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Executives

H. Ravi Brar - President and CEO

Susie Herrmann - CFO

Murray Jones - COO

Analysts

Philip Shen - Roth Capital Partners LLC

Jeremy Hellman - Divine Capital Markets

Gary Markoff - Morgan Stanley

ECOtality, Inc. (ECTY) Q3 2012 Earnings Conference Call November 20, 2012 10:00 AM ET

Operator

Good morning everyone and thank you for participating in today’s conference call to discuss ECOtality’s Third Quarter ended September 30, 2012. Joining us today are Ravi Brar, the President and CEO of ECOtality; Susie Herrmann, the present CFO and Murray Jones, COO.

Following the remarks, we’ll open up the call for your questions. Then, before we conclude today’s call, I will provide the Company’s Safe Harbor statement with important cautions regarding forward-looking statements made during this call.

Before we begin, I’d like to remind everyone this call is being recorded and will be available for replay through November 27, 2012, starting later this evening via the link provided in yesterday’s press release, as well as on the Company’s website.

Now I’d like to turn the call over to the President and CEO of ECOtality, Mr. Ravi Brar. Sir, please proceed.

H. Ravi Brar

Thanks, [Luke]. Good morning, everyone and thanks for joining us on the call today. On today’s call, we’re going to talk about the strong operational progress we’ve made during the third quarter, with the roll-out of our nationwide Blink electric vehicle charging network and the introduction of access fees on that network.

I will cover ECOtality’s strategy for growth later in the call. But for now I’d like to turn the call over to our new CFO, Susie Herrmann, who will briefly take us through the financial details for the quarter. Then our Chief Operating Officer, Murray Jones, will provide operational highlights for the quarter. I will then return to talk about our strategic initiatives including some of the progress around our multiple complementary lines of business and cost containment. Following my remarks, we will do some Q&A.

So, now on to the financial results. Susie?

Susie Herrmann

Thank you, Ravi. For the third quarter of 2012 revenue was $14.4 million compared to $9.5 million in Q3 of 2011. Approximately 76% or $11 million of our third quarter revenue was attributable to work performed under the EV Project.

As of September 2012 we’ve recognized a total of $52.9 million of revenue from the EV Project, up from $41.9 million at June 30, 2012. During the third quarter, the EV project amend – agreement was definitized resulting in final approved total estimated cost and cost share amounts under the agreement. The definitization amendment did not result in any change to the $100.2 million recoverable under the agreement, but did result in a slight increase in the average percentage recoverable on cost increase to-date.

Through a separate amendment also received in Q3, the performance period of the contract was extended to December of 2013, while the brand accounting for these amendments is complex, the primary impact in Q3 of definitization and expansion was reduced cost of goods sold on equipment depreciation of $2.5 million as compared to what has been recorded under the original agreement.

For an expanded discussion of our accounting treatments for these amendments, I’d encourage you to refer to these topics in our third quarter 10-Q. To continue gross margin in Q3, 2012 was 43% compared to 23% in Q2. Excluding the $2.5 million quarter-over-quarter favorable impact of the EV Project amendment on cost of goods sold, gross margin was 25% for the third quarter.

Total operating expenses for the quarter were $10.7 million compared to $6.9 million in Q2. Operating expenses in the third quarter included a $3.5 million goodwill impairment loss. Due to a sustained decline in our market capitalization, we determined an interim test of goodwill for possible impairment was necessary in the third quarter. Based on the results of that test, we concluded that all $3.5 million of our ECOtality North America’s goodwill was impaired and we recorded a non-cash goodwill impairment charge. Following that adjustment we’re not carrying any goodwill in any of our reporting segment.

During the quarter we focused on controlling operating cost, so they’re in line with the lower than anticipated rate of adoption of EVs and PHEVs by consumers to-date, while maintaining the ability to take advantage of a potential uptick in the market as certain events transpired like record monthly EV sales, which built out in August as well as several new EVs and PHEVs coming to market.

Net loss for the third quarter was $4.6 million compared to a net loss of $3.9 million in the second quarter. Excluding the impact of the EV Project agreement definitization and goodwill impairment, our net loss reflects a $300,000 improvement as compared to the second quarter.

In terms of liquidity, we ended the quarter with $2.1 million in cash, cash equivalents and restricted cash compared to $5 million in Q2 and $10.2 million at the end of last year. We strengthened our balance sheet in October with a collection of $12 million in receivables and we continue to actively manage cash and expenses. This completes my summary report on our results for the quarter.

Now I’d like to turn the call back over to our Chief Operating Officer, Murray Jones. Murray?

Murray Jones

Thank you, Susie. During the third quarter of 2012 we made tremendous operational progress with our EV network. The product management focus and functional organizational realignment has been producing dramatic results. The roll-out of new versions of software along with hardware updates have brought our public charging infrastructure up to a [bi-site] charging availability of 97%.This was accomplished while we continue to dramatically increase both the residential and public charging units and sites.

The close of the third quarter brought us visibility on the completion of the placement and installation phases of the EV Project. We have approximately 8,100 unit installed with increase – increasing success with our recent roll-out cities Chicago, Philadelphia and Atlanta, we see our acquisition phase of the Level 2 infrastructure being complete in the fourth quarter.

As discussed in our last call we’re now in the midst of installing our DC Fast Chargers with 41 units installed and commissioned, an additional 114 with signed host agreements towards our goal of 200 units.

Our national account efforts continue to be an area of success for us with many recent national account agreements in place. The remainder of the EV Project will be focused on gathering charger and driver data, which will require substantially less of our resources and investment.

During the third quarter we also rolled out our access fees from public charging. We’re extremely pleased with early acceptance of this business model by our member base as public charging sessions have actually grown by 44% in Q3, the quarter we began fees. Our membership base has grown from 4,930 members to 8,223, a 67% increase during that same quarter.

Furthermore, we’ve also sold an additional 649 units, which are installed at host utility and individual sites outside of the EV Project. These sales have helped us to develop our approach for our post EV Project world starting in January 2013. The updated version of our Level 2 charger is in testing and validation phase and will be available for sale in January. We are in the process of accelerating our geographic coverage well beyond the EV Project zip codes and adding more channels to market beyond our current direct sales model. We believe that with our footprint of 8,800 installed chargers, loyal and growing membership base and strength of the Blink network and brand, we’re well positioned to continue to grow in 2013.

Moving on to the industrial side, we’re in the final stages of development of our new industrial charging system for material handling, that will serve a substantially larger segment of this market. We also received $1 million order from Southwest Airlines for ground service equipment chargers, which we will ship over the next three quarters.

Finally, our ongoing ECOtality labs project business has a backlog of contracts, all beyond the EV Project, valued at over $9 million with deliverables over the next five quarters. All of the successes, progress and habits we’ve learned getting to this point that I have highlighted today, position us for 2013 and the installation fees of the EV Project will be completed.

We will still be collecting data and revenue through 2013, while organization as you’ve heard today is pivoting to be accompanied with clear and distinct business lines, industrial ECOtality labs, Blink network and hardware with a focus on profitable sales. This completes the operational portion of our presentation.

I’ll now turn the call back over to Ravi for further comments on the business and priorities moving ahead. Ravi?

H. Ravi Brar

Thanks, Murray. I want to spend the rest of the call talking specifically about the direction of the business and the opportunities we see in 2013 and beyond for ECOtality. In the face of slower than expected consumer acceptance of EVs and PHEVs, our focus is to expand and diversify ECOtality sources of revenue. While at the same time, containment costs by shedding overhead and other expenses. Examples of our cost cutting efforts includes downsizing the Executive Team from 15 to 9, which was a work-in-progress to be complete by the end of the year. Another example is eliminating several hundreds of 1000s of dollars a month of outside contract and consulting services and being even more efficient with our existing team of engineers, developers, sales and field and other professionals.

At the same time, we have to grow our business to replace EV Project revenue, which will begin to trail off in 2013. We do this by focusing on the four following lines of business as Murray mentioned previously, the Blink network, Blink hardware sales, ECOtality labs, and Minit-Charge.

We will start by discussing the Blink network. As you may know in late Q3 we began charging for usage on our installed base of public EV charging infrastructure. We’ve already seen the first signs of success that is the consumer is willing to pay for charging their EV in the public domain. As of this week, we already have over 8,00 Blink network members who have provided us a credit card on file, so they can use the network to charge the EVs.

In addition, we just achieved our first week of 1,000 paid charging sessions across our installed base of 3,100 chargers that are enabled for payment. While current revenue is only about 10k per week at this point, these are early days, a combination of more EVs on the road, more chargers, more Blink network members, higher levels of utilization and in certain geographies higher price points, will drive significant increases in revenue. But like any annuity business it takes patience and time to turn the corner to building a large profitable business. Fortunately, we’ve built this business of scale, thanks to the investments we’ve made – been able to make over the course of the last year in back office.

Our goal for 2013 is to generate at least $2.5 million of Blink network revenue and become cash flow positive with this product in the second half. Considering that we just surpassed the million use of a charger on our network in the last quarter and considering that the network is only been around for 18 months, there is plenty of room to run when it comes to generating usage groups.

Now let’s talk about Blink chargers. The iconic Blink Level 2 pedestal charger has undergone a major redesign over the last six months. On the outside it’s still the same design, but on the inside it has significant improvements in reliability, serviceability, communications, screen quality and ease of manufacturing. What’s the significance? In 2013, we like others will shift from a DOE supported effort to seed the fledging EVSD space to commercial sales and a vibrant competitive, but smaller than expected market for charging infrastructure and flat out confidence that the team here has built the best EVSD available in North America. And amazingly it’s extremely cost competitive with a list price of about 3k. So I think we’re ready to capture our unfair share of the market next year. Price research predicts that there will be approximately 30k, 30,000 Level 2 chargers sold and installed in the U.S. next year.

Next I’d like to discuss ECOtality labs. Going into 2013, we’re going to reorganize all of our testing, consulting, data and analysis business activities into one organization headed by a couple of our most talented leaders. This cool little business unit does everything from EV micro climate studies on military bases, to testing fleets of alternative energy vehicles, to testing advanced battery technologies for government labs and the private sector.

As Murray mentioned previously, ECOtality labs goes into 2013 with a significant backlog of work in the near-term and long-term contracts that extend into the next five years. We’re going to build on that base and leverage our 15-year history of providing testing, analytical services to grow this business in a concerted manner.

Finally, I want to talk about our Minit-Charge business. Industry seems to be leading the charge when it comes to EVs. Airports and Airlines continue to move their fleets to greener electric vehicles on the tarmac and industrial electric forklift truck sales continue to grow as a percentage of total forklift truck sales in that space.

We estimate the market for industrial motive power, as it’s called, to be in excess of $1 billion a year in the U.S. alone. This includes chargers, batteries, software and services. We invented fast charging in this space, and hold several patents on fast charging algorithms applicable to industrial batteries. We currently have over 6,000 chargers in use with Fortune 500 companies such as Nestle, Home Depot and Pepsi. But unfortunately over the years our products have become outdated and less competitive, yet we still manage to generate $4 million of revenue in 2012 from Minit-Charge.

Well, we’ve got some great new industrial products coming to market next year that we will leap frog everything else out there. This family of products is based on scalable, modular and connected design, with the first product the i-Flow as Murray mentioned launching in Q2 followed by additional higher capacity iterations of this design by year-end. We’re going to take back our leadership position in the first – in the fast charging space and figure out how to get a much larger slice of this annual billion dollar pie.

Finally, last week we were in China kick starting our effort to former JV there. Interestingly industrial EVs are leading the charge there too and we determined that the industrial EV charging space will be our focus – our and our partners focus in China in 2013. We’re really excited about China, where it will be another 60 to 90 days before the JV is approved and up and running there.

To sum it all up, we’ve got some great opportunities ahead of us going into 2013. However, we’re cognizant of the careful balancing act we must perform. We must reduce our overall cost structure. We must preserve our capital, we must leverage our existing strengths across several complementary lines of business to ultimately generate profit from value to our shareholders.

We look forward to the challenge and updating you on our progress in our next earnings call and hopefully at a few conferences in the near future. Finally, I’m pleased to announce that the Company has put the ongoing SEC inquiry into insider trading behind it. We’ve received confirmation from the SEC that neither the Company nor its current officer team on this call are implicated in that matter in anyway, which is really great news and kind of lift that cloud.

Now I’d like to turn the call back to the operator and we will take any questions that you may have.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Your first question today comes from the line of Philip Shen of Roth Capital Partners. Please go ahead.

Philip Shen - Roth Capital Partners LLC

Hi, everyone. Thank you for taking my questions.

H. Ravi Brar

Hi, Philip.

Philip Shen - Roth Capital Partners LLC

Hey, Ravi. My first question is on the cash situation, I know you ended the quarter with $2.1 million cash balance, but then I think you got a $12 million invoice payment following the quarter. So, would it be fair to say that your cash balance is around $14 million right now?

H. Ravi Brar

Well, we began the quarter obviously with $14 million, but we are not there today and we still have some fairly intense activity associated with completing our obligations under the project. So we’re definitely not there and we won’t exit the quarter at $14 million. We’ve got some work to do to make sure that we get the rest of the DC Fast Chargers and Level 2 Chargers associated with the project installed, that will use up some of our cash.

Philip Shen - Roth Capital Partners LLC

Okay. Your cash flow from operations was about minus $5 million – actually minus $5 million for the – first time, can you tell us what the cash flow from operations were in Q3 and then what do you expect in Q4?

H. Ravi Brar

Just give a sec.

Susie Herrmann

The cash flow from operation in Q3 was $2.8 million.

Philip Shen - Roth Capital Partners LLC

So, negative ….

Susie Herrmann

I apologize, it was $443,000 generated in operating activity.

Philip Shen - Roth Capital Partners LLC

So you’ve generated $400,000 in cash, in Q3? And then on a go – on a Q4 basis, what do you expect?

Susie Herrmann

Well, in Q4 we’re going to continue our operations associated with the contract and for that reason we think that cash flow from operating activities should not be anticipated to be positive in Q4.

H. Ravi Brar

It won’t be positive, so we’re looking at – it’s extremely lumpy based on the activities associated with the project inventory build and/or install activities. So we got all the inventory build behind us. I think you see some of the benefit of that in Q3, operating activities, but we’ve got one or two quarters Q4 and Q1, a pretty intense activity to get install that. And that’s going to cause negative operating cash flows as a result.

Philip Shen - Roth Capital Partners LLC

Okay. And then you talked about – shifting gears here, there was a access fees, it sounded like you’re starting to charge access fees, can you tell us what the structure of this fees are?

H. Ravi Brar

Sure. Sure. There is a – you start with the membership and for now we’re waiving the membership fees and we will institute that the future. And then after that you pay as you go and right now we’re keeping it really simple, very, very, very simple and it’s basically a buck an hour to use a Level 2 charger. We will DC Fast Charging fees, right now that’s still free under the project and on our systems. So, we’ll introduce those in Q1, and I don’t have the number for you yet, but that will most likely be a per-session charge versus a per-hour charge since the vehicle can be fully charged on a DC Fast Charger in about 20 to 30 minutes.

Philip Shen - Roth Capital Partners LLC

Okay, that’s helpful. And so your goal in 2013 just to reiterate is $2.5 million in network revenue?

H. Ravi Brar

Correct.

Philip Shen - Roth Capital Partners LLC

Correct?

H. Ravi Brar

Yeah.

Philip Shen - Roth Capital Partners LLC

Okay, good. And then in terms of the hardware, I think I caught this right on the – well tell me if I got this number right from you prepared remarks, but you sold 649 chargers in Q3, independent of the EV Project, is that correct?

H. Ravi Brar

No, I think that’s 649 to-date.

Murray Jones

649 to-date.

Philip Shen - Roth Capital Partners LLC

Okay, so then how many did you sell in Q3?

H. Ravi Brar

Basically no – not very many at all. We basically have turned our focus in Q3, Q4 and the early part of Q1 to just getting the project installs done and behind us the new Level 2 product that Murray and I referred to on the call is really the product that we intend to lead with in terms of commercial sales. Those we have 75 data’s of that project currently being built and undergoing testing, so they’re bulletproof. First production runs happen in January, and it will start getting installed. Selling starts now, production January, installs February, so commercial sales in earnest kind of start again in Q1 of next year.

Philip Shen - Roth Capital Partners LLC

Okay, that’s good. And then how do you expect, so while as the EV Project kind of winds down, what is your marketing plan to gain share with, -- in charger sales. Have you -- can you give us an update on how your negotiations are going with OEMs, so for instance are you able to sell your charger with certain cars on the dealer showroom floor or on the OEM website? Now what is it that you plan on doing, I know you’ve redesigned the charger so that there could be performance benefits, but in terms of marketing how do you plan to drive sales?

H. Ravi Brar

Sure, and it’s really bifurcated. There are two customers, one customer is the commercial host, everybody from IKEA to McDonald’s to Wal-Mart and Kohl’s and many, many others in between. Our strategy on that side is to continue our current direct sales effort which is really an EV Project driven effort, but the transition in that to a narrow focus sort of name account driven direct sales effort to commercial host that is complemented by a dealer channel and a reseller channel.

So, we’re in the process of building that and we’ll launch that going into Q1 where there is a specific set of resellers that are out there, be on the street, distributing the commercial product and we’ve seen others generate both in this space and out of this space generate success with that and we have great people onboard, on the team currently who have that history and that experience and can build that reseller channel, that’s one of the most efficient way to go to market with that product.

On the residential customer side, Phil, we have -- we were coming at it from couple of different angles. We can't mention any OEMs right now, but we are actively working on and need to land as a Company an OEM relationship beyond the ones that we already have with this [script], which is a great start. So that’s one very, very important channel. The dealers themselves are another important channel and there’s a dealer channel manager onboard who is actively working and cultivating that. And then lastly, there is online and we’re sorting through and figuring out how we sell the residential products online whether it’s by distribution outlets like Amazon or directly through our own site which needs some work in order to be able to handle online consumer sales, that’s the third and final channel for FY ’13.

Philip Shen - Roth Capital Partners LLC

Okay. And then let me ask about the Minit-Charger; you guys have $4 million or may have about $4 million of revenues in 2012. I’ve always wondered what's going on with this business unit, it seems like if you guys were leaders there, there should be an opportunity to grow this. So, what do you expect to see in 2013 with some new products that are coming online, where could revenues go?

H. Ravi Brar

Yeah, I’d like to see and I think we can achieve 50% plus growth perhaps even doubling in top of where it is today. Doubling sounds like a big deal, but its doubling up $4 million base and it will do $4 million this year, and its done $4 million a year for the past several years. Historically way back when it hit highs of roughly $10 million a year and that’s when the Company was a very, very small Company, kind of focused just on that and historically it’s an acquisition that was done long ago precedes all of us. So, there’s some great technology and some great IP there. And it’s actually a good sized base, right now we only compete in a portion of a portion of a portion of that space.

We are very focused and concentrated on a sliver of this billion dollar market for motor power and providing motor power to industrial electrical vehicles. The i-Flow and the future i-designs significantly expand the portion of that market that we can address, and then beyond that if we extend into -- and we can and will extend into software applications associated with motor power, essentially services and even the battery component of it. There’s a large market there and we can leverage what we have in order to go after a much, much bigger piece of this than we have today.

Philip Shen - Roth Capital Partners LLC

Okay. One last question, I’ll jump back in queue. I know you spent a fair amount of time on your prepared remarks discussing your cost reduction activities and cost containments. Tell us how much more you can do, so as we look to 2013 and you guys have an operating expense structure of call it -- about $7 million, $5.5 million for G&A. What should we -- how low could we get OpEx in Q4 in 2013?

H. Ravi Brar

Yeah, we need to – Q4 was – G&A was $5.6 million, we’ve got to get that sub $5 million and then push it even further than that.

Philip Shen - Roth Capital Partners LLC

Okay. Thanks very much.

H. Ravi Brar

All right. Thank you.

Operator

(Operator Instructions) Your next question comes from the line of Jeremy Hellman of Divine Capital Markets. Please go ahead.

Jeremy Hellman - Divine Capital Markets

Hey, good morning everybody.

H. Ravi Brar

Hey, Jeremy.

Jeremy Hellman - Divine Capital Markets

Just going back, when you were talking about motor power, you weren’t speaking specifically about the Company motor power that just signed the contract, so electric garbage trucks in Chicago, were you – I’m presuming I’m right about that; is something like that going to be an opportunity for you guys?

H. Ravi Brar

I definitely was not talking about the Company motor power. We refer and folks that we work with refer to just the industry of electric industrial vehicles and charging electric industrial vehicles as motor power, that’s what its referred to in the research data -- on the industry data that we look at, so we weren’t talking about them.

Now within that industry, you can charge everything from a little pallet jack which we don’t do, all the way up to a bus or a garbage truck. And Jeremy, the space that we’ve been focused on as I said earlier is a sliver of a sliver of a sliver of that market, but everything we do can translate and grow and address a larger chunk of the market.

So, we’re not quite ready to move-up to charging buses and garbage trucks which is a much larger scale chargers than what we do today, but that could be in our future. Our focus right now really is things like electric forklifts in warehouses, we charge a lot of those today just because of our historical install base. The baggage tractors and so forth that are on tarmac at airports and for certain airlines, that and expanding that is the near-term focus.

Jeremy Hellman - Divine Capital Markets

Okay. And going back to one of Philip’s questions, I just want to kind of take a little bit of a different tack on it, in terms of marketing effort and I guess along that thread, if I think about some of the big-box retailers you work with like Kohl’s; are you doing any co-marketing with them in a sense of any kind of involvement with their royalty programs for people that might have a Kohl’s card for example and maybe if you bring in a Groupon type thread where if someone comes in and you have a customer that might be in a Kohl’s loyalty program that’s driving an electric car, he parked at one of your chargers out in the parking lot and upon that instance of plugging in you have an ability to deliver some sort of promotional material. Are you doing anything like that and if not is that something that you’re looking at?

H. Ravi Brar

We're absolutely doing that. We actually do that with Kohl’s although we’re not ready to get into a lot of the detail or discussion around that yet. But, they have quite a few of our chargers and one of the value adds that we bring is just what you described, and our chargers are uniquely capable unlike others in the market to interact with the customer and allow the type of loyalty and measurement and couponing and so forth activity that you just described and we’re in good early stage ongoing conversations with others to do similar types of marketing.

Jeremy Hellman - Divine Capital Markets

Okay. And do you have, as you go and pursue other alliances, do you have a really good kind of quote data story from your experience with Kohl’s that you can use as a selling point?

H. Ravi Brar

We have an excellent data story to use as a selling point.

Jeremy Hellman - Divine Capital Markets

Great. Now, couple of more for me, sorry I’ve got a bunch. In China as you kind of go forth there; are your chargers going to be able to support eBikes, is that part of the mix as well?

H. Ravi Brar

That was part of the conversation in China and I’m assuming that’s what you’re referring to, right …

Jeremy Hellman - Divine Capital Markets

Yeah.

H. Ravi Brar

… or are you referring to U.S? Yeah, that’s part of the conversation in China. We could move down-market into eBikes. We could move up-market into buses. We could move across the neighborhood electric vehicles or EVs eventually. So, it’s part of the conversation but its prospective, and I think one thing that’s really, really important with our partner in China is that we have focus and what we agreed to and we spent a lot of time talking about this last week and coming to a really good solid conclusion of what we’re going to focus on, and the focus is going to be electric industrial vehicles, because and this is based on – I’ve limited data, I don’t have a ton of data on China yet, but the limited data I have says that about 20% to 25% of the industrial warehouse vehicles sold in China are already electric. So, we’re going to focus on creating motor power solutions for those vehicles that are already there and then we’ll kind of expand in other directions from there.

Jeremy Hellman - Divine Capital Markets

Okay, thanks. One last one for me and then I’ll jump back. Just kind of curious for your thoughts on Tesla’s decision to basically develop their own super fast charger, was that something that you guys ever sat down with them, you on this team could try and be involved in a way, was that always going to be a “closed project” with them, just kind of curious for your thoughts on that.

H. Ravi Brar

My thoughts are that they’ve -- I’m not sure when they made their decision, but their decision obviously is that they want a proprietary connector and they have their reasons for that. Luckily they provide an adapter also. So, a model S can be charged on one of our chargers and on other manufacturer’s chargers that adhere to the J-1772 standard. So it’s proprietary, but it’s not entirely closed.

From my perspective I wish there were three more Tesla’s and five more [leads] and ten more bolts out there. So, would it be better if everything was on the same standard and everything worked together and really, really well. Yes, but I’ll take it and I hope they’re extraordinarily successful. It will be good for the industry.

Jeremy Hellman - Divine Capital Markets

Okay. Thanks guys. Best of luck.

H. Ravi Brar

All right. Thank you.

Operator

Your next question comes from the line of Gary Markoff of Morgan Stanley. Please go ahead.

Gary Markoff - Morgan Stanley

Ravi, the rumor has it that it’s a pretty big brand name airline company that’s come up with a large purchase for you, and the question is; how much of their needs does this cover?

H. Ravi Brar

Their near-term needs meaning, I’d say between now and the end of ’13. It probably takes care of them. They are -- it’s a combination of expansion and sort of absorbing operations that they’ve acquired in the past. So for that particular airline this order will probably that (indiscernible) through this next year, but for this particular airline it probably takes care of them through the course of 2013.

Gary Markoff - Morgan Stanley

And what's the expected life of one of these units for them?

H. Ravi Brar

Those are long-live boxes, I mean, you put these things out there and they’re out there for 5 to 10 years.

Gary Markoff - Morgan Stanley

Okay. And is there any revenue from them or is that just the box sale?

H. Ravi Brar

There is an ongoing stream of service and parts, and that’s really a big chunk Gary of this $4 million that we do each and every single year. Its servicing this existing install base providing parts and services for it – moving it for example when they need to – when XYZ warehouse for example, is consolidating distribution centers or expanding them or what have you, they call on us to relocate and recalibrate and reinstall the gear.

Gary Markoff - Morgan Stanley

Answer if it’s good enough for them, what isn’t this happening throughout the entire industry domestically and internationally?

H. Ravi Brar

Are you talking about airline or you’re talking about warehouse?

Gary Markoff - Morgan Stanley

No, airline. Just the whole surface, the airport infrastructure?

H. Ravi Brar

Well, it is happening. I mean, just up in your neck of the woods, Westchester and even Westchester County Airport has gone fully and completely electric to the tune of, you can even -- that can pull all their equipment back, plug it in and use it to the power of the airport and we did that work in order to both charge the vehicles as well as reverse the flow of power and power the airport. So, it’s happening, I mean it takes time, right. It takes a consorted effort to change anything at an airport simply because of all of the regulation and security and so forth, but there is a definite trend in the market to go electric.

Gary Markoff - Morgan Stanley

And do you have a demonstrated cost savings for them?

H. Ravi Brar

Well sure, absolutely.

Gary Markoff - Morgan Stanley

And what percentage cost savings does that amount to?

H. Ravi Brar

I don’t have it on top of my head, but we can certainly share it with you.

Gary Markoff - Morgan Stanley

Okay. Could you go a little deeper on the China issue? You mentioned something on the call earlier that its 45 to 90 days away to something, and I didn’t catch what you were referring to what that something was.

H. Ravi Brar

I was just referring to the time it takes in order to go from a JV agreement and in the stage that we’re in currently to actually getting approval from the local authorities to form the company, capitalize the company and begin to hire employees and begin operation.

Gary Markoff - Morgan Stanley

And who would be doing the capitalizing?

H. Ravi Brar

We have a partner which is both an investor in ECOtality as well as they’ve grown to become one of the largest venture capital firms in China focused on the domestic market there. So, they’re providing – this is all in the docs, so we can speak – kind of speak freely about it. They’re providing up to $3 million in capital. We’re providing -- we’re getting inclined value in the JV because we’re licensing and contributing our IP and our know-how, so that’s how it’s being formed.

Gary Markoff - Morgan Stanley

And how much of do you -- of the future business model do you see coming from China potentially?

H. Ravi Brar

I can't even venture to guess at this point Gary; I mean we’ve got to form the JV. We’ve got to get some market research done. We’re very early days in first steps in terms of just getting focus on industrial and we’ve got to size the market and then go from there. But there is a market there, the 25% of these industrial vehicles that are EVs currently they’re doing battery swapping which is what was happening in the U.S. and its still happening in the U.S. a decade ago and we have an immediate opportunity to walk in and show an ROI that don’t buy two batteries or three batteries at the tune of $4,000 to $5,000 per vehicle. Here’s a $1,500 to $2,500 Fast Charger that will allow you to charge your battery and get back to work.

Gary Markoff - Morgan Stanley

Could you also update us on what you know are the automobile manufacturer’s intentions for introducing electric vehicles in the United States in 2013, 2014?

H. Ravi Brar

No, they remain to have -- there are several products in the pipeline that we are excited about. We’re excited about the C-Max coming to market. The Fusion Energi which I think is going to be a great car and a great PHEV. We’ve seen by the way Gary, I think we’ve talked about this in previous calls, if propensity of PHEV drivers to plug in and charge on public infrastructure even more than a battery electric vehicle drivers, since they deplete their battery and save 30 to 40 miles, it’s extremely convenient for them to plug in and exit wherever they’ve retail establishment office et cetera, that they’re visiting and come back out with 30 to 40 miles worth of charge again and not have to use gas so the C-MAX which is a PHEV, the fusion, the Chevy spark and several others are coming to market in the course of 2013.

Gary Markoff - Morgan Stanley

And is it true that in California there is the ability to travel on the high occupancy vehicle lane as an individual driver if you’re using a electric car?

H. Ravi Brar

Oh yeah, absolutely. It’s a huge value add especially on the Bay Bridge, in San Francisco for example.

Gary Markoff - Morgan Stanley

And has that moved into other states where EVs are also being driven?

H. Ravi Brar

Yeah, and we’re sitting here from – in Arizona, doing the call today and it’s also applicable in Arizona.

Gary Markoff - Morgan Stanley

Great. Thank you very much. Keep up the good work.

H. Ravi Brar

All right. Thank you, Gary.

Operator

And ladies and gentlemen, this does conclude the question-and-answer session. I’d now like to turn the call back over to Mr. Brar. Mr. Brar, please proceed.

H. Ravi Brar

Okay. We just want to thank everyone for participating on the call today. We look forward to giving you an update at the end of the year, as I mentioned earlier we’re going to try to get out there, do a couple of conferences and hope to see you then. Thanks everyone.

Operator

Thank you. Before we conclude today’s call, I’d like to take a moment to read the Company’s Safe Harbor statement. Remarks made on this call may have contained forward-looking statements within the meaning of Section 27A of Securities Act of 1933 as amended in Section 21A at the Securities Exchange Act of 1934. Forward-looking statements are inherently uncertain and they’re based on current expectations and assumptions concerning future events or future performance of the Company.

Listeners are cautioned not to place undue reliance on the forward-looking statements, which are only predictions and speak only of the date hereof. In evaluating such statements, perspective investors should review carefully various risks and uncertainties identified in the conference call and the matter stated in the Company’s SEC filing. These risks and uncertainties could cause the Company’s actual results to differ materially from those indicated in the forward-looking statements.

Now again, I’d like to remind everyone, this call will be available for replay through November 27th starting later this evening. We have a link provided in yesterday’s press release as well as available in the Investor Section of the Company’s website.

Thank you ladies and gentlemen for joining us today for our presentation. You may now disconnect your lines.

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