Investor Relations

Quarterly Update - Second Quarter 2008

Second Quarter 2008 Highlights

Revenue for the second quarter totaled $3.4M representing an increase of 470% compared to the same quarter last year
The Company shipped a record number of units during the second quarter: 35 BalanceTM Hybrid Electric, 14 CitiBusTM Series Hybrid Electric shuttle buses and 37 Force DriveTM Electric vehicle systems
Key deliveries were made to FedEx Express, AT&T, Pennsylvania Department of Transportation and several others
The Company signed its first four dealerships with a Sales & Service agreement that allows each of the dealerships to service the growing market demand for Azure’s vehicles

“The second quarter was a watershed period in meeting Azure’s commitment to commercialization,” said Azure Dynamics’ Chief Executive Officer, Scott T. Harrison. “Production began on our BalanceTM Hybrid Electric, integrated on the Ford E450 Chassis, and orders and revenue are following. Customers using the vehicle report that it is meeting or exceeding expectations from both a performance and cost metric. The BalanceTM Hybrid Electric was designed and built to serve the delivery vehicle market niche and all of our indicators, including increased sales and growing interest from potential customers, suggest that the market is responding favorably.”

Financial Results

Revenue for the second quarter of 2008 totaled $3.4 million compared to $0.6 million in the second quarter of 2007. For the six months ended June 30, 2008, revenue totaled $3.8 million compared to $0.7 million in the same period a year ago. The increase in revenue for the three and six months ended June 30, 2008 was due to shipments of BalanceTM Hybrid Electric, Azure CitiBusTM and Force DriveTM Electric products. Net loss for the second quarter of 2008 was $8.1 million, or $(0.03) cents per share, compared to a loss of $6.9 million or $(0.03) cents per share in the second quarter of 2007. Net loss for the six months ended June 30, 2008 was $16.0 million, or $(0.06) per share, compared to a loss of $13.4 million or $(0.07) per share in the same period a year ago. The higher loss for the three and six months ended June 30, 2008 is primarily attributable to higher levels of engineering expenses and negative gross margin. Engineering expenses were higher as a result of the Company’s ongoing technology development. Negative gross margin is primarily the result of negative production variances typically associated with lower volume early stage production.
Before contributions, the Company’s engineering, operations and product development expenses for the quarter totaled $5.7 million (including $3.4 million in product development costs), compared to $4.2 million for the same period in 2007 (including $2.4 million in product development costs). For the first half of 2008, the Company’s engineering and R&D expenses totaled $10.5 million (including $5.8 million in product development costs), compared to $8.5 million in the first half of 2007 (including $4.8 million in product development expenses). During the second quarter, the Company focused on the production and sale of its BalanceTM Hybrid Electric program and component development, as well as ongoing production activities associated with a CitiBusTM a Series Hybrid Electric shuttle bus and Force DriveTM Electric components.
As of June 30, 2008, the Company’s net cash and cash equivalents totaled $5.4 million, and working capital totaled $17.5 million, compared to cash and cash equivalents of $16.8 million, and working capital of $19.6 million, as at June 30, 2007, and cash and cash equivalents of $24.1 million, and working capital of $32.3 million, as at December 31, 2007. The reduction in net cash and cash equivalents from December 31, 2007 is mainly due to cash used in support of product development and the Company’s ongoing efforts to commercialize its products.
The Company’s fiscal 2008 second quarter financial statements and MD&A are available at www.sedar.com or on the Company’s website at www.azuredynamics.com.

Product Developments

Series Hybrid Electric (G1):

Purolator’s fleet of 49 G1 hybrid vehicles has accumulated over 700,000 miles as of June 30, 2008. The vehicles are deployed in Montreal, Ottawa, Toronto and Vancouver. Two of the 19 diesel hybrids have now surpassed three years in service, while the 30 G1 gas hybrids will soon be approaching a year and a half in service.
As of June 30, 2008 the Company had completed assembly of all 59 units in the G1 hybrid cab chassis production run at Product Concepts Inc. Orders have been received for 15 of the 59 which were delivered to Startrans for body build for various customers including Pennsylvania DOT within the quarter.

Balance Hybrid Electric (P1):

The Company delivered 20 pre-production step vans to FedEx Express in California and the vehicles began revenue service.
The Company initiated the accelerated seven year Altoona durability test on the shuttle bus variant. The Altoona testing is expected to be completed in the third quarter, at which point the BalanceTM Hybrid Electric shuttle bus will be eligible for funding programs administered by the Federal Transit Administration (FTA) in the United States.
An order for 15 hybrid chassis from AT&T was received. These AT&T chassis were hybridized within the quarter and will begin service in the third quarter once their body builds are complete.

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

Within the quarter, Azure delivered one LEEP FreezeTM system to Kidron which is being used for sales and marketing purposes.
Within the quarter the Company continued the development and build of the first demonstration LEEP LiftTM system as part of the memorandum of understanding (MOU) with Altec, a leading manufacturer of aerial boom trucks.

Force Drive (Electric Solutions):

During the quarter, Azure continued the controlled production of its Force DriveTM systems planned for delivery against a 200 unit release within the supply agreement with Electro Autos of Mexico. Azure’s scope of supply for the 1,000 Force DriveTM systems includes the motor, controller, gearbox and 12 V converters.

The Company’s fiscal 2008 first quarter financial statements and MD&A are available at www.sedar.com or on the Company’s website at www.azuredynamics.com.

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Quarterly Update - Q3 2007
Quarterly Update - Q2 2007
Quarterly Update - Q1 2007
Annual Update - Q4 2006
Quarterly Update - Q3 2006
Quarterly Update - Q2 2006
Quarterly Update - Q1 2006
Annual Update - Q4 2005
Quarterly Update - Q3 2005
Quarterly Update - Q2 2005
Quarterly Update - Q1 2005