Final Results

RNS Number:5743R
Vycon Inc
04 April 2008




                                Vycon, Inc

               Results for the year ended 31 December 2007


Vycon Inc ("Vycon" or the "Company"), the designer and manufacturer of
high-speed flywheel based energy storage systems, today announces its results
for the year ended 31 December 2007.


Financial highlights:

* Total revenue of US$737,192 (2006: US$193,006) driven by increased sales 
  of UPS and crane units

* Net loss of US$(7,391,408) (2006: US$(7,508,454)), reduced primarily due to 
  lower net interest expenses

* Cash balance of US$8.6 million up from US$1.6 million in 2006, as a result 
  of the successful admission and placing on the Alternative Investment
  Market in London in March 2007


Operational highlights

* Significant new customer deliveries to clients including, Hutchison Port 
  Holdings and Long Beach Container Terminal (US)

* Entered into a Memorandum of Understanding with Fantuzzi Reggiane Group, a 
  leading crane manufacturer, to market and supply REGEN flywheel systems
  for both new cranes as well as retrofit applications

* Entered into an agreement with Chloride Group PLC, an international
  provider of secure power solutions worldwide, for the distribution and 
  marketing of Vycon's VDC flywheel for use on Chloride UPS

* Completed California Air Resources Board (CARB) emissions testing and 
  subsequently received certification for the REGEN product as a Level 1 system

* Approved by the Port of Los Angeles to receive funding under the Air Quality 
  Mitigation Incentive Program for flywheel systems to be installed at three 
  different port operation sites in Los Angeles

* Strengthened the management team with the appointment of Mr. Pana Shenoy as 
  Vice President of Engineering and the appointment as Mr. Frank DeLattre to 
  Vice President of Sales and Marketing

* Completed the relocation to a substantial manufacturing facility for flywheel 
  systems

* Strengthened the Board of Directors with the appointment of an additional 
  Non-Executive Director with extensive experience with UK listed companies



David Potter, Chairman, commented:


"Vycon's business model remains robust and we are confident that the very large
addressable market in UPS will increasingly turn to flywheels rather than
batteries in an environment dominated by the need for cleaner energy. During
2007, progress was made in the development of our products and in the expansion
of our distribution and marketing channels world wide. We remain confident that
this solid base will produce growth and value. Early indications for 2008 show
developing sales traction."



Enquires:

Vycon Inc                           Vatche Artinian        001 714 386 3800
                                    Dennis Whittler        001 714 386 3800

Smith & Williamson                  Nick Reeve             [phone]
Corporate Finance Limited           Martyn Fraser

Cardew Group                        Rupert Pittman         [phone]
                                    Shan Shan Willenbrock
                                    Emma Consett





CHIEF EXECUTIVE OFFICER'S STATEMENT

I am pleased to present Vycon's preliminary results for the year ended 31
December 2007. As we had previously outlined in our trading update (November
2007), it was a disappointing year from a sales perspective. While sales of
$737,192 for the year ended 31 December 2007 were a significant increase on the
previous twelve months, they did not materialise at the rate anticipated. Sales
were impacted by three principal factors; the lack of a dominant Vycon sales
team, the lack of strong and established channel partners and more conservative
than expected crane customers.

Despite this, during the period under review, flywheel products were shipped to
high-potential, targeted customers, including some of the largest port operators
in the world, for testing and validation purposes. An agreement was also entered
into with one of the world's leading crane manufacturers, to supply flywheel
systems for both new cranes as well as retrofit applications.

Vycon successfully completed an AIM listing in March 2007, providing the
financial resources required to pursue our strategic objectives. We remain
positive on the market opportunity and believe that there is significant
potential demand for our products.


Operational Review

Crane

Customer Testing

During the year ended 31 December 2007, three REGEN 120 flywheel systems were
shipped to high-potential customers in the US, China and Korea for validation
testing. Additionally, a further two REGEN units were sent for, and continue to
undergo, long-term testing at port operation sites in the US. Based on positive
preliminary results, testing for some of the REGEN units has been expanded to
evaluate the use of the REGEN units with smaller generator sets, providing
further fuel saving and emission reductions.

Environment

In October 2007, the REGEN system was approved by the California Air Resources
Board (CARB) as a Level 1 system. This award validates our REGEN technology and
its ability to reduce emissions and provide improved fuel economy. The award of
the CARB verification certificate is a necessary step forward for the Company,
both in California and worldwide as CARB is an internationally recognised
authority in emissions controls.

In September 2007, the Company received notification from the Port of Los
Angeles ("POLA") that funds will be provided for the purchase of flywheel
systems under the Air Quality Mitigation Incentive Program. We expect to install
our flywheel systems this year at three different port operation sites in Los
Angeles, the funding of which will be provided under the program.


Sales Channels

During 2007, negotiations were entered into with Fantuzzi Reggiane Group
("Fantuzzi"), a leading crane manufacturer that delivers container handling
equipment to port operations around the world. Since the period end, Fantuzzi
and Vycon have signed a Memorandum of Understanding. Fantuzzi is now the first
authorised Vycon representative to offer the REGEN system on new Rubber-Tired
Gantry (RTG) cranes. Additionally, Fantuzzi will promote the REGEN system as a
retrofit technology with all existing Fantuzzi crane customers. Fantuzzi, with
its subsidiary company, Noell Crane Systems (China) Ltd, has a production
capacity of approximately 120 new RTG cranes each year and there are currently
over 1,100 units in operation around the world.


UPS

The strategic alliance that was entered into with MGE UPS Systems, Inc., to
provide VDC flywheel based energy storage systems was frustrated by a merger of
MGE with another UPS provider, and did not lead to any significant sales.

Efforts to create Vycon's UPS sales channels remains a key focus and we continue
to strengthen our direct sales force by assembling a sales team that will
augment the new sales channels. In the latter half of 2007, the Company entered
into an agreement with Chloride Group PLC ("Chloride"), for the marketing and
distribution of Vycon's VDC flywheel for use in Chloride UPS systems. Chloride,
an international provider of secure power solutions for the business continuity
of customers worldwide, has a strong presence in Europe and the Middle East.

Upon reviewing the VDC flywheel product and its value proposition, management
also determined that certain modifications to the product were necessary to
increase its value proposition. In September, the Company embarked on a
development program to increase the capacity of the existing UPS product and
reposition it in the UPS market. The new, more highly rated product is expected
to be available for shipment at the end of the second quarter of 2008.


Funding

During the period under review, the Company prepared for an AIM listing which
was completed in March 2007. A placing undertaken at the same time raised US$18
million and attracted investors from the US, UK, New Zealand, Hong Kong and
Denmark. The listing on AIM continues to help raise the profile of Vycon and the
placing has provided the additional equity financing required to assist in
funding the development of higher capacity products. These higher capacity
products are utilising the Company's existing technologies but will be capable
of storing more useable energy than the current products, and will be capable of
being paralleled into multi-flywheel configurations. This will provide the
Company with a broader product offering and enable it to satisfy demand from
existing markets for a larger product providing greater power, together with
opening new markets, such as rail, which are only accessible with higher
capacity products.


Facilities Relocation

In May 2007, a five year lease was signed and Vycon headquarters relocated to a
35,000 square foot manufacturing facility in Yorba Linda, California. The new
manufacturing facility provides sufficient space to support the expected growth
in production and the development and testing of larger flywheel products.


Key Appointments

In March 2007, Mr. Pana Shenoy was appointed as Vice President of Engineering.
Mr. Shenoy is responsible for the end product development role for the
engineering team and complements the core flywheel expertise of the Company's
Chief Technical Officer, Mr. Pat McMullen. Mr. Shenoy has over 20 years
experience in the power industry and a solid track record in successful product
launches; he joins Vycon from Liebert Corporation, a division of Emerson, where
he was Manager of Power Technology.

In September 2007, Mr. Frank DeLattre was appointed as Vice President of Sales
and Marketing. Mr. DeLattre has a wealth of knowledge and technical sales
experience in both domestic and international markets, having spent over twenty
years in the power quality and related industries. Mr. DeLattre joined Vycon
from Pentadyne, a Los Angeles based Flywheel company where, for the past two and
half years, he served as their Senior Vice President of Sales, Marketing and
Service.

Since year end, two changes in Directors' duties have also been announced.
Following the departure, by mutual consent, of Mr. John Uttley, Mr. David 
Potter, who was appointed Non-Executive Director in May and who has extensive
experience of board appointments to a number of UK listed companies, was
appointed as Chairman. Additionally, I have assumed the role of Chief Executive
Officer following the departure of Tony Aoun.


Outlook

Although it is frustrating that orders have failed to materialise at the rate
previously expected, I am confident that the improvement we are making to our
sales channels and to our products will have a positive impact on the Company's
results. Furthermore, we are strengthening our application engineering to help
the customer better utilize our systems and creating a service strategy which is
imperative to support the product in the field.


Since the beginning of this year, we have received a number of orders and
currently have an order backlog, most of which we intend to ship during the
first half. We expect that our new relationships with Chloride and new UPS
channel partners, combined with our upgraded UPS product, will start producing
further results during the second half of the year. We are also hopeful that we
will achieve further sales traction with the customers that have tested and
validated our REGEN crane product over the past 12 months.

I would like to thank Vycon shareholders for their continued support and
commitment.


Vatche Artinian
President and Chief Executive Officer


Operating Statements
For the year ended 31 December 2007 and 2006

                                                       2007             2006
                                                   ------------     ------------

REVENUE                                           $    737,192     $    193,006

DIRECT LABOR AND MATERIAL                             (588,086)        (177,159)
MANUFACTURING COSTS                                 (1,864,817)               -
                                                   ------------     ------------
COST OF SALES                                       (2,452,903)        (177,159)
                                                   ------------     ------------

GROSS PROFIT                                        (1,715,711)          15,847

OPERATING EXPENSES                                  (5,809,192)      (6,316,023)
                                                   ------------     ------------

OPERATING LOSS                                      (7,524,903)      (6,300,176)

Other gains and losses                                 (12,041)           4,616
Finance income (costs)                                 146,336       (1,212,094)
                                                   ------------     ------------

LOSS BEFORE TAX                                     (7,390,608)      (7,507,654)

TAXES                                                     (800)            (800)
                                                   ------------     ------------

LOSS ATTRIBUTABLE TO EQUITY STOCKHOLDERS          $ (7,391,408)    $ (7,508,454)
                                                   ============     ============

LOSS PER SHARE - BASIC AND DILUTED (a)            $      (0.29)    $      (1.47)
                                                   ============     ============


(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 3 for calculations of the pro
forma net loss per share of the periods presented.



Balance Sheets
As at 31 December 2007 and 2006

                                                       2007             2006
                                                   ------------     ------------
ASSETS

NONCURRENT ASSETS
Property, plant and equipment                     $   943, 532      $   280,103
Capitalized development cost                          477, 840                -

CURRENT ASSETS
Inventories, net                                     2,934,543        1,253,020
Trade receivables                                      153,495          196,200
Deferred offering costs and other prepaid
expenses                                               162,320          966,671
Cash and cash equivalents                            8,624,763        1,589,354
                                                   ------------     ------------
Total current assets                                11,875,121        4,005,245
                                                   ------------     ------------

Total assets                                      $ 13,296,493      $ 4,285,348
                                                   ============     ============
LIABILITIES AND EQUITY (DEFICIT)

CURRENT LIABILITIES
Trade and other payables                          $  1,258,881      $ 1,343,324
Obligations under finance leases                        40,523           38,762
                                                   ------------     ------------
Total current liabilities                            1,299,404        1,382,086
                                                   ------------     ------------

NONCURRENT LIABILITIES
Obligations under finance leases                        54,004           31,504
Series A convertible 8% preferred stock                      -       12,095,612
Series B convertible 8% preferred stock                      -        7,146,369
                                                   ------------     ------------
Total noncurrent liabilities                            54,004       19,273,485
                                                   ------------     ------------

Total liabilities                                    1,353,408       20,655,571
                                                   ------------     ------------

EQUITY (DEFICIT)
Share capital                                            3,025              533
Share premium                                       36,435,909          733,685
Accumulated deficit                                (24,495,849)     (17,104,441)
                                                   ------------     ------------
Total equity (deficit)                              11,943,085      (16,370,223)
                                                   ------------     ------------

Total liabilities and equity (deficit)            $ 13,296,493      $ 4,285,348
                                                   ============     ============



Statements of Cash Flow
For the year ended 31 December 2007 and 2006
                                                        2007             2006
                                                   ------------     ------------

NET CASH FLOWS FROM OPERATING ACTIVITIES          $ (7,950,722)    $ (7,024,553)
                                                   ------------     ------------

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds on disposal of property and
equipment                                                    -           24,164
Purchases of property and equipment                   (836,109)         (80,290)
                                                   ------------     ------------
Net cash used in investing activities                 (836,109)         (56,126)
                                                   ------------     ------------

CASH FLOWS FROM FINANCING ACTIVITIES
Capital lease payments                                 (47,594)         (33,726)
Proceeds from the issue of Series B
convertible 8% preferred stock                               -        6,905,972
Proceeds from the issue of common shares            15,869,834          150,000
                                                   ------------     ------------
Net cash provided by financing activities           15,822,240        7,022,246
                                                   ------------     ------------

NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS                                          7,035,409          (58,433)
                                                   ------------     ------------
CASH AND CASH EQUIVALENTS -                          
beginning of year                                    1,589,354        1,647,787
                                                   ------------     ------------
                                                    
CASH AND CASH EQUIVALENTS -                      
end of year                                       $  8,624,763      $ 1,589,354
                                                   ============     ============



1. GENERAL INFORMATION

Vycon, Inc. ("Vycon" or the "Company") is a company incorporated in and under
the laws of the State of Delaware. The Company's registered office is 615 South
DuPont Highway Dover, DE, United States of America. The Company's principal
activity is the development and manufacture of flywheel-based energy storage
systems.

These financial statements have been presented in United States dollars, the
currency of the primary economic environment in which the Company operates.

The financial statements have been prepared by the Company's management in
accordance with International Financial Reporting Standards ("IFRS") as adopted
for use in the European Union. At the date of authorization of these financial
statements, certain Standards and Interpretations which have not been applied to
these financial statements were in issue but not yet effective. The directors
anticipate that the adoption of these Standards and Interpretations in future
periods will have no material impact on the financial statements of the Company
except for additional disclosures required when the relevant Standards and
Interpretations come into effect.


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying financial statements have been prepared on a going concern
basis, which contemplates, among other things, the realization of assets and
satisfaction of liabilities in the ordinary course of business. As of 31
December 2007 the Company had cash and cash equivalents of $8.6 million and
positive working capital of $10.6 million. For the year ended 31 December 2007
the Company recorded a net loss of $7.4 million and negative cash flow from
operating activities of $7.9 million, and as of 31 December 2007 had an
accumulated deficit of $24.5 million.

Management has taken or is taking certain actions to address liquidity issues
and minimize losses including the reduction of certain expenses and capital
expenditures and is negotiating a new line of credit with a major financial
institution. Certain major shareholders have also indicated support regarding
additional investment in the Company should the need arise in the next twelve
months.

Based upon current backlog and projections of future orders, management believes
that sales in fiscal 2008 will contribute to significant recovery of its
indirect expenses. Management has developed an operating plan to manage costs in
line with estimated total revenues for fiscal 2008, including contingencies for
cost reductions if projected revenue growth and improvement in gross margins are
not fully realized. After making enquiries and examining revenue and expenditure
projections and a cash flow forecast, the Directors have a reasonable
expectation that the Company has adequate resources to continue in operational
existence for at least 12 months from the date of approval of the financial
statements and for the foreseeable future. For this reason they continue to
adopt the going concern basis in preparing the financial statements.

However, there can be no assurance that projected revenue growth and improvement
in operating results will occur or that the Company will successfully implement
its plans. In the event cash flow from operations is not sufficient, additional
sources of financing will be required in order to maintain the Company's current
operations. These additional sources of financing may include an equity 
offering. Whereas management believes it will have access to these financing
sources, no assurance can be given that such additional sources of financing
will be available on acceptable terms, on a timely basis or at all.


3. LOSS PER SHARE

The calculation of basic and diluted loss per share is based on the following
data for the years ended 31 December 2007 and 2006:

                                                         2007             2006
                                                   ------------     ------------
Loss for the year attributable to equity
stockholders                                      $ (7,391,408)    $ (7,508,454)
                                                   ============     ============
Weighted average number of common shares in
issue                                               25,608,940        5,116,774
                                                   ============     ============

Basic and diluted loss per share                  $      (0.29)    $      (1.47)
                                                   ============     ============


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 year.

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.

The directors consider that there are no instruments in issue, which could
dilute basic loss per share. As of 31 December 2007, there were 323,005 warrants
outstanding to purchase share, which are anti-dilutive.

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 shares 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.

                                                         2007             2006
                                                   ------------     ------------
Loss for the year attributable to equity
stockholders                                      $ (7,391,408)    $ (7,508,454)
                                                   ============     ============

Weighted average number of common shares in
issue                                               25,608,940        5,116,774

Adjustment to reflect the weighted average
number of preferred shares on an as-if
converted basis                                      2,721,259       12,040,797
                                                   ------------     ------------

Total pro forma weighted average number of
shares outstanding                                  28,330,199       17,157,571
                                                   ============     ============

Pro forma basic and diluted loss per share        $      (0.26)    $      (0.44)
                                                   ============     ============



4. NET CASH FLOWS FROM OPERATING ACTIVITIES


Notes to the cash flows statements for the years ended 31 December 2007 and
2006:

                                                       2007             2006
                                                   ------------     ------------

Net cash flows from operating activities
Loss before taxes                                 $ (7,390,608)    $ (7,507,654)
Depreciation and amortization                          249,664          194,150
Stock compensation                                     259,418           38,963
Net loss on disposal of fixed assets                    12,041           (4,416)
Interest expense on Series A & B preferred
stock                                                  333,483        1,255,804
                                                   ------------     ------------
Operating loss before changes in working
capital                                             (6,536,002)      (6,023,153)
                                                   ------------     ------------

  Increase in trade/other receivables             $    (95,343)    $   (135,848)
  (Increase) decrease in deferred offering costs       942,399         (942,399)
  (Increase) decrease in inventory                  (1,681,523)        (572,242)
  (Increase) in capitalized development               (477,840)                -
  Increase (decrease) in trade payable                (339,073)         656,014
  Increase (decrease) in accruals                      237,460           (6,125)
  Taxes paid                                              (800)            (800)
                                                   ------------     ------------

  Cash flows from operating activities            $ (7,950,722)    $ (7,024,553)
                                                   ============     ============



This announcement contains forward looking statements based on current
assumptions and forecasts made by the Company's management. Various known and
unknown risks, uncertainties and other factors could lead to substantial
differences between the actual future results, financial situation, development
or performance of the Company and the estimates given here. The Company accepts
no obligation to continue to report or update these forward-looking statements
or adjust them to future events or development.

This announcement does not constitute or form part of any offer or invitation to
sell or issue or any solicitation of any offer to purchase or subscribe for any
securities in any jurisdiction, nor shall it (or any part of it) or the fact of
its distribution form the basis of, or be relied upon in connection with, or act
as any inducement to enter into, any contract or commitment therefore.

Recipients of this announcement who intend to purchase or subscribe for shares
in the Company are reminded that any such purchase or subscription must only be
made solely on the basis of the information contained in the admission document
relating to the Company in its final form.

This document does not constitute an offer of securities in the United States,
nor may shares be offered or sold in the United States absent registration or an
exemption from registration under the U.S. Securities Act of 1933. as amended
(the "Securities Act"), and the rules and regulations thereunder; and any public
offering of shares in the United States will be made by means of a Prospectus
that will contain detailed information about the Company and management, as well
as financial statements. The Company does not presently intend to register any
securities under the Securities Act.




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

END
FR FKNKKABKDBQK