Cyclone Power Technologies (www.cyclonepower.com) (OTCQB: CYPW) has
filed with the Securities and Exchange Commission its Annual Report
on Form 10-K for the year ended December 31, 2012, and has released
the following progress report to its shareholders:
Dear Shareholders:
Greetings from South Florida. Our year ended December 31, 2012
was marked by increased revenue and decreased expenses, as well as
key technological growth and solid business development. Our Annual
Report on Form 10-K was timely filed with the Securities &
Exchange Commission today, which we urge our shareholders to
review. Some notable achievements throughout the past year and
forecasts for the current year are highlighted below:
Revenue & Profitability
We exceeded our forecasts by generating $1.13 million in revenue
in 2012, which represented a 350% increase over 2011, and achieved
a gross profit of approximately $483,000. We believe these results
clearly demonstrate that we are on the right path to profitable
expansion. For 2013, we are forecasting a doubling of our revenue
followed by even greater growth in 2014 resulting from the
anticipated shift of our engines from prototype to production by
the end of the current year.
In addition to exceeding our revenue forecasts for the year, we
succeeded in reducing our operating expenses by 8%, as compared to
the previous year. Most recently in 2013, we scaled back costs even
further by shifting a substantial amount of our parts machining to
our new in-house fabrication shop and reducing employee hours and
efforts on non-revenue producing projects. Overall, our operating
loss in 2012 was $2.9 million, which represented a 24% improvement
over the previous year. It is important to note that only
approximately $1.1 million of this loss represented actual cash
used in operations or capital expenses. The net loss per weighted
average share for the year 2012 was ($0.01) compared to ($0.15) in
2011, which was skewed by a non-cash derivative liability charge of
almost $20 million. In 2012 we eliminated all derivative
liabilities on our books.
As you can see, our revenue in 2012 was approximately equal to
our cash expenditures for the year. This is an extremely
encouraging sign for future growth. With expenses already being
reduced and revenue expected to increase materially in the current
year, we forecast that we could be at a cash "break-even" point by
the end of 2013 and in an even stronger position in 2014.
We remain focused on augmenting revenue via development
contracts and licensing agreements, as well as the sale of products
and prototypes. We expect to receive about $650,000 from our
contract with the U.S. Army in the first half of 2013, and another
$300,000 from our license with the Irish equipment manufacturer
Combilift within the following six months. Additionally, we have
contracts in various stages of negotiation that could generate
another $2 million in revenue over the following 12 to 24 months.
We cannot guarantee that we will be successful in closing these new
contracts, but we are cautiously optimistic that these or other
opportunities will materialize in the coming quarters.
Funding & Future Growth
The successful implementation of our operational goals and
revenue-generating initiatives will require us to seek additional
financing, which we are committed to accomplishing in the least
dilutive manner for our shareholders. In 2012 we established
working relationships with three strong investment funds that
collectively provided us with over $750,000 in debt and equity
financing; and in 2013, we added another fund with commitments to
provide up to an additional $500,000. Much of the debt we issued is
convertible into common shares, typically at floor prices slightly
above market. We believe that these considerations are important to
limiting dilution and putting Cyclone in a stronger cash position
over the long term.
We have also submitted approximately $1.5 million in grant
applications and proposals with the Department of Defense, USAID
and other government offices, which could provide non-dilutive
funding and positive cash flow for our development. Additionally,
we are in discussions with the State of Ohio to provide low
interest loans and grants for machinery purchases, facility
expansion and technology research.
With respect to our Land Speed Record vehicle, we believe that
this asset can also generate funding for Cyclone, especially as we
start testing and running the car in the coming months. We have had
interest from corporations and private investors in sponsoring or
outright purchasing the vehicle, either of which could provide us
with substantial non-dilutive funding. The possibility of breaking
the land speed record for steam power vehicles this year could also
attract new strategic partners to provide development support and
private investors to provide project-based capital.
As for our Cyclone-WHE division, it was initially established to
provide a corporate entity for the operation of our waste-to-power
business, as well as another funding option for investors who
prefer to invest in non-public companies. We are actively seeking
partnership arrangements for this company, and believe that this
strategy could be successful over the coming year in raising
additional capital for both Cyclone and the subsidiary entity.
Engine Development & Delivery
The core of our business, engine development and delivery,
continued on-course throughout 2012, and during the year we met
several important milestones that will be instrumental in
propelling us to the next stage of growth. Below is a recap of some
of these achievements:
U.S. Army: On time and within budget, we
met the first two milestones under our $1.4 million contract with
the U.S. Army / TACOM, and believe we have developed a very good
working relationship with our contracting officers there. We are
presently working on securing Phase 2 funding to continue
development through the next several years. We believe that this
ultra-compact, multi-fuel capable 10kWe power generator for combat
vehicles and mobile military or emergency operations is an
extremely important technology for myriad government and commercial
customers.
Phoenix Power / WHE: We commenced
integration of our Waste Heat Engine (WHE-25) with Phoenix Power's
waste oil combustion system, which marked an important
technological milestone for Cyclone. We estimate completion for
this integrated system can be achieved and in-field demonstrations
conducted in 2013.
Raytheon: We delivered two engines to
Raytheon on time and within budget. This was another significant
milestone for Cyclone. With current military requirements and
funding in this sector remaining uncertain, it is difficult to
predict how this particular project will proceed. We maintain a
good relationship with our engineering leads at Raytheon, and
expect to continue to develop solutions for the undersea power and
propulsion sector in the future.
Shift to Manufacturing: We signed a Letter
of Intent to form a Joint Venture with Ohio-based manufacturer
Precision CNC, and a multi-faceted development agreement with the
prestigious Ohio State University's Center for Automotive Research
(CAR). These agreements mark two major steps forward in our plan to
move our engines into commercial production this year.
Waste-to-Power: We secured several
alliances needed to place our engines into fully operating systems,
specifically in the small-scale waste-to-power market. These
included teaming and development agreements for electric generators
with Aura Systems, for biomass gasifiers with Enginuity Energy, and
for methane combustors with B&W Construction. In 2013, we
expect to complete integrated demonstration units with each of
these partners.
Land Speed Record: Our efforts to claim
the land speed record for steam powered vehicles advanced
considerably in 2012 with the recruitment of two-time NHRA champion
Nelson Hoyos, the construction of a brand new ultra-aerodynamic
streamliner, and the successful (albeit not yet completed)
dynamometer testing of our Mark 5 engine. As we have mentioned
before, given our current manpower, paying customers and revenue
generating contracts have priority over our LSR attempt. However,
we are unified in the importance of this project and are confident
that we will make it happen in the near future.
Combilift: We began work on the two Mark 5
engines for Combilift in 2012 as scheduled, and estimate delivery
to our customer this year. To assist us in moving this project
towards completion, we have recruited contractors with expertise in
certain areas such as engine controls and condensing systems.
Overall, we are pleased with our operational and technological
growth and milestones achieved in 2012, and determined to show even
stronger results moving forward. Although there is more work to do
to complete the development of our engines, move products into
production and commence consistent revenue, we believe that the
steps taken in 2012 have put us into a strong and favorable
position to accomplish this plan.
On behalf of the entire Cyclone team, thank you for your support
today and for your continued support of our revolutionary
technology. We look forward to a very successful 2013 and
beyond.
Sincerely, /s/ Harry Schoell Harry Schoell, Chairman &
CTO
Safe Harbor Statement Certain statements
in this news release may contain forward-looking information within
the meaning of Rule 175 under the Securities Act of 1933 and Rule
3b-6 under the Securities Exchange Act of 1934, and are subject to
the safe harbor created by those rules. All statements, other than
statements of fact, included in this release, including, without
limitation, statements regarding potential future plans and
objectives of the company, are forward-looking statements that
involve risks and uncertainties. There can be no assurance that
such statements will prove to be accurate and actual results and
future events could differ materially from those anticipated in
such statements. The company cautions that these forward-looking
statements are further qualified by other factors. The company
undertakes no obligation to publicly update or revise any
statements in this release, whether as a result of new information,
future events or otherwise.
About Cyclone Power Technologies
Cyclone Power Technologies is the developer
of the award-winning Cyclone Engine -- an all-fuel, clean-tech engine with the power and versatility to run
everything from waste energy electric generators and solar thermal
systems to cars, trucks and locomotives. Invented by company
founder and CEO Harry Schoell, the patented Cyclone Engine is a
eco-friendly external combustion engine,
ingeniously designed to achieve high thermal efficiencies through a
compact heat-regenerative process, and to run on virtually any fuel
-- including bio-diesels, syngas or solar -- while emitting
fewer greenhouse gases and irritating pollutants into the air. The
Cyclone Engine was recognized by Popular Science Magazine as the
Invention of the Year for 2008, was included
in a 2011 report by Popular Mechanics as an important waste energy
technology for the future, and was twice presented with the Society
of Automotive Engineers' AEI Tech Award.
Additionally, Cyclone was named Environmental
Business of the Year by the Broward County Environmental
Protection Department. For more information, visit
www.cyclonepower.com.
Cyclone Investor Relations American Capital Ventures Howard
Gostfrand President Tel: 305-918-7000 info@amcapventures.com
Company Contact Christopher Nelson Tel: 954-943-8721
info@cyclonepower.com