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 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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