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Vycon Inc (VYCO)

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Monday 29 September, 2008

Vycon Inc

Interim Results

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 2007US$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.


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: 2007US$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 attributable to equity shareholders

 $(4,238,584)

 

 $(3,160,442)

 

 $ (7,391,408)

 






Loss per share: Basic and diluted

  (0.14)


  (0.15)


  (0.29)


(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 leases

 $ 40,523 


 $ 52,439 


 $ 40,523 

Deferred gross profit

 $ 193,462


 $ -


 $ -


 $ 1,992,753 

 

 $ 1,653,179 

 

 $ 1,299,404 

Non-current liabilities






Obligations under finance leases

 $ 30,638 


 $ 68,734 


 $ 54,004 







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 (used in) operating activities

 $ (5,129,134)


 $ (2,870,858)


 $ (7,950,722)













Net cash flows from investing activities






Acquisition of property and equipment

 $ (303,201)


 $ (509,282)


 $ (836,109)

Proceeds from sale of fixed assets

 $ - 


 $ - 


 $ - 

Net cash used in investing activities

 $ (303,201)

 

 $  (509,282)

 

 $  (836,109)







Net cash flows from financing activities






 Payments on capital lease obligations

 $ (23,366)


 $ (20,370)


 $ (47,594)

Common Stock sold

 $ - 


 $ 16,214,108 


 $ 15,869,834 

Net cash used in financing activities

 $ (23,366)

 

 $ 16,193,738 

 

 $ 15,822,240 







Net (decrease)/increase in cash and cash equivalents

 $ (5,455,701)


 $ 12,813,598 

   

 $ 7,035,409 







Cash and cash equivalents at beginning of period

 $ 8,624,763 


 $ 1,589,354 


 $ 1,589,354 







Cash and cash equivalents at end of period

 $ 3,169,062 

 

 $ 14,402,952 

 

 $ 8,624,763 


  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 attributable to equity stockholders

 $ (4,238,584)


 $  (3,160,441)


$  (7,391,408)








Number

 

Number

 

Number

Weighted average number of common shares in issue

  30,259,927 


     20,888,064


  25,608,940 


 

 

 

 

 








US $

 

US $

 

US $







Basic and diluted loss per share

  $  (0.14)


  $      (0.15)


   $   (0.29)


 

 

 

 

 


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 shares on as-if converted basis

  -  

  5,487,622 

  2,721,259 





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 asset

 $ -  


 $ 12,041 


 $ 12,041 

Interest expense Series A & B preferred stock

 $ -  

 

 $ 333,477 

 

 $ 333,483 

Operating loss before changes in working capital

 $ (3,872,767)

 

 $ (2,625,259)

 

 $ (6,536,002)


   





Increase in trade/other receivables

 $ (679,915)


 $ (1,671)


 $ (95,343)

(Increase) decrease in deferred offering costs/other pre-paids

 $ 31,746 


 $ 820,730 


 $ 942,399 

(Increase) decrease in inventory

 $ 44,040 


 $ (511,005)


 $ (1,681,523)

(Increase) decrease in capitalized development

 $ (1,222,661)


 $ (444,669)


 $ (477,840)

Increase (decrease) in trade payables

 $ 377,761 


 $ (108,184)


 $ (101,613)

Increase (decrease) in deferred gross profit

 $ 193,462 


 $ - 


 $ - 

Taxes paid

 $ (800)

 

 $ (800)

 

 $ (800)

Net cash flows (used in) operating activities

 $ (5,129,134)

 

 $ (2,870,858)

 

 $ (7,950,722)



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


Ninterim dividend has been recommended


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
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