Inverpower Controls Ltd. second quarter results - fiscal 1997.

BURLINGTON, Ontario--(BUSINESS WIRE)--March 25, 1997-- Inverpower Controls Ltd. (TSE:IPW) announces results for the second quarter and for the six months ended January 31, 1997. -0-

                         Three Months Ended    Six Months Ended
                         January 31               January 31
                         1997          1996    1997        1996
                              $000's              $000's
                         ------------------    ----------------

REVENUE                  3,532        5,765    8,515     10,839
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NET INCOME (LOSS)        (872)           26    (760)
                                                            407
---------------------------------------------------------------
EARNINGS (LOSS) PER
 SHARE ($S)              (0.12)        0.00    (0.11)      0.06
---------------------------------------------------------------

Dr. S. B. Dewan, President and C.E.O., reported that the lower revenue in the second quarter (Q2) was attributable to three factors. First, revenues from electromagnetic stirring (EMS), which accounts for approximately 40 percent of total revenues, were down due to delays in new order intake. He said that he expected a substantial improvement in EMS revenues in the second half of fiscal 1997.

Second, initial market acceptance for the new Static Transfer Switch (STS) product has been positive, but development delays and additional costs impacted Q2 results. The product is performing successfully in the field and management expects this new product to be a major source of revenues to Inverpower.

Third, as reported at the end of the first quarter (Q1), revenues were adversely effected by certain business taken on in fiscal 1996 that did not meet the Company's criteria of repeatability and profitability, in particular power supplies for high energy physics applications. The Company has made appropriate provision in Q2 for expected losses on this work. Corrective actions have been taken to ensure that all future work meets these criteria.

Research and development spending in Q2 was $1.9 million (or 53 percent of sales), compared with $1.2 million (or 25 percent of sales) in Q1. This abnormal level of spending was attributable mainly to the high energy physics projects referred to above.

Dr. Dewan added that the financial results reflect the ambitious R & D investment program started two years ago. He predicted that the high level of investment in fiscal 1996 (38 percent of sales) would be reduced in the current year but it would take until fiscal 1998 to complete the current development program and reduce R & D to the sustainable levels of the 1992 - 1995 period. This program had resulted in the development of the STS, the Switching Rectifier and the Arc-Furnace Flicker Controller as complete products and, in the case of the Static Voltage Regulator (SVR), as an advanced prototype. In Q2, Inverpower completed a long-term, exclusive, supply and marketing agreement for the STS with Vantus Energy, which gives the Company access to the large U.S. West Coast market. Inverpower is now close to developing a similar strategic relationship with another major U.S. electrical utility company. Development of the SVR is now well advanced and the Company expects to deliver the first commercial unit in late summer 1997 under an agreement with Vantus Energy. The ability to provide these two products in combination gives Inverpower an important competitive advantage in selling power quality products to the utility industry.

The Company is actively marketing the new Switching Rectifier (SR) product. The SR features new technology, is price competitive and offers significant operational advantages. Quotation activity is building rapidly and significant sales are expected over the next year from this large existing industrial market.

Inverpower is close to completing the Arc-Furnace Flicker Controller at Co-Steel Lasco's Whitby, Ontario, mini-mill. The unit has operated successfully over the duration of numerous steel-making heat cycles and provides clear evidence of enhanced current control and smoother furnace operation. As soon as this evaluation phase is completed, Inverpower will start to aggressively market this product, in which a number of steel mills have shown strong interest.

The Company continues to adapt its management structure to facilitate its strategic transition from a development company to a manufacturing company. In this regard, Inverpower has created the new position of Chief Operating Officer which will be filled effective March 31, 1997. This new member of the management team brings broad manufacturing and marketing experience, gained at one of the leading multi-national companies in the electrical industry.

The Directors have considered it appropriate for Inverpower to raise new equity in view of the commitment to complete the development of new products. Accordingly, on February 26, 1997 the Company entered into an Underwriting Agreement with Sprott Securities Limited and Yorkton Securities Limited for the issue, by way of private placement, of 1.2 million Special Warrants at $5.50 for aggregate gross proceeds of $6.6 million. Each Special Warrant is convertible into one common share of the Company. This issue will meet the foreseeable cash needs of the business, as Inverpower completes its program of product development.

Inverpower Controls Ltd. is a Canadian high technology company which designs, builds and services electrical power conditioning systems and electromagnetic stirring ("EMS") systems.

The primary activity of the Company is manufacturing power quality products for electrical utilities and large industrial power users and for a number of emerging niche markets, utilizing a combination of high speed parallel processing and solid state power technologies.

CONTACT: Inverpower Controls Ltd.

Graham Desson, 905/ 639-4692

905/ 639-0961 (FAX)