Axion Power Reports Third Quarter Results For 2013

NEW CASTLE, Pa., Nov. 15, 2013 /PRNewswire/ -- Axion Power International, Inc. (OTC QB: AXPW), the developer of advanced lead­-carbon PbC® batteries and energy storage systems, today announced results for its third quarter and nine months ended September 30, 2013.

(Logo: http://photos.prnewswire.com/prnh/20100119/AXIONLOGO)

Net sales for the quarter were $2.2 million in 2013 compared to $2.2 million in 2012.  Sales were primarily specialty lead-acid batteries built in our factories for sale under the label of our customer, a large and well-known battery company.  Our cost of sales was lower and our gross profit correspondingly a bit higher, but the operating loss of $2.1 million was also flat at $2.1 million.  Net loss for the quarter was $4.7 million, or $0.04 loss per share, the corresponding net loss for the third quarter in 2012 was $2.1 million, or $0.02 loss per share. Included in the net loss for the quarter were non-cash items of $2.9 million as compared to $0.4 million for the same quarter in 2012, the increase in non-cash charges for the quarter stem primarily from the accounting treatment for the senior notes and senior warrants and the related interest, extinguishment loss, amortization of discounts and expenses.

Net sales for the nine months were $7.1 million, compared to $6.7 million in the first nine months of 2012. The operating loss was $5.8 million vs $6.4 million in 2012, and the net loss was $6.7 million or $0.06 loss per share, compared to $6.4 million or $0.06 loss per share in 2012. The same non-cash charges increasing the third quarter net loss accounted for $2.1 million of the net loss for the nine months in 2013 as compared to $1.3 million for the same period in 2012.

Chairman & CEO Thomas Granville commented, "With our commercialization roll out at the beginning of this year, we primarily focused on energy storage for the Motive and for the Stationary markets. In the motive area we have provided commercial quantity product to Norfolk Southern for a hybrid locomotive and to ePower for their series hybrid trucks. Of course we have sold PbC batteries to other hybrid passenger vehicle and hybrid truck vehicle manufacturers, and we continue to work with all of them, but we are not yet at commercial size quantities. In the stationary area, we commissioned small projects for zero energy buildings and for the demand response and frequency regulation markets, but the modeling requirements we would have to adhere to in order to be successful on a larger scale commercial level were always moving targets. We kept working at it and finally got to a good place in developing our current model that includes an attractive ROI for stand-alone storage to service the frequency regulation and ancillary services market, and an even more attractive model for servicing those markets when solar power is incorporated into the equation.  We also have modeled for stand-alone, off-grid applications that would be needed for places such as island nations, or other Southern Hemisphere countries where, if a utility grid exists at all, the grid infrastructure is dated, subject to blackout and brown out issues and is basically unreliable. For us, the market attraction in these underdeveloped regions is the high price that consumers currently pay for their power. It is not uncommon to see kwh pricing that is six or seven times the power cost here in North America. And this price differential is across the board – manufacturing plants, commercial buildings, resorts, individual homes – they are all subject to the same expensive cost for power."

Granville pointed out that the Company on November 12th, subsequent to the end of the quarter, announced receipt of its first order for a 'solar integrated," commercial size (600 batteries), renewable energy PowerCUBE™. The Cube will support a solar panel array at a commercial customer site and it will be used to buffer power and interact with the building's power needs and with the grid power provider. In addition, the Cube will be on standby and available to provide power in a backup role or in an emergency situation. It is anticipated that the Cube will also be participating in the "frequency regulation market" on a daily basis and in so doing, create substantial revenue for the end user. That order will generate revenue for the Company of approximately $320,000 and the schedule calls for battery shipment before the end of 2013 with installation to follow immediately. We plan to market this model aggressively, but the Cube can easily be scaled and retain the same model parameters and ROI.

"In addition," Granville said, "activity has picked up in the transportation sector.  The third quarter saw Norfolk Southern reaffirm their commitment to the all electric and hybrid electric locomotive program going forward. Their July 2013 Sustainability Report stated in part that, 'that we (NS) will continue to develop the yard switcher and road locomotive programs with industry partner – Axion Power'.  We completed our shipment of batteries and battery management systems to Norfolk Southern earlier this year."

Granville reiterated that PbC batteries have the potential to become widespread power sources for America's rail lines because of their high charge acceptance and fast recharge capability; their ability to operate in partial state of charge applications; their ability to recharge quickly from regenerative braking opportunities; and particularly because of our batteries' inherent voltage equalization, especially in large string applications. The Company has presented and reported on the hybrid locomotive program at various conferences, with and without NS. This has generated significant interest with other railroad companies, some in distant lands, resulting in our team seriously addressing those opportunities.

"We have also advanced our strategic partnership with ePower Engine Systems with regard to Class 8 (18-wheeler) hybrid trucks.  These heavy-duty gas guzzlers are a prime target for fuel and emissions reduction, and the retrofit system that was designed with ePower's proprietary series hybrid products that include our PbC batteries, has demonstrated a reported 35% increase in miles per gallon of diesel fuel. And the system hasn't been optimized as yet, according to ePower. We are currently working with them on their 'Day Cab' retrofit, for shorter trucking runs with less weight load, and on their third generation full 'Sleeper' design that utilizes a six-cylinder, 240 hp diesel engine in lieu of the four-cylinder 197 hp engine. This is truly a case of bigger is better, in that the six-cylinder unit is expected to further improve fuel economy while operating with a full 80,000 pound payload.

Granville continued, "There are currently 2.4M Class 8 trucks on the road in the United States today, and the US DOT expects that number to increase going forward. At 56 batteries per retrofitted truck, the battery opportunity is staggering. ePower has tried other battery technologies and concluded that our PbC works best for their application because of all the attributes that distinguish our product from other battery chemistries. This is a great opportunity for us and we are fully focused and devoting significant resources to the space."

Granville also revealed that the Company is developing a strategic partnership with Elyria OH-based MultiLink Inc. "Together we have discovered a niche market opportunity within the domestic telcom market that is ideal for PbC batteries, especially when coupled with MultiLink's new EB1 CATV power module product line. We have seen the data from several sections of the country where the grid is subject to 'flickering/modified brownout'."

Granville concluded, "The products that are currently being used to neutralize this lack of consistency issue, do work – but they do not last and are subject to high maintenance costs as well as replacement costs. Many of the areas in question are remote – which just adds to the problem. Once again, because of the unique attributes of the PbC battery (long cycle life; high charge acceptance; fast re-chargeability; etc.), we both feel our products, working in tandem, offer a very viable solution for this 'niche market'  application. We look forward to working with MultiLink, a major supplier to the cable television and telcom industries in North America, and more importantly, we look forward to advantageously developing a market solution with them."

The Company's financial position remains acceptable, with approximately $6.5 million in cash and restricted cash, compared to cash of $2.0 million at December 31, 2012.  The current ratio is 2.1:1, with no significant bank debt. 

Conference Call and Webcast details:

The Company's management team will host a conference call to discuss its third quarter and nine months ended September 30, 2013 results today, November 15 at 11:00 am Eastern Time.

Participants should dial into the call ten minutes before the scheduled time using the following numbers: 1-877-300-8521 (USA) or +1-412-317-6026 (international) to access the call.

Audio Webcast:

There will also be a simultaneous live webcast through the Company's website, www.axionpower.com and selecting the investor tab. Participants should register on the website approximately ten minutes prior to the start of the webcast.

Replay:

An audio replay of the conference call will be available for seven days and can be accessed by dialing 1-877-870-5176 (USA) or +1-858-384-5517 (international) and using passcode 10036319.

For those unable to attend to the live webcast, it will be archived shortly following the event for 30 days in the Investors section of the Company's website.

About Axion Power International, Inc.

Axion has developed and patented a next generation energy storage device that won the prestigious Frost & Sullivan Technology Award for North America in the field of lead-acid batteries. According to Frost & Sullivan, Axion's new PbC® batteries have "the potential to revitalize the lead-acid battery industry by breathing new life into an established technology that has not been well suited to the requirements of important new applications like hybrid electric vehicles and renewable power."

Axion Power International, Inc. is the industry leader in the field of lead-carbon energy storage technologies. Axion believes its new PbC battery technology is the only class of advanced battery that can be assembled on existing lead-acid battery production lines throughout the world utilizing Axion's proprietary activated carbon electrodes. Axion's future goal, after filling their plant's lead-carbon battery production capacity, is to become the leading supplier of carbon electrode assemblies for the global lead-acid battery industry.

For more information, visit www.axionpower.com

Forward-looking Statements

Certain statements in this Press Release are "forward-looking statements" within the meaning of the Private Securities Litigation Act of 1995. These forward-looking statements are based on our current expectations and beliefs and are subject to a number of risk factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Such risks and uncertainties include the risk for the Company to complete its development work, as well as the risks inherent in commercializing a new product (including technology risks, market risks, financial risks and implementation risks, and other risks and uncertainties affecting the Company), as well as other risks that have been included in filings with the Securities and Exchange Commission, all of which are available at www.sec.gov. We disclaim any intention or obligation to revise any forward-looking statements, including, without limitation, financial estimates, whether as a result of new information, future events, or otherwise.

Contacts

Axion Power International, Inc.
Tom Granville, Chairman & CEO
(724) 654-9300

Allen & Caron, Inc.
Rudy Barrio (Investors)
r.barrio@allencaron.com
(212) 691-8087

Len Hall (Media)
len@allencaron.com 
(949) 474-4300

–FINANCIAL TABLES FOLLOW–



AXION POWER INTERNATIONAL, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS

(unaudited)



September 30, 2013


December 31, 2012

ASSETS








Cash and cash equivalents

$        1,061,823


$         2,004,391

Restricted cash

5,420,901


-

Accounts receivable

330,048


771,410

Other current assets

585,647


194,975

Inventory, net

3,254,630


2,838,791

Total current assets

10,653,049


5,809,567





Property & equipment, net

6,986,411


7,963,041

Other receivables

32,000


41,000





Total Assets

$       17,671,460


$        13,813,608





LIABILITIES AND STOCKHOLDERS' EQUITY








Accounts payable

$          606,860


$           581,503

Other liabilities

297,291


305,510

Note payable

104,777


113,921

Accrued interest convertible notes

163,023


-

Derivative conversion feature senior convertible notes

7,403


-

Subordinated convertible notes, net of discount

368,709


-

Senior convertible notes, net of  discount

3,526,198


-

Total current liabilities

5,074,261


1,000,934





Deferred revenue

1,007,345


1,262,295

Note payable

247,917


331,247

Subordinated convertible notes

411,288


-

Derivative liability senior warrants

846,774


-

Derivative liabilities

-


1,217

Total liabilities

7,587,585


2,595,693





Stockholders' Equity




Convertible preferred stock – 12,500,000 shares designated, no shares

issued and outstanding

-


-

Common stock-350,000,000 shares authorized $0.0001 par value per share 142,807,864 shares issued & outstanding (113,233,762 in 2012)

14,281


11,326

Additional paid in capital

101,539,455


96,013,439

Retained earnings (deficit)

(91,218,249)


(84,555,174)

Cumulative foreign currency translation adjustment

(251,612)


(251,676)

Total stockholders' equity

10,083,875


11,217,915





Total Liabilities & Stockholders' Equity

$       17,671,460


$        13,813,608



AXION POWER INTERNATIONAL, INC.

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)












Three Months Ended


Nine Months Ended



September 30,


September 30,



2013


2012


2013


2012










Net sales


$     2,185,699


$     2,178,077


$ 7,111,812


$ 6,690,502










  Cost of sales


1,931,321


2,014,731


6,212,531


6,014,886










  Gross profit


254,378


163,346


899,281


675,616










  Operating expenses


2,362,188


2,313,827


6,997,784


7,055,156

  Other (income) expense


3,836


(2,787)


(321,159)


(1,421)

  Operating loss


(2,111,646)


(2,147,694)


(5,777,344)


(6,378,117)










  Change in value conversion feature senior notes, gain


(535,926)


-


(2,091,226)


-

  Change in value of senior warrants, gain


(112,750)


-


(1,504,597)


-

  Debt discount amortization expense


1,333,470


-


2,051,198


-

  Interest expense, note payable


4,064


5,484


15,551


13,313

  Extinguishment loss on senior notes conversion


1,087,822


-


1,283,322


-

  Derivative revaluations (gain) loss


-


(17,176)


(1,217)


(12,465)

  Interest on convertible notes


586,573


-


795,797


-

  Financing costs on convertible notes


206,948


-


336,903


-










  Net (loss)


(4,681,847)


(2,136,002)


(6,663,075)


(6,378,967)

  Foreign Currency Translation adjustment


-


(1)


(64)


(4)










  Comprehensive (loss)


$    (4,681,847)


$  (2,136,003)


$   (6,663,139)


$    (6,378,971)










  Basic and diluted net loss per share


$          (0.04)


$        (0.02)


$         (0.06)


$         (0.06)










  Weighted average common shares outstanding


132,929,067


113,249,335


114,928,123


109,826,629












AXION POWER INTERNATIONAL, INC.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)



Nine Months Ended


September 30,


2013


2012

Operating Activities








Net loss

$       (6,663,075)


$         (6,378,967)





Adjustments to reconcile deficit accumulated for noncash items




   Depreciation expense

1,128,200


1,035,336

   Derivative revaluations (gain) loss

(1,217)


(12,465)

   Change in value of senior warrants, gain

(2,091,226)


-

   Change in value conversion feature senior notes, gain

(1,504,597)


-

   Debt discount amortization expense

2,051,198


-

   Interest accrued, senior convertible notes –paid in common stock

727,217


-

   Debt discount amortization expense on subordinated note

42,579


-

   Extinguishment loss on senior notes conversion

1,283,322


-

   Amortization deferred finance costs

336,903


-

   Stock based compensation expense

168,244


311,637





Changes in operating assets & liabilities




   Accounts receivable

441,362


3,169

   Other receivables

-


140,389

   Other current assets

(89,298)


(85,575)

   Inventory, net

(415,839)


(512,002)

   Accounts payable

17,100


219,559

   Other current liabilities

(8,748)


(116,489)

   Accrued interest

32,001


-

   Deferred revenue

(254,950)


(226,682)

Cash (used) by operating activities

(4,800,824)


(5,622,090)





Investing Activities




   Other receivables

9,000


5,000

   Capital expenditures

(151,570)


(742,834)

Cash (used) by investing activities

(142,570)


(737,834)





Financing Activities




   Repayment of note payable

(92,474)


(80,870)

   Proceeds from senior and subordinated convertible notes

10,000,000


-

   Net Proceeds from sale of common stock

-


8,625,979

   Payment of debt issuance costs

(485,735)


-

   Amount deposited into restricted cash account

(5,420,901)


-

Cash provided by financing activities

4,000,890


8,545,109





   Net increase in cash and cash equivalents

(942,504)


2,185,185

   Effect of exchange rate on cash

(64)


(4)

   Cash and cash equivalents – beginning

2,004,391


1,987,637

   Cash and cash equivalents – ending

$      1,061,823


$         4,172,818





Supplemental Schedule of Non Cash Investing and Financing Activities:




     Common stock issued for principal payments on senior notes

$3,075,000



     Warrants issued for placement agent fees

$ 143,777



 

SOURCE Axion Power International, Inc.



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