RNS Number : 4871E
Vycon Inc
29 September 2008
Vycon, Inc.
Interim results for the six months ended 30 June 2008
Vycon Inc. ("Vycon" or the "Company"), the designer and manufacturer of high-speed flywheel based energy storage systems, today
announces its results for the six months ended 30 June 2008.
Financial highlights:
* Revenue increased by 200% to US$1.0million (H1 2007: US$0.3million)
* Operating loss US$4.2 million (H1 2007: US$3.2 million)
* Increase in loss primarily due to investment in the infrastructure to support the growing business
Operational highlights
* Management team strengthened by senior appointments
* Growing sales trend with good visibility for remainder of 2008
* In line with revenue recognition policy, US$1.0 million of H1 2008 shipments will be recognized as revenue in second half year as
units are commissioned
* New VDC and VDC-XE Direct Connect systems with higher power and more energy storage released
David Potter, Chairman, commented:
"I continue to be encouraged by the progress the Company is making in gaining acceptance for its products with its targeted customers
and markets. The Company remains focused on driving sales now that its products are technically proven. This focus is beginning to pay off
and is reflected in the steadily increasing level of shipments exhibited during the first Half of 2008.
I also recognize Vycon has more challenges ahead as it seeks to deliver returns for shareholders. Previously announced delays in the
anticipated rate of sales growth have contributed to a requirement for additional funding. The Board proposes to address this by issuing a
convertible debenture. Certain large shareholders have already indicated their backing for this.
The Board is pleased by this show of support by major shareholders and is working to enable Vycon to continue its development towards
growth and value."
Inquiries:
Vycon Inc. Vatche Artinian 001 714 308 0388
Craig Glynn 001 714 386 3800
Smith & Williamson Nick Reeve + 44 (0) 117 376 2000
Corporate Finance Ltd. Martyn Fraser
Cardew Group Rupert Pittman + 44 (0) 20 7930 0777
Shan Shan Willenbrock
Chief Executive Officer's Statement:
Since being appointed Chief Executive Officer of Vycon in February 2008, I have focused on ensuring that the traction which Vycon
achieved in its markets prior to my appointment, has been fully exploited. With the increased unit shipments during the six months ended 30
June 2008, the Company has begun to demonstrate its potential. The majority of shipments were made to crane manufacturers who enjoy
significant shares of their markets, and this reflects Vycon's efforts during 2007 to introduce its technology and products to them.
The Company has also focused on enhancing our products in response to feedback received from customers in both the crane and in the UPS
target markets. While these enhancements took additional time and resources, we feel that they were important to ensuring Vycon's success as
a valued product in
our target markets.
The recently announced release of our new VDC and VDC-XE Direct Connect systems, targeted at the UPS market, is only the first of what I
anticipate will be a number of positive developments you will hear from Vycon over the next several months. These products are being
released to the market, in part through our channel partners Chloride Power Systems and Eaton.
The arrangements with Chloride and Eaton reflect a shift in how we are approaching this market by aligning Vycon with organizations of
recognized standing. Of course, this would not be possible if our channel partners did not have a high degree of confidence in Vycon's
flywheel energy storage solutions.
In the short term we expect to achieve significant milestones with both our products and customers; our strategic alliances with
international manufacturers; and with regard to the Company's financing.
We recognize Vycon will need additional funding and are in the process of securing this funding in the form of a convertible debenture.
We are seeking US$6.4 million. The debenture will be convertible into shares of Vycon common stock and interest will be Paid-in-Kind. The
debenture will be unsecured and subordinate to other indebtedness, if any, may be prepaid at the Company's option after two years, and will
be convertible at the holder's option after one year.
Certain of Vycon's major shareholders have indicated they will participate in the offering on these terms.
Financial review
Total revenue for the six months ended 30 June 2008 was US$1,007,857 compared to total revenue for a similar period ended 30 June 2007
of US$252,260. In line with our revenue recognition policy, a further US$1,027,000 of revenue from shipments made in the first half of the
year will be recognized later in the year as the units are commissioned. The increase in revenue is directly attributable to the growth in
sales of crane units.
The gross loss for the six months ended 30 June 2008 was US$1,476,683 versus a loss for the similar period last year of US$757,938. This
was primarily due to the low volume of sales relative to the company's fixed manufacturing costs and the investment the Company has made in
infrastructure to support product development.
Operating expenses for the six months ended the 30 June 2008 were US$2,842,971 compared to the comparable period ended 30 June 2007 of
US$2,276,051. This higher figure resulted from the expansion of the company's sales, operations and administrative departments to support
its increased business compared to the prior year. Additionally during the period under review, higher engineering expenses, relating to the
Company's new product development were offset by the capitalization of US$1,252,661 in development costs under IAS 38 (Intangible Assets).
The loss per share for the six months ended 30 June 2008 was US$0.14 (H1: 2007: US$0.15). The decrease in loss per share is primarily
due to the Company having more average shares outstanding in FY 2008 vs. FY 2007 for the same period. For comparability the net loss per
share on a pro forma basis is a better measure as outlined in note 2 below and was US $0.14 vs. US $0.12 which was a result of the company
building up its infrastructure to support its ongoing development.
Cash and cash equivalents as of 30 June 2008 were US$3,169,062 compared to US$14,402,952. The reduction in cash was due primarily due to
sales slipping from FY 2007 to 2008 and the company continuing to build its infrastructure.
Key Appointments
In February 2008 Mr. David Potter, who had been a non-executive director of the Company since May 2007, was appointed Chairman of the
Board of Directors. Mr. Potter has extensive experience within UK listed companies, having held a number of senior board positions.
In June 2008, Mr. Craig Glynn was appointed Chief Financial Officer. As Vycon enters its next stage of development I believe Mr. Glynn's
expertise and input will prove invaluable. In addition to the expected roles and responsibilities of a CFO, Craig will be proactively
working with management in all areas of the business.
Outlook
I thank Vycon shareholders for their continued support and commitment to the business. I am excited about the level of interest we are
currently seeing for our products in our target markets. In addition to the news about the VDC and VDC-XE Direct Connect systems mentioned
above, I am optimistic that Vycon will soon be able to begin sharing other positive developments about its products, customers and markets.
While there are challenges for this young growing company to overcome, I believe we now have the team and infrastructure needed to
deliver growth and value creation for our shareholders in the future.
Vatche Artinian
President and Chief Executive Officer
Operating statements
For the six months ended 30 June For the 12 months
ended 31 December
2008 2007 2007
(Unaudited) (Unaudited) (Audited)
US $ US $ US $
Revenue $ 1,007,857 $ 252,260 $ 737,192
Cost of sales $ 2,484,540 $ 1,010,198 $ 2,452,903
Gross profit $(1,476,683) $ (757,938) $ (1,715,711)
Operating expenses $ 2,842,971 $ 2,276,051 $ 5,809,192
Operating loss $(4,319,654) $(3,033,989) $ (7,524,903)
Other gains and losses $ - $ (12,041) $ (12,041)
Finance costs $ 81,870 $ (113,612) $ 146,336
Loss before tax $(4,237,784) $(3,159,642) $ (7,390,608)
Tax $ 800 $ 800 $ 800
Loss for the period $(4,238,584) $(3,160,442) $ (7,391,408)
attributable to equity
shareholders
Loss per share: Basic and (0.14) (0.15) (0.29)
diluted
(a.) As a result of the conversion of the Company's preferred stock into 14,606,758 shares of common stock upon completion of the
Company's IPO in March 2007, there is a lack of comparability in the basic and diluted loss per share amounts for the periods presented
above. See Note 2 for calculations of the pro forma net loss per share of the periods presented.
Balance Sheet
As of 30 June As of 31 December
2008 2007 2007
(Unaudited) (Unaudited) ( Audited)
US $ US $ US $
Assets
Non-current assets
Property, plant and equipment $ 1,219,930 $ 775,877 $ 943,532
Capitalized development costs $ 1,700,501 $ 444,669 $ 477,840
$ 2,920,431 $ 1,220,546 $ 1,421,372
Current assets
Inventories $ 2,890,503 $ 1,764,025 $ 2,934,543
Trade receivables $ 833,410 $ 197,871 $ 153,495
Other prepaid expenses $ 130,573 $ 145,941 $ 162,320
Cash and cash equivalents $ 3,169,062 $ 14,402,952 $ 8,624,763
$ 7,023,548 $ 16,510,789 $ 11,875,121
Total assets $ 9,943,979 $ 17,731,335 $ 13,296,493
Liabilities
Current liabilities
Trade and other payables $ 1,758,768 $ 1,600,740 $ 1,258,881
Obligations under finance $ 40,523 $ 52,439 $ 40,523
leases
Deferred gross profit $ 193,462 $ - $ -
$ 1,992,753 $ 1,653,179 $ 1,299,404
Non-current liabilities
Obligations under finance $ 30,638 $ 68,734 $ 54,004
leases
Total liabilities $ 2,023,391 $ 1,721,913 $ 1,353,408
Equity
Share capital $ 3,035 $ 3,025 $ 3,025
Share premium $ 36,651,986 $ 36,271,279 $ 36,435,909
Retained deficit $ (28,734,433) $ (20,264,882) $ (24,495,849)
Total equity deficit $ 7,920,588 $ 16,009,422 $ 11,943,085
Total equity liabilities $ 9,943,979 $ 17,731,335 $ 13,296,493
Statements of Cash Flow
For the six months ended 30 June For the 12 months
ended 31 December
2008 2007 2007
(Unaudited) (Unaudited) (Audited)
US $ US $ US $
Net cash flows provided by $ (5,129,134) $ (2,870,858) $ (7,950,722)
(used in) operating activities
Net cash flows from investing
activities
Acquisition of property and $ (303,201) $ (509,282) $ (836,109)
equipment
Proceeds from sale of fixed $ - $ - $ -
assets
Net cash used in investing $ (303,201) $ (509,282) $ (836,109)
activities
Net cash flows from financing
activities
Payments on capital lease $ (23,366) $ (20,370) $ (47,594)
obligations
Common Stock sold $ - $ 16,214,108 $ 15,869,834
Net cash used in financing $ (23,366) $ 16,193,738 $ 15,822,240
activities
Net (decrease)/increase in $ (5,455,701) $ 12,813,598 $ 7,035,409
cash and cash equivalents
Cash and cash equivalents at $ 8,624,763 $ 1,589,354 $ 1,589,354
beginning of period
Cash and cash equivalents at $ 3,169,062 $ 14,402,952 $ 8,624,763
end of period
Notes
1. General
The condensed financial statements have been prepared in accordance with the International Accounting Standards. The accounting policies
adopted are consistent with those followed in the preparation of the company's annual financial statements for the year ended 31 December
2007.
This financial information has been presented in United States dollars, the currency of the primary economic environment in which the
company operates.
The interim results for the six months ended 30 June 2008 and 30 June 2007 are unaudited. While 31 December 2007 results are audited.
2. Loss per share
The calculation of basic and diluted loss per share is based on the following data:
For the Six Months Ended 30 June For the Twelve
Months Ended
31 December
2008 2007 2007
(Unaudited) (Unaudited) (Audited)
US $ US $ US $
Loss for the period $ (4,238,584) $ (3,160,441) $ (7,391,408)
attributable to equity
stockholders
Number Number Number
Weighted average number of 30,259,927 20,888,064 25,608,940
common shares in issue
US $ US $ US $
Basic and diluted loss per $ (0.14) $ (0.15) $ (0.29)
share
Basic loss per share is calculated by dividing the loss for the year attributable to equity shareholders by the weighted average number
of shares in issue during the period.
Diluted loss per share is calculated by dividing the loss for the year attributable to equity shareholders by the weighted average
number of shares in issue plus the number of shares which could be issued on conversion of dilutive instruments. Diluted loss per share is
the same as basic loss per share as the dilutive instruments have been excluded due to their anti-dilutive effect.
Pro Forma Net Loss Per Share
Upon the completion of the Company's IPO on 9 March 2007, all of the Company's previously outstanding preferred shares converted into
14,606,758 share of common stock. As a result of the issuance of these shares of common stock, there is a lack of comparability in both the
basic and diluted net loss per share amounts for the periods presented. In order to provide a more relevant measure of the Company's
operating results, a pro forma net loss per share calculation has been included. The shares used to compute pro forma basic and diluted net
loss per share include the assumed conversion of all outstanding shares of preferred stock into shares of common stock using the as-if
converted method as of the beginning of each period presented or the date of issuance, if later.
For the Twelve
Months Ended
For the Six Months Ended 30 June 31 December
2008 2007 2007
(Unaudited) (Unaudited) (Unaudited)
US$ US$ US$
Loss for the period attributable to equity stockholders $ (4,232,584) $ (3,160,441) $ (7,391,408)
Weighted average number of common shares in issue 30,259,927 20,888,064 25,608,940
Adjustment to reflect the weighted average number of preferred - 5,487,622 2,721,259
shares on as-if converted basis
Total pro forma weighted average number of shares outstanding 30,259,927 26,375,686 28,330,199
Pro forma basic and diluted loss per share $ (0.14) $ (0.12) $ (0.26)
3. Net cash flow from operating activities
For the six months ended 30 June For the 12 months
ended 31 December
2008 2007 2007
(Unaudited) (Unaudited) (Audited)
US $ US $ US $
Loss before taxes $ (4,237,784) $ (3,159,641) $ (7,390,608)
Deprecation and amortization $ 148,929 $ 102,782 $ 249,664
Stock based compensation $ 216,088 $ 86,082 $ 259,418
Net loss on disposal of fixed $ - $ 12,041 $ 12,041
asset
Interest expense Series A & B $ - $ 333,477 $ 333,483
preferred stock
Operating loss before changes $ (3,872,767) $ (2,625,259) $ (6,536,002)
in working capital
Increase in trade/other $ (679,915) $ (1,671) $ (95,343)
receivables
(Increase) decrease in $ 31,746 $ 820,730 $ 942,399
deferred offering costs/other
pre-paids
(Increase) decrease in $ 44,040 $ (511,005) $ (1,681,523)
inventory
(Increase) decrease in $ (1,222,661) $ (444,669) $ (477,840)
capitalized development
Increase (decrease) in trade $ 377,761 $ (108,184) $ (101,613)
payables
Increase (decrease) in $ 193,462 $ - $ -
deferred gross profit
Taxes paid $ (800) $ (800) $ (800)
Net cash flows (used in) $ (5,129,134) $ (2,870,858) $ (7,950,722)
operating activities
4. Share Capital
During the period under review the Company issued $10,000 shares to its former Chairman of the board as part of his separation. As of 30
June 2008 the Company had 30,262,345 shares of common stock outstanding with par value of US $.0001 each.
5. Dividends
No interim dividend has been recommended.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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