Cyclone Power Technologies (www.cyclonepower.com) (OTCQB: CYPW) has
filed with the Securities and Exchange Commission its Quarterly
Report on Form 10-Q for the period ended March 31, 2013, and has
released the following progress report to its shareholders:
Dear Shareholders:
Cyclone continued its growth in the first quarter of 2013,
generating increased revenue, advancing technological development,
and building a strong foundation for product commercialization. Our
Quarterly Report on Form 10-Q was filed with the Securities &
Exchange Commission today, and we urge our shareholders to review
it. Notable achievements during the quarter and additional forward
looking information are highlighted below:
Continued Increased Revenue & Decreased
Expenses
We generated $251,441 in revenue in the quarter, and achieved a
gross profit of approximately $86,000. This is compared to zero
revenue in the same period in 2012. As discussed at year end, we
believe these results clearly demonstrate that we are on the right
path to profitable expansion.
Our operating expenses in the quarter were $678,475, as opposed
to $823,523 in the same period in 2012. This represents an 18%
decrease in expenses, and reflects a sincere effort on the part of
management to cut costs and focus our resources on
revenue-producing projects. Consequently, our operating loss also
decreased dramatically -- down 32% over the previous year.
It is important to note that only approximately $134,000 of our
operating loss represented actual cash used in operations. This
means that our gross revenue was almost double our cash
expenditures for the quarter. While we are by no means satisfied
having a net loss for the period, we are extremely encouraged by
this positive trend leading to future growth.
Commercialization & Sales
In connection with our Annual Report last month, we provided an
update on each of Cyclone's current projects and contracts. While
we continue to make excellent progress on these endeavors, we would
like to use this shareholder communication to provide greater
visibility about our plans to commercialize our engine technology
and expand sales in the next 12 months.
Three Cyclone engines are currently in development: the WHE-25,
the S-2 (under contract with the U.S. Army) and the 100hp Mark 5.
Of these models, the plan to commercialize the WHE-25 for
micro-grid waste-to-power applications is the closest to
realization.
Development Partners: We believe that the WHE-25 has satisfied
its "proof-of-concept" stage -- we have achieved several hundred
hours of aggregate run-time, generating power under the load of a
dynamometer or electric generator. The next step in development is
to achieve continuous operation of the engine in a rigorous thermal
cycling environment with third party validation. For this stage, we
have recruited the prestigious Ohio State University's Center for
Automotive Research (CAR), which will commence work with Cyclone
this month. Our plans with CAR are twofold: (i) conduct a thorough
analysis of the mechanical design of the WHE-25 to predict stresses
and potential weak points during durability testing, and then (ii)
conduct that durability testing. We anticipate this process will
occur over the next six months.
Manufacturing: We continue to push ahead to establish a base of
manufacturing operations near CAR at the Ohio facility of our
partner Precision CNC. We expect over the following few months to
complete our joint venture agreement with Precision CNC, which will
allow us to co-locate engineers and equipment, and leverage the
machining expertise and production oversight that their management
provides. We anticipate that the State of Ohio may provide certain
incentives to assist us in this process, including low interests
loans, tax abatement and possible development grants. Regardless of
State assistance, however, we are currently budgeting for this
critical stage of growth and engine development.
Early Adaptor Sales: Already, Cyclone has a long list of
early-adaptor "beta" customers for the first release (Gen-1)
WHE-25, which we expect to be ready by the end of this year. This
Gen-1 engine will be sufficiently validated for pilot programs and
integration projects with manufacturers of vertical technologies --
i.e., biomass gasifiers, wood pellet stoves, used oil and waste
furnaces, and other similar products. Deposits for these initial
sales could be accepted by the third quarter, with delivery of the
engines commencing by the end of 2013. These Gen-1 engines will
command a premium over the eventual commercial price due to the
requirements of early customers to complete and validate their own
technologies. Consequently, our revenue projections for Gen-1
engines are between $2.5 million and $3 million which will help
fund the final phase of development: engineering for
manufacturability. This we believe can be completed in 2014.
S-2 - Portable Power: Our S-2 project with the U.S. Army /
TARDEC to develop a compact, multi-fuel 10-kWe auxiliary power unit
continues to move forward. We expect to complete the
proof-of-concept stage on this engine by this summer, with the
balance of our $1.4 million fees being paid during this time. We
are currently martialing support and interest for Phase 2 of this
project, which will consist of engine "hardening" over the
following 24 month period, and could provide Cyclone with several
million dollars more in revenue.
Mark 5 Engine: Our Mark 5 project will generate revenue from
several sources. We expect to receive an additional $300,000 from
Combilift this year as we provide prototype engines for their
material lift equipment. We are currently in discussions with
additional customers for the Mark 5 engine for a variety of uses --
from micro-CHP (combined heat and power) to automotive.
With respect to our use of the Mark 5 engine with the Land Speed
Record vehicle, we believe that this asset can also generate
revenue 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, as well as
private investors to provide project-based capital.
Funding & Future Growth
The successful implementation of our operational goals and
revenue-generating initiatives will require us to seek additional
financing. In the first quarter of 2013, we sold $100,000 in common
stock to an investor at a premium above market prices, and signed a
$500,000 convertible note with a hard conversion floor price of
$0.08 / share, also representing a premium to current market
prices. We closed the first $100,000 tranche of that note in
April.
We believe that our track record demonstrates our commitment to
raising funds in the least dilutive manner for our shareholders. We
will continue to pursue financing opportunities with this approach,
which may include funding at the subsidiary level (i.e., through
Cyclone-WHE and Cyclone Performance), and seeking government grants
(we currently have $1.5 million in applications in review and
others to be submitted). However, our focus remains generating
revenue from product sales and technology licensing.
The first quarter of 2013 was positive for Cyclone, and we are
determined to get stronger moving forward. We believe that we have
a solid plan to transition our products into production and
commence consistent revenue this year, and we intend to meet those
milestones. It has been a long road and we are beginning to see the
proverbial light at the end of the tunnel. That makes it a very
exciting time to be a Cyclone shareholder.
On behalf of the entire Cyclone team, we thank you for your
support.
Sincerely, 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 Chairman 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