Axion Power International, Inc. announced results for its second quarter and six months ended June 30, 2013, including net income from sales of its lead-carbon (PbC) batteries and energy storage systems were $0.1 million for the current quarter compared to a net loss of $1.9 million or $0.02 per basic and diluted share in 2012. The change to a net income in 2013 from a net loss in 2013 of $2.0 million resulted from a decrease in operating loss of $0.3 million and an increase in non-operating income of $1.7 million. The decrease in operating loss was due to an increase in other income resulting from the sale of R&D tax credits to generate cash. The increase in non-operating income related primarily to the accounting for the issuance on May 8, 2013 of private placement senior notes and warrants and had an almost entirely non-cash impact on operating results and cash flow for the second quarter of 2013.
Thomas Granville, Chairman and CEO of Axion, commented, "naturally, we are very pleased that our cost reduction measures, together with improved sales, have resulted in continued significant reductions in cash burn through the second quarter. Net cash used for operating and investment activities was reduced by 37% ($1.6 million) in the first six months of 2013, when compared to that same time period in 2012. Phil Baker, our COO, and Chuck Trego, our former CFO, worked together to implement prudent cost reduction measures at the beginning of 2013, and we will continue to implement them going forward."
Net sales for the first half of 2013 were $4.9 million compared to $4.5 million for the first half of 2012, an increase of $0.4 million or 9%. The increase in net sales resulted from the sale of specialty lead-acid batteries to a single customer which will sell these batteries under its brand, as well as carry the cost of inventory and provide the raw materials for production of these batteries.
Net loss for the first half of 2013 was $2.0 million or $0.02 per basic and diluted share compared to a net loss of $4.2 million or $0.04 per basic and diluted share in the first half of 2012. The decrease in net loss of $2.2 million resulted from a decrease in operating loss of $0.6 million and an increase in non- operating income of $1.6 million. The decrease in the operating loss resulted from equal increases in gross profit and other income.
For the first six months of 2013 compared to the same period in 2012, excluding the cash provided by financing activities of $3.5 million in 2013 and $8.6 million in 2012, cash flow used by operating and investing activities was $2.7 million in 2013 compared to $4.3 million in 2012, a reduction in net cash burn of $1.6 million or 37 %. The latter significant reduction in net cash burn is in alignment with the plans initiated beginning in 2012 and continuing in 2013 to improve the liquidity while continuing to focus on those activities critical to initial commercialization of our PbC technology.
Granville continued, "New orders for our PbC batteries came from several sources in the second quarter and subsequent to the end of the second quarter. Some of these orders we have spoken about, such as ePower's $200,000 plus purchase order, and some we have not, and still cannot make public at this time. Small initial batch orders from industry leaders in motive applications would be one example. The Class 8-A, 8-B, and even the Class 7 trucks, present a huge potential market opportunity for Axion and our unique proprietary PbC product. For a hybrid conversion system, like ePower's, to work efficiently and substantially increase 'miles per gallon of diesel fuel', a robust battery with the right product attributes is needed. In the hybrid system, the battery is designed to provide adjunct power when the truck requires it and to level out the fuel consumption peaks that traditional trucks create in normal operation. The robust battery must be capable of high charge acceptance, fast re-chargeability, voltage stability in large series string applications and operating at full function in temperature extremes.
“We believe our PbC battery is the perfect fit for these requirements. In the US alone, on an annual basis, there are statistics that report that Class 8-A and 8-B trucks consume 19 billion gallons of diesel fuel. The opportunity to save literally hundreds of millions of gallons of this diesel fuel is what drives the hybrid conversion market initiative. Each year in the US, it is estimated that approximately 120,000 Class 8 trucks are rebuilt. Since the engines, drive trains, motors and motor generators are changed out during this rebuild anyway, it is an ideal time to incorporate a series hybrid conversion - a conversion that provides us with a potential sale of 56 of our PbC batteries per converted truck."
Granville concluded, "We have spoken on various prior occasions about the numerous markets that our PbC products can service. I won't go into all of them here, but I will highlight the PowerCube and 'scaled' PowerCube markets. We are devoting significant time and resources to pursue these opportunities, and I expect to report a combination of confirmed orders and initial sales in these markets before our next quarterly earnings call in mid-November. These opportunities include PbC applications for: back up for wind and solar; frequency regulation; electric vehicle charging stations; single family and multi-family residential back up, both grid tied and standalone; off grid lighting tied to renewables - and more. We look forward to reporting on the progress we make in these exciting areas."
