Azure Dynamics reports third quarter 2007 results



    OAK PARK, MI, Nov. 7 /CNW/ - Azure Dynamics Corporation (TSX: AZD & LSE:
ADC) ("Azure" or the "Company") a leading developer of hybrid electric and
electric powertrains for commercial vehicles, today announced its financial
results for the three and nine-month periods ended September 30, 2007. The
Company also provided an update on corporate and product development
activities in the quarter.

    2007 Third Quarter Highlights

    
    -   Established new head office in Oak Park, Michigan;
    -   Signed a commercial development and cooperation agreement with a
        major fleet, which became Azure's third lead customer for the P1
        Delivery Van Program;
    -   Finalized agreement with Kidron Inc. ("Kidron") for 1,000 Low
        Emission Electric Power ("LEEP") systems;
    -   Received initial purchase order release from Electro Autos Eficaces
        of Mexico ("EAE") for 200 drive systems;
    -   Awarded the 2007 Deloitte Technology Green 15 as a top performer in
        environmental technology;
    -   Completed equity financing subsequent to the quarter end for
        $30.0 million in gross proceeds.
    

    "During the third quarter of 2007, we established our new corporate
headquarters in Oak Park, Michigan, in the heart of the U.S. auto industry,"
said Scott T. Harrison, Chief Executive Officer of Azure. "Relocating our
corporate office to this strategic location will help us expand our
relationships with key industry partners, such as the Ford Motor Company, and
further our ongoing business development and commercialization initiatives."
    "We made major progress in the commercialization of our core products,
Delivery Vans, Shuttle Busses, and Electric Drive Solutions during the third
quarter. We signed a commercial development and cooperation agreement with a
major delivery fleet on the Ford E-450 chassis," continued Mr. Harrison. "The
successful completion of this program will result in this customer purchasing
a minimum of 10 percent of their annual delivery truck buy from Azure
Dynamics. Also in the quarter, we completed an additional 6 shuttle busses for
the BOEDC and UPROSE contracts. In addition, we continued to move forward with
our LEEP program, and finalized an agreement with Kidron for 1000 LEEP systems
to provide auxiliary power for cold storage trucking applications."

    Financial Results

    Revenue for the third quarter of 2007 totalled $1.5 million compared to
$0.4 million in the third quarter of 2006. For the nine months ended
September 30, 2007, revenue totalled $2.3 million compared to $2.8 million in
the same period a year ago. The increase in revenue for the three months ended
September 30, 2007 was due to the ramp up of deliveries from the G1 shuttle
bus program. Net loss for the third quarter of 2007 was $8.5 million, or
$(0.04) per share, compared to a loss of $9.0 million or $(0.06) per share in
the third quarter of 2006. Net loss for the nine months ended September 30,
2007 was $21.9 million, or $(0.11) per share, compared to a loss of
$18.4 million or $(0.12) per share for the same period a year ago. The
increased net loss for the nine months ended September 30, 2007 was primarily
related to higher levels of activity in operations, product support and sales
and marketing, as well as one-time charges for the exit costs related to
facility closures and senior management changes.
    Before contributions, the Company's engineering, operations and product
development expenses for the quarter totalled $4.4 million (including
$2.6 million in product development costs), compared to $7.1 million for the
same period in 2006 (including $5.6 million in product development costs). For
the first nine months of 2007, the Company's engineering, operations and
product development expenses totalled $12.8 million (including $7.4 million in
product development costs), compared to $12.5 million in the nine months ended
September 30, 2006 (including $8.2 million in product development costs).
During the third quarter, the Company continued to focus on the development of
its P1 program and electric drive solutions, as well as ongoing production
activities associated with the G1 shuttle buses and electric components.
    As of September 30, 2007, the Company's net cash and cash equivalents
totalled $5.8 million, and working capital totalled $11.5 million, compared to
cash and cash equivalents of $3.8 million, and working capital of
$3.3 million, as at September 30, 2006, and cash and cash equivalents of
$27.2 million, and working capital of $32.4 million, as at December 31, 2006.

    Corporate

    In the third quarter of 2007, Azure finalized previously announced
arrangements to relocate its head office and, on September 19, 2007, announced
that it had established its new corporate headquarters in Oak Park, Michigan.
The facility's strategic location, close to Azure's key industry partners, is
expected to meet all of the Company's ongoing business development and
production needs. The State of Michigan has granted Azure a tax credit valued
at more than US$1.7 million over the next seven years. The city of Oak Park
has also proposed an 11-year local tax abatement worth an estimated US$55,400.
    The Company does not anticipate any material changes to employee counts
at its other facilities. Azure will maintain its electric drive solutions
business unit and facility in Boston, Massachusetts, and the bulk of its
hybrid and hybrid-electric systems engineering and technology development team
will remain at its facility in Vancouver, British Columbia. The Company will
also maintain a service facility in Mississauga, Ontario to support major
customers in the Toronto area.
    On September 20, 2007, Azure announced that it had been presented the
2007 Deloitte Technology Green 15, awarded as a top performer in environmental
technology. "The Deloitte Technology Green 15 Awards recognize those Canadian
companies that offer solutions to global environmental challenges by creating
intellectual property (IP) and technology that reduce society's environmental
impact," said John Ruffolo, National Leader, Technology, Media &
Telecommunications Industry Group, Deloitte. "Companies such as Azure Dynamics
are creating technology solutions that have a significant environmental impact
and demonstrate a compelling return on investment."
    Subsequent to the end of the third quarter, Azure completed an equity
financing for $30.0 million in gross proceeds. The Company plans to use the
proceeds of the offering to fund its ongoing product development, as well as
general corporate purposes.

    Product Developments

    The main developments in core product lines for the third quarter of 2007
included the following:

    
    G1 Series (7,500 to 16,000 lbs. gross vehicle weight, "GVW")
    ------------------------------------------------------------
    -   Purolator Courier Ltd. ("Purolator") continued to operate its fleet
        of 49 G1 hybrid delivery vans in Toronto, Ontario, Montreal, Quebec
        and Vancouver, British Columbia.

    -   Continued G1 shuttle bus production and completed an additional six
        hybrid buses in the quarter.

    -   Subsequent to the end of the third quarter, Azure completed the
        durability testing of a shuttle bus at the U.S. Federal Transit
        Administration's Altoona Bus Research and Testing Center. In the
        U.S., successful completion of durability testing is required in
        order to be eligible for federal capital subsidies in public transit
        applications.

    P1 Parallel (10,000 - 19,000 lbs. GVW)
    --------------------------------------

    -   Signed a commercial development and cooperation agreement with a
        third lead customer for its P1 Delivery Van Program. Azure will
        deliver a gasoline parallel hybrid electric Ford E-450 based vehicle
        for industry viability validation, testing and demonstration within
        the company's North American fleet. Successful completion of the
        program will result in the company committing to use Azure's hybrid
        technology on the Ford E-450 chassis for a minimum of 10 percent of
        their annual fleet replacement purchases.

    -   Built three prototype 2008 E-450 hybrid vehicles with production
        intent hardware.

    -   Completed FedEx and Purolator demonstration vehicles and commenced
        internal testing.

    Electric Drive Solutions and other production:
    ----------------------------------------------
    -   Concluded arrangements with Kidron for the branding, marketing and
        sale of Azure's LEEP systems throughout the North American
        refrigerated truck body segment.

    -   Received initial purchase order release from EAE for 200 electric
        drive systems to be integrated into the Nissan Tsuru platform, for
        use in Mexico City's municipal fleet. During the second quarter of
        2007, the first converted vehicle was completed and unveiled at the
        International Electric Vehicle Forum. Azure expects to complete the
        conversion of 1,000 vehicles over the next 15 months.
    

    The Company's fiscal 2007 third 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) (LSE: ADC) 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 and LSE Exchanges do 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
                                             (A Development Stage Enterprise)
                                                  Consolidated Balance Sheets
                                                        (Stated in Thousands)

    As at                                  September    December    September
                                            30, 2007    31, 2006    30,  2006
                                         (unaudited)    (audited) (unaudited)
    -------------------------------------------------------------------------
                                              $            $            $
    ASSETS

    Current
      Cash and cash equivalents                5,852      27,192       3,818
      Accounts receivable                        691       3,394         777
      Contributions receivable                   865       1,274         604
      Inventory and related prepayments        7,876       3,821       4,308
      Prepaid expenses                           879         831         962
                                             --------------------------------
                                              16,163      36,512      10,469

    Restricted cash                              977         699         671
    Property and equipment                     5,806       5,614       5,707
    Other assets                                   -           -           -
    Intangible assets, net of amortization
     (Note 3)                                  9,548      10,542      11,085
    Goodwill (Note 3)                          2,932       2,932       2,932
                                             --------------------------------

                                              35,426      56,299      30,864

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

    LIABILITIES AND SHAREHOLDERS' EQUITY

    Current
      Accounts payable and accrued
       liabilities                             4,148       2,814       4,237
      Customer deposits & deferred revenue       307       1,046         541
      Current portion of notes payable
       (Note 4)                                  181         212       2,417
                                             --------------------------------
                                               4,636       4,072       7,195
    Long-term
      Deferred revenue                           945         943         965
      Notes payable                            1,934       2,294           -
                                             --------------------------------
                                               2,879       3,237         965
                                             --------------------------------
    Shareholders' equity
      Share capital (Note 5)                 112,734     112,803      82,356
      Contributed surplus (Note 5)             4,683       3,816       2,970
      Deficit                                (89,506)    (67,629)    (62,622)
                                             --------------------------------
                                              27,911      48,990      22,704
                                             --------------------------------

                                              35,426      56,299      30,864

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



    -------------------------------------------------------------------------
                                                   Azure Dynamics Corporation
                                             (A Development Stage Enterprise)
                             Consolidated Statement of Operations and Deficit
                                                        (Stated in Thousands)

                                 For the three months     For the nine months
                                   ended September 30      ended September 30
                                          (unaudited)             (unaudited)

                                     2007        2006        2007        2006
    -------------------------------------------------------------------------
                                    $           $           $           $

    Revenues                       1,534         411       2,283       2,757

    Cost of sales                  1,731         577       2,401       2,550

                                ---------------------   ---------------------
    Gross Margin                    (197)       (166)       (118)        207
                                ---------------------   ---------------------
    Expenses
      Engineering, research,
       development and related
       costs, net                  4,132       6,414      11,949      11,151
      Selling and marketing          940         717       2,603       2,265
      General and
       administrative              1,870       1,780       5,864       5,532
                                ---------------------   ---------------------
    Total expenses                 6,942       8,911      20,416      18,948

                                ---------------------   ---------------------
    Loss from operations          (7,139)     (9,077)    (20,534)    (18,741)
                                ---------------------   ---------------------
      Interest and other
       income, net                   156          65         460         321
      Other Expense               (1,537)          -      (1,748)          -
      Foreign currency
       gains/(losses)                 66          (3)        (55)         (7)
                                ---------------------   ---------------------

    Net loss for the period       (8,454)     (9,015)    (21,877)    (18,427)

    Deficit, beginning of
     period                      (81,052)    (53,607)    (67,629)    (44,195)
                                ---------------------   ---------------------

    Deficit, end of period       (89,506)    (62,622)    (89,506)    (62,622)

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Loss per share - basic         (0.04)      (0.06)      (0.11)      (0.12)

    Weighted average number of
     shares - basic(*)           198,276     159,206     198,276     158,143

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



    -------------------------------------------------------------------------
                                                   Azure Dynamics Corporation
                                             (A Development Stage Enterprise)
                                         Consolidated Statement of Cash Flows
                                                        (Stated in Thousands)

                                 For the three months     For the nine months
                                   ended September 30      ended September 30
                                          (unaudited)             (unaudited)
                                    2007         2006        2007        2006
    -------------------------------------------------------------------------
                                    $           $           $           $

    Cash flows from operating
     activities
      Net loss for the period     (8,454)     (9,015)    (21,877)    (18,427)
      Adjustments for:
      Amortization of property
       and equipment and other
       assets                        226         204         665         589
      Amortization of
       intangible assets             348         365       1,090       1,174
      Unrealized foreign currency
       gains/(losses)                 20          (9)        (52)        162
      Loss on disposal of assets      19                     185
      Stock option compensation
       expense                       284         208         809         846
      Deferred share units
       compensation expense           63           -          63           -
                                ---------------------   ---------------------
                                  (7,494)     (8,247)    (19,117)    (15,656)
                                ---------------------   ---------------------

    Changes in non-cash working
     capital items                (2,796)      1,267        (480)     (1,606)
    Movement due to exchange
     impact                          (79)         (2)         85         (40)
                                ---------------------   ---------------------
                                  (2,875)      1,265        (395)     (1,646)

                                ---------------------   ---------------------
    Total Cash flows from
     operating activities        (10,369)     (6,982)    (19,512)    (17,302)
                                ---------------------   ---------------------
    Cash flows from financing
     activities
      Issuance of common
       shares (net of costs)         (88)        172         (73)      1,462
      Principle payments on
       notes payable                  (8)        (13)        (27)        (41)
      Movement due to exchange
       impact                       (151)          3        (365)        (99)
                                ---------------------   ---------------------
    Total Cash flows from
     financing activities           (247)        162        (465)      1,322
                                ---------------------   ---------------------

    Cash flows from investing
     activities
      Acquisition of property
       and equipment                (201)       (122)     (1,042)       (723)
      Acquisition of other
       assets                        (27)          4         (96)        (65)
      Changes in restricted
       cash                         (201)          -        (426)          -
      Movement due to exchange
       impact                          -           6           -        (198)
                                ---------------------   ---------------------
    Total Cash flows from
     investing activities           (429)       (112)     (1,564)       (986)
                                ---------------------   ---------------------

    Decrease in cash and
     cash equivalents            (11,045)     (6,932)    (21,541)    (16,966)

    Exchange impact on cash
     held in foreign currency         50           3         201          63

    Cash and cash equivalents,
     beginning of period          16,847      10,747      27,192      20,721
                                ---------------------   ---------------------
    Cash and cash equivalents,
     end of period                 5,852       3,818       5,852       3,818
                                ---------------------   ---------------------
                                ---------------------   ---------------------

    Certain reclassifications have been made to the September 30, 2006
    comparative numbers to conform to the current period presentation.

    





For further information:

For further information: Daniel Renzella, Chief Financial Officer, (781)
932-9009 ext 229, Email: drenzella@azuredynamics.com; Steven Glaser,
Vice-President, Corporate Affairs, (416) 367-0220, Email:
sglaser@azuredynamics.com

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AZURE DYNAMICS CORPORATION

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