Capstone Green Energy Corp (CGRN) 2007 Q3 法說會逐字稿

Welcome to the Capstone Turbine fiscal year 2007 earnings conference call. [OPERATOR INSTRUCTIONS] As a reminder, this conference is being recorded for replay purposes. I would now like the turn the presentation over to the Vice President of Financial Planning and Analysis, Mr. Ed Reich. Please proceed, sir.

Thank you. Good afternoon, and welcome to Capstone Turbine Corporation conference call for the third quarter ended December 31, 2006. I am Ed Reich, your contact for today's conference call. Capstone filed its quarterly report on Form 10-Q with the Securities and Exchange Commission today February 9, 2007. If you do not have access to this document and would like one please contact Alice Barsoomian at 818-407-3628 or you can view all of our public filings on the SEC website at www.sec.gov.

During the course of this conference call management my make projections or other forward-looking statements regarding future events or financial performance of the Company within the meaning of the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. These statements relate to, among other things future financial performance and attaining positive cash flow, the ability to reduce costs and improve operational efficiencies, aftermarket service potential and remanufacturing opportunity, potential for licensing and selling certain technologies, revenue growth and increased sales volume, our success in key markets, our ability to enter into relationships with channel partners and distributors and other third parties, increasing our focus on customers and building strong long-lasting customer relationships, our ability to improve the efficiency of our sales group, and to improve sales effectiveness and execution and our ability to finalize and commercialize the Company's C200 products.

These forward-looking statements are subject to numerous assumptions, risks, and uncertainties including the following--Our expectations about expansion into key markets may not be realized, certain strategic business initiatives and relationships may not be sustained, and may not lead to increased sales, we may not be able to reduce costs or improve customer satisfaction, our release of new products may be delayed or new products may not perform as we expect, our expectations with respect to aftermarket service, remanufacturing, and licensing and sale of certain technologies may not be realized, and we may be unable to increase our sales and sustain or increase our profitability in the future, we may not be able to obtain or maintain customer, distributor, and other relationships that result in an increase in volume and revenue; we may not be able to retain or development distributors or dealers in our targeted markets in which case our sales would not increase as expected. If we do not effectively implement our sales, marketing, service, and products enhancement plan, our sales will not grow and therefore may not generate the net revenue we anticipate. These are among many factors which may cause Capstone's actual results to be materially different from future results predicted or implied in such statements.

We refer you to the Company's Form 10-Q, Form 10-K and other recent filings with the Securities and Exchange Commission for a description of these and other risk factors. Because of the risks and uncertainties Capstone cautions you not to place undue reliance on these statements which speak only as of today. We undertake no obligation and specifically disclaim any obligation to release any revision to any forward-looking statements to reflect events or circumstances after the date of this conference call or to reflect the occurrence of unanticipated events. I will now turn the call over to Darren Jamison our President and Chief Executive Officer.

Thank you, Ed. Good afternoon and welcome, everyone. With me today is Mark Gilbreth our Executive Vice President and Chief Technology Officer; Chuck McBride our Executive Vice President and Chief Financial Officer; and Jim Crouse our new Executive Vice President of Sales. I would like to take a minute and thank Mark Gilbreth for his hard work and dedication as the interim CEO of Capstone. Mark did a great job in the last six months leading this organization during difficult times. Reaching out to -- Mark reached out to several key customers to start rebuilding our relationships. The overall strength of Mark, Chuck, and the entire Capstone management team is one of the key reasons I decided to leave my position as President of Northern Power and accept the position of President and CEO of Capstone.

In fact, I must say in my first 40 days at Capstone that is one question I have been asked repeatedly by investors, analysts, and members of our industry. What made me decide to resign by position as President of Northern Power and accept this position at Capstone. Well, in short the answer is it was an opportunity that was too good to pass up. In my 18 years in this industry I have become very familiar with Capstone and its revolutionary air bearing technology but like many other distribution partners I found it difficult to work with Capstone and moved onto selling competitive products. However, I strongly believe that not only does Capstone have the best microturbine solution but they have the best solution for distributed generation below 2 megawatts. I believe this because of my years of experience in developing, installing, and servicing and variety of distributed generation technologies.

I believe most customers below 2 megawatts do not want a solution that requires frequent maintenance and the amount of schedules and had preventive maintenance required by engines is too much for a small customer to deal with. Also, the reliability and redundancy you get from a microturbine solution is favorable compared to reciprocating engine solutions.

The second reason I decided to join Capstone is I believe that my strengths accent Capstone's weaknesses. I have a proven track record in sales, channel development, marketing, service, and generally driving the overall top line growth. As I look at Capstone, I see a company with a tremendous product that really should dominate its market but has not managed to build the necessary channel partners, customer relationships, to grow the business to profitability.

In addition, I see a tremendous yet mostly untapped aftermarket service potential and remanufacturing opportunity that has yet to be harvested. In addition, capstone has a tremendous potential for licensing and selling our air-bearing and power electronic technologies I see these opportunities as very significant, but will not let them detract from our core business of manufacturing the world's best microturbine product. Overall, I see Capstone as an excellent company with tremendous opportunity but has failed to execute on a front end and the back end of the business cycle. Fortunately, improving these area sincerely one of my strengths, and I believe that is why the Capstone Board selected me for this position. At this point I would like to turn the call over to Chuck McBride, our Executive Vice President and Chief Financial Officer to review the third quarter financial results. Chuck?

Thank you, Darren. Good afternoon, everyone. I would like to provide you with the results for the third quarter and December 31, 2006. Backlog at the end of the quarter was $8.1 million which increased over 19% from the prior quarter although decreased 19% from the same period last year. Our revenue for the third quarter was $5.7 million which improved 97% from $2.9 million in the prior quarter although decreased approximately 19% from the same period last year. Our gross loss for the quarter was approximately $0.5 million or 8% of revenue compared to $2.8 million or 39% of revenue from the same period last year and $2.3 million or 79% of revenue from our prior quarter. The improvement in gross loss reflects higher volume, improved product mix, decreasing warranty, and depreciation charges. This is the lowest reported gross loss for the Company since 2001.

Research and development costs were $2 million for the second quarter which improved $1.1 million or 35% from the same period last year and $600,000 or 23% from the prior quarter. Expenses declined primarily due to reduced payroll, consulting and development hardware costs as well as increased contract recoveries. SG&A expenses were $6.4 million for the quarter, an improvement of $2.6 million or 29% from the same period last year. The improvement is primarily attributable to lower marketing, payroll, professional fees, and legal settlement costs offset by approximately $300,000 of increased non-cash stock compensation. SG&A expenses increased $300,000 or 5% from the prior quarter, the increase from the prior quarter is due to executive hiring costs from increased facilities expense offset by decreased administrative costs associated with our annual shareholder meeting.

Total third quarter operating expenses were $8.4 million which improved $3.7 million or 31% from the same period last year and improved $300,000 or 3% from the prior quarter. Our third quarter net loss was $8.5 million or $0.08 per share, an improvement of $1.9 million from the $10.4 million loss or $0.10 per share reported for the second quarter of 2007. Cash balances decreased by $13.8 million during the third quarter. The cash decrease consisted primarily of $8.5 million net loss and changes in working capital of $6.1 million.

Changes in working capital were primarily the result of higher accounts receivable due to increased sales in the quarter and decreased accounts payable and accrued expenses. As of December 31, cash and cash equivalent were $25.5 million. On January 24, the Company completed an equity offering previously announced on January 19. The offering of common stock and warrants pursuant it our shelf registration was at an offering price of $1.14 per unit which was $0.07 below our closing bid price on Thursday -- excuse me, $0.07 above our closing bid price on thursday, January 18. We issued 40 million shares of common stock and warrants to purchase 20 million shares of common stock. The five-year warrants are immediately exercisable at an exercise price at $1.30 per share. The net proceeds from the offering were $42.4 million. Let me turn the call back over to Darren.

Thank you, Chuck. As I look at the third quarter results I am encouraged by 97% improvement in revenue over the prior quarter, but I must say I am most encouraged by the continuing downward trend in the operating expenses and dramatic reduction in gross margin loss from 79% to 8%. I believe that much of the market misunderstands our gross margin rates and how much volume, product mix, and warrant costs impact our margins. Obviously we must drive deposited gross margins before we can drive to an overall cash flow positive position.

In my short time at Capstone I have seen that our direct product margin is sound, however historically our margins have been impacted by warranty adjustments, inventory charges, as well as the need to have sufficient volumes to cover the fixed manufacturing costs. I am also encouraged by the 19% increase in backlog to 8.1 million despite our continued effort to gain traction in several key markets like New York, Connecticut, Asia, and GSA, or the U.S. Government.

I would now like to take a minute to outline my 100-day plan for the Company and then I will open the call up for your questions. In my first 100 days as CEO of Capstone my primary focus is on the following four areas--First maintain a strong balance sheet to ensure the Company has the right foundation for which to grow the organization. Second, increase the number of unit sales and provide top line revenue growth. Next, we must reduce the costs of selling and reduce R&D expenses. Finally, we must become a customer and market-driven company.

Let's start with the first item on my list, our balance sheet. As you know and Chuck mentioned we recently went to the capital markets to raise an additional 46 million in cash. Obviously this was an extremely difficult decision because of the dilution effect to our valued shareholders. However, as I looked at the Company, I was not comfortable that we could reach positive flow, cash flow positive and have any significant cash reserve left on the balance sheet. I could have decided to do wait to go to the capital markets until after the earnings call, but I firmly believe that you should never try to time the market.

My second point, in order to increase our top line revenue, we need to improve our sales execution, bring on new channel partners, and new OEMs. To this end I have hired Mr. Jim Crouse who is a 20-year industry veteran to lead our sales and marketing efforts. I have previously worked with him on several -- previous companies, and he has a tremendous experience and industry knowledge as a result of having sold in excess of 200 megawatts of distributed generation projects. Jim will provide the necessary leadership to help restructure our salesforce, to improve our overall costs from selling, and sales effectiveness.

I have had several meetings with current and potential channel partners aimed at improving results from the current channels and adding new partners where we have holes in our distribution network. In the coming weeks we will expect to announce several new channel partners to help broaden and strengthen our customer outreach and grow top line revenue. I have also begun to search for an industry veteran to lead and grow our service and remanufacturing. With only a small number of our units under long-term service agreements, this is a great untapped revenue stream for Capstone. I plan to fill the position quickly and drive to a more traditional razor and razor blade strategy with our after-market parts, service, and remanufacturing business. The third area of focus will be selling and R&D expenses.

Frankly, Mark had started to make some progress in reducing costs in these areas, but we're still too heavy for a company our size. We must drive our cost of selling from today's approximate 44% to 10% with increased volume and lower direct costs. In order to do this we must improve the efficiency of our sales group and also stop selling direct wherever possible. We must move to establish strong distributors and leverage their experience to get our product into the market. Too much is being spent on R&D, and I will move to lower costs as we transition from an R&D company to a continuing engineering product company. In addition, I will look for a strategic partner to help fund the tooling and remanufacturing expenses related to the final development and commercialization of the C200 product.

Lastly, I will focus on reshaping capstone into a more customer-focused and market driven company. I have already begun by meeting several of our large customers, and my entire management team will be assigned a customer as a corporate response or to make sure we stay close to the market and build strong, long-lasting customer relationships. I will also personally chair a Distributor Advisory Council who will focus on the market needs of the distributors and the OEMs. By listening to go our channels and using that feedback to drive our current product development, we will increase revenue and volume and build strong channels to market and satisfied repeat customers. I would like to now open the call up for questions, operator.

[OPERATOR INSTRUCTIONS] Your first question comes from the line of Sanjay Shrestha with First Albany.

This is actually Brian calling in. Just wanted to know, are you guys comfortable now with the current capital after the $42 million offering to execute and actually gets towards profitability? Kind of go into what are the main challenges involved in this.

Hey, Brian, this is Darren.

Hey, Darren.

Good to hear from you. We'll take that in two parts. The first question being are we comfortable with the capital we raised getting us to profitability. I think as we've talked about before the management believes that Q4 '08 or March of '08 we're going to get to cash flow positive. That was with the current cash position. I think definitely with this additional raise we've got more than enough cash to get to that position as we'll have cash on the balance sheet for strategic purposes going forward.

Second part of your question is what are our challenges. Obviously that made our statements Capstone has not been as customer friendly, market driven, and built the type of long-term relationships both in the channels and in the customers that we need to be successful, so I think it is a easy thing for me to do with my experience, but it is going to take some time to rebuild those relationships, grow the top line, and then obviously we need to take some costs out of the business as well.

The only other thing, I guess, is just is this more of a Jim thing post MEA, May of '06, is sales going to pick up in new York City or is this going to be more demonstrations with no follow-up or what kind of time line is that going to be?

We've got about 12 projects going through NYSERDA right now. I believe we talked about that on previous calls. The MEA is opening the gates for us, so it is just a matter of time of getting those projects through NYSERDA then going to full contract. So we're really seeing the projects move through the pipeline and we hope to in the next quarter or two start showing bookings and results for those projects.

Thanks a lot, guys. Appreciate it.

Thank you.

Your next question is from the line of Walter Nasdea with Ardour Capital. Please proceed.

Good afternoon, guys. Kind of a follow-up a little bit to that last question about how things are coming here in New York, can you give a little color on the buildout in Brooklyn and how the facility is coming and then are you getting any product in there to start assembling and pushing out the door and an overview of that?

Currently the lease is in place. We are going through potential buildout. We have not decided exactly what will be manufactured in New York. We're reevaluating obviously all of our current plans from a global distribution perspective, so we're definitely going to have a roll in New York and be big players in New York, but how much that role is going to be we're still up in the air at this point, Walter.

Now, you're talking about establishing a distributor network, distribution network. The prior -- not the management team before you, but the prior one to that had a fairly significant distributor network that wasn't really working that well, and then kind of we shifted away from that, and now it looks like we're coming back to it again. What plans, and I'm sure you've got some good ones but what plans do you have in place to ensure the issues that were happening before don't recur?

Great question, Walter. I was actually one of those distributors in Northern Power, and I know several of the other distributors during the time frame you're speaking of. The problem we had is that Capstone management at that time handed out fishing licenses so to speak but didn't teach distributors how to fish. So they got frustrated with those distributors and decided to go direct or to fewer distributors and moved to where we are today. The real issue is getting the right distributors that are dedicated but not necessarily exclusive to the product.

Another issue we had in the past is they wanted distributors to be exclusive to the product which limited the types of distributors you could have and frankly, push you towards under capitalized small distributors with. With my experience base and Jim's as well we're looking at distributors that are currently in the industry representing similar but accent type products that would represent the product in a dedicated fashion but would not be exclusive. So I think that we can get the right folks in place with the right balance sheet, the right experience, build long-term relationships and is teach them how to fish. I think that the previous management had the right idea, they just didn't have the right approach and frankly probably didn't have people from the industry to manage that channel.

Okay. Do you have any clarification or color on the KeySpan relationship? Is that moving forward or is that stalled or where are we at on that?

KeySpan has been purchased from my understanding by National Grid. We have had meetings set up recently and will continue to push that relationship. I think in New York our issue is more getting through the MEA process and through the NYSERDA process than it is getting enough leads to move to market.

Can you give me just a rough ballpark on your manufacturing, current manufacturing capacity?

Yes. We can build about 2,000 Machines a year with the capacity we have today. We probably had a couple hundred thousand dollars worth of capital expenditures, but frankly, one of the reasons we struggled to get to positive gross margin is the founders of the Company blessed us with over facilitation. We can greatly increase our manufacturing capabilities without adding additional capital expenditures.

Good. Any progress on the 250 kilowatt Machine?

200 kilowatt Machine is our Machine, Walter. We have four units in beta testing. We have got some design changes we're making, we've learned from the process, and as I mentioned in my comments, I am looking for preferably an industry partner to help give us some funding to buy tooling and to full that up to full production. I would hope we'll find that partner and be in full commercialization in probably 18 to 20 months.

Great. Just kind of a little offshoot on that, what's the footprint of that Machine in relationship to your existing products? Is it like five, ten times bigger or is it going to still kind of have a sleek Capstone look to it?

I would say it is probably a three times as big, maybe six feet by ten feet. That's how big the prototypes are today. Obviously we can get that probably a little bit smaller as we go into full production. When you build beta units, you're not worried about size as much as you are quality and making sure the product works and then we'll go and take some size out of it. It is still definitely a microturbine in a similar sleek package that we have today.

Great. Thank you very much, guys.

Thank you, Walter. Great questions.

Bye.

[OPERATOR INSTRUCTIONS]

Looks like those are the only two questions we have.

We actually do have more questions, sir. Your next question now comes from the line of [Abi Canatar] with RHO Capital Partners. Please proceed.

Hi. One thing I recall is you have 400 million of NOLs on your balance sheet. I was wondering how much of those in a scenario where someone else may be interested in the Company, how many of those are actually usable for let's say a strategic acquirer?

Abi, I am going to lateral this one over to Chuck.

Hi, Abi. The answer to that is the $400 million are all usable providing that you meet the tax law, and it is a complicated tax law subject to certain limitations, but I would tell you that as long as they are in the same line of business if you had a strategic acquirer, that, was in the distributor generation business, that met the IRS definition, subject to limitations they would be able to take advantage and use those tax NOLs on future profit streams.

Okay. And secondly, the revenue uptick this quarter and the backlog building efforts going forward, will they be going in any new directions? Will you be trying to add any new types of revenue streams to the existing product sales efforts?

Abi, this is Darren. Obviously the service revenue is -- we have some small service revenue today, but we've got close to 4,000 units that we've actually manufactured and maybe 10 to 15% of those under long-term service agreement, so we're definitely going to grow our long-term service revenue. We've got some remanufacturing opportunities. When you start thinking about the fleet as it ages and gets to 40,000 hours, we've got a huge opportunity for remanufactured engine sales at a very nice margin rate to repower those Machines for another five years of operation. I think you'll see us bring on some new distributors in some areas where we have holes in our current distribution, Connecticut, New Jersey, Massachusetts, to name a few. I think there are some other areas internationally we have not done as well as we should, and so I think you'll see some new top line growth from additional distribution and OEMs as well as additional parts and service revenue and remanufacturing growth.

Terrific. And does this also give you an opportunity then to sort of go in with a new message to existing customers and sort of repitch them with added service products?

Absolutely, it gives us the chance to repitch them. Frankly, with Jim and I's experience in the industry al lot of these customers are customers I've dealt with in previous roles or Jim has, so they're very comfortable with our integrity and us as business partners, and then we can repitch them on a long-term service program to really lock in those service rates. Yes, I think we've got a chance to not only get new customers, regain some old customers, and also build stronger relationships where we currently have relationships today, but maybe drive to higher level of relationship.

Great. And finally, any updates you can provide us on either the Wal-Mart opportunity, Shop Right opportunity or UTC Power?

I didn't hear the third one.

UTC.

Okay. Let's start with the last one. Obviously UTC has been a very important OEM for Capstone. I have known John at UTC from my Stewart & Stephenson days as well as any Northern Power days. I met with UTC twice in my first 40 days. Mark began to rebuild the relationship before I came on board and received a nice order from UTC. We have got another meeting set up here in Capstone later this month. I would say the UTC relationship is strong and getting stronger, and I am looking forward to building some really good growth with UTC and looking for ways to work even closer together. As far as Wal-Mart goes, that is a UTC customer. We have a unit that is in Colorado being tested on at a store now. I think it has been out there a little over a year. They go through a two to three-year testing cycle before they make decisions to move forward. I am proud to report the Machine is doing very well, but UTC is managing that relationship.

Shop Right?

Chuck, do you have any information on Shop Right? I am not familiar with -- that is not one I touched in my first 40 days.

No, I don't. I don't.

The final -- I mentioned I am going through these all because they're -- all if any one of them connects we all know they can lead to large repeatable order sizes. The final one that I didn't mention in the earlier list is the GSA.

Okay. Yes, we do have our GSA contract in place. We have been processing leads. In fact, we've got a bid that bids early next week that Jim Crouse has jumped on very quickly. Jim and I are evaluating, like I said, the whole global distribution strategy. We're taking a hard look at GSA and trying to understand why we have not gained more traction with that contract. As we continue to bid projects, continue to push forward, we'll be looking for ways to speed up the effectiveness and get more traction in that area.

Great. Thank you.

Thank you.

Your next question comes from the line of [John McCann] with Wachovia Securities. Please proceed.

Good afternoon, gentlemen. These strategic partnerships with UTC, Broad, KeySpan really haven't yielded very much in the way of results, and I have always -- I scratch my head and I wonder why. What needs to be done to tweak those relationships? Is it just the long lead times that are involved with working with Wal-Mart or something like that or are there other issues?

I think there's -- it is never an easy answer or Silver Bullet. I think Capstone has struggled to build long-term relationships in the past, so that may be some of the issues. We're going to jump in and get involved in all of those. I know on the Broad relationship Jim Crouse will be going over there later this month. We do have two C65 units that have been commissioned with Broad, and they're doing testing on it. Obviously Wal-Mart is doing testing. A lot of these relationships take time to get the customer comfortable with our technology and they want to see some run time on the machines before they move forward. With that being said, I am not happy with the speed and results and the traction we're getting in a lot of these areas. New York has been slower than I would anticipate. GSA has not yielded what we like, and a lot of other areas frankly, we can do better. The answer to your question is threefold, yes, we can do better building the relationship. Our sales effectiveness can be better, but a lot of it is timing to develop proper testing and protocol and moving to the sales process.

With these industry partners has Capstone actually taken an active part of the process with the ultimate customer or have you always been removed away from interfacing with potential customers?

I think in a lot of cases we've been one step removed, and it is not that we want to reach past our channel partners, but I think we need to stand shoulder to shoulder more often. From my background, I am very customer focused and I'm not used to not having direct access to the customer, so that's something we're going to change, and I am out seeing both channel partners and customers today, and part of what we're going to do on the service side in signing these long-term service agreements is finding all the units that are out in the field, making sure we touch those customers, make sure the units are running and they're happy with the product, and if they're not running or they're not happy with the product, get them up and running, reestablish a relationship, put in a SCATA system to make sure we can monitor them at our monitoring center here in Chatsworth and then sign long-term service agreements. I think you will see us in the coming quarters talk about getting closer to customers and managing these relationships a little more firsthand.

A follow-on question in the recent one or two quarters. There was mention of a certification of the offshore platform product. What kind of traction are we getting there? What is the sales effort? Is it directed by Capstone or are you going through your channel partners or what?

Currently -- well, first of all, the first question, we do have the certifications in place. We are getting traction in that market. We are currently going direct though my prior company Northern Power was a channel into that market, and I've got meetings scheduled next week with them to discuss possible ways we can work together, so I think we're going to obviously be involved direct but look for strategic partners that we can push going forward. Pemex was a big customer of mine at Northern and I think it is an area where I think I can help pull through some more customers and more sales here for Capstone.

And finally, any rough ideas on projections of when you will be cash flow positive?

Our projections are not changed. We're still projecting March 2008.

2008. Okay. Thank you.

Thank you.

Your next question comes from the line of Kent Holden with Gagnon Securities. Please proceed.

Good afternoon, gentlemen. You talked about manufacturing capacity of about 2,000 units per year, and I was curious if you hit at that run rate, or thereabouts, what kind of gross margin would we anticipate?

We can't unfortunately give you gross margin guidance, but I think you'll see that the run rates we're looking at today which are a fraction of that number we're very close to gross margin positive, so I think you can see that we're about to tip over the line.

You should keep in mind as well--.

I wasn't asking for guidance as much as I was as a target at a specific level of production.

Yes. As we go forward, I mean we'll target 40% gross margins.

Okay. And then as you switch back to selling to distributors rather than direct, what should we look at for an average selling price?

I don't think you would see much difference in average selling price per se because we do sell through channels and we supplement that with direct sales today. What we need to do is get more productive and effective with those dollars we're spending or the discounts won't change that route.

To be honest the majority of our sales we're getting today are not through our direct channels, they are through Europe and Russia and a lot of our strategic partners.

Okay. All right. Great. Thank you.

Thank you.

At this time there are no more questions in queue. I would now like the turn the call over to Darren Jamison for closing remarks. Please proceed, sir.

Thank you. Before I close, we've received several questions that came into our Investor Relations department and also they were posted on the message boards, and I want to make sure we hit all those questions for our folks and smaller investors not on the call. We hit a lot of them in the call, but I will hit a couple that we didn't hit. One is, what is the status of our SRS or elevator product. That product is in the early development stage, and we are just now finalizing our patent application. Obviously a little bit too early to give you a full target release date. We're very happy with the way the product is progressing and look forward to giving you more news next quarter on some release dates.

The next one that I am surprised frankly we didn't get to was how did Elliott get an MEA so quickly. I know Dave Dewitts at Elliotts from my days at Northern Power. We represented their product. They're very aware of the MEA that Capstone has been doing. As you know, Capstone laid the foundation for the MEA and approval in New York, spent over a year working with the Building Department and the New York City Fire Department, other regulatory authorities to complete the due diligence on Microturbine Technologies.

With the work and the trail that Capstone blazed and with the frequent conversation about the MEA on our earnings calls it is not surprising that Elliott received approval fairly quickly behind Capstone, and I would assume that Ingersoll Rand is probably very close to getting their MEA in the near future. That being said, obviously as I said earlier we're disappointed in our progress in converting our MEA approval to orders, but we're in the process of reviewing plans to accelerate that and as I said we got several projects going through NYSERDA we hope to turn to bookings and revenue shortly. I think those are the only two areas that we have not covered during the call. With that I would like to thank all of you for joining us and look forward to speaking to you again next quarter. Thank you.

Thank you for attending today's conference. This concludes the presentation. You may now disconnect. Good day.