CybAero Year-End Report January–December 2014 CybAero AB

• Net sales: SEK 46.8 million (SEK 24.4 million)
• EBITDA: SEK -22.3 million (SEK -15 million)
• Operating loss: SEK -33.7 million (SEK -24.3 million)
• Loss after tax: SEK 34.2 million (SEK 25.4 million)
• Earnings per share: SEK -1.62 (SEK -2.94)

Events during the year

• In January, CybAero receives its largest order to date with a value of EUR 5.5 million. The order is for the delivery of three systems to be operated from ships. China Customs is the end user.
• In February, the final delivery of orders on hand to the company’s U.S. partner AeroVironment is completed.
• In March, AeroVironment converts one of its two convertible loans to CybAero, each worth SEK 10 million, giving them 1,062,699 shares, which is equal to ownership in the company of just over 8.5 percent.
• In April, CybAero receives an order for a demo system from its agent in China.
• In April, CybAero conducts a private placement to four international institutional investors. In total 1.8 million shares are issued, which is equal to approximately 12.6 percent of CybAero’s total share capital. The private placement brings in approximately SEK 50 million for CybAero before issuing costs.
• On July 2, the company announces a framework agreement with one of the world’s largest companies and aircraft manufacturers, Chinese AVIC. The agreement spans eight years and has a minimum commitment from AVIC for orders of at least 70 systems worth approximately SEK 700–800 million.
• In August, AeroVironment converts its second convertible loan, which gives them 1,062,699 shares, corresponding to company ownership of over 6.9 percent.
• In August, CybAero receives a supplementary order from Airbus Defence & Space for avionics and subsystems for the continuing development of their TANAN 300 demonstrator.
• In November, CybAero conducts another private placement. In total, 1.6 million shares are issued, corresponding to approximately 9.3 percent of CybAero’s total share capital. The private placement brings in approximately SEK 45 million for CybAero before issuing costs.

Key events after the period

In January, the redemption period ends for the TO 8 warrants issued in connection with the preferred issue in December 2013. A total of 1,334,111 warrants are exercised, corresponding to 98.4 percent of the warrants. The company thus receives an injection of approximately SEK 16 million before issue expenses. After registration, there will be 18,497,213 shares, and CybAero’s share capital will be SEK 27,745,819.50.

In February, the company commences factory testing on systems to be delivered to China Customs.
The deliveries are estimated to begin in March 2015, which is three months later than originally estimated.

Initial training of AVIC staff is held in February. The purpose of this training is to give them knowledge on how to manage the company’s systems in order to boost their sales activities in China.

Message from the CEO

The year 2014 was even more intense than 2013 and served as the springboard for CybAero’s expansion. In January, we received our largest order ever to deliver three ship-based systems with China Customs as the end user. This is a key breakthrough order that demonstrates our competitiveness in these highly advanced systems. Delivery of the systems was originally estimated to begin before the end of last year, but the deliveries were postponed due to extensive development work. The deliveries are set to begin in March 2015.

We continued to work hard on our marketing during the year, especially to the Chinese market, which led to a major framework agreement with Chinese AVIC at mid-year. AVIC is a group of companies whose activities include development and production of aircraft and is one of the largest companies in the world with over half a million employees. The framework agreement stipulates that AVIC commit to ordering at least 70 systems over the next eight years. The order value is estimated to be at least approximately SEK 700–800 million. This is the largest contract ever in our segment and reinforces our position as the world leader in our product and market segment.

We have seen a substantial increase in interest in CybAero from the financial market as well. This was demonstrated by the two successful private placements we conducted during the year, which several renowned international investors participated in, and by the fact that the number of shareholders in the company has increased substantially. At the end of the year, our shareholders numbered nearly five thousand (4,794), which is an increase of around two thousand shareholders in one year.

We are very pleased that we can see clear evidence on a daily basis that the market for our systems is now really taking off. This is manifested in the significant increase in the number of inquiries we are receiving, particularly in regard to the civilian and commercial applications of our products. The order in January and the agreement with AVIC are also clear signs of this. We are continuing to pursue our objective of being a global leader.

Development and production

In late fall, 2013, we commenced major, large-scale work on upgrading the performance and reliability of our main product, APID 60. This work continued in 2014 and is estimated to be completed in March 2015. We have revised our production strategy, and as a result, we now perform the final assembly of aircraft and systems in-house and use subcontractors and partners for the assembly of subsystems. The company is simultaneously expanding its production capacity, which includes expanding its production facilities and increasing the production workforce. In this context, we have also decided to build our own test center, which is estimated to be put into service in April 2015.

Market presence and collaboration agreements

In January, as previously mentioned, we received very clear proof of the success of our marketing efforts when we received an order worth EUR 5.5 million for delivery to China Customs. Our agent in China placed an order in April for a demo system which will enable more intense marketing on the Asian market. In July, we were able to announce an agreement with Chinese AVIC, which definitively solidifies CybAero’s role as a global leader in supplying computer-controlled, helicopter-based systems under 200 kg.

We conducted demonstration flights for potential clients in China over a three-week period in July and August. Many people representing various government authorities and companies were present, including state-owned energy companies, public sector agencies working on environmental initiatives, as well as several private/commercial representatives. The demonstrations were very successful and also made a major breakthrough by exposure on Chinese television and other media outlets.

CybAero finished its work with its partner Indra on their Pelican project where the APID 60 serves as the foundation of the system by delivering the final subsystems during the year. As for us, we plan to  focus more on our own work for end users as we move forward.

Linköping, February 27

Mikael Hult

CEO