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John Petersen
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John Petersen is the executive vice president and chief financial officer of ePower Engine Systems, Inc., a Kentucky-based enterprise that has developed, built and demonstrated an engine-dominant diesel-electric hybrid drivetrain for long-haul heavy trucks that promises fuel savings of 25 to 35... More
My company:
Fefer Petersen & Co.
My blog:
ipo-law.com
  • The ABC's Of Axion Power's Business Execution And Price Performance 16 comments
    Feb 5, 2014 2:21 PM

    As most of my followers know, Axion Power International (OTCQB:AXPW) has endured the price chart from hell since late 2009. Since I'm a former Axion director and worked as its legal counsel for several years, I've always believed the price chart was 180° out of synch with its business execution. I've also believed the declining stock price is purely a function of supply and demand dynamics in the stock market.

    This morning I decided to put together a quick graph that shows Axion's stock price; 100-day moving average trading volume and 100-day moving average daily liquidity since December 2009. The beige bar at the bottom is a reference key that shows when a variety of corporate events occurred. Financing transactions are highlighted in red and business execution events are in simple black type.

    (click to enlarge)

    The events identified on the stock price chart are summarized in the following table.

    (click to enlarge)

    While I showed the business execution events in black on the price graph, I've highlighted several execution events in green because I believe they're extraordinary for a nano-cap company that carries a fully diluted market capitalization of less than $25 million.

    When I look at the list of business accomplishments I'm delighted to see the orderly conclusion of a development process that began in September 2003 with a crude laboratory prototype and finished up in March 2013 with the commissioning of a continuous roll carbon sheeting process that makes the PbC technology portable by giving Axion the ability to build electrode fabrication facilities anywhere in the world.

    When I look at the list of disclosed development partners I'm floored because my experience is that first tier companies don't associate with nano-caps, and if they do they certainly don't allow the nano-caps to mention their names in public. Until September 2010, I had never heard of a case where a first tier company publicly wrapped its arms around a nano-cap company that was still engaged in R&D for a promising technology. Before July 2013 I had never seen a case where a first tier company publicly identified a nano-cap as an industry partner. By November 2013, a second joint presentation with a first tier company at an industry event was almost old hat.

    I spend a lot of time communicating with Axion stockholders who worry that there's no clear path to sustainable revenues. When I look at Axion's history over the last four years and factor in all the challenges Axion had to overcome in order to simply survive until December 2009, I can't see any reason beyond my own insecurity to question the competence of management or the ultimate market acceptance of the PbC. It's a hell of a battery.

    By nature I'm a very impatient person. I want what I want and I want it right now. Ten years of experience in the battery industry has taught me that progress in electrochemistry is far more difficult than I ever imagined it could be, but Axion's management team has never failed to attain a critical business objective. The only expectations I've had that went unsatisfied arose from my own naïve assumptions about timing and the behavior of other investors who bought stock in Axion's 2009, 2012 and 2013 offerings.

    Disclosure: I am long AXPW.

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Comments (16)
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  • alsobirdman
    , contributor
    Comments (431) | Send Message
     
    Well put, John. One of the reasons I built such a large position here is that I know that companies like NS would NEVER publicly name a company like Axion as a partner unless they fully intended to have a long and fruitful partnership with them. The only thing that could possibly change that would be if another technology came along that blew Axion out of the water on price, performance and all of the other characteristics of the PbC and I certainly don't see that happening any time soon. Sure, things have not moved as quickly as we would like, but I've been involved in project management at large companies for a good share of my career, and sometimes that's just the way things work.

     

    Add in the Power Cube, ePower, etc. and it's all just gravy on the potatoes.
    5 Feb 2014, 02:45 PM Reply Like
  • ARGE
    , contributor
    Comments (724) | Send Message
     
    "only thing that could possibly change that would be if another technology came along."

     

    Or a big honking Federal grant to test a dead end technology.
    http://nbcnews.to/1b2UGEU
    5 Feb 2014, 04:16 PM Reply Like
  • ARGE
    , contributor
    Comments (724) | Send Message
     
    " PbC...portable by giving Axion the ability to build electrode fabrication facilities anywhere in the world."
    Any idea when or where (or how much it cost) they are going to do that, given that BMW has stated that they want that to happen before making any cars with a PbC under the hood?
    5 Feb 2014, 04:07 PM Reply Like
  • John Petersen
    , contributor
    Comments (30629) | Send Message
     
    Author’s reply » I think the ideal situation would be to have an electrode facility in close proximity to where the electrodes will be used. IIRC, each electrode line is designed build the electrode assemblies for about 150 PbCs per shift, or 360 batteries a day. Each carbon sheeting system can apparently cover the requirements for four or five electrode lines. With that kind of modularity you could pretty well size your electrode fab facility to match the capacity of a single plan, and be scalable over time as demand grows.

     

    If Axion cuts a deal with another battery manufacturer I'd expect the electrode assemblies to ship from New Castle in the early days and be built in a new facility after the relationship matures and the demand picture firms.

     

    Were I in Axion's position, I'd probably try to negotiate agreements with other battery manufacturers that provide for joint ownership and operation of the electrode plants that serve their facilities. That would give Axion a better ability to control its IP and ensure proper quality while protecting the larger partner in case something bad happened to Axion. Until a deal is struck, however, there's just no way to tell what the terms might be.
    5 Feb 2014, 04:27 PM Reply Like
  • ARGE
    , contributor
    Comments (724) | Send Message
     
    I think it would be nice to have another carbon sheeting system in a (for lack of a better word) DR site a few 100 miles away from the money maker. I think an enterprise zone somewhere would be willing to foot the bill (I have seen worse ideas) and give some publicity as well.
    5 Feb 2014, 07:14 PM Reply Like
  • PbC Believer
    , contributor
    Comments (258) | Send Message
     
    John,

     

    "IIRC, each electrode line is designed build the electrode assemblies for about 150 PbCs per shift, or 360 batteries a day."

     

    You state this as if were a fact, so may I ask where this kind of information comes from?

     

    PbC Believer
    26 Feb 2014, 11:50 AM Reply Like
  • John Petersen
    , contributor
    Comments (30629) | Send Message
     
    Author’s reply » There were several 2009 and 2010 vintage stories about Axion's desire to build a 10-line facility that would make electrodes for a million batteries a year. That works out to 100,000 batteries per line per year, or roughly 400 per line per day based on a 250 day work year. I was also a board member when the original design specifications were adopted, but I don't talk about things that haven't been publicly disclosed by Axion.
    26 Feb 2014, 12:01 PM Reply Like
  • PbC Believer
    , contributor
    Comments (258) | Send Message
     
    I have no recollection of such stories but there was a federal grant application that Axion failed to receive. I though that perhaps you had gotten a copy of that application via the FOI act.

     

    Axion also runs the plant tours every year and a keen eye and the ability to count teaches the observer many things about manufacturing processes and facilities, and when shown to one without restriction, it is shown to all without restriction - you have little to worry yourself about on this one.

     

    PbC Believer
    26 Feb 2014, 01:13 PM Reply Like
  • froggey77
    , contributor
    Comments (2846) | Send Message
     
    I believe it came out shortly after they leased the second Plant.
    Basic questions of how big and how many lines and how that translated into carbon sheets could be made at one time. The sheets would be transferred to a factory to make the actual batteries. (Axion's or someone else's.)

     

    There may be more room than we thought at the time.
    I assume that with the machine making the sheets it takes less space than hand making of them. (Which they were doing at the time.)
    Whether this is a significant amount of space and might allow for an additional line(s). I have no idea.
    1 Mar 2014, 06:19 PM Reply Like
  • bazooooka
    , contributor
    Comments (3606) | Send Message
     
    JP, looks like we haven't had a spike since Jan. 2012. Was that because of the PowerCube commissioning 5 weeks earlier? Or were there technical factors that foretold the demand overtaking supply and will that happen again in the near term?
    5 Feb 2014, 08:54 PM Reply Like
  • John Petersen
    , contributor
    Comments (30629) | Send Message
     
    Author’s reply » That spike was the wind down of selling pressure from the big uglies. If you'll think back Quercus was out by then and Special Sits held a big year end blow out sale that took them off the supply side of the equation too.

     

    Unfortunately the spike was a very short-lived respite because Axion closed the next financing round in February 2012 and immediately took the wind out of the market's sails. Without an immediate follow-on financing I think the chart would look very different today.
    5 Feb 2014, 09:00 PM Reply Like
  • Ikechowanec
    , contributor
    Comments (147) | Send Message
     
    JP I've been following AXPW and your articles for about 6 months. They have the technology and business contacts, but what info do you have about day to day operations. Everyone talks big picture, but what about the small details. Shifts being run, product shipped, ability to keep the lights on, etc... As a small business owner I feel the little things are very important and will show how strong a company is. The details of daily operations will always get you through the hype.
    12 Feb 2014, 10:25 AM Reply Like
  • John Petersen
    , contributor
    Comments (30629) | Send Message
     
    Author’s reply » Axion's primary revenue over the last few years has come from a flooded battery manufacturing contract with East Penn. They've used that contract as a base to train manufacturing staff and help support ongoing activities on the PbC. Their quality and cost controls are extraordinary and the management team throws nickels around like manhole covers. Given the variety of things the company is pursuing I'm continually amazed at their quarterly cash burn under $2 million.
    12 Feb 2014, 10:40 AM Reply Like
  • froggey77
    , contributor
    Comments (2846) | Send Message
     
    I can't understand how people can believe things are not moving forward.
    Yeah not on the timeline I wanted or expected. I thought the Exide deal was the breakthrough that would get the ball rolling. Unfortunately, they were in financial straits I did not understand and morphed into a shark that cheated and then tried to eat Axion.

     

    Still events are clearly happening faster and faster. A bunch of PC sales happening soon would be very nice though.
    EPower as well. :-0 Thanks John.
    12 Feb 2014, 02:09 PM Reply Like
  • PbC Believer
    , contributor
    Comments (258) | Send Message
     
    Froggey,

     

    The skepticism comes from the lack of PbC product related sales, be they large or small PowerCube systems or just PbC batteries that go into cars, trucks, planes, trains, or boats for whatever use.

     

    The first marketable PbC batteries came into being five years ago in 2009, and so Axion has now had five years of practical experience in attempting to sell these PbC batteries and battery systems. Look through John's list of events above and note the 'PbC sales' events or should I say the lack thereof.

     

    The PbC battery related revenues have been so small that Axion doesn’t even report the PbC sale in their financial statements - such sales are just AXPW 'news' events that occur oh so infrequently.

     

    This is not the PbC revenue performance that Axion has predicted either verbally or in the various written documents that they produced in the course of their fund raising efforts.

     

    The simple fact is that Axion's management has failed to produce the PbC sales revenues that they themselves said would be made to happen. The shareholders did not say to AXPW that they must do this or that in the way of PbC sales. It was management that said to the investors that certain PbC revenues would come to be in a particular time frame and it is management that has failed to make it happen. John's perpetual excuse that these things take time rings hollow in this matter because it is management's job to know how long things take and to make their predictions on the realities of their situation. If management didn't know how long things take then that in and of itself is a failure of management.

     

    As investors in a public corporation we should also be asking what actions Axion's board of directors has taken through all of these PbC revenue prediction failures? Why has the management team not been held accountable, and what changes or corrections in the in the management of AXPW have been initiated by the board of directors? What resolutions have been passed by the Board with the intention of correcting the problems?

     

    As I understand it these minutes and resolutions are a matter of semi-public record and are accessible to interested shareholders who have cause to see them - I think that we have cause based simply upon this recent PIPE dibacle. Perhaps it is time that we shareholders took a serious interest in what's being done by this board to protect our long term investments that management has caused to be so horrifically diluted?

     

    On the other hand if management does come in with PbC sales of at least $2 million in first quarter and $4 million in the second quarter - all may be forgiven and Axion lives on.

     

    PbC Believer
    26 Feb 2014, 12:52 PM Reply Like
  • John Petersen
    , contributor
    Comments (30629) | Send Message
     
    Author’s reply » Axion had crude pre-commercial prototype in 2009. It did not exit the development stage or have a fully manufactured commercial product until this time last year when the automated carbon sheeting process was commissioned. Since I wrote the original versions of the fundraising documents you mention, I know full well that they always spoke about the hurdles to be overcome before Axion would have a commercially acceptable manufactured product. I also know full well that Axion's disclosure documents have never predicted a timeframe for commercial product sales or established revenue targets. Board minutes are never available to stockholders.

     

    I take a very dim view of factual distortions in the comment section of my Instablogs and unlike the main pages where SA retains all moderation power for its staff, I have the right and the responsibility to moderate comments here.
    26 Feb 2014, 01:52 PM Reply Like
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