Azure Dynamics Announces Second Quarter 2009 Results



    OAK PARK, MI, Aug. 13 /CNW/ - Azure Dynamics Corporation (TSX: AZD) -
("Azure" or the "Company"), a leading innovator in the development of
environmentally friendly and cost effective hybrid electric and electric
technologies for commercial vehicles, today reported its second quarter
financial results for the period ending June 30, 2009. The Company also
provided an update on corporate and product development activities.
    "Although revenues were down from last year's record second quarter, our
current sales outlook suggests a strong second half for Azure in 2009," said
Azure Dynamics Chief Executive Officer Scott T. Harrison. "As the economy
recovers and federal stimulus funds are released, we're bullish on the
potential for our business."
    Harrison said that Azure put a number of things in place during the
quarter to ensure that the company is able to take advantage of the increased
market demand it expects for its products in the second half of the year and
beyond. In addition to booking new orders for approximately 75 vehicles during
the quarter, the company also expanded its distribution network and signed
important new partnership agreements with Collins Bus and Champion Bus.
    "As cost reduction and concern for the environment take center stage for
all businesses these days, our products directly address both of these issues
and take center stage with them," Harrison said. "When going green and saving
green are your issues, Azure is there to be part of the solution."
    Earlier today, Azure Dynamics announced that it has closed a private
placement offering of 58,823,529 common shares at a price of CDN$0.17 per
common share (the "Issue Price") for gross proceeds of approximately
CDN$10,000,000 (the "Offering"). The Offering was conducted through a
syndicate of agents co-led by Raymond James Ltd. and TD Securities Inc. and
including Paradigm Capital Inc. and Stonegate Securities, Incorporated as
co-managers (collectively, the "Agents"). The Company plans to use the net
proceeds of the Offering to fund its ongoing product development and
commercialization efforts as well as general corporate purposes.

    
    Following are Select Highlights of Second Quarter 2009:

    -  Purolator Courier Ltd. ("Purolator") placed an order for an additional
       50 Balance(TM) Hybrid Electric trucks. The trucks will be delivered in
       the fourth quarter 2009 and will be deployed primarily in Ontario.
    -  Metro Mobility in Minnesota placed an order for fifteen Balance(TM)
       Hybrid Electric shuttle buses. Metro Mobility provides door-to-door
       ADA paratransit service in the Minneapolis/St. Paul region.
    -  Four Balance(TM) Hybrid Electric trucks were sold to the University of
       Alberta. The trucks will be predominantly used for campus mail
       delivery to over 100 buildings with more than 1,000 mail delivery and
       pickup points daily.
    -  The City of Toronto ordered five Azure trucks for use in various city
       departments.
    -  At the Azure Dynamics Annual General Meeting, executives outlined a
       margin improvement plan that reduces the Balance(TM) Hybrid Electric
       bill of material costs by 42% over the next 18 months.
    -  Azure signed a partnership with Collins Bus Corporation to be its
       exclusive provider of hybrid electric drive trains for its Type A
       (short) school buses. Collins is the dominant producer in the Type A
       bus market with representation across the United States and Canada.
    -  Azure entered into a partnership with Champion Bus. The agreement
       allows Champion Bus customers and dealers the option to select Azure's
       Balance(TM) Hybrid Electric Drivetrain System in Ford E-450 Shuttle
       Buses they order from Champion.
    

    Financial Results

    Revenue for the second quarter of 2009 totaled $1.2 million compared to
$3.4 million in the second quarter of 2008. For the six months ended June 30,
2009, revenue totaled $1.8 million compared to $3.8 million in the same period
a year ago. The decrease in revenue for the three and six months ended June
30, 2009 was due to decreased shipments of Balance(TM) Hybrid Electric, Azure
CitiBus(TM) and Force Drive(TM) Electric products. Net loss for the second
quarter of 2009 was $6.7 million, or $(0.02) cents per share, compared to a
loss of $8.1 million or $(0.03) cents per share in the second quarter of 2008.
Net loss for the six months ended June 30, 2009 was $14.1 million, or $(0.04)
per share, compared to a loss of $16.0 million or $(0.06) per share in the
same period a year ago.
    The Company's engineering, operations and product development expenses
for the quarter totaled $3.3 million (including $0.8 million in product
development costs), compared to $5.5 million for the same period in 2008
(including $3.1 million in product development costs). For the first half of
2009, the Company's engineering and R&D expenses totaled $7.1 million
(including $2.0 million in product development costs), compared to $10.2
million in the first half of 2008 (including $5.5 million in product
development expenses).
    During the second quarter, the Company focused on reducing operating
costs and reducing the cost of future products. The reduced expenses for Q2
2008 to Q2 2009 are a direct result of actions taken by management at the
beginning of 2009 to react to market conditions. These actions reduced
non-essential product development costs and focused activities on current
product cost reductions. During the second quarter, the engineering and
operations teams focused on the identification and validation of the
appropriate components and suppliers for 2010 product launch. These actions
will reduce the bill of material cost more than 40% throughout calendar year
2010.
    As of June 30, 2009, the Company's net cash and cash equivalents totaled
$2.4 million, and working capital totaled $6.9 million, compared to cash and
cash equivalents of $5.4 million, and working capital of $17.5 million, as at
June 30, 2008, and cash and cash equivalents of $13.8 million, and working
capital of $19.8 million, as at December 31, 2008.

    
    Product Development Updates

    CitiBus (G1) Series (7,500 to 16,000 lbs. gross vehicle weight, "GVW")
    ----------------------------------------------------------------------
    -  The 49 G1 Purolator fleet crossed over 1.1 million miles in service
    -  25 G1 CitiBuses have been delivered and are in service

    Balance(TM) Hybrid Electric (P1) Parallel (10,000 - 19,000 lbs. GVW)
    --------------------------------------------------------------------
    -  The Company completed the build and delivery of three Balance(TM)
       Hybrid Electric school bus chassis per the Collins Bus agreement
       announced in Q1
    -  The Company received notification from the IRS that the 2009 model
       year Balance(TM) Hybrid Electric was certified for a Federal Tax
       Credit as a new qualified heavy-duty hybrid motor vehicle - eligible
       customers may receive a $3000 tax credit
    -  The Company continued design and testing of advancements to the
       Balance(TM) Hybrid Electric which will launch in 2010

    LEEP Freeze & LEEP Lift (Low Emission Electric Power)
    -----------------------------------------------------
    -  The field trial of LEEP(TM) Lift by AT&T in Kansas continued in the
       quarter
    -  A second LEEP Lift truck was delivered to Altec for marketing and
       customer demonstrations
    -  Customer demonstration trial of LEEP Freeze commenced with Dreyer's in
       Florida

    Sales and Marketing Highlights:

    -  BlueCross(R) BlueShield(R) of Tennessee (BCBST) put an Azure Series
       CitiBus in service to connect its employees at its new corporate
       headquarters to other destinations in downtown Chattanooga.
    -  The Company signed agreements with thirteen additional dealerships to
       represent Azure's Balance(TM) Hybrid Electric. The new dealerships
       serve the metropolitan communities of: Baltimore; Boston; Chicago;
       Columbus; Denver; Detroit; Edmonton; Kansas City; New York City;
       Philadelphia; Sacramento; Washington DC and San Juan in Puerto Rico.
    -  The 2009 Azure Balance(TM) Hybrid Electric was approved by the
       Environmental Protection Agency to qualify for a $3,000 IRS tax
       deduction.
    -  Azure technology is currently on the bid-list in numerous U.S. states
       with many additional states soon to sign. These relationships allow
       public organizations within the represented states the ability to
       select Azure technology at a pre-determined and pre-approved price.
    -  Several current and potential Azure customers have submitted
       applications for federal grant assistance for purchases. Noteworthy
       funding programs include the Clean Cities Coalition fund administered
       by the Department of Energy and the TIGGER Funds administered by the
       Federal Transit Administration. These funding sources can, in some
       cases, buy down the total cost of an Azure equipped vehicle by 50% and
       100%, respectively.
    -  The Company was chosen as a winner at the 24th Annual Canadian
       Advanced Technology Alliance (CATA) Innovation and Leadership Awards.
       Azure was recognized with an 'Outstanding Product Achievement' award
       in the Clean Technology category.
    -  Azure participated in the June 11th "Hybrids on the Hill" event.
       Sponsored by CALSTART and Environmental Defense Fund, the event
       showcased hybrid truck technology to an audience of legislators and
       media in Washington D.C. This event offered unique visibility for
       Azure in front of policy-makers, key customers, industry associations
       and media.
    -  Purolator Courier, Canada's largest courier company and Azure's
       largest customer, was named the Greenest Company in Canada by the
       Toronto Star.
    -  Azure announced 16 sales of its Low Emission Electrical Power
       (LEEP(TM)) vehicles for use in a major produce fleet. The LEEP system
       is coupled with Kidron's UltraTemp to deliver a reliable, efficient
       and clean cold plate refrigeration transport solution.
    

    "In addition to Azure directed business activities, the Company is poised
to benefit from significant federal support programs currently in place that
offer public entities financial assistance for the purchase of alternative
energy, green transportation products," said Harrison. "Programs via the
Department of Energy and the Federal Transit Administration, along with
regional programs like those in California and Ontario, are now active and are
encouraging a wide array of customers to consider Azure technology and its
transportation solutions."
    The Company's fiscal 2009 second quarter financial statements and MD&A
are available at www.sedar.com or on the Company's website at
www.azuredynamics.com.

    About Azure Dynamics

    Azure Dynamics Corporation (TSX: AZD) is a world leader in the
development and production of hybrid electric and electric components and
powertrain systems for commercial vehicles. Azure is strategically targeting
the commercial delivery vehicle and shuttle bus markets and is currently
working internationally with various partners and customers. The Company is
committed to providing customers and partners with innovative, cost-efficient,
and environmentally friendly energy management solutions.

    For more information, please visit www.azuredynamics.com.

    
    The TSX Exchange does not accept responsibility for the adequacy or
    accuracy of this release.
    

    Forward-looking Statements

    This press release contains forward-looking statements. More
particularly, this press release contains statements concerning Azure's
business development strategy, projected commercial revenues and product
deliveries.
    The forward-looking statements are based on certain key expectations and
assumptions made by Azure, including expectations and assumptions concerning
achievement of current timetables for development programs, target market
acceptance of Azure's products, current and new product performance,
availability and cost of labour and expertise, and evolving markets for power
for transportation vehicles. Although Azure believes that the expectations and
assumptions on which the forward-looking statements are based are reasonable,
undue reliance should not be placed on the forward-looking statements because
Azure can give no assurance that they will prove to be correct. Since
forward-looking statements address future events and conditions, by their very
nature they involve inherent risks and uncertainties. Actual results could
differ materially from those currently anticipated due to a number of factors
and risks. These include, but are not limited to, the risks associated with
Azure's early stage of development, lack of product revenues and history of
losses, requirements for additional financing, uncertainty as to commercial
viability, uncertainty as to product development and commercialization
milestones being met, uncertainty as to the market for Azure's products and
unproven acceptance of Azure's technology, competition for capital, product
market and personnel, uncertainty as to target markets, dependence upon third
parties, changes in environmental laws or policies, uncertainty as to patent
and proprietary rights, availability of management and key personnel, and
acquisition integration risk. These risks are set out in more detail in
Azure's annual information form which can be accessed at www.sedar.com.
    The forward-looking statements contained in this press release are made
as of the date hereof and Azure undertakes no obligation to update publicly or
revise any forward-looking statements or information, whether as a result of
new information, future events or otherwise, unless so required by applicable
securities laws.

    
    -------------------------------------------------------------------------
                                                  Azure Dynamics Corporation
                                                  Consolidated Balance Sheet
                                                        (Stated in Thousands)

                                                      June 30    December 31
                                                        2009         2008
    As at                                            (unaudited)   (audited)
    -------------------------------------------------------------------------
                                                          $            $
    ASSETS

    Current
      Cash and cash equivalents                           2,443       13,803
      Accounts receivable                                   749        2,317
      Inventory (Note 4)                                  9,555        8,318
      Prepaid expenses                                      627          675
                                                    -------------------------
                                                         13,374       25,113

    Restricted cash                                       1,312        1,440
    Property and equipment                                5,684        6,194
    Intangible assets                                     7,434        8,012
    Goodwill                                              2,932        2,932
                                                    -------------------------

                                                         30,736       43,691

    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY

    Current
      Accounts payable and accrued liabilities            5,972        4,806
      Customer deposits & deferred revenue (Note 5)         300          360
      Current portion of notes payable (Note 3)              72           74
      Current portion of obligations under capital
       leases (Note 6)                                      121          114
                                                    -------------------------
                                                          6,465        5,354
                                                    -------------------------
    Long-term
      Obligations under capital leases (Note 6)             177          263
      Customer deposits & deferred revenue (Note 5)         703          839
      Notes payable (Note 3)                              2,311        2,459
                                                    -------------------------
                                                          3,191        3,561
                                                    -------------------------
    Shareholders' equity
      Share capital (Note 7)                            165,012      165,007
      Contributed surplus (Note 7)                        6,882        6,500
      Deficit                                          (150,814)    (136,731)
                                                    -------------------------
                                                         21,080       34,776
                                                    -------------------------

                                                         30,736       43,691

    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                                  Azure Dynamics Corporation
      Consolidated Statements of Operations, Comprehensive Loss, and Deficit
                                                        (Stated in Thousands)


                        For the three months ended  For the six months ended
                                   June 30                   June 30
                                 (unaudited)               (unaudited)

                              2009         2008         2009         2008
    -------------------------------------------------------------------------
                                $            $            $            $

    Revenues                    1,228        3,383        1,801        3,753

    Cost of sales               2,419        3,565        3,532        4,082
                          ------------------------- -------------------------
    Gross Margin               (1,191)        (182)      (1,731)        (329)
                          ------------------------- -------------------------

    Expenses
      Engineering,
       research,
       development and
       related costs, net       3,258        5,505        7,092       10,243
      Selling and marketing       423          577          985        1,267
      General and
       administrative           2,063        1,777        4,146        3,896
                          ------------------------- -------------------------
    Total expenses              5,744        7,859       12,223       15,406

                          ------------------------- -------------------------
    Loss from operations       (6,935)      (8,041)     (13,954)     (15,735)

      Interest and other
       income, net                140           99          287          245
      Interest expense            (28)          (3)         (59)          (3)
      Other expense               (93)        (109)        (618)        (561)
      Foreign currency
       gains/(losses)             254          (65)         261           28
                          ------------------------- -------------------------

    Net loss and
     comprehensive loss
     for the period            (6,662)      (8,119)     (14,083)     (16,026)

    Deficit, beginning of
     period                  (144,152)    (105,771)    (136,731)     (97,864)
                          ------------------------- -------------------------

    Deficit, end of period   (150,814)    (113,890)    (150,814)    (113,890)

    -------------------------------------------------------------------------

    Loss per share - basic
     and diluted                (0.02)       (0.03)       (0.04)       (0.06)

    Weighted average
     number of shares -
     basic and
     diluted(*)           379,405,157  279,376,177  379,390,747  279,376,177

    -------------------------------------------------------------------------
    (*) No fully diluted earnings per share have been disclosed, as these
        would be anti dilutive.

    -------------------------------------------------------------------------
                                                  Azure Dynamics Corporation
                                       Consolidated Statements of Cash Flows
                                                        (Stated in Thousands)


                        For the three months ended  For the six months ended
                                   June 30                   June 30
                                 (unaudited)               (unaudited)

                              2009         2008         2009         2008
    -------------------------------------------------------------------------
                                $            $            $            $

    Cash flows from
     operating activities
      Net loss for the
       period                  (6,662)      (8,119)     (14,083)     (16,026)
      Adjustments for:
        Amortization of
         property and
         equipment                255          224          535          447
        Amortization of
         intangible assets        353          374          702          716
        Unrealized foreign
         currency (gains)/
         losses                  (195)          68          (83)          56
        Stock option
         compensation
         expense                   87           98          264          452
        Deferred share
         units compensation
         expense                   60           21          122           53
                          ------------------------- -------------------------
                               (6,102)      (7,334)     (12,543)     (14,302)

      Changes in non-cash
       working capital
       items                      808         (703)       1,436       (3,888)
                          ------------------------- -------------------------
    Total cash flows from
     operating activities      (5,294)      (8,037)     (11,107)     (18,190)
                          ------------------------- -------------------------

    Cash flows from
     financing activities
      Issuance of common
       shares (net of costs)        1           (1)           1           (1)
      Principle payments
       on notes payable           (17)          (9)         (36)         (18)
      Repayment of
       obligations under
       capital lease              (72)          (8)         (95)         (10)
                          ------------------------- -------------------------
    Total cash flows from
     financing activities         (88)         (18)        (130)         (29)
                          ------------------------- -------------------------

    Cash flows from
     investing activities
      Acquisition of
       property and
       equipment                  (28)        (195)         (35)        (385)
      Acquisition of
       intangible assets          (60)         (45)        (124)        (108)
      Sale of property and
       equipment                   35            -           35            -
      Changes in restricted
       cash                        62            -           62            -
                          ------------------------- -------------------------
    Total cash flows from
     investing activities           9         (240)         (62)        (493)
                          ------------------------- -------------------------

    Decrease in cash and
     cash equivalents          (5,373)      (8,295)     (11,299)     (18,712)

    Exchange impact on
     cash held in foreign
     currency                     (69)          (5)         (61)           7

    Cash and cash
     equivalents,
     beginning of period        7,885       13,728       13,803       24,133
                          ------------------------- -------------------------
    Cash and cash
     equivalents, end of
     period                     2,443        5,428        2,443        5,428
                          ------------------------- -------------------------
                          ------------------------- -------------------------

    Supplemental cash flow
     information

    Cash paid for interest         21           18           43           36
                          ------------------------- -------------------------
                          ------------------------- -------------------------
    Non cash investing and
     financing activities:
      Vehicles and
       equipment acquired
       under capital lease         24           77           24          185
                          ------------------------- -------------------------
                          ------------------------- -------------------------
    





For further information:

For further information: Ryan Carr, Chief Financial Officer, (248)
298-2403 ext 1206, Email: rcarr@azuredynamics.com; Mike Elwood, Vice
President-Marketing, (905) 607-3486 x203, Email: melwood@azuredynamics.com;
Pat Liebler, Liebler Group, (313) 832-4376, Email: pat@lieblergroup.com

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