Azure Dynamics Announces First Quarter Results for 2010

    -   Azure Dynamics announced revenue of $2.8M, an improvement of more
        than 400%, and gross margin improvement of 94% in the quarter

    -   The Company shipped 230 units in the first quarter

    -   Transit Connect Electric was successfully introduced and lauded by
        industry analysts and international media at the Chicago Auto Show in
        February. Subsequent to the quarter end, Azure and Ford jointly
        announced Transit Connect Electric program expansion to Europe

    -   Azure's cash position remains strong with a cash balance of more than
        $31 million at quarter end

OAK PARK, MI, May 12 /CNW/ - Azure Dynamics Corporation (TSX: AZD) (OTC: AZDDF) - ("Azure" or the "Company"), developer of environmentally friendly and cost effective hybrid electric and electric technologies for commercial vehicle fleets, today reported first quarter financial results for the period ending March 31, 2010. The Company also provided an update on corporate and product development activities.

"As each quarter is eclipsed, we talk less about expectations and more about accomplishments. In 2009, we focused on our margin improvement plan and maintaining sufficient cash to execute our plan. In Q1 2010, we are pleased with results on both fronts with margins improving by 94% in the quarter and with our quarter ending cash balance at $31.6 million," said Scott T. Harrison, Azure Dynamics Chief Executive Officer. "We expect these trends to continue through the fourth quarter 2010 when the Johnson Controls-Saft lithium-ion battery pack shipments begin and our margin improvement should be even more dramatic.

"The first quarter was also noteworthy for the highly successful introduction of the innovative Ford Transit Connect Electric at the Chicago Auto Show in early February. Analysts were impressed that Ford and Azure not only introduced the vehicle on an accelerated timeline, but also took the bold step of offering media test drives on the spot, and on one of the coldest and snowiest days in Chicago in decades. These test drives of an early Transit Connect Electric prototype were a testament to our technology and a tribute to our world-class engineering team.

"As a result of the Transit Connect Electric launch, Azure received extensive media attention in North America and around the globe. The added visibility was especially important in the first quarter as the economic recovery expanded. Our end-market customers have an increasingly optimistic outlook and are on the front-end of their respective fleet rebuilding efforts," said Harrison. "Azure has never been more top-of-mind."

Financial Results

Revenue for the first quarter of 2010 totaled $2.8 million compared to $0.6 million in the first quarter of 2009. Net loss for the first quarter of 2010 was $4.6 million, or $(0.01) cent per share, compared to a loss of $7.4 million or $(0.02) cents per share in the first quarter of 2009.

Before contributions, the Company's engineering, operations and product development expenses for the quarter totaled $5.3 million (including $2.7 million in product development costs), compared to $3.8 million for the same period in 2009 (including $1.2 million in product development costs).

As of March 31, 2010, the Company's net cash and cash equivalents totaled $31.6 million, and working capital totaled $27.7 million, compared to cash and cash equivalents of $7.9 million, and working capital of $13.1 million, as of March 31, 2009, and cash and cash equivalents of $33.6 million, and working capital of $31.7 million, as of December 31, 2009.

The Company shipped 230 units in the first quarter (33 Balance(TM) Hybrid Electric; 176 LEEP(TM), and 21 Force Drive(TM).

Sales and Marketing Highlights

    -   On January 12, Azure announced that its dealer MidWest Transit
        Equipment had been awarded a contract with Terre Haute Transit for
        two Azure CitiBus(TM) vehicles.
    -   On February 10, the Transit Connect Electric made its debut at the
        Chicago Auto Show. Azure collaborated with Ford Motor Company to
        introduce the Transit Connect Electric, a pure electric powered
        version of the 2010 North American Truck of the Year.
    -   On March 9, Azure announced that AT&T agreed to become a lead
        customer for Transit Connect Electric by purchasing two of the
        initial 2010 units. To participate in the Lead Customer program,
        customers like AT&T must also agree to purchase a minimum of ten
        units in 2011.
    -   On May 3, Azure and Ford Motor Company announced plans to expand the
        Transit Connect Electric program to the European market. Transit
        Connect has a successful history in Europe.

    Product Development Updates

    Balance(TM) Hybrid Electric
    -   Design validation testing of upgrades to inverter controllers and
        DC/DC converters progressed through the first quarter with test
        completion planned for Q2 in support of a mid-year production
    -   Within the first quarter, the Company completed the initial design
        releases to its industry first belt starter generator (BSG) system on
        a V8 engine. Fabrications of the new prototype BSG commenced in the
        quarter. An important accelerated life durability test was complete
        in support of a 2011 model year launch later this year
    -   The Company continued its development and testing of the lithium-ion
        battery pack from Johnson Controls-Saft (JC-S) accumulating mileage
        in AZD's development fleet as well as completing some industry
        standard testing in support of a Q3, 2010 launch.

    Transit Connect Electric (Force Drive(TM))
    -   In January of 2010, Azure completed and delivered to Ford a
        production representative show vehicle which debuted at the Chicago
        Auto Show in February
    -   Also in January, the Company completed an engineering prototype
        vehicle which underwent performance testing in Detroit including
        among other tests, cold chamber tests and driving range tests
    -   Of major significance in the quarter, Azure was able to demonstrate
        through computer aided analysis that it could achieve federally
        regulated safety tests performance
    -   The Company produced the first crash correlation test vehicle

    LEEP Freeze(TM) & LEEP Lift(TM) (Low Emission Electric Power)
    -   In the first quarter, the Company completed its manufacturing ramp up
        activities for the LEEP(TM) Freeze system
    -   Minor design improvements were made in the quarter to address lessons
        learned during the increase in production
    -   AT&T completed its trial of the LEEP Lift trucks within the quarter
        and purchased the units to have them continue in revenue service in
        their fleet


"As the economic rebound continues, and government stimulus funds for environmental initiatives continue to be readily available, we expect more customers to rebuild their fleet inventories at an accelerated pace. With our product performing well for our customers and greater corporate focus on sustainability, we anticipate more orders coming our way," said Harrison. "We are making real strides towards accomplishing our goal of being Part of the Solution for customers, partners, shareholders and society at large."

The Company's fiscal 2010 first quarter financial statements and MD&A are available at or on the Company's website at

Conference Call

Please join Scott Harrison, Azure Dynamics Chief Executive Office, and Ryan Carr, Chief Financial Officer for an earnings call today, May 12th, at 5:00 PM EST. Interested listeners can access the call toll free at 1-800-941-4658. It is recommended that you access the call at least fifteen minutes before the scheduled start time. An accompanying presentation will be posted to the company's website,, immediately prior to the call.

For those unable to participate in the live conference, a call replay will be posted on Azure's site on May 13th.

Annual General Meeting information

All interested parties are invited to attend the Annual General Meeting on June 8, 2010 at 4:30 p.m. (local time) at our Corporate Headquarters, 14925 W. 11 Mile Road, Oak Park, Michigan, 48237. In addition to the formal business described in the Management Information Circular there will be a management presentation on business activities and the Company's 2009 financial results. Immediately following the meeting, guests are encouraged to join Azure management for a reception. Guests will also have an opportunity to experience first-hand select Azure products, including the Ford Transit Connect Electric, on a ride and drive course.

All figures are in Canadian dollars.

Azure Dynamics

Azure Dynamics Corporation (TSX: AZD) (OTC: AZDDF) 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

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

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 Sheets
                                    (Stated in thousands of Canadian dollars)

                                                       March 31  December 31
                                                           2010         2009
    As at                                            (unaudited)    (audited)
                                                              $            $

      Cash and cash equivalents                          31,604       33,588
      Accounts receivable                                 1,109        2,632
      Inventory (Note 3)                                  5,002        5,215
      Prepaid expenses                                      937          974
                                                         38,652       42,409

    Restricted cash                                       1,006        1,041
    Property and equipment                                5,261        5,277
    Intangible assets                                     6,463        6,755
    Goodwill                                              2,932        2,932
                                                         54,314       58,414


      Accounts payable and accrued liabilities           10,592        9,837
      Customer deposits & deferred revenue                  159          746
      Current portion of notes payable                       65           66
      Current portion of obligations under
       capital leases                                       117           99
                                                         10,933       10,748
      Obligations under capital leases                      156          117
      Customer deposits & deferred revenue                  627          644
      Notes payable                                       1,970        2,055
                                                         13,686       13,564
    Shareholders' equity
      Share capital (Note 4)                            202,239      202,250
      Contributed surplus (Note 4)                        7,513        7,139
      Deficit                                          (169,124)    (164,539)
                                                         40,628       44,850
                                                         54,314       58,414

    Nature of operations and going concern (Note 1)
    Commitments (Note 5)

    Approved on behalf of the Board:

    "signed D. Campbell Deacon" Director
    D. Campbell Deacon

    "signed James C. Gouin" Director
    James C. Gouin

    The accompanying notes are an integral part of these consolidated
financial statements.

                                                  Azure Dynamics Corporation
      Consolidated Statements of Operations, Comprehensive Loss, and Deficit
      (Stated in thousands of Canadian dollars, except per share amounts and
                                                            number of shares)

                                                  For the three months ended
                                                                    March 31

                                                           2010         2009
                                                              $            $

    Revenues                                              2,847          573

    Cost of sales                                         3,017        1,106

    Gross margin                                           (170)        (533)

      Engineering, research, development and
       related costs, net                                 1,743        3,839
      Selling and marketing                                 514          562
      General and administrative                          2,334        2,083
    Total expenses                                        4,591        6,484

    Loss from operations                                 (4,761)      (7,017)

      Interest and other income, net                        137          147
      Interest expense                                      (26)         (31)
      Other expense                                         (11)        (526)
      Foreign currency gains                                 76            6

    Net loss and comprehensive loss for the period       (4,585)      (7,421)

    Deficit, beginning of period                       (164,539)    (136,731)

    Deficit, end of period                             (169,124)    (144,152)


    Loss per share - basic and diluted                    (0.01)       (0.02)

    Weighted average number of shares - basic
     and diluted                                    605,128,008  379,376,177
    The accompanying notes are an integral part of these consolidated
    financial statements.

                                                  Azure Dynamics Corporation
                                       Consolidated Statements of Cash Flows
                                    (Stated in thousands of Canadian dollars)

                                                  For the three months ended
                                                                    March 31

                                                           2010         2009
                                                              $            $

    Cash flows from operating activities
      Net loss for the period                            (4,585)      (7,421)
      Adjustments for:
        Amortization of property and equipment              243          280
        Amortization of intangible assets                   326          349
        Unrealized foreign currency (gains)/losses         (188)         113
        Stock option compensation expense                   322          177
        Deferred share units compensation expense            58           62
                                                         (3,824)      (6,440)

      Changes in non-cash working capital items           2,068          629
    Total cash flows from operating activities           (1,756)      (5,811)

    Cash flows from financing activities
      Issuance of common shares (net of costs)              (17)           -
      Principal payments on notes payable                   (17)         (19)
      Repayment of obligations under capital lease          (64)         (24)
    Total cash flows from financing activities              (98)         (43)

    Cash flows from investing activities
      Acquisition of property and equipment                (101)          (7)
      Acquisition of intangible assets                      (34)         (65)
    Total cash flows from investing activities             (135)         (72)

    Decrease in cash and cash equivalents                (1,989)      (5,926)

    Exchange impact on cash held in foreign currency          5            8

    Cash and cash equivalents, beginning of period       33,588       13,803


    Cash and cash equivalents, end of period             31,604        7,885

    Supplemental cash flow information

    Cash paid for interest                                   26           31
    Non cash investing and financing activities:
      Vehicles and equipment acquired under
       capital lease                                        126            -

    The accompanying notes are an integral part of these consolidated
    financial statements.


For further information: For further information: Ryan Carr, Chief Financial Officer, (248) 658-7506, Email:; Pat Liebler, Liebler Group, (313) 832-4376, Email:

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