Cyclone Power Technologies Releases Letter to Shareholders Regarding Capitalization of its Subsidiary
July 23 2014 - 10:09AM
InvestorsHub NewsWire
POMPANO BEACH, FL, July 23,
2014. Cyclone Power Technologies (OTC: CYPW) has released the
following letter to its shareholders regarding plans to capitalize
its waste heat subsidiary, WHE Generation
Corp.
July 23, 2014
Dear Cyclone
Shareholders:
As many of you saw last week,
Cyclone’s Board of Directors approved the strategic capitalization
of its waste heat subsidiary, WHE Generation Corp. (formerly
Cyclone-WHE LLC, and called “WHE GEN” in this letter). These
transactions are expected to result in Cyclone retaining up to 24%
ownership in its subsidiary, significantly reducing its debt and
liabilities, and establishing future revenue streams. The action
taken by our Board is consistent with Cyclone’s long range vision,
and represents major growth of our business model of advancing the
Cyclone engines to market through licensing for specific uses and
manufacturing.
Developing technology as unique and
potentially disruptive as the Cyclone engines requires significant
resources. From the Company’s inception, however, raising
sufficient funding has been a challenge. Currently, our share
price, debt load and other market factors have created further
headwinds towards this objective. Yet as early as 2012, Cyclone
discussed in its public filings that we envisioned WHE GEN as an
operating company for waste heat applications and a vehicle for
capitalizing our on-going technology development and business
model.
Recently, opportunities for Cyclone
to secure long-term capital funding have presented themselves and
have led to this strategic move, demonstrated as
follows:
- 1) Last month we announced the
appointment of three very experienced and well qualified new Board
members who embody Cyclone’s core model and vision to move the
Cyclone engines into the next phase, including providing business
development, licensing and manufacturing
expertise.
2) We signed a Separation
Agreement and amended License Agreement to allow WHE GEN to operate
as an independent company, and concurrently, established a
structure to provide Cyclone with funding to improve its balance
sheet and receive operating capital
3) Cyclone’s Board commissioned
a valuation report and fairness opinion from a certified,
independent expert opining as to the overall fairness from a
financial prospective of the WHE GEN financings and the terms of
the Separation Agreement and amended License Agreement. The Board
also received consents to these transactions from all of the
non-affiliated debt holders of the Compan.
Based on the totality of all the
facts, our Board determined that these transactions to capitalize
WHE GEN are consistent with Cyclone’s long-term strategy and may
have the following positive benefits for Cyclone and its
shareholders:
1) It will allow Cyclone to
monetize its investment in WHE GEN, part of which is expected to be
sold to private investors to raise non-dilutive capital for
Cyclone. We intend on selling up to $500,000 worth of our WHE GEN
stock simultaneously with the separate funding of our
subsidiary.
2) Upon the closing of the several
financings, WHE GEN will pay to Cyclone approximately $175,000 in
licensing and development fees, and assume over $200,000 in
accounts payable and another $800,000 in current and future
contract liabilities.
3) With these new funds,
Cyclone will fully retire the senior secured debt which is
collateralized by all of our assets. We will also be able to redeem
a substantial portion of our convertible debt which has placed a
great deal of pressure on our stock and has diluted current
shareholders. With a greatly improved balance sheet, we believe
that additional growth opportunities will present themselves for
Cyclone.
4) The equity Cyclone will hold
in WHE GEN, estimated to be between 12% and 24% of the subsidiary
depending on the final size of each of the financings, is expected
to further strengthen our balance sheet as an appreciating
asset.
- 5) Securing funds for WHE GEN will
help it grow as a self-supported company capable of further
developing and commercializing the Cyclone engines which WHE GEN
licenses for stationary waste heat and waste-to-power applications
only. Cyclone, in turn, will receive on-going royalty revenue
in the amount of 5% of all WHE GEN’s engine sales. We estimate that
this royalty could provide significant revenue to Cyclone over the
next 20+ years.
- 6) WHE GEN has the rights to
advance our technology, and Cyclone will co-own any new
intellectual property and patents created from these specific
efforts. Cyclone will continue to receive royalty payments on
improved Cyclone technology, and will be able to use on a
royalty-free basis any co-owned patents for our other vast business
applications. It is important to note that none of our current
patents have been transferred to WHE GEN – Cyclone still controls
these very valuable assets.
- Cyclone is continuing our core
business model of licensing our technology to other companies in
different fields including but not limited to: automotive, marine
surface and undersea propulsion, off-road equipment and vehicles,
and distributed and mobile/auxiliary power utilizing traditional
fuels or biofuels (we refer to these vast business opportunities as
the “Cyclone Business”). For some areas of the Cyclone Business, we
already have customers like Combilift and additional potential
partners in discussions. We are also pursuing other manufacturing
opportunities that could be very beneficial for our
shareholders.
As announced last week, Christopher
Nelson has resigned as President of Cyclone to become CEO of WHE
GEN. Mr. Nelson, however, has given his commitment that he
will continue to help the Company with SEC filings and other
business development activities as requested from time to
time. Frankie Fruge will assume the position of President of
Cyclone, supported by the three very competent and well-rounded new
Board members.
As a true R&D and engineering
company, Cyclone has nurtured WHE GEN from the beginning, providing
design, development and know-how to help get it where it is today –
on the brink of product commercialization. But to complete this
goal funding is required. As a result, the Board of Directors took
a careful look at what was in the best interest of the Company and
our shareholders, and unanimously agreed that these transactions
were the right move for all parties. We will now be able to
concentrate efforts on progressing the development of our other key
engines and Cyclone Business applications, all while continuing to
build value for our shareholders.
We believe that this is the dawn of a
new era consistent with Cyclone’s long-term vision marked by our
new Board of Directors, and supported by debt retirement, future
revenue growth, and technological advancement powered by quality
production engine manufacturing.
Sincerely,
Harry
Schoell
Frankie Fruge
Chairman & CTO
President & Director
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.
Company
Contact
Frankie Fruge,
President
Tel: 954-943-8721
info@cyclonepower.com