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Hy-Drive Announces Financial Results for the Three and Nine Month Period Ended September 30, 2009

November 18, 2009

MISSISSAUGA, ON, Nov. 18 /PRNewswire-FirstCall/ – Hy-Drive Technologies Ltd. today announced its financial results for the three and six month period ended September 30, 2009. This release also covers Financial Statements for the Company and an accompanying MD&A released at www.sedar.com.

Highlights for the three month period ended September 30, 2009:

The following outlines the key events during the three months ended September 30, 2009 and up to November 17, 2009, the date of this MD&A, in the development of the Company, the HGS(R) product, the mining product and the Class 8 truck market:

    Interim Consolidated Balance Sheet as at September 30, 2009

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                                                September 30,    December 31,
                                                        2009            2008
                                        Note      (unaudited)       (audited)
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    ASSETS
    Current assets
      Cash and cash equivalents                $      63,241   $   2,193,612
      Short-term investments                       4,355,598       7,041,712
      Inventory                                      745,202         544,449
      Prepaid expenses and other assets              225,042         155,977
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                                               $   5,389,083   $   9,935,750

    Property, plant and equipment              $     315,128   $     474,004
    Patents and trademarks                           818,843         870,052
    Development costs                      6       4,452,948       3,049,947
    Profit participation interest                    299,623         299,623
    -------------------------------------------------------------------------
                                               $  11,275,625   $  14,629,376
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES
    Current liabilities
      Accounts payable and accrued
       liabilities                             $   1,055,573   $   1,476,170
    -------------------------------------------------------------------------

    SHAREHOLDERS' EQUITY
    Capital stock                          8   $  55,594,987   $  55,527,647
    Contributed surplus                    9       5,104,300       5,015,712
    Deficit                                      (50,479,235)    (47,390,153)
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                                               $  10,220,052   $  13,153,206
    -------------------------------------------------------------------------
                                               $  11,275,625   $  14,629,376
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The following outlines the key events during the three months ended
September 30, 2009 and up to 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:

    -   In July 2009, Professional Services Industries, Inc. (PSI) completed
        third party validation testing of the HGS(R). PSI followed the Joint
        SAE/TMC Fuel Consumption Test Procedure, Type II, SAE J1321 (Oct 86)
        to validate and certify the results. The tests were conducted over
        three days on Class 8 highway tractors with Caterpillar engines
        equipped with HGS(R) units. PSI's testing concluded that the use of
        the HGS(R) resulted in an overall reduction in fuel consumption of
        10.47% and reduced opacity by 39.5%.

    -   Subsequent to the end of the quarter, the Company entered into a
        definitive agreement (the "Agreement") with an arms length third
        party to acquire intellectual property assets (the "IP Asset") and
        for the development of enhancements for the HGS(R) (the "Modules").
        This Agreement provides Hy-Drive an expanded market for the HGS(R)
        technology. The Company acquires the ownership and exclusive right to
        use the IP Asset and Modules with a wider range of vehicles than
        originally included in the MOU. It now includes Class 4 and pick-up
        trucks, and other applications including in respect of mining,
        forestry, construction, and industrial market places, as well as in
        light duty truck and other sectors. The details of the Agreement are
        set out in the Press Release issued November 17, 2009 and in the
        Capital Commitments Section in the MD&A. The Agreement concludes the
        transaction first disclosed in a press release dated October 30,
        2008, wherein the Company announced a non-binding Memorandum of
        Understanding (the "MOU") to acquire the IP Asset and Modules by the
        issuance of common shares and warrants and for cash consideration as
        detailed in Note 13 to the Consolidate Financial Statements.

        Development of Modules to enhance the HGS(R) progressed after the
        signing of the MOU and prior to completion of the Agreement. The
        resulting enhancement to the HGS(R) contributed to the successful
        third party PSI validation mentioned above and confirmed Management's
        belief that this acquisition and development work give the Company a
        unique product and a competitive advantage in its market place.

        Management believes that the expanded vehicle range available with
        the enhancements, and under development, opens another potential
        market for the HGS(R) in the United States. Many State and Municipal
        owned fleets or companies contracting to them, operating all Classes
        of trucks, are mandated to reduce their emissions. Management
        believes the HGS(R) will be a viable alternative to other retrofit
        emissions reduction technologies currently on offer to those fleets,
        and one that also offers fuel consumption reductions.

    -   In August 2009, the Company announced receipt of an order for 100
        HGS(R) units from Mining Technologies International, Inc. The order
        was valued at $1,200,000; it is to be fulfilled with a combination of
        units designed specifically for a mining application plus units
        intended for normal on road use. Timing for fulfillment of the order
        is not finalized. Subsequent to quarter end, the Company received the
        first payment in advance of shipment for $200,000.

    -   In September 2009, the Company announced completion of the audit by
        Canada Revenue Agency (CRA) of the Company's claim for Scientific
        Research and Experimental Development (SRED) Credits for fiscal years
        2005, 2006 and 2007. In addition to the Federal Tax Credits, the
        audit qualifies the Company to received cash payments from the
        Government of Ontario as part of its refundable Ontario Investment
        Tax Credit (OITC) program. Subsequent to quarter end, the Company
        received $591,503.

    -   Subsequent to the third quarter, the Company entered into an
        agreement with an agency, BKV, Inc. ("BKV"), to implement a marketing
        and sales plan for the HGS(R) system. BKV will assist Hy-Drive to
        achieve the commercialization of the HGS(R) in North America. BKV is
        an integrated marketing communications company with particular
        experience in direct and interactive business-to-business marketing,
        including in the truck aftermarket segment. They number many Fortune
        500 companies in their customer base.

    -   In 2008, the Company wrote down a Loan Receivable and accrued
        interest of $513,333 due from an arms length party, which went into
        bankruptcy. The Estate Trustee advised the Company that realizations
        may result in full recovery of the Loan Receivable, for which the
        Company held security. The outcome is subject to Taxation of the
        Estate by the Courts.

    -   In anticipation of increased demand and production requirements, the
        Company initiated exploratory discussions with companies specializing
        in outsource manufacturing. Management believes that significant cost
        savings can be realized in the manufacturing process.

    -   In conjunction with the Company's sales and marketing efforts, the
        Company commenced discussions with several parties to provide
        purchase finance or lease alternatives for prospective customers.

    -   The Company continued internal testing of the reliability and
        performance of its HGS(R) and component parts. That testing was both
        in-lab and on-road and related to Thermal Ranges (-40C to +50C),
        Vibration Testing, Salt-Spray Testing, Altitude Testing,
        Electromagnetic Interference and Conduction Testing (EMI/EMC), and
        Shock Testing. Reliability Demonstration Test results for the current
        HGS(R) design show it meets performance requirements for a minimum of
        9000 hours of operational hours.

    -   Hy-Drive HGS(R) units available for sale incorporate the latest
        refinements developed over the past year. The Company has a trial
        programme with several prospects, using the latest HGS(R) technology,
        to confirm its efficacy on the road prior to purchase. HGS(R) systems
        are being installed on trucks with Caterpillar engines.

    -   The Company implemented a program of cash conservation in 2008 that
        is carried forward into 2009. Total cash and short-term investments
        used in operating activities was $1,351,640 and $3,409,313 for the
        three months and nine months ended September 30, 2009 (2008 -
        $1,341,816 and $4,398,167).

    -   Net loss for the three months and nine months ended September 30,
        2009 was $1,065,343 and $3,089,082 ($0.02 and $0.05 per share
        respectively) (2008 - $2,522,498 and $5,816,263 ($0.04 and $0.10 per
        share respectively)).

    -   The Company reports cash, cash equivalents and short-term investments
        of $4,418,839 as at September 30, 2009, compared to $9,235,324 as at
        December 31, 2008; a reduction of $4,816,485 in the nine months.

    -   The Company received notice of an action brought against it by a
        company with a foreign distribution agreement for the HGS(R). The
        Company and its counsel believe the action is without merit. Hy-Drive
        has filed a defence in the action and the matter is proceeding.

    -   Management recognizes that the economic downturn presents risks to
        the trucking industry. However, management believes that its product
        will provide sufficient economic benefit to prospective trucking
        customers for them to purchase the HGS(R). Industry statistics
        indicated that sales of Class 8 trucks continued to decline in the
        third quarter of 2009. This represents an enhanced opportunity for
        Hy-Drive because our HGS(R) unit is most effective on engines built
        before 2006, which are not being replaced at prior rates.

    -   Management recognizes the risk the current economic climate presents
        to the Company if prospective purchasers of our HGS(R) product are
        not able to finance the acquisition of our product in spite of the
        value proposition that it represents.

    -   Management believes that the growing importance of sustainability and
        carbon trading in North America, Europe and elsewhere, combined with
        the current business climate, will create an increase in interest in,
        and the value of, our HGS(R) product and the Company. Our HGS(R)
        should create sustainable carbon credits that our customers or the
        Company will be able to market and further increase the value
        proposition of purchasing our product.

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 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 2009, 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.

SOURCE Hy-Drive Technologies Ltd.


Source: newswire



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