Axion Power Reports First Quarter Results for 2014

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May 16, 2014, 07:30 ET

NEW CASTLE, Pa., May 16, 2014 /PRNewswire/ -- Axion Power International, Inc., (OTC QB: AXPW), the developer of advanced lead-carbon PbC® batteries and energy storage systems, yesterday announced results for its first quarter ended March 31, 2014.

Net sales for the quarter were $2.3 million with a net loss of $6.5 million, which includes noncash charges aggregating approximately $4.5 million related to the senior note financing that the Company entered into in May of 2013. The loss in the year-earlier period was $2.1 million. On an operating basis, the operating loss for the first quarter of 2014 was $2.0 million compared to a net operating loss for the first quarter of 2013 of $2.1 million. The loss per share for the quarter ended March 31, 2014 was $0.03 loss per share, compared to a 2013 first quarter loss per share of $0.02.

Sales during the first quarter were largely from specialty lead-acid batteries built in our factories for sale under the label of our customer, a large and well-known battery company. The product mix will change as we move from the sale of lead acid batteries for our current legacy business to the sale of larger numbers of PbC batteries as we continue to execute our PbC commercialization strategy.

In an event subsequent to the end of the quarter, our New Jersey strategic partner provided a follow-on order for four 500kw PowerCube™ units that will be used in Solar PV configurations similar in size (600kw approximately) to the unit we installed for them in the first quarter of 2014.

Chairman & CEO Thomas Granville commented, "The follow-on order we announced this week is valued at approximately $1.1 million, which makes it the largest purchase order we have received to date. Our pipeline for potential PowerCube business has grown considerably in the last nine months, so we are pleased to move this project from near the top of the 'prospective order' list, to the 'confirmed purchase order' list. The four PowerCubes will be part of four individual Solar PV systems that will provide solar power to a commercial entity, employ net metering with the grid, participate in the frequency regulation market and provide backup power to the commercial entity in the event of an emergency. We spoke of our 'model' in a letter to shareholders back in January in which we highlighted the advantages of combining Solar PV with storage. That model was the basis for our original New Jersey order and for the recent four unit follow-on order. The frequency regulation portion of that model, with or without any of the various solar configurations, is what has continued to attract potential market participants. Whether they are building owners looking to reduce the total cost of power, or investors looking for an attractive return or investment institutions looking to provide an alternative investment product to their clients in an emerging energy sector – our model's ROI and IRR have brought them to the table.

"So that's the North American story, but we have also received added interest from more remote sites (island nations, third world countries and emerging countries) where the cost of power is many times what it cost individuals and commercial entities in the US. Most of these locations have abundant sunlight and/or wind, so renewables are a strong alternative. To date, however, these renewable solutions have not included storage for a number of reasons, not the least of which was having a viable storage option. We feel, and our strategic partners feel, that the PowerCube can provide that viable option. As a result we have expanded our initiative in this area," he added.

Granville said that Axion is also very pleased with the progress made by ePower Engine Systems, which recently purchased four trucks for series hybrid conversion. They shared with us, the results of their extensive fuel economy testing, and their belief that additional improvement may be achieved because of the improved equipment they are now working with. In addition, this week ePower also advised Axion that they received notice of issuance from the US Patent Office confirming their foundation patent for engine dominant series electric hybrid drivetrain was approved for issuance. Granville continued, "We have spoken in the past about the potential growth the battery market would experience should the ePower technology be adopted. It is a relatively easy calculation if you use a very conservative extrapolation from the USDOT numbers speaking to the size of the Series 8 Heavy Duty Truck market, which is approximately 2.7 million trucks. These trucks are rebuilt, depending on type of usage - point to point and back day cab versus over-the-road hauling with the latter being rebuilt approximately every 4 years and the former approximately every 6 years. Even if we reduced the market estimate by one-half of the approximate 2.7 million trucks, and divided by an average life before rebuild of 5.25 years, the number of trucks rebuilt annually would be 250,000. Multiply that by 56 batteries and you get 14 million specialty batteries annually. This is why we are excited about this potential market for battery manufacturers," Granville concluded.

The Company had cash and restricted cash of $3.2 million at March 31, 2014, compared to $4.9 million at December 31, 2013. The current ratio at March 31, 2014 was 3.3:1. The Company will need to raise additional funds by the beginning of the fourth quarter of 2014 to support the ongoing process of commercialization.

Granville pointed out that Axion Power has asked its shareholders for their approval of a reverse stock split that would make Axion Power shares suitable for a much wider range of US institutional and retail investors. Once reversed, management also believes the Company would qualify to uplist to a national exchange, which would further increase the population of potential investors. And finally, we believe an increase in share price created by such a reverse would also enhance the Company's ability to access the broader capital markets.

Conference Call:

The Company's management team will host a conference call tomorrow, Friday May 16, 2014 at 10:00 am Eastern Time to discuss its first quarter ended March 31, 2014 results.

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 10046423.

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.
Thomas Granville, CEO
[email protected]
(724) 654 9300

Allen & Caron, Inc.
Rudy Barrio (Investors)
[email protected]
(212) 691-8087

Len Hall (Media)
[email protected]
(949) 474-4300

– FINANCIAL TABLES FOLLOW–



AXION POWER INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)

	March 31, 2014	December 31, 2013
ASSETS

Cash and cash equivalents	$ 1,609,466	$ 1,169,093
Restricted cash	1,566,678	3,780,341
Accounts receivable	258,141	562,583
Other current assets	160,039	281,055
Inventory, net	2,542,371	2,250,637
Total current assets	6,136,695	8,043,709

Property & equipment, net	6,356,959	6,698,536
Other receivables	26,000	29,000

Total Assets	$ 12,519,654	$ 14,771,245


LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable	$ 487,146	$ 420,337
Other liabilities	179,265	352,857
Note payable	104,777	104,777
Accrued interest	72,000	52,001
Subordinated convertible notes, net of discount	647,926	583,574
Senior convertible notes, net of discount	390,000	2,046,948
Total current liabilities	1,881,114	3,560,494

Deferred revenue	822,200	922,362
Note payable	191,314	219,722
Derivative liability senior warrants	2,937,788	518,433
Total liabilities	5,832,416	5,221,011

Stockholders' Equity
Convertible preferred stock – 12,500,000 shares designated 0 shares issued and outstanding	-	-
Common stock-350,000,000 shares authorized $0.0001 par value
216,045,389 shares issued & outstanding (180,401,405 in 2013)	21,576	18,039
Additional paid in capital	109,947,789	106,302,018
Retained earnings (deficit)	(103,030,515)	(96,518,212)
Cumulative foreign currency translation adjustment	(251,612)	(251,611)
Total stockholders' equity	6,687,238	9,550,234

Total Liabilities & Stockholders' Equity	$ 12,519,654	$ 14,771,245



AXION POWER INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME and COMPREHENSIVE INCOME
(Unaudited)

	Three Months Ended
	March 31,
	2014	2013
Net sales	$ 2,314,300	$ 2,237,647
Cost of tangible goods sold	2,352,636	2,260,479
Cost of goods sold – idle capacity	437,257	501,441
Gross profit	(475,593)	(524,273)


Research and development expense	443,926	517,801
Selling, general and administrative expense	1,113,597	1,021,664
Other (income) expense	(43,791)	-
Operating loss	(1,989,325)	(2,063,738)

Change in value of senior warrants, loss	2,419,355	-
Change in value conversion feature senior notes, loss	(32)	-
Debt discount amortization expense	809,334	-
Interest expense, note payable	5,359	4,580
Extinguishment loss on senior notes conversion	834,000	-
Derivative revaluations expense (income)	-	(1,063)
Interest on convertible notes	454,963	-
Loss before income taxes	(6,512,304)	(2,067,255)

Income taxes	-	-
Net loss	(6,512,304)	(2,067,255)

Foreign translation adjustment	(1)	64
Comprehensive income (loss)	$ (6,512,305)	$ (2,067,191)


Loss per share

Basic and diluted net loss per share	$ (0.03)	$ (0.02)


Weighted average common shares outstanding	201,274,198	113,285,979



AXION POWER INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

	Three Months Ended
	March 31,
	2014	2013
Operating Activities

Net loss	$ (6,512,304)	$ (2,067,255)

Adjustments to reconcile deficit accumulated for noncash items
Depreciation	371,870	360,332
Derivative revaluations (gain)	-	(1,063)
Change in value senior warrants, loss	2,419,355	-
Change in value conversion feature senior notes, loss	(32)	-
Debt discount amortization expense	742,404	-
Interest accrued, senior convertible notes paid in common stock	434,963	-
Extinguishment loss	834,000	-
Amortization deferred finance costs	66,930	-
Share based compensation expense	37,905	92,685

Changes in operating assets & liabilities
Accounts receivable	304,442	484,434
Other current assets	54,087	(1,731)
Inventory, net	(291,734)	85,426
Accounts payable	66,809	44,117
Other current liabilities	(166,123)	(32,958)
Accrued interest	20,000	-
Deferred revenue	(100,162)	(84,983)
Cash (used) by operating activities	(1,717,590)	(1,120,996)

Investing Activities
Other receivables	3,000	3,000
Purchase of property & equipment	(30,294)	(90,820)
Cash (used) by investing activities	(27,294)	(87,820)

Financing Activities
Repayment of note payable	(28,407)	(36,713)
Change in restricted cash account	2,213,663	-
Cash provided (used) by financing activities	2,185,256	(36,713)
Net change in cash and cash equivalents	440,372	(1,245,529)
Effect of exchange rate on cash	(1)	64
Cash and cash equivalents – beginning	1,169,093	2,004,391
Cash and cash equivalents – ending	$ 1,609,466	$ 758,926

Supplemental schedule of Non Cash Investing and Financing Activities:
Common stock issued for principal payments on senior notes:	$ 2,335,000