Azure Dynamics Announces Third Quarter 2009 Results

Revenue Up as Sales Trend Improves

OAK PARK, MI, Nov. 12 /CNW/ - November 12, 2009 - Azure Dynamics Corporation (TSX: AZD) - ("Azure" or the "Company"), an industry leader in the development of hybrid electric and electric technologies for commercial vehicles, today reported its third quarter financial results for the period ending September 30, 2009. The Company also provided an update on product development activities.

"While the automotive and commercial vehicle industries struggled along with the rest of the economy to recover during the quarter, we saw definite signs of improvement and opportunity," said Scott Harrison, Azure Chief Executive Officer. "Interest from our current and prospective customers picked up significantly and several new orders that had been on hold were released late in the quarter and into the fourth quarter. We see that trend continuing to improve as we move closer to the end of the year."

Harrison said that interest in fuel efficient green products continues to mushroom in the commercial vehicle industry and that as federal stimulus funds are released he expects more companies and municipalities to take advantage of them to order vehicles equipped with Azure technology.

"It's clear that we have the right products for today's market and as we continue to amass on-the-road experience and customer understanding of our unique product benefits, the market is responding," said Harrison. "Our more than two decades of development work in alternative vehicle transportation systems is finally starting to pay off."

Subsequent to the quarter end, Azure announced significant advancements for each of its core technologies. On October 14th, the Company announced its largest LEEP(TM) Freeze order to date with 248 units for Schwan Food Company. On October 30th, Azure and Ford Motor Company jointly announced that Azure's Force(TM) Drive technology would power the Transit Connect battery electric vehicle, the first of four electric vehicles coming from Ford in the next three years. Then, on November 9th, Azure announced 51 additional Balance(TM) Hybrid Electric sales to FedEx Express, most of which will be deployed at an all-hybrid facility in Bronx, New York.

"We're delighted at the amount of financial support that is being made available to the Company to assist us in our development efforts for the Transit Connect battery electric vehicle. For the first time in the Company's history, we will share the development costs of a major product program with several project collaborators. Additionally, we're evaluating several commitment letters received from government for a significant economic package to further reduce our overall development costs," said Harrison. "With the added financial benefits of sharing development costs, and support from government, we are now more confident than ever in our ability to continue delivering our innovative products to meet the growing customer demand."

    Third Quarter 2009 Highlights

    -   On July 9, Azure was awarded a 16 vehicle contract from the Hybrid
        Truck Users Forum's (HTUF) Small Hybrid Bus Working Group. HTUF's
        Small Hybrid Bus Working group is a joint program between CALSTART
        and the U.S. Army TARDEC's National Automotive Center (NAC) and is
        supported by the Federal Transit Administration. Azure won the
        competitive bid process because its technology provided the
        flexibility to service the needs of a broad range of HTUF

    -   On August 5, the Company announced a successful bid for up to
        50 Balance(TM) Hybrid Electric shuttle buses for the State of
        Kentucky. Ten buses were ordered immediately by three separate
        Kentucky municipalities with an option for up to 40 additional buses.

    -   On August 13, Azure Dynamics closed a private placement offering for
        gross proceeds of approximately CDN$10,000,000. 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.

    -   On August 18, the NAPA Valley Unified School District (NAPA) in
        California purchased the nation's first NEXBUS, the only hybrid
        electric Type A school bus available in North America. NEXBUS is
        produced by Collins Bus Corporation and features Azure Dynamics'
        Balance(TM) Hybrid Electric drive train. Collins is the largest
        builder of Type A (short) school buses and Azure's exclusive partner
        in producing certified hybrid school buses.

    -   On August 25, Azure announced the sale of five Balance(TM) Hybrid
        Electric buses to Votran, the transit entity for Volusia County,
        Florida. Votran, which used FTA stimulus funds to cover 100 percent
        of the cost of the vehicles, will integrate the buses into its
        county-wide paratransit service.

    -   On August 26, Azure announced that the United States Postal Service
        (USPS) had added a Balance(TM) Hybrid Electric vehicle to its fleet.
        The Azure product, a Balance(TM) Hybrid Electric two-ton walk-in van,
        will actively participate in the USPS fleet in Long Island, New York,
        for a twelve month pilot program. Azure has an additional 30 vehicles
        already in service with USPS.

    -   On September 24, Azure's Balance(TM) Hybrid Electric technology was
        approved by the Michigan Department of Transportation (MDOT) for use
        by state transportation agencies. The MDOT contract creates a fixed
        price for up to 50 buses and will remain in effect for up to three
        years with a total maximum value of $5.6 million.

    -   On September 30, Azure's dealer, Colonial Equipment Co., was awarded
        a bid with Howard County, Maryland, for up to 25 of the
        Azure CitiBus(TM) units with 17 units immediately ordered.

    -   As the fourth quarter began in October, Azure received two separate
        orders from Kidron Body Company for a total of 257 Low Emission
        Electric Power (LEEP(TM) Freeze) systems.

Financial Results

Revenue for the third quarter of 2009 totaled $3.2 million compared to $1.3 million in the third quarter of 2008. For the nine months ended September 30, 2009, revenue totaled $5.0 million compared to $5.1 million in the same period a year ago. Net loss for the third quarter of 2009 was $5.7 million, or $(0.01) cents per share, compared to a loss of $8.3 million or $(0.03) cents per share in the third quarter of 2008. Net loss for the nine months ended September 30, 2009 was $19.8 million, or $(0.05) per share, compared to a loss of $24.3 million or $(0.08) per share in the same period a year ago.

Before contributions, the Company's engineering, operations and product development expenses for the quarter totaled $3.3 million (including $1.2 million in product development costs), compared to $4.9 million for the same period in 2008 (including $2.7 million in product development costs). For the first nine months of 2009, the Company's engineering and R&D expenses totaled $10.4 million (including $3.2 million in product development costs), compared to $15.5 million in the same period of 2008 (including $8.5 million in product development expenses).

As of September 30, 2009, the Company's net cash and cash equivalents totaled $5.3 million, and working capital totaled $11.1 million, compared to cash and cash equivalents of $21.2 million, and working capital of $33.6 million, as of September 30, 2008. Revenue for the third quarter increased significantly and the company is in the process of completing delivery of several previously announced orders for which it expects to receive payment during the fourth quarter of 2009 and the first quarter of 2010.

The Company is progressing in its discussions with Technology Partnerships Canada ("TPC") with respect to extending the length and modifying the scope of its existing grant program from TPC to include additional costs related to the development of the Balance(TM) Hybrid Electric P1 parallel hybrid program. Azure's application for an amendment totaling approximately $2.8 million has been submitted and is currently under review. Management believes that this request will be approved sometime during the fourth quarter of 2009.

    Third Quarter Product Development Updates

    CitiBus(TM) (G1) Series (7,500 to 16,000 lbs. gross vehicle weight,

    -   The 49 G1 Purolator fleet crossed over 1.2 million miles in service
    -   28 G1 CitiBuses have been delivered and are in service

    Balance(TM) Hybrid Electric (P1) Parallel (10,000 - 19,000 lbs. GVW)

    -   In addition to notification from the IRS that the 2009 model
        Balance(TM) Hybrid Electric qualifies for a $3,000 U.S. Federal tax
        credit to eligible buyers, Azure received notification of
        certification from California Air Resources Board (CARB) for the 2009
        Azure Balance Hybrid E-450

    -   The EPA and CARB certifications are requirements for the Balance(TM)
        Hybrid Electric to qualify for the California Hybrid Truck and Bus
        Voucher Incentive Project (HVIP). The HVIP will provide vouchers of
        $10,000 to $45,000 on a first-come, first-served basis for purchase
        of each eligible new hybrid truck or bus. The program is anticipated
        to be in effect January 2010

    -   Second generation prototype Lithium battery packs were received from
        Johnson Controls-Saft and are running in the Azure development fleet

    LEEP(TM) Freeze & LEEP(TM) Lift (Low Emission Electric Power)

    -   The field trial of LEEP(TM) Lift by AT&T in Kansas continued in the

    -   Customer demonstration trial of LEEP(TM) Freeze with Dreyer's Grand
        Ice Cream, Inc. in Florida was completed within the quarter

    -   Engineering and production prepared for increased manufacturing rates
        for LEEP(TM) Freeze in Q4 as a result of recent orders announced

    Sales and Marketing Highlights:

    -   On July 17, Azure announced two new patents for innovations to its
        proprietary hybrid electric drive trains. Azure Dynamics broad patent
        portfolio includes 21 total patents issued or pending. The newest
        additions address key value-adding components applicable to electric,
        hybrid and PHEV vehicle drive trains.

    -   On July 22, Azure announced a partnership with Turtle Top, a leading
        body manufacturer specializing in small to mid-sized buses and
        specialty vehicles. The agreement provides Turtle Top customers and
        dealers the opportunity to select Azure's Balance(TM) Hybrid Electric
        drivetrain system on the Ford E-450 chassis.

    -   On August 20, Azure Dynamics announced that its shuttle buses will
        service student and faculty needs at both the College of Staten
        Island and the University of Fairfield. The College of Staten Island
        is working to set a green example for its community. J & R Tours will
        manage the second bus on behalf of the University of Fairfield in
        Fairfield, Connecticut.

    -   On September 22, Azure announced the sale of two hybrid electric
        NEXBUS school buses to Durham School Services, a subsidiary of
        National Express Corporation (NEC). NEC manages more than
        16,000 school buses in North America. NEXBUS utilizes Azure's
        Balance(TM) Hybrid Electric drivetrain with a Collins school bus

The Company's fiscal 2009 third quarter financial statements and MD&A are available at or on the Company's website at

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

    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 Sheet
                                                        (Stated in Thousands)

                                                    September 30  December 31
    As at                                               2009         2008
                                                          $            $

      Cash and cash equivalents                           5,297       13,803
      Accounts receivable                                 2,621        2,317
      Inventory (Note 4)                                  8,313        8,318
      Prepaid expenses                                    1,366          675
                                                         17,597       25,113

    Restricted cash                                       1,173        1,440
    Property and equipment                                5,497        6,194
    Intangible assets                                     7,116        8,012
    Goodwill                                              2,932        2,932

                                                         34,315       43,691



      Accounts payable and accrued liabilities            6,029        4,806
      Customer deposits & deferred revenue (Note 5)         285          360
      Current portion of notes payable (Note 3)              67           74
      Current portion of obligations under capital
       lease (Note 6)                                       111          114
                                                          6,492        5,354
      Obligations under capital lease (Note 6)              138          263
      Customer deposits & deferred revenue (Note 5)         659          839
      Notes payable (Note 3)                              2,111        2,459
                                                          2,908        3,561
    Shareholders' equity
      Share capital (Note 7)                            174,407      165,007
      Contributed surplus (Note 7)                        7,014        6,500
      Deficit                                          (156,506)    (136,731)
                                                         24,915       34,776

                                                         34,315       43,691


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

                        For the three months ended  For the nine months ended
                                 September 30              September 30
                                 (unaudited)               (unaudited)
                              2009         2008         2009         2008
                                $            $            $            $

    Revenues                    3,168        1,325        4,969        5,078

    Cost of sales               3,594        2,132        7,126        6,214

                          ------------------------- -------------------------
    Gross Margin                 (426)        (807)      (2,157)      (1,136)
                          ------------------------- -------------------------

       development and
       related costs, net       3,330        4,832       10,422       15,074
      Selling and
       marketing                  519          679        1,504        1,945
      General and
       administrative           1,859        1,937        6,005        5,834
                          ------------------------- -------------------------
    Total expenses              5,708        7,448       17,931       22,853

                          ------------------------- -------------------------
    Loss from operations       (6,134)      (8,255)     (20,088)     (23,989)

      Interest and other
       income, net                136           40          423          285
      Interest expense            (26)          (3)         (85)          (6)
      Other expense                24            -         (594)        (561)
      Foreign currency
       gains/(losses)             308          (91)         569          (64)
                          ------------------------- -------------------------

    Net loss and
     comprehensive loss
     for the period            (5,692)      (8,309)     (19,775)     (24,335)

    Deficit, beginning
     of period               (150,814)    (113,890)    (136,731)     (97,864)
                          ------------------------- -------------------------

    Deficit, end of period   (156,506)    (122,199)    (156,506)    (122,199)


    Loss per share -
     basic and diluted          (0.01)       (0.03)       (0.05)       (0.08)

    Weighted average
     number of shares -
     basic and
     diluted*           410,241,505  316,332,699  389,787,339  291,784,936

    * No 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 nine months ended
                                 September 30              September 30
                                 (unaudited)               (unaudited)
                              2009         2008         2009         2008
                                $            $            $            $
    Cash flows from operating
      Net loss for the
       period                  (5,692)      (8,309)     (19,775)     (24,335)
      Adjustments for:
        Amortization of
         property and
         equipment                254          252          789          699
        Amortization of
         intangible assets        354          347        1,056        1,063
        Unrealized foreign
         currency (gains)/
         losses                  (279)         129         (362)         180
        Stock option
         expense                   69          181          332          633
        Deferred share
         expense                   64           93          186          146
                          ------------------------- -------------------------
                               (5,230)      (7,307)     (17,774)     (21,614)

      Changes in non-cash
       working capital
       items                   (1,193)        (680)         248       (4,563)
                          ------------------------- -------------------------
    Total cash flows from
     operating activities      (6,423)      (7,987)     (17,526)     (26,177)
                          ------------------------- -------------------------

    Cash flows from
     financing activities
      Issuance of common
      shares (net of
      costs)                    9,395       24,394        9,395       24,392
      Principal payments
       on notes payable           (17)          (9)         (53)         (27)
      Repayment of
       obligations under
       capital lease              (36)         (10)        (131)         (20)
                          ------------------------- -------------------------
    Total cash flows from
     financing activities       9,342       24,375        9,211       24,345
                          ------------------------- -------------------------

    Cash flows from
     investing activities
      Acquisition of
       property and
       equipment                  (67)        (577)        (103)        (961)
      Acquisition of
       intangible assets          (35)         (17)        (160)        (125)
      Sale of property
       and equipment                -            -           35            -
      Changes in
       restricted cash             35            -           97            -
                          ------------------------- -------------------------
    Total cash flows from
     investing activities         (67)        (594)        (131)      (1,086)
                          ------------------------- -------------------------

    Increase (decrease)
     in cash and cash
     equivalents                2,852       15,794       (8,446)      (2,918)

    Exchange impact on
     cash held in foreign
     currency                       2          (15)         (60)          (8)

    Cash and cash
     beginning of period        2,443        5,428       13,803       24,133

                          ------------------------- -------------------------
    Cash and cash
     equivalents, end of
     period                     5,297       21,207        5,297       21,207
                          ------------------------- -------------------------
                          ------------------------- -------------------------

    Supplemental cash
     flow information

    Cash paid for
     interest                      26           21           85           57
    Cash paid for taxes             -            -            -            -
                          ------------------------- -------------------------
                          ------------------------- -------------------------
    Non cash investing
     and financing
      Vehicles and
       equipment acquired
       under capital
       lease                        -          151            -          336
                          ------------------------- -------------------------
                          ------------------------- -------------------------


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

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