. Of
these fleets, Ryder and Sysco have ordered and installed additional units while
the remaining fleets and new customers continue to purchase and evaluate the
systems. In addition to Ryder and Sysco, the Company now has approximately 26
fleet customers who have purchased and installed systems which include McLean
Trucking, US Foods, E-One, McKinsey, Integris, and Perdue. The Company also
expanded selling systems in the recreational vehicle market. Forest River, Inc.
has begun offering the PLVS systems as an option on two of their 2005 Class B/C
models. In addition to approximately 12 dealers, the PLVS system is also being
sold through the following RV wholesale distributors: Aralax (Canada),
Stagparkway, WinnTron Technologies, and RadarBusters.
However, in order to meet increasing demand, the Company enlisted the services
of Velociti, www.velociti.us, to serve as a nationwide installer of our
PowerLine Vision Systems(TM) (PLVS) in the Transportation market segment. Since
1975, Velociti has been a market leader in Transportation and Logistics by
providing mobile installation service throughout the United States. Velociti has
extensive experience in the installation of transportation technology systems
and solutions for large, medium and small fleets. The program to be implemented
by Velociti will initially focus on PLVS installations on mid-to-large size
fleets. Velociti began initial installations in late May for several fleet
customers after completing the necessary installation time studies in late
April. With the addition of Velociti to the PowerLinx Team, PowerLinx is now
poised to accomplish scalability of sales for our PowerLine Vision Systems(TM)
(PLVS) product line. Alcalde & Fay, the Company government relations firm
continues to work on the implementation of a formal study of the rear vision
safety solution. The Company is also seeking preferred vendor status with
several fleets along with continuing sales development with OEM's, distributors
and dealers.
4
<PAGE>
Also during the quarter ended June 30, 2004, the Company launched the newly
redesigned Web site at www.power-linx.com. The Company's recent name change from
Seaview to PowerLinx, as well as its redesigned Web site, reflects on its
emphasis to continually develop new powerline products for the consumer,
transportation, and commercial security markets. The Web site is very customer
focused, and is expected to greatly facilitate converting visitors to customers.
The Company's products are grouped into six product lines with animated
illustrations to communicate more details about its products. For instance, each
product line has a unique URL that appears as a separate Web site. The customer
can access the product line of interest directly, without navigating to the
corporate home page and layers of menus. At the same time, a visitor can
navigate to any part of the Web site from any product URL. This makes it easier
and faster for visitors to get the information they are looking for and purchase
the product they want. The products are segmented as follows:
o Home Monitoring
o Transportation
o Commercial Security
o Home Networking
o Hotel Connectivity
o SeaView Marine
The investor or potential investor will continue to be able to access PWLX stock
quotes, up-to-date Company news, and our SEC filings. In the future, we expect
to provide access to our annual report and investor registration for our
shareholder database and investor package requests. The architecture makes the
site much more flexible allowing PowerLinx to display new products in
development. The Company expects to introduce several new products and new
product lines this year, and the Web site will easily integrate new products
with existing products. The site will be capable of highlighting new
introductions while fitting them into the overall site in a way that is very
intuitive for users. The new site will add online product registration with a
feature for e-mail capture, supplying PowerLinx with a direct customer care and
marketing program. The Company will be able to communicate with its customers to
increase customer satisfaction and to sell product line additions as well as new
product lines. Additional enhancements planned for the future are expected to
provide easy access and improved service for our dealers and commercial
customers.
The Company launched its Hotel and Multiple Dwelling Unit business segment in
May 2004 with the announcement of the strategic alliance agreement with Choice
Hotels International, one of the largest hotel franchise companies in the world
with more than 5,000 hotels, inns, all-suite hotels and resorts open and under
development in 44 countries under the Comfort Inn, Comfort Suites, Quality,
Clarion, Sleep Inn, Rodeway Inn, Econo Lodge and MainStay Suites brand names.
The launch and agreement were facilitated through the hiring of certain
employees of Guest ISP LLC.
The Business: High Speed Internet Access (HSIA) & Video On Demand (VOD)delivery
systems for Hotels and Multi Dwelling Units (MDU's) market.
The Company has developed and designed High Speed Internet Access (HSIA) & Video
On Demand (VOD) delivery systems for the Hospitality and Multi Dwelling Units
(MDU) markets which utilize powerline communications (PLC), Cat 3 & Cat 5 ADSL,
wireless along with hybrids and combinations of these technologies. The Company
also expects to develop a coaxial cable application for our products later this
year.
Principal Products: Hotel & MDU Segment
The Company specializes in providing the most technologically advanced and fully
integrated network (HSIA) solutions for hotels and (MDU's). Power-Linx product
line is as follows:
o Powerline PLC: This system utilizes the existing electrical grid in a
hotel for total high speed Internet (HSI) coverage, anywhere there is
an electrical outlet you can have (HSIA). This can also be used as
backbone for wireless install.
o Cat 3 & Cat 5 ADSL: This system utilizes the existing telephone lines
in a hotel or MDU and uses the two free pairs to deliver ten Mbps to
each room with RJ45 connection in each room. This can also be used for
the backbone for a wireless install.
o Wireless 802.11b and 802.11g: Power-Linx can cover an entire building
with wireless signals including all guest rooms, lobby, common areas,
meeting rooms and administration offices. We use our ADSL or PLC
technology to use existing wiring for the backbone for the wireless
systems to keep our systems very affordable.
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o Hybrid Systems: We can provide wireless and hardwired solutions and
can provide wireless to a hardwired connection by using our (WiFi)
bridges in the rooms that pick up wireless signals and have a RJ45
connection for hard-wired connections.
o Video On Demand (VOD): Power-Linx can provide VOD via the Internet
which until required the hotels to rely on cable providers for this
service. There is no expensive equipment to install. Now hotel
customers can purchase and watch a movie on their laptop in their
rooms. Customers can download movies on computer and watch for a
twenty-four hour period. Set top boxes for in room television are
expected to be available later this year.
The Company entered into a marketing and distribution agreement with
B2 Networks LLC to distribute the new B2 Digital Services Product
Line. The agreement also provides the Company the ability to market
and distribute the Pay-Per-View and Digital Satellite Services of
Telecommunication Products, Inc. ("Telpro") who is a strategic partner
and minority shareholder of B2 Networks LLC. The distribution
agreement complements and enhances the product offerings of high-speed
internet and connectivity to the Hotel & MDU market segment. The
agreement provides for recurring revenue sharing by all participants,
including the hotel & MDU property owner, on the services used and
purchased by customers.
Pursuant to the agreement, B2 Networks and Telpro will be supplying
Point-to-Point Wireless Local Loop internet connectivity in each hotel
room through the B2 Wireless Access Point (B2WAP) which will connect
to the in-room Hotellinktv.com for laptop users and the B2 Digital TV
set top box and handheld remote control for in-room television. These
products allow Powerlinx to market a large variety of in-room digital
services, which include making airline reservations, ordering pizza,
event ticketing, and transportation services, along with delivery of
Hollywood movies, sports and live events, and distinct genres of
Pay-Per-View content. The Company will actively market the B2Wap
service and the B2 Digital TV Broadband Set Top Television System with
our complete Hotel & MDU Connectivity products later this month
through our business-to-business marketing partner, Winn Technology
Group, Inc. These products may be viewed at the web site:
www.hotellinktv.com.
o 24/7 Call Center and Technical Support; The Company bills each
property a monthly maintenance fee on a per day per room and/or unit
basis through a system service agreement. For hotel properties, Tent
Cards are provided in each room with a toll free number for the guest
to use. The Company also utilizes its 24/7 online monitoring system to
check and maintain installed hotel/MDU systems. Franchises like
Holiday Inn, Hampton and Choice Hotels have mandated that hotels
maintain 24/7 support for their guests. This provides recurring
revenues for the Company.
o Internet Service Providers: The Company has negotiated agreements with
these (ISP's) that provide the HSI connections to the hotels to
promote their products such as DSL, cable, T1, wireless point to point
and satellite. Through these agreements the Company earns a percentage
of the monthly ISP charges to the hotel or MDU. This creates
recurring revenue for the Company on a per installation basis. The
Company is in the process of evaluating the creation of a wholly owned
subsidiary to act as an agent for these ISP providers to maximize
income opportunities for the Company. In addition, this would improve
customer service to the property owner or management company since the
Company currently provides the HSI connection specifications with a
referral to several ISP providers for the hotel/MDU to negotiate and
facilitate installation. Having a one-stop shop for the customer
should also improve the entire sales and installation process.
The Company also expects to sell and market PowerLine Security systems which
integrate into the HSI systems the Company installs as it provides a value added
product to the property owners. Further, the Company expects to develop an
installation network similar to that developed in our Transportation segment.
Principle Markets: Hotel & MDU Market
One of the most requested services in hotels today is (HSIA) and there are over
sixty five thousand hotels and nearly 30 millons units in the MDU market in the
United States plus government installations throughout the world. Over fifty
percent of all travel plans will be booked online this year and over 35% of all
travelers
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carry laptop computers. In the next five years most of these hotels will have
(HSIA) in their hotel rooms and meeting areas. Ninety two percent of travelers
who use laptops base their stay on availability of (HSIA) in the rooms. The
Hotel Franchises such as Hampton Inn, Holiday Inn have already mandated their
hotels to have (HSIA) installed in the rooms by January 2005. The Company is a
Choice Hotels Preferred Vendor, which means Choice Hotels International has
certified and recommends that its franchisees do business with PowerLinx. Choice
Hotels will release their mandate to their 4,400 hotels on or about August 16,
2004. Clarion, Comfort Suites, and Sleep Inns will be mandated to have (HSIA) by
December 31, 2004 and Comfort Inns, Quality Inns, Quality Inns Suites and
Mainstay Suites will be mandated by May 31, 2004.
The Company's principal markets are Hospitality, Multi Dwelling Units,
Hospitals, Schools and Government Facilities:
o Hospitality market is excellent because HSI is the number one amenity
asked for by hotel guests. The market is also driven by competition
between hotels and franchise mandates that require hotels to install
systems by a certain date.
o Multi Dwelling Units: This covers apartments, condos, and tenant
housing. Many apartments do not have coax cable or a method to have
HSIA to individual apartments. Half the world's population lives in
apartments. PowerLinx PLC and ADSL technologies using existing wiring
provide a viable economical and secure solution for this market.
o Hospital: Hospitals are budgeting to put in Intranet systems for
maintaining patient's records and more reliable operating systems in
addition to providing HSIA and digital services to patient rooms.
o Schools: As the Internet grows there is a growing demand for school
systems to provide HSIA to the children their school environment.
Using the existing wiring in schools is a viable, economical and
secure solution.
o Government Facilities: The Company expects to develop this market with
the aid of our government relations group, Alcalde & Fay. The United
States government is the largest owner of property in North America.
Distribution Methods: Hotel & MDU Segment
o Direct sales through a highly trained in house sales force that sells
(HSIA) & (VOD) to hoteliers on daily basis.
o Strategic partners such as Winn Technologies that tele-markets to
hotels nationwide and set qualified appointments for the HSIA & VOD
sales force. The process provides for hot leads to be directly
transferred to our in house sales force.
o Choice Hotels International provides in-house marketing that promotes
PowerLinx as a preferred vendor and also transfers those leads to the
Company. We are also listed at Choice.com, Primary Source and all
promotional materials provided by Choice Hotels International.
o The Company entered into a strategic alliance agreement with Choice
Hotels International, one of the largest hotel franchise companies in
the world with more than 5,000 hotels, inns, all-suite hotels and
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resorts open and under development in 44 countries under the Comfort
Inn, Comfort Suites, Quality, Clarion, Sleep Inn, Rodeway Inn, Econo
Lodge and MainStay Suites brand names in May 2004.
The PowerLinx-Choice Hotels International agreement is an annual,
renewable contract which appoints PowerLinx as a Choice Endorsed
Vendor offering PowerLinx's high speed internet access and
connectivity to Choice Hotels' United States franchisees. PowerLinx
becomes one of only four Choice Endorsed Vendors offering these
products which have been mandated for enterprise wide deployment by
the end of 2007. In addition, PowerLinx and Choice Hotels
International began cooperative efforts for the marketing, advertising
and promotion of PowerLinx's internet access solution to their
franchisees prior to and through the Choice Hotels national
convention, May 12-14, 2004 in San Diego, CA.
o Outside sales partners and agents: The Company is hiring agents across
the country to sell and promote its HSIA & VOD products. We are also
partnering with companies that sell other products to the hotel market
and have previous business relationships with hoteliers such as
communication providers.
Competitive Business Conditions: Hotel & MDU Segment
The hospitality and MDU markets provide the Company a unique opportunity to
create revenues through the sales and marketing of HSIA and reoccurring revenue
from 24/7 technical support, VOD and ISP access to hotels and MDU's. Although
there is significant competition with many companies providing HSI to the
hospitality market through wireless, coax and other hardwired solutions, the
Company is positioned to garner market share. Through use of the Company
patented technologies, ADSL & PLC using existing wiring allows PowerLinx HSIA
products to be very competitive, reliable and economical for the property owner.
Also PowerLinx alliance with Choice Hotels International provides
standardization for the market along with certification of the PowerLinx product
line. The Company is actively soliciting and negotiating similar alliances with
other hotel chains to further solidify a strong market presence and to provide
stable future revenue growth for the Company.
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The Company also continues to hire associates primarily in sales and engineering
to support future sales growth and expanding research and development projects.
The Company now employs a total of 26 employees which includes 13 employees
dedicated to sales. Of these 16, 3 serve as Sales Directors while the remaining
are Account Sales Executives compensated on a straight commission or draw versus
commission pay plan. The Company also continues to add manufacture sales
representatives. To provide the expanding sales team with qualified leads,
enlisted the services of Winn Technology Group, Inc., www.winntech.net, to serve
as the marketing resource to provide business-to-business marketing campaigns,
inbound sales management, first level tech support service, dealer database
management and competitive intelligence research. WTGI has extensive experience
in fielding and processing all types of inbound response to various client
marketing campaigns which includes inbound programs similar in nature to the
program being launched by PowerLinx. WTGI has provided lead qualification
services that included inbound response for clients such as Palm, Gartner,
TruSecure, McDATA, Cisco, PeopleSoft, Siemens CN and MercuryMD. The PowerLinx
program implemented by the Winn Technology Group initially focused on
business-to-business marketing campaigns in our home monitoring, transportation,
marine and recently launched hotel connectivity/MDU business segments. We expect
to generate qualified sales leads for the sales team. WTGI will take
responsibility for managing the daily sales orders to our toll-free order
number, 1-800-POWERLX along with the initial contact for product tech support
questions. In addition, WTGI has the ability to provide PowerLinx with extensive
marketing feedback and competitive intelligence research to continually improve
the process and provide maximum sales productivity.
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