Axion Power Reports First Quarter Results for 2014

NEW CASTLE, Pa., May 16, 2014

Net sales for the quarter were $2.3 million with a net loss of $6.5 million, which includes noncash charges aggregating approximately $4.5 million related to the senior note financing that the Company entered into in May of 2013.  The loss in the year-earlier period was $2.1 million.  On an operating basis, the operating loss for the first quarter of 2014 was $2.0 million compared to a net operating loss for the first quarter of 2013 of $2.1 million.  The loss per share for the quarter ended March 31, 2014 was $0.03 loss per share, compared to a 2013 first quarter loss per share of $0.02.

Sales during the first quarter were largely from specialty lead-acid batteries built in our factories for sale under the label of our customer, a large and well-known battery company. The product mix will change as we move from the sale of lead acid batteries for our current legacy business to the sale of larger numbers of PbC batteries as we continue to execute our PbC commercialization strategy.

In an event subsequent to the end of the quarter, our New Jersey strategic partner provided a follow-on order for four 500kw PowerCube™ units that will be used in Solar PV configurations similar in size (600kw approximately) to the unit we installed for them in the first quarter of 2014.

Chairman & CEO Thomas Granville commented, "The follow-on order we announced this week is valued at approximately $1.1 million, which makes it the largest purchase order we have received to date.  Our pipeline for potential PowerCube business has grown considerably in the last nine months, so we are pleased to move this project from near the top of the 'prospective order' list, to the 'confirmed purchase order' list.  The four PowerCubes will be part of four individual Solar PV systems that will provide solar power to a commercial entity, employ net metering with the grid, participate in the frequency regulation market and provide backup power to the commercial entity in the event of an emergency.  We spoke of our 'model' in a letter to shareholders back in January in which we highlighted the advantages of combining Solar PV with storage. That model was the basis for our original New Jersey order and for the recent four unit follow-on order. The frequency regulation portion of that model, with or without any of the various solar configurations, is what has continued to attract potential market participants.  Whether they are building owners looking to reduce the total cost of power, or investors looking for an attractive return or investment institutions looking to provide an alternative investment product to their clients in an emerging energy sector – our model's ROI and IRR have brought them to the table.

"So that's the North American story, but we have also received added interest from more remote sites (island nations, third world countries and emerging countries) where the cost of power is many times what it cost individuals and commercial entities in the US. Most of these locations have abundant sunlight and/or wind, so renewables are a strong alternative. To date, however, these renewable solutions have not included storage for a number of reasons, not the least of which was having a viable storage option. We feel, and our strategic partners feel, that the PowerCube can provide that viable option. As a result we have expanded our initiative in this area," he added.

Granville said that Axion is also very pleased with the progress made by ePower Engine Systems, which recently purchased four trucks for series hybrid conversion. They shared with us, the results of their extensive fuel economy testing, and their belief that additional improvement may be achieved because of the improved equipment they are now working with. In addition, this week ePower also advised Axion that they received notice of issuance from the US Patent Office confirming their foundation patent for engine dominant series electric hybrid drivetrain was approved for issuance.  Granville continued, "We have spoken in the past about the potential growth the battery market would experience should the ePower technology be adopted. It is a relatively easy calculation if you use a very conservative extrapolation from the USDOT numbers speaking to the size of the Series 8 Heavy Duty Truck market, which is approximately 2.7 million trucks. These trucks are rebuilt, depending on type of usage - point to point and back day cab versus over-the-road hauling with the latter being rebuilt approximately every 4 years and the former approximately every 6 years.  Even if we reduced the market estimate by one-half of the approximate 2.7 million trucks, and divided by an average life before rebuild of 5.25 years, the number of trucks rebuilt annually would be 250,000.  Multiply that by 56 batteries and you get 14 million specialty batteries annually. This is why we are excited about this potential market for battery manufacturers," Granville concluded.