Hy-Drive Announces Financial Results for 2nd Quarter 2010
MISSISSAUGA, ON, Aug. 13 /CNW/ - Hy-Drive Technologies Ltd. today announced its financial results for the three-months and six months period ended June 30, 2010. This release also covers Financial Statements for the Company and an accompanying MD&A released at www.sedar.com .
Highlights for the three-months and six-months period ended June 30, 2010:
The following outlines the key events during the three-months and six-months period ended June 30, 2010 and up to August 12, 2010, the date of the MD&A, in the development of the Company, the HGS(R) product, the mining product and the Class 8 truck market.
The following table summarizes the Company's operating results for the three-months and six-months ended June 30, 2010:
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Three Months ended Six Months ended
June 30 June 30
(unaudited) (unaudited)
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2010 2009 2010 2009
$ $ $ $
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General and administration 599,169 504,691 1,041,865 879,813
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Sales and marketing 229,547 1,200 432,300 2,291
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Research and development 210,899 297,811 650,872 607,078
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Inventory write-off - 163,776 - 202,222
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Warranty costs - 66,218 (21,764) 66,218
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Stock-based compensation 1,797 44,796 4,683 83,979
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Amortization - property
and equipment 27,551 63,601 55,606 128,149
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Amortization - development
costs 239,585 - 482,145 -
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Amortization -
intellectual property 41,412 37,802 82,010 74,792
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Total Expenses 1,349,960 1,179,895 2,727,717 2,044,542
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Foreign exchange gain or
(loss) 12,225 (4,549) 5,022 (24,930)
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Interest and other income 4,126 34,198 8,950 45,733
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Net gain or loss for the
period (1,333,609) (1,150,246) (2,713,745) (2,023,739)
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Loss per share (0.02) (0.02) (0.04) (0.03)
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- During the quarter and continuing in July 2010, Hy-Drive continued to
execute its marketing plan. Three direct marketing mail packages were
sent to approximately 1,500 fleets of varying sizes. Research showed
those fleets own Class 8 trucks with Caterpillar engines of the type
on which the HGS was third party validated. The mailers covered
significant markets in Canada and the USA. Follow-up calls and
referrals to the Company's sales agency, IntraLink Associates Ltd.,
continued to produce leads for trials. Hy-Drive is offering 90-day
risk free trials to prospective purchasers of its HGS to allow them
to satisfy themselves with respect to Hy-Drive's third party
validated reduction in fuel consumption and opacity.
- During the quarter, six additional fleets signed up for trials
ranging from one to five HGS units. Subsequent to the quarter end
four fleets agreed to commence trials with installation dates being
scheduled for July and August. Trials are being monitored on a
regular basis to ensure ongoing efficacy of the HGS units.
- Hy-Drive has targeted high profile fleets known to possess CAT
engines in its "Bell Weather Fleet" initiative. Included in the trial
fleets is one such fleet with over 300 CAT engines compatible with
the HGS. Trials on that fleet commenced in June 2010.
- Hy-Drive's Australian sales agent, Sparta Capital Ltd. ("Sparta")
started a sales trial and a marketing program to introduce the HGS to
the Australian market has been finalized. Management thinks Australia
represents an excellent market for its initial HGS product because of
higher diesel costs and significant numbers of CAT engines in use in
Class 8 vehicles.
- In May 2009 Hy-Drive engaged Olson-Ecologic Engine Testing
Laboratories, LLC, Fullerton, California ("Olson") to conduct certain
testing for the Company. The testing was to demonstrate that a 2004
Caterpillar C15 engine modified by the use of the HGS met baseline
emissions for that engine when measured by the Hot-Start EPA
Transient Test Procedure (FTP). A Final Emissions Report was received
from Olson in November 2009. Olson concluded that the engine
emissions, with the HGS, were consistent with the baseline tests. On
that basis they also concluded that the California Air Resources
Board ("CARB") should make a finding that the Hy-Drive HGS system
does not cause an emissions increase and, therefore, would qualify
for the exemption under the Executive Order provisions of CARB. Olson
recommended that Hy-Drive apply to CARB for an Executive Order. Hy-
Drive deferred making application for the Executive Order pending its
application for EPA verification of the HGS. Qualification for the
CARB Executive Order means that the HGS is not a "defeat device" as
defined in the Clean Air Act (40 CFR Part 86, Subpart A 86.004-2
Definitions) in that it does not bypass, defeat or render inoperative
the engine's emissions control system thereby making emissions worse
than approved for the engine type tested.
- In August 2009, the Company announced receipt of an order for 100 HGS
units from Mining Technologies International, Inc. ("MTI") valued at
$1,200,000. MTI is an OEM manufacturer of underground mining
equipment with plans to integrate the HGS into several of its models
and to market it as an aftermarket retrofit for underground mine
equipment. The initial order called for immediate delivery of 33 HGS
units to be followed by a newly designed HGS for mining applications.
Subsequently, the Company agreed with MTI to delay delivery of the
existing design and to design a more compact HGS to meet MTI's
requirements. Hy-Drive worked with MTI's engineers on that new
configuration. In recognition of the change in the order, MTI paid
Hy-Drive a deposit of $200,000 in the final quarter of 2009. The
final design was approved in early 2010 and in July 2010, Hy-Drive
started building ten Beta models of the mining HGS for qualification
testing. Once testing is complete, Hy-Drive will build the balance of
the order. Testing is expected to be completed by approximately
December 2010 at which time the purchase order can be fulfilled. Hy-
Drive and MTI believe the HGS provides significant reductions in
particulate emissions, as confirmed in the PSI validated tests, which
could improve air quality and reduce maintenance costs in underground
mines. In order to be used underground the final product must receive
approval from the relevant government agency.
- On June 29, 2010, Hy-Drive completed the third and final tranche of
its previously announced "best efforts" private placement (the
"Private Placement") bringing the total gross proceeds raised to
$4,272,850 of a maximum of $5 million of Units. Proceeds are to be
used by the Company for working capital, marketing and production of
HGS units, production of the mining HGS and for capital expenditures
required to complete the development of IP for engine platforms other
than Caterpillar. The Company has issued a total of 14,242,830 Units
pursuant to the Private Placement at a price of Cdn$0.30 per Unit.
Each Unit was comprised of one common share (a "Share") of the
Company and one-half of one warrant (a "Warrant"), with each whole
Warrant exercisable for one Share of the Company at an exercise price
of Cdn$0.46 per share for a period of five years. CapStone
Investments, non-Canadian placement agent for the Private Placement,
is receiving a cash fee of $193,496 and 794,989 broker warrants, each
exercisable for one Share at price of Cdn$0.46 per share for a period
of two years. All securities issued or issuable pursuant to the
Private Placement are subject to a hold period expiring 120 days
after closing, in accordance with the policies of the TSX Venture
Exchange and applicable securities laws.
- On July 15, 2010, the Company received notice that the TSX Venture
Exchange had accepted the filing documentation with respect to the
Brokered Private Placement referred to above.
- Hy-Drive completed installation of the eighteen units previously
announced as rented to Ontario Waste Management ("OWM"). Hy-Drive is
renting the HGS units to OWM for a twelve month period. The Company
is also renting and wrapping with advertising eighteen OWM trailers
to increase the visibility of the HGS units on the highways in
Ontario, Canada. The rental revenue to Hy-Drive for the term of the
agreement will be offset entirely by the rental cost of the trailers.
As a result, net rental revenue has not been reflected by Hy-Drive.
- On June 9, 2010, the Company announced that the Board of Directors
re-elected Dan Doucette as Executive Chairperson of the Board. Dr.
Richard Marceau and Fred Florence joined the Board of Directors on
the retirement from the board of David Merrion and Hugo Sorensen. The
latter two former Board members are continuing to provide assistance
to Hy-Drive in consulting capacities.
- On June 9, 2010, the Board of Directors also announced the issuance
of 121,875 options, 87,500 to Directors and 34,375 to an Officer of
the Company. All options have an exercise price of $1.00, vest
quarterly in 25% increments over one year and expire June 8, 2020.
- As previously announced, Mr. Hugo Sorensen, President and CEO,
stepped down from his position and the Board of Directors effective
June 1, 2010. The Executive Chairman, Mr. Dan Doucette, announced the
commencement of a search process for a CEO, which is nearing its
conclusion.
- The Company's program of cash conservation continues in 2010. Total
cash and short-term investments used in operating activities was
$1,162,556 and $2,445,086 for the three-months and six-months ended
June 30, 2010 (2009 - $1,357,077 and $2,057,669). The increased use
of cash chiefly reflects the increase in marketing costs and
inventory production in 2010 resulting from the market introduction
of the HGS product. Other operating cash usage is being largely held
in line with 2009 levels.
- Net loss for the three-months and six-months ended June 30, 2010 was
$1,333,609 and $2,713,745 (net losses of $0.02 and $.04 per share
respectively) (Net losses in 2009 were $1,150,246 and $2,023,739 (net
losses of $0.02 and .03 per share respectively)).
- The Company reports cash, cash equivalents and short-term investments
of $5,782,194 as at June 30, 2010, compared to $4,268,265 as at
December 31, 2009; an increase of $1,513,929 in the six-months as a
result of the successful Private Placement.
- Hy-Drive continues to await the finalization of bankruptcy
proceedings to receive funds arising from a Loan Receivable and
accrued interest of $513,333 due from an arms-length party that
declared bankruptcy. The Bankruptcy Estate Trustee advised the
Company that realizations could result in full recovery of the Loan
Receivable subject to Taxation of the Estate by the Saskatchewan
Courts. Therefore, while Management believes there is a high
likelihood of significant recovery, the Company did not include any
recovery in the three-months ended June 30, 2010.
About Hy-Drive
Hy-Drive is a technology firm that has developed a proprietary, patented hydrogen generating system. Hy-Drive's Hydrogen Generating System ("HGS(TM)") generates and injects hydrogen gas into a regular internal combustion engine, enhancing the combustion process by allowing fuel to burn more efficiently and completely. For more information, please visit www.hy-drive.com.
Cautionary Note Regarding Forward-Looking Statements:
This press release contains certain forward-looking statements that are based upon current expectations, which involve risks and uncertainties associated with the Company's business, and the economic environment in which the business operates. Forward-looking statements contained in this press release and MD&A that are not statements of historical fact may be deemed to be forward-looking statements including but not limited to, statements about future development of Hy-Drive's products, commercial production in 2010, future working capital requirements, and validation of Hy-Drive's products, and can be identified by the use of forward-looking terminology such as "plans", "expects", or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", or "does not anticipate", "thinks", or "believes" or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might", or "will be taken", "occur", or "be achieved" and similar expressions to the extent that they relate to the Company or its management. These forward-looking statements are not historical facts, but reflect the Company's current expectations regarding future results or events. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations, including the matters discussed in the section "Risks and Uncertainties" below.
Although Hy-Drive has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information. Hy-Drive does not undertake to update any forward-looking information that is incorporated by reference herein, except in accordance with applicable securities laws.
The TSX Venture Exchange has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release. The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.
%SEDAR: 00016984E
For further information: Fred M. Florence, COO & CFO, Hy-Drive Technologies Ltd., Tel: (905)542-3024 ext. 257, [email protected]
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