CITY OF INDUSTRY, Calif. — Aug 23, 2004 — Global ePoint, Inc. (Nasdaq: GEPT), a leading provider of digital video surveillance systems, today announced financial results for the second quarter and six month period ended June 30, 2004.

Financial results for the three months ended June 30, 2004 compared to the three months ended June 30, 2003.

For the quarter, revenues increased 173.3 percent to $5.6 million from the $2.0 million reported for the second quarter of 2003. The quarter over quarter increase resulted from a $2.6 million increase in the contract manufacturing division comprising sales of consumer PCs and component parts and $910,000 in revenues from the recently completed acquisitions. Revenues for the second quarter of 2003 did not include sales from either AirWorks or Perpetual.

Cost of sales for the quarter was $4.6 million, an increase of 225.1 percent from the $1.4 million for the second quarter of last year. As stated previously, the increase in the cost of sales was primarily due to the increase in contract manufacturing sales to the consumer PC market and sales of computer and electronic components. The acquisitions increased cost of sales by $557,000 compared to the three months ended June 30, 2003.

Gross profit was $967,000, or 17.4 percent of sales, compared to gross profit of $622,000, or 30.6 percent of sales, for the second quarter of 2003. The decrease in gross profit as a percent of sales was due to the increase in lower margin sales of consumer PC products and component parts offset by the increased gross margins provided by Perpetual (38.6 percent) and AirWorks (39 percent). Gross margins for the core business of AirWorks were 47.7% and 21.1% for the non core business resulting in a 39 percent blended gross margin.

The Company reported a 17 percent increase in sales and marketing expense to $668,000 and a 228 percent increase in general and administrative expense to $1.4 million. $646,000 of the increase was related to the integration and ongoing SG&A expenses of Perpetual (acquired April 5, 2004) and AirWorks (acquired April 26, 2004). During the second quarter, the Company consolidated the operations of Sequent and Perpetual, into a new operating division, the Digital Technology Division. Costs associated with being a public company totaled approximately $174,000 and an additional $200,000 corporate salaries and wages was incurred in the second quarter 2004. There were no comparable expenses in the second quarter of 2003. The Company also reported $255,000 in research and development expenses compared to $221,000 in R&D for the second quarter of 2003 continuing management’s investment in the development of new products and technologies to facilitate continued growth.

Net loss for the quarter was $1.5 million, or $0.13 per basic and diluted share, compared to the net loss of $621,000, or $0.10 per basic and diluted share for the second quarter of 2003. Weighted average shares outstanding for the quarter were 10.8 million compared to 5.9 million for the second quarter of 2003.

Financial results for the six months ended June 30, 2004 compared to the six months ended June 30, 2003.

For the six–month period, revenues increased 131.4 percent to $10.4 million compared to $4.5 million from the first six months of 2003. This increase was the result of an increase in contract manufacturing revenue of $5.0 million and the revenue provided due to the acquisitions in April of Perpetual, $250,000, and AirWorks, $659,000, (the acquisitions) compared to the first six months of 2003. The year over year increase in contract manufacturing revenue was primarily attributed to the increase in sales in the consumer PC market and sales of computer components.

Cost of sales was $8.4 million, a 166.8 percent increase from $3.1 million reported for the first six months of 2003. The increase in the cost of sales was primarily due to the increase in contract manufacturing sales to the consumer PC market and sales of computers and electronic components. The acquisitions increased cost of sales by $557,000 compared to the six months ended June 30, 2003.

Gross profit for the first half of 2004 was $2.0 million, or 19.6 percent of sales, compared to gross profit of $1.4 million, or 30 percent of sales, an increase of 50.0 percent. The decrease in gross profit as a percent of sales was due to the increase in lower margin sales of consumer PC products and component parts offset by the increased gross margins provided by Perpetual (38.6 percent) and AirWorks (39 percent).

Selling and marketing expenses increased 10.2 percent to $1.1 million compared to $987,000 for the first six months of 2003. A $241,000 year over year increase is due to the acquisitions offset by a decrease of $190,000 due to a reduction in non essential sales personnel within the digital technology division.

General and administrative expenses, increased 231.4 percent to $2.3 million, compared to $707,000 for the first six months of 2003. Research and development resulted in a year over year increase of $144,000 to $506,000, compared to $362,000 for the first six months of 2003. In addition, the Company incurred approximately $372,000 in professional fees and other expenses associated with being a public entity. $404,000 was due to the acquisitions comprised of salaries and wages and other administrative expenses. Additionally, expenses in the contract manufacturing division increased $515,000 year over year. An additional $284,000 of personnel and other facility expansion expenses was required due to increase in sales and the anticipated increase in production to support expected ramp up of revenue resulting from the Perpetual acquisition. $231,000 was due to additional salaries, selling, administrative costs, marketing and promotional costs associated with Vicious PC, our new consumer gaming product for which there were no comparable expenses in the six months ended June 30, 2003.

Net loss for the first six months of 2004 was $1.8 million, or $0.17 per basic and diluted share, compared to a net loss of $586,000, or $0.10 per basic and diluted share for the first six months of 2003. Weighted average shares outstanding for the quarter were 10.8 million compared to 5.9 million for the second quarter of 2003.

The Company’s net book value was $7 million and had $16.2 million of total assets as of June 30, 2004.

"In the past six months, our management team has acquired and integrated the key components necessary to create a dynamic, vertically integrated company," commentedToresa Lou, Global ePoint’s chief executive officer. "We also assembled an experienced management team and expanded the breadth of our proprietary digital surveillance products to address the growing needs in a broad array of industries. In addition, we have laid the groundwork, through a considerable investment in our research and development budget, for our future growth as we look to maintain our technological advantages and develop tomorrow’s products. While we have made considerable progress integrating our operating divisions to create a unified and diversified Company, we still have considerable work to do in terms of exploiting the inherent synergies while continuing to reduce redundant operating expenses. Those goals are the immediate focus going forward and we feel that if our efforts are successful, we should start harvesting the substantial profit potential provided by the multi-billion dollar digital surveillance and security market."

On August 5, 2004, Global ePoint completed the private placement sale of convertible preferred stock and common stock purchase warrants to three equity funds managed by Mercator Advisory Group, LLC, of Los Angeles, California. The gross proceeds to the Company were $5.5 million. The Company filed an 8-K listing the specific terms and will discuss this in more detail on its conference call.

"The confidence shown in our business plan by Mercator Advisory Group is encouraging, and we now have the necessary capital to completely integrate our recent acquisitions, continue prudent research and development efforts, accelerate our sales and marketing efforts, and execute our growth strategy," commented John Pan, the Company’s chairman and chief financial officer.

Highlights of events during and subsequent to the quarter:

• On Aug. 17, Global ePoint announced the appointment of Joseph P. Cappelletti to Vice President of Sales and Marketing for the Company’s Digital Division. Mr. Cappelletti was a founder and also previously served as President of Ademco Distribution, Inc. (ADI), a Melville, New York based division of Honeywell, Inc. During his 24 year career with the Ademco Group, he helped create one of North America’s largest wholesale distributors of security and low voltage products with annual sales that exceeded more than $1 billion.

• On Aug. 2, Global ePoint announced its AirWorks division has received additional orders, including reorders and upgrades, worth $212,000, for the Company’s Cockpit Door Surveillance Systems (CDSS). LTU, one of Germany’s premier vacation and charter carriers, placed a reorder for additional CDSS systems and will upgrade the fleet which already has CDSS systems with the new AirWorks five–inch CDSS touch sensitive monitors.

• On July 27, Global ePoint announced its AirWorks division has received FAA and European JAA (Joint Aviation Authorities) certification for Fire Detection and Fire Suppression kits and will immediately begin delivering kits to Air One airlines of Italy. The initial $257,400 order was placed through Autronics and is for 19 aircraft to be followed with a reorder for six additional aircraft.

• During the quarter, Global ePoint announced its AirWorks division has entered into a purchase term agreement amendment with Lufthansa Technik AG, which will allow Lufthansa Technik to market and sell the AirWorks Cockpit Door Surveillance System (CDSS). Lufthansa Airlines was the original customer for the AirWorks CDSS, installing the system on their entire fleet of Narrow body and Wide Body Aircraft.

• In July Global ePoint’s AirWorks division received initial orders from American Airlines to install Laptop Computer Power systems in 103 additional MD-80 aircraft. The initial orders are for $361,000 with a follow–on orders anticipated.

• During the quarter, Global ePoint announced its Perpetual Digital division has completed initial delivery of Digital Video Recorder (DVR) Surveillance Systems with point–of–sale interface to Ace Hardware.

The Company’s Aviation division contains Global AirWorks, whose primary communications and security products include the Cockpit Door Surveillance System (CDSS), a digital electronic "flight bag" of all flight and on–board manuals and records for pilots and a Laptop Computer Power System for passengers and flight crews. AirWorks customers include airline major OEMs, such as AT&T Aviation, BAE Systems, In–flight Phone, L3 Communications, and Rockwell Collins; all major U.S. airlines; and all major international carriers, including ATA, Air China, Bombardier, Finnair, Varig, KLM, Lufthansa, and Cathay Pacific. AirWorks holds more than 40 supplemental type certificates (STC) certifying AirWorks as a Federal Aviation Administration (FAA)–approved manufacturer and installer for a range of interior equipment and systems for a variety of commercial aircraft flying worldwide.

Global ePoint’s growth catalyst, through its wholly-owned subsidiaries, is the design, manufacturing, sales and distribution of digital video surveillance systems for the law enforcement, military, aviation and homeland security markets. On the cutting edge of digital technology and seeking to expand its product line, Global ePoint is developing new compression technologies and next–generation, secure network digital video systems and servers for a wide range of new markets, concentrating primarily on security and homeland defense applications. As a solid recurring revenue stream, the Company also manufactures customized computing systems for industrial, business and consumer markets, as well as other specialized electronic products and systems. Complete vertical integration — from design and manufacturing to sales and distribution — allows the Company to capture efficiencies and maintain cost advantages in these growing markets, particularly homeland security. For more information, please visit www.globalepoint.com.

This news release contains forward–looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward–looking statements are based on the company’s current expectations, estimates and projections, management’s beliefs and numerous assumptions, all of which are subject to change. These forward–looking statements are not guarantees of future results and are subject to numerous risks and uncertainties. Our actual results could differ materially and adversely from those expressed in any forward–looking statement. For example, deliveries may be delayed or installations canceled. Regulations may change and negatively affect demand for our products. There can be no assurance that the company’s subsidiaries and/or divisions will be able to achieve growth of sales or market share. The forward–looking statements in this release speak only as of the date of this release. We undertake no obligation to revise or update publicly any forward–looking statement for any reason. These and other risk factors are detailed in our periodic filings with the Securities and Exchange Commission.

Contact:
Global ePoint, Inc.
John Price, 909.839.1700
[email protected]