Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Start Time: 10:07

End Time: 11:07

Axion Power International, Inc. (OTCQB:AXPW)

Q1 2014 Earnings Conference Call

May 16, 2014 10:00 AM ET

Executives

Thomas Granville - Chairman and CEO

Philip Baker - COO

Rudy Barrio - Investor Relations, Allen & Caron, Inc.

Analysts

Warren Portis - Private Investor

Walter Bird - Private Investor

Stephen Moroney - Private Investor

Patrick Young - Private Investor

Brad Warnecke - Warnecke Investment Group

William Blanchard - Private Investor

Operator

Good morning and welcome to the Axion Power First Quarter 2014 Earnings Conference Call. All participants will be in listen-only mode. (Operator Instructions) After today's presentation, there will be an opportunity to ask questions. (Operator Instructions) Please note this event is being recorded.

I’d now like to turn the conference over to Rudy Barrio. Please go ahead sir.

Rudy Barrio

Thank you, (indiscernible). Good day everyone and welcome to Axion Power International’s investor conference call to discuss its financial results for the first quarter ended March 31, 2014. With us from management today is Chairman and Chief Executive Officer, Thomas Granville; and Chief Operating Officer, Philip Baker.

Before we start today’s call there are a couple of items I’d like to cover. Many of you received the copy of Axion Power’s first quarter 2014 results press release, which was disseminated early this morning. If you did not receive a copy of the press release it is posted on Axion Power’s website at www.axionpower.com and in the Investor Relations section of our website at www.allencaron.com. It is also posted on Yahoo Finance and most financial sites. You may also call our office in New York at 212-691-8087 and we will email it to you.

As mentioned earlier this call is being recorded. A replay will be available shortly after the call for seven days and may be accessed from North America by calling 877-870-5176 and entering pass code 100-46423. International callers should dial 858-384-5517. This call is being -- is also being broadcast live over the internet and may be accessed via Axion Power’s website. A replay of the Webcast will be available shortly after this call and will continue for 30 days.

Further we’d like to remind everyone of the Safe Harbor statement under the Private Securities Litigation Reform Act of 1995. Some of the statements made during this call, may contain forward-looking statements. These forward-looking statements and all other statements made on this call that are not historical facts are subject to a number of risks and uncertainties that may cause actual results to differ materially. Any forward-looking statements made on this call today, speak as of today and Axion does not undertake any obligation to update any such statements to reflect events or circumstances occurring after today. We advise you to read the cautionary note regarding forward looking statements and Axion Power’s recent earning release and in the risk factor section of the Company’s most recent filing with the Securities and Exchange Commission, for a description of the factors that could cause forward-looking statements to differ materially from actual results, all of which are available at www.sec.gov.

I’d now like to turn the call over to Thomas Granville. Good day, Tom.

Thomas Granville

Good morning, Rudy and good morning ladies and gentlemen. Welcome to Axion’s first quarter earnings call reflecting on the document filed with the SEC on March 15. I’m joined this morning by our COO Philip Baker and by our Controller, Daniel Baker.

It’s been six weeks since our last call and those six weeks have been busy ones. I will be doing double duty this morning, taking on the call role of the CFO and my normal CEO comments. More on the CFO later, but now I’d like to review the financials.

As I indicated we filed our Form 10-Q yesterday and it is available on the SEC’s EDGAR website as well as on Axion’s Web site. It can be accessed for financial and other information regarding the results and activities of Axion Power International. We encourage you to review this document as well as this morning’s press release that can be accessed at the same site.

So let’s begin with the financial report. Summary of consolidated income for the first quarter of 2014 compared with the first quarter of 2013. Net sales for the first quarter of 2014 were $2.3 million compared to $2.2 million for the first quarter of 2013. We have one customer that accounted for approximately 84% and 88% respectively for the first quarter of 2014 compared to the first quarter of 2013. The increase in sales is due to a series of orders for unbranded flooded lead-acid batteries with the purchaser carrying the cost of inventory and providing the raw materials for production.

Cost of tangible goods sold, the cost of tangible goods sold for the first quarter of 2014 were $2.4 million compared to $2.3 million for the first quarter of 2013. The change in cost of tangible goods sold resulted from the increase in net sales. Cost of goods sold idle capacity -- the cost of goods sold idle capacity for the first quarter of 2014 were $437,257 compared to $501,441 for the first quarter of 2013. The change in cost of goods sold idle capacity resulted primarily from a decrease in non-direct manufacturing costs.

Gross loss for the first quarter of 2014 was $475,593 compared to a $524,273 loss for the first quarter of 2014. Gross margin for the first quarter of 2014 was a negative 21% compared to a negative 23% for the first quarter of 2013.

Research and development expenses for the three months ended March 31, 2014 was $0.4 million compared to $0.5 million for the same period in 2013. Selling, general, and administrative expenses for the first three months of 2014 was $1.1 million compared to $1 million for the same period in 2013.

Liquidity and capital resources. Our primary source of liquidity has historically been cash generated from issuances of our equity securities. From inception through March 31, 2014, we have generated revenue from operations that was not significant enough to produce an operating profit. We believe that currently available funds at March 31, 2014 which includes the net remaining amount available and restricted cash from our 2013 senior convertible note financing and funds generated from product sales and working capital will provide sufficient resources for operations working capital and will fund in the sales of our traditional battery business and our anticipated capital expenditures in to the fourth quarter of 2014.

Subsequent sources of outside funding will be required to fund the Company's working capital, capital expenditures and operations through the fourth quarter of 2014. Failure to obtain such funding will require management to substantially curtail if not seize operations, which will post a material adverse effect on the financial position and the results of operations of the Company.

Working capital as of March 31, 2014, working capital was $4.3 million compared to $4.5 million at December 31, 2013. Cash flows from operating activities, net cash used in operations for the first quarter of 2014 was $1.72 million. Of the net cash used $1.62 million was used to fund the operation of the business while $0.1 was used to fund operating assets and liabilities. Of the net cash of $1.1 million from the same period in 2013, $0.7 million was used to fund the operations of the business while $0.4 million was used to fund operating assets and liabilities.

Cash flows from investing activities, net cash used by investing activities for the first quarter of 2014 was $0.02 million compared to $0.09 million for the same period in 2013. Investing activities were primarily for purchases of property and equipment. Cash flows from financing activities, net cash provided by financing activities for the first quarter of 2014 was $2.2 million compared to net cash used of $0.04 million in 2013. Cash from financing activities is being used to fund ongoing operational requirements, capital expenditures and working capital.

I don’t expect to have to give that report again, because our search for a new CFO candidate has gone well and progressed down to two finalists. Each is an excellent candidate and each would bring broad general knowledge and experience as well as specific skill sets to the CFO position. We expect to complete the process and name our new CFO by the end of May.

In the last few weeks our project engineer for the Norfolk Southern Locomotive project travel to Texas to assist Norfolk Southern and their integrator with the boost charge to our PbC batteries. We shipped the batteries for this project nearly 17 months ago and they have been sitting idle thus the need for charge before they’re shipped in their final container locations to the Norfolk Southern yard, in Juniata.

The “Final” NS-999 components will be assembled later this month, including our batteries. The expectation is at the locomotives will be on the road the first week in June. We’ve scheduled an inspection right in review meeting with Norfolk Southern in mid June. As part of that meeting, we will review the work outlined and discuss next steps for the over the road hybrid unit and feature all electric locomotives. We are optimistic and anxious to see our PbC batteries perform in a real world [ph] [graveyard] environment.

Our onsite PowerCube continues to provide frequency regulation in the PJM network through our CSP provider Viridity Energy. It has been more than 2.5 years since we commissioned this Cube and it continues to serve as a real world demonstration unit. Potential customers visit a site and as a matter of fact I just left the meeting with group representing a potential business partner and they’re scheduled to tour the Cube later this morning. When we have set the unit up with display screens in real time, showing our actual live and historical participation in the PJM frequency regulation market is a powerful visual tool for us and explaining our product and our technology in a real world application.

In the first quarter of 2014, we installed batteries, racks, BMS, controller, wiring and miscellaneous equipment at the New Jersey location of our 500kw system being installed with our strategic partner. This unit will mimic our onsite Cube and participate daily in the PJM frequency regulation market, but it will do so in accordance with our newly developed model.

We still feel, as does our strategic partner - more strongly than ever based on our model and past PJM records that this 500kw installation will provide the owner more than $9,000 per month net after expenses, in frequency regulation revenue. This attractive ROI and IRR are major points of focus in our go forward marketing plan for our PowerCubes. Of course this revenue is in addition to the storage and emergency back up capability of the PowerCube.

In an event subsequent to the end of the first quarter, that same New Jersey customer issued us a purchase order for four additional 500kw PowerCube units designed to provide frequency regulation to PJM in a range covering 500kw up and 500kw down. This follow on order is further validation of their belief in our PbC product and our frequency regulation model. They have viewed our test data, and our real world PJM revenue stream data, which they indicated was the impetus for the follow-up order.

The purchase order, which is in excess of $1.1 million, is the next step in our planned partnership that will include multiple like sized 500kw units in and out of New Jersey. In addition, our partnership is planning larger sized PowerCubes, 1MW and beyond in both New Jersey and in other states that have very competitive SREC credits and other incentives.

We anticipate that the first 500kw unit will ship in the third quarter of this year, followed by unit two and three in the fourth quarter, with the fourth unit shipping in the first quarter of 2015. These units as well as the unit we’re currently commissioning were purchased by the same New York City real estate entity.

After the sale of our first unit back in October of 2013, I travel to New York and met with this group and subsequently identified a dozen buildings from this group’s ownership portfolio that would be good candidates for solar storage and frequency regulation. The four units we’ve sold to them will be installed in four of those 12 sites. This same entity manages numerous other properties that could also be candidates for the same cookiecutter install of 500kw worth of batteries and 500kw to 700kw of solar.

But first our customer would like to see our unit in service on his property, instead of just relying on our onsite unit revenue numbers. To that end, the first unit sold in October will be operating early next month. Problems with the Building Inspector Division, in New Jersey totally unrelated to us have delayed the project to date.

In a separate initiative with investors, we continue to pursue site selection for multi mega-watt systems that would service the frequency regulation market. Our 1.25 megawatt and 2.5 megawatt building block our sweet spots for this market.

On the smaller side of the storage equation, in the first quarter of 2014, we sold, installed and subsequently fully commissioned a 10 megawatt miniCube unit complete with a 12kw solar array. This unit was installed for a private individual in New Castle and will provide us with additional information about our smaller applications that might be tied to solar and islanded or be grid tied, as well as data on the system’s use as an electric vehicle charging station. This is one of our offshore initiatives, so we’re very interested in that data. Currently the Owner is using that system to charge his Tesla and to net meter. Both applications have been working well.

Our work with ePower Systems continues and we’re pleased with the progress made by ePower Systems. ePower 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 maybe achieved because of the improved equipment they’re now working with.

In addition, this week ePower also advised Axion that they’ve received notice of issuance from the U.S. patent office confirming their foundation patent for engine-dominant series electric hybrid drivetrain was approved for issuance. We’ve spoken in the past about the potential growth of the battery market -- about the battery market we experienced should the ePower technology be adapted.

It is a relatively easy calculation, if you use a very conservative extrapolation from the U.S. field team numbers speaking to the size of the Series 8 heavy duty truck market. They estimate that at approximately 2.7 million trucks. These trucks are rebuilt depending on type of usage, whether it would be point-to-point and back, big cab versus over the road hauling with the latter being rebuilt approximately every four years and the former approximately every six years.

So even if we reduce the market estimate by one half, so the 2.7 million goes to 1.35 million and divided by an average life before rebuilt of 5.25 years. The number of trucks rebuilt annually which still be in excess of 250,000. Multiply that number by 56 batteries, and you get 14 million specialty batteries annually. This is why we’re excited about this potential market for battery manufacturers. It converts to $5 billion annually. Of course, we feel that Axion is in the driver seat here, no pun intended, because our technology has proven out as the technology that works. Not just works, the best, but works. ePower, you may recall from previous calls, tested other technologies. And those test resulted in a battery system, in a power system that was inadequate to fill the needs of the ePower series hybrid system.

Axion on the other hand, first provided batteries to them nearly a year-ago for use in a real world truck test. Our batteries and the next generation of those batteries had been successful in the ePower truck initiative. They currently have an improved product that they’re working on; we’re very excited about it. We are very excited about the market opportunity. One percent of that $5 billion market is a $50 million opportunity.

Axion had cash and restricted cash of $3.2 million at March 31, 2014 compared to $4.9 million at December 31, 2013. The current ratio at March 31, 2014 was 3.3 to 1. Company will need to raise additional funds by the beginning of the fourth quarter of 2014 to support the ongoing process of commercialization.

We have asked our shareholders for their approval of a reverse stock split that would make Axion Power shares suitable for a much wider range of U.S. institutional and retail investors. Once reversed, management also believes the Company would qualify to up list to a National Exchange, which would further increase the population of potential investors. And finally, we believe an increase in share price created by such a reverse would also enhance the Company’s ability to access a broader capital market.

I should comment here that I received several phone calls inquiring about the authorized shares and what would happen to them in a reverse? The Board has been cognizant of this situation since we first discussed a reverse. Our feeling was that we’d wait until the time that we did a split in a reverse to decide on what a reasonable number of authorized shares would be? Certainly, it would be a cut back from the existing 350 million shares.

We are cognizant of the concern of the shareholders and so we may do that in two parts. I don’t want to get into too much depth and detail right now speculating about something that hasn’t happened, that isn’t planned to happen, date specific. So I’m sure I will probably get questions -- more questions on this, but let me say that we’re certainly aware of it and the Board plans on, it has addressed it and plans on addressing it further with a reduction in the authorized shares.

So with that lightening spot, let me move to questions.

Question-and-Answer Session

Operator

Sure. We can start our question-and-answer session. (Operator Instructions) Our first question comes today from a Private Investor, Warren Portis. Please go ahead.

Warren Portis Titus - Private Investor

Hello sir. Hello?

Thomas Granville

I’m here.

Warren Portis - Private Investor

Okay. This is Warren Portis. I was at the Annual Meeting last fall [ph] [and met you]. What is the status of the initiative relative to the truck auxiliary power unit business?

Thomas Granville

That’s still something that we’re working on. We certainly have not abandoned that. There are a number of initiatives that we spoke about in our filings that we’re still working on. Our focus is on the two areas that I spoke most about this morning. But there are a number of things that we’re still doing that we’re not ignoring and of course that’s one of them. We are engaged with more than one manufacturer in this area and along with things like the vehicle manufacturing single and two battery systems, off grid power, grid tied, non-grid tied, streetlights, charging stations, all of those things are initiatives that we continue with and we think there is market opportunity for. However, with the limited resources that we have, that we’re expanding, we’re devoting as much time, even though we’re devoting time, we’re devoting as much time as we’re to the storage, the powerCubes and the ePower truck.

Warren Portis - Private Investor

Regarding the automotive area initiatives, because various irons in the fire that you have mentioned from time-to-time, can you please access how hot the various irons are and sort of what’s going on, and especially are we still having regular frequent meetings with the German manufacturer?

Thomas Granville

We are having meetings with a number of large manufacturers and we actually -- the business partner, potential business partner that share this morning is a -- is in that market. They’re supplier, they’re not a manufacturer, but we continue to look for better ways to address the needs of the automotive manufacturers, both here and in New York.

Warren Portis - Private Investor

Finally, you had spoken earlier of, I guess, initiatives with two other major lead-acid battery manufacturers with them adapting production of the PbC. What is the status of those initiatives?

Thomas Granville

That continues. We still are very interested in that relationship and in doing the math just for the ePower initiative, you can see that we’d run out of capacity here in New Castle to make that many batteries pretty quickly. So for the things that we’re planning and the things that we will be doing, we will definitely need those relationships going forward to complete our business plan and our business model. Our business model as most of you know has always been to be the provider of the value add and the provider of the negative electrode to other large lead-acid battery companies. We don’t want to build more battery plants. We want to make their batteries better. We don’t want to get into the commodity business. We want to provide the negative electrode and we may even as we run out of manufacturing capability capacity. For components, we may at some point end up licensing some of that technology to these battery companies.

Warren Portis - Private Investor

Thank you, sir. I will give to someone else.

Operator

Thank you. Our next question comes from Walter Bird, also a Private Investor.

Walter Bird - Private Investor

Hi, Tom. I’m just looking for a point of clarification. It seems like when you were mentioning the 999 you said these locomotives (indiscernible)? I mean, is there more than one 999 going to be rolling out in the next month or so?

Thomas Granville

That was probably a freudian slip of some sort on the hopeful side. No, there is only one 999. There are of course plans to do other all electrics, but they will not be 999’s and that’s part of what we’ll be talking about when we meet with Norfolk Southern. Right now there is only one 999 that’s being outfitted, that has been in the process of being outfitted for some time as most of you know, much to our frustration. But we are anxious to see that thing finally get on the road. We’re anxious to get data from it, and see it in action and see our PbC batteries performing in a real world environment.

Walter Bird - Private Investor

Okay, great. Thank you.

Operator

The next question is from Stephen Moroney a Private Investor.

Stephen Moroney - Private Investor

Good morning, Tom. How are you doing today?

Thomas Granville

Good morning.

Stephen Moroney - Private Investor

You said there on your discussion the auto; that you’re looking to better address automotive. And my first question is how are you -- how is Axion not addressing their needs now? What's the disconnect between what we need to -- where we are now to what we need to be doing to be adopted?

Thomas Granville

We always need to improve -- we always need to improve the product. We always need to give them a reason to leapfrog what they’re doing and to get into something that we can provide. There are of course numerous initiatives that the different automotive manufacturers are constantly looking at. Those initiatives include lithium ion, they include nickel metal hydride, they include supercaps of some sort. Without getting into a lot of detail which I certainly don’t want to do, there is always the potential for us to combine in producing a product for them. I don’t really want to say anything more about that. We are addressing their needs. Their needs are ever changing. Everyone is looking for a better mousetrap, and we want to be proactive rather than reactive in this regard. So, we are always looking for ways to obtain something new and take it to them.

Stephen Moroney - Private Investor

Okay. Has Axion ever produced a 48 volt car battery?

Thomas Granville

We have not. We talked about doing that for some time. We first met with ABC in 2008 when they were talking about that project, and we decided for numerous reasons one of which was, that it wasn’t going to be adopted any time soon. And it certainly wasn’t -- it is an alternative that’s out there. It's an alternative space that currently anyway we have chosen not to play in.

Stephen Moroney - Private Investor

Okay. I noticed a couple of months ago that there was a grid interactive double conversion inverter patent application that Axion had submitted, and I was wondering if you could just give some color on, are you guys getting out of the battery business a little bit or is that something I just don’t really know anymore than what's in the patent?

Thomas Granville

Did you say an inverter?

Stephen Moroney - Private Investor

Yes, its grid interactive double inverter, Axion Power International was March 16, 2014 was the publication date.

Thomas Granville

I think that’s probably a misprint on the inverter. There are a number of patents that are coming up for review, international patents and local patents as well. But no, we’re not in the electronics business.

Stephen Moroney - Private Investor

It's interesting. I’ll email it to you. It's got -- which sets me off is the inverter and it's got a solar panel. I figured it was something to do with the PowerCube?

Thomas Granville

Okay, yes. Yes, that’s a battery management system. Yes, that’s flat. That is part of the PowerCube, but it's not really an inverter.

Stephen Moroney - Private Investor

Okay. I guess, is that something -- I guess we’ll probably hear more about that as time goes on.

Thomas Granville

Yes, it's an adjunct to what we’re doing with the PowerCube in our proprietary battery management system. It's something that was filed sometime ago. We have been working on that for probably five and half years, something like that.

Stephen Moroney - Private Investor

Okay. On the tool contract, is there a date when that’s said to expire?

Thomas Granville

That’s gradually phasing out. We’re continuing to do work. It's phasing out in the general sense, but they’ve given us some specialty work to do, and we’re still looking at some of the aspects of that specialty work to see if we want to take that on. We’ve already taken some of it on. It's different than what we’ve been doing. It's a space allocation issue and so it's something we’re direct addressing on an ongoing basis. But it was always the plan as I had mentioned before to phase that out and get in to PbC the more profitable mix in what we’re really all about. So, it's something that they’ve been cognizant of that some day we were going to pull the plug. So, we’re jointly addressing that and ramping down appropriately.

Stephen Moroney - Private Investor

Okay. The 10 kilowatt install, is there a price tag that you can share on that?

Thomas Granville

No, there isn't one that, that I want to share on that. That’s something that, it's nice, it's a specialty item in the U.S. but it's really something that we’re very interested in seeing the results on because of it's application in areas where electricity is much more expensive than it is here, and I am talking about the islands for example, where they need charging stations for and some third world countries where they need charging stations for their electric vehicles. So, this was a great real world opportunity for us to gather some of that data.

Stephen Moroney - Private Investor

There was a recent RFQ for the Imperial Irrigation District in California.

Thomas Granville

Yes.

Stephen Moroney - Private Investor

Were you guys part of that process or not?

Thomas Granville

We were not part of that one. We're looking at storage projects in California, storage projects in Hawaii, and we’ll be on the bidders list for those whether it's a separate or in partnership with others.

Stephen Moroney - Private Investor

All right. And then there is, the last question that I have is, I guess, there’s been kind of a disconnect between last August and now, and the ideas between the investor base and significant sales and what that means, and so it would probably be beneficial for all of us to get on the same page with respect to you to figure out I mean, you guys are asking for a major capital restructure here, a reverse split of somewhere between 20 and 50. Is what you’re looking at with respect to significant sales which were confirmed again at the annual meeting again in November and again in your interview in a local New Castle news? Is that something that was going to put you on track in the near future, did not have to do additional secondaries or is it, is $1 million what you were considering significant?

Thomas Granville

A series of $1 million would be significant to me. It's not an ongoing, ongoing, ongoing forever series of capital raises. We’re interested in getting to breakeven and interested in getting beyond breakeven to profitability. That’s what the company is all about. That’s what business is all about, and that’s what our goal is. We have been reducing earn rate as you have seen quarter-over-quarter, sometimes gradually, sometimes more significantly, that’s our goal.

Stephen Moroney - Private Investor

Okay. And do you see that as a -- as approaching breakeven as a multi-year process from here or is something that is realistically accomplishable in the next [ph] [one] to two years based on what you …?

Thomas Granville

Well yes, certainly in that timeframe. And I don’t want to give guidance here, and I won't give guidance here. We are not going to breakeven in three months. We’re not going to breakeven this year. But, yes that’s our goal and you’ll see continued progress towards that goal.

Stephen Moroney - Private Investor

I imagine that has to be mostly on the back of the PowerCube’s, because if ePower doesn’t scale up to about maybe 10 trucks this year and potentially 50 next year, then it couldn’t be on the back of ePower yet.

Thomas Granville

Correct.

Stephen Moroney - Private Investor

I mean we would hope that scales up and everything goes well with that project, but it would have to be -- I would imagine it would have to be strictly either on the back of the PowerCube’s because Norfolk Southern doesn’t seem like they’re moving any time soon with [ph] [records abandoned] either?

Thomas Granville

There are a number of initiatives out there. I think you hit on our number one target right now. It's a now target. It's something that can happen right now. It's something that can be installed tomorrow and so it's -- it is a great use of our technology and our model. We have spent significant time developing it, getting to the point that we’re at right now. And we are getting a different kind of customer. I alluded to that in one of the releases in addition to the traditional customer that wants to use the cube and utilize the assets of the cube or getting a lot of action from investment groups that are looking to purchase these kinds of assets for investment as opposed to using it for in conjunction with solar to power building to smooth wind or whatever the commercial application is. This is a different kind of market, and it's something that’s developed really in the last six months.

Stephen Moroney - Private Investor

Okay. And a last question before I let you go. At the end of your, I guess press release you noted that, that you were going to be charging forward in Hawaii and California. Do you guys expect to add somebody to focus primarily on that market?

Thomas Granville

I think you want to make that a bodies, yes somebody’s to do that. It's way too hard to try and attempt to do that from New Castle with the travel that would be required and the time zones and everything else. We talked about increasing our sales force in the past and we’re still pursuing that and will be adding to the sales force before the end of this quarter.

Operator

Thank you. Our next question comes from Patrick Young a Private Investor.

Patrick Young - Private Investor

Yes. Hi, Tom. Congratulations on your PowerCube sales, and you’ve done a fine job answering questions in this conference call. So, you mentioned the investors are interested in purchasing PowerCube’s in the megawatt range for frequency regulation. And so, do you mean to say that these investors are purchasing PowerCube’s as a standalone product and are interested in their value outside of any kind of solar regulation?

Thomas Granville

Both in and out. Both as standalone’s and in conjunction with solar. The problem with solar is that you really need a place to put the solar. You need to load where with the standalone unit you can literally put it out in a field next to a substation or you don’t even need to put it next to what, depending on the size of it or you may or may not need to put it close to a substation. So yes, it's a way for people to invest in energy. This is what we’re being told. There are products that are being created by investment institutions that allow people to participate in energy without participating or purchasing the shares of a particular energy company. They get to invest a small portion or maybe a larger portion of their portfolio in energy similar to an investment in a REIT for example. It's just another basket that the investor has to select from.

Patrick Young - Private Investor

Okay. And you also once mentioned the interest of an Asian OEM heavy industries position. Can you give us more clarity on that?

Thomas Granville

You’re talking about in the past?

Patrick Young - Private Investor

In the past, I believe the last conference call you mentioned that one of the OEMs you were dealing with in Asia had a heavy industries division that was speaking with you. Could you give us some more color on that?

Thomas Granville

The truth I don’t recall that, we had one time. We were dealing with an automotive company in Asia that wanted to utilize our product for their vehicles or at least told us that, it didn’t quite work out that way. They wanted something a little different than that. There have been Asian companies that have talked to us about different mixes but, and we do have some NDA signed with them. I am threading very likely here because …

Patrick Young - Private Investor

Okay. So, on that point, I appreciate it is just that really a comment which is -- I appreciate that you want to focus on the aspects of the business that are selling right now. But actually what I am really interested in actually on getting a recognizable brand name like Norfolk Southern or BMW being a surplus for Axion. And so just because these things are not yet ready to rollout, I think it's an important relationship for PR purposes. So, whatever you can do to loosen these NDAs and just get a little bit of cheerleading from our potential partners.

Thomas Granville

Believe we would love to. It's a constant push-pull on that. It would -- I think I know what you’re talking about with the last call. That was a supplier that we were talking about as an adjunct to some of our products that would make them better, that was going on about two months ago. So that probably was the reference there. It wasn’t a customer, it was a supplier. Wasn’t, is.

Patrick Young - Private Investor

Okay. Thank you very much.

Operator

Our next question comes from Brad Warnecke with Warnecke Investment Group.

Brad Warnecke - Warnecke Investment Group

Good morning, Tom.

Thomas Granville

I like your tie, Brad.

Brad Warnecke - Warnecke Investment Group

Couple of questions in relation to the mix around financing, the fourth quarter will be upon us very quickly. I would like to know two sides of that, well I am in favor of the reverse split. I am not really that concerned about the share issuance. I am assuming the board is on the same side that we are in terms of future issuance. And I think the higher prices, is absolutely necessary. But a high price of your (indiscernible) would be nothing to attract good investors as opposed to parasitic investors. You got to have revenue. I mean there’s got to be a road to revenue. There’s got to be backlog. So, two questions I have -- can you describe to me where you're in those negotiations. The type of investors you’re working with. And how will you bring -- how confident are you in a revenue run rate that you can show them to give them confidence to participate at a fair rate as opposed to a flash and burn approach to partnering?

Thomas Granville

Right. Well this is something we’ve obviously given a lot of thought to, and know what we need to do here. We are not discussing in anyway shape or form a debt structure as we were forced into the last time around. We have had -- we have interviewed people. We have had people here to the plant. We have taken all of the steps that are necessary. More important than what my confidence level is, is what their confidence level is. And by they; I am talking about more than one. They are confident that we can do what's necessary and show the investment entities what it is that we are doing to accomplish this at a minimum discount to market. And I already went too far by saying that, so I wish I hadn’t just said that.

Brad Warnecke - Warnecke Investment Group

And they’re going to require some evidence of solid revenue base?

Thomas Granville

Absolutely.

Brad Warnecke - Warnecke Investment Group

Do you feel you can give them that before the fourth quarter comes up?

Thomas Granville

We definitely feel that we can do what we need to do to achieve a funding.

Brad Warnecke - Warnecke Investment Group

Can you speak to the reputation of these potential investors that you’re speaking to?

Thomas Granville

They are fundamental investors. They certainly are not structural investors.

Brad Warnecke - Warnecke Investment Group

All right, great. Good luck with that, because that’s going to be a very important step going forward and congratulations on the work to date. We appreciate it. I know you’re putting a lot of time and effort into [ph] [gaining sales] lined up for them.

Thomas Granville

Thank you.

Operator

Our next question is from William Blanchard a Private Investor.

William Blanchard - Private Investor

Good morning, Tom. In today's PR you had a quote, we feel and our strategic partners feel that the PowerCube can provide a variable option, and I note that you said the word partners with an S on the end. So, I have some question’s about that, partners could be two or it could be significantly more than two and it could be, you’ve already mentioned that the financial people are talking to you, but there is system integrators or just inverter companies. So, I’m wondering how are you prioritizing your scarce recourses to talk to different types of strategic partners, and can you tell us who you’ve actually made proposals worth, and who you’re still hoping to get on board with? Not to but ideal idea of how many or the types. Thank you.

Thomas Granville

Yes, it's more than just one or two types. I think I mentioned in my comments this morning the owner of the existing New Jersey asset that we’re, and I am getting a back feed here so excuse me just a minute. Okay, now I think that’s better. That entity purchased PowerCube from us back in October. That’s a continuing customer for example. These last four have gone to that same group. They are separate in distinct projects in separate and distinct locations, but it is with the same customer. I think I mentioned institutions. More than one are interested in our product, in purchasing our product for their use as an investment tool. And so, there are more than one of those. There are also other customers -- potential customers that have other uses for the product such as solar and really want the solar to do a job for them, to power a plant that they have or to power an apartment, complex more than one apartment, complexes. So, it's across the board -- all types that will use the product to do different things.

William Blanchard - Private Investor

Okay. But are you trying to mostly go alone with this or are you working with large system integrators or inverter companies making joint proposals or responses to RFPs?

Thomas Granville

So it depends on the individual project. There are some things that we can’t do. So, when you’re not good at something, get help and that’s what we’ve done. And there are certain things that other of these companies can’t do. And they have come to us to do it jointly for example where you need a long storage time, four hours or more worth of storage that’s not really us. Where you need fast response, a millisecond response that isn't most of them. Them being the other providers of storage, they can’t do the fast response and so it makes sense for us to do joint proposals with them in those instances. In other instances such as New Jersey and this last order in particular we’re going in alone. There isn't any, well we obviously have a solar installer and a solar integrator that we partnered with, but we're going in alone as far as the storage entity is concerned. So, it depends on the particular project and the projects needs.

Operator

Thank you very much. This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Granville for any closing remarks.

Thomas Granville

Thank you, and thanks to all of you for listening today, and thanks to all of you for the support that you’ve shown over time. It's been a long process. It's been a difficult process at times. It's been a very difficult process at times for us and certainly for you the loyal shareholder base. We appreciate you sticking with us. We are emerging and showing progress in terms of sales, in terms of organization, in terms of what it is that we’re doing here, and in terms of being recognized as a market player. I can’t say enough about what I think these few sales will do for us, because one of the questions that I get all the time and then our sales people get is; okay, where do you have a few of these? Where do you have one of these? And our response in the past has been, well we have one site here at Axion come and see it, and that’s been useful, that’s been very useful for us because people can come in and tour and see exactly what it is that we’re doing in real time. But there comes a point in time when you have to show something that’s out in the field. And the recent orders that we have, the install that we’ve already done will address that. And I think they will be a major asset in helping to give us credibility going forward. Thanks again, and we’ll see you next time.

Operator

Thank you, sir. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. Take care.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Axion Power International's (AXPW) CEO Thomas Granville on Q1 2014 Results - Earnings Call Transcript
This Transcript
All Transcripts