Quantum Fuel Systems Technologies Worldwide Management Discusses Q4 2012 Results - Earnings Call Transcript

|
 |  About: Quantum Fuel Systems Technologies Worldwide, Inc. (QTWW)
by: SA Transcripts

Quantum Fuel Systems Technologies Worldwide (NASDAQ:QTWW)

Q4 2012 Earnings Call

March 28, 2013 4:30 pm ET

Executives

William Brian Olson - Chief Executive Officer, President and Director

Bonnie Poyer

Bradley J. Timon - Chief Financial Officer

Analysts

Joseph Bess - Roth Capital Partners, LLC, Research Division

Operator

Good afternoon. My name is Stephanie and I will be your conference operator today. At this time, I would like to welcome everyone to the Quantum Technologies Fourth Quarter 2012 Financial Results Conference Call. [Operator Instructions] Thank you. I would now like to turn the conference over to Brian Olson, President and CEO of Quantum. Please go ahead.

William Brian Olson

Thank you, good afternoon, ladies and gentlemen. Thank you for joining us today on behalf of Quantum Technologies. We appreciate the opportunity to report the financial results of fourth quarter 2012. Joining me today are Brad Timon, Chief Financial Officer; and Bonnie Poyer, Executive Assistant. Before we get started, I'll turn it over to Bonnie Poyer to read the Safe Harbor Statement.

Bonnie Poyer

Certain statements made during this call may constitute forward-looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1985.

Forward-looking statements often addressed are expected future business and financial performance and often contain words such as may, could, will, should, assume, expect, anticipate, plan, intend, believe, predict, estimate, forecast, outlook, potential or continue, or the negative of these terms and other comparable terminology.

The examples of forward-looking statements made during this call include our expectations regarding future revenues, cost reduction, production capacity and the growth of the CNG market and sales of our CNG products and services. Various risks and other factors including those discussed in the Risk Factor section contained in our annual report on Form 10-K that we expect to file with the SEC by April 1, 2013, could cause our actual results to differ materially and adversely from those contemplated by the forward-looking statements.

Forward-looking statements are based on current market conditions and the management’s reasonable expectations and assumptions at the date of this call.

The company disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements made during this conference call to reflect any change in management's assumptions, beliefs or expectations, or any change in events, conditions or circumstances upon which any forward-looking statements are based.

William Brian Olson

Okay, thank you Bonnie. So before jumping in the quarterly results, I want to take this opportunity to set the agenda for today's call. In addition to highlighting our financial results, I'm going to provide an update on the progress we are making in building upon the underlying fundamentals in our Natural Gas business plan. I will highlight the early on accomplishments, as well as the foundation we began reconstructing in 2012 that will continue to positively impact 2013 and beyond. I will highlight our production expansion, the introduction of our enhanced natural gas products, our expanding customer and strategic relationships, our growing natural gas product sales and order flow and probably most importantly our improving operating performance. With that, I will turn it over to Brad for a review of fourth quarter and full year operating results.

Bradley J. Timon

Thanks, Brian and good afternoon, everyone. I first want to take a few moments to provide a quick overview of the financial impact that our lower cost structure is starting to reflect in our operating results and comment on certain measures we are taking with respect to the capitalization of the company.

One of our primary goals is minimizing our cash burn until we can reach profitability. We are seeing traction on the cost reductions we have made to date, which has reduced the cash burn from operations. Specifically, our cash burn in the fourth quarter from operating activities has improved over the previous quarters in 2012. We used just $1.3 million of cash for our consolidated operating activities in the fourth quarter, as compared to the $11.2 million that we used over the first 9 months. Further, the loss from continuing operations improved by approximately 30% in the second half of 2012, compared to the first half of 2012.

We believe this trend will continue into 2013 as we are currently introducing lower-cost materials into our manufacturing process and believe this will be reflected by improved gross margins that we expect to report during 2013. We still have work to do on reducing facility and other cost, but we continue to make progress. With respect to our investments in wind and solar activities, since the completion of the acquisition of the Zephyr Wind Farm in the second quarter of 2012, we have substantially eliminated any new investments into the Schneider Power Wind business. Further, we did not make any investments in solar-related activities in 2012, nor do we plan to make any in the foreseeable future.

We are however, investing cash resources in tank manufacturing equipment in our efforts to ramp-up our production capacity to be ready for the increasing needs of our CNG storage customers that we anticipate in the second half of 2013.

As far as the capital needs of the company, we will need to raise capital as we move forward in 2013. However, we are sensitive to shareholder dilution and continue to look for opportunities to bring in sources of less dilutive and lower cost capital to either monetization of non-core assets, namely, the sale of our wind assets in the coming months. Further, the use of traditional non-dilutive credit facilities to finance working capital needs and equipment purchases. In addition, we have the ability to utilize an aftermarket structure that we filed in December 2012 to sell registered common shares into the daily existing market demand without pricing discounts.

And finally, we have been actively aligning ourselves with various entities that play in the natural gas industry that we believe can become key partners in driving demand for our CNG storage systems and which we believe can lead to strategic and less dilutive investment capital becoming available to the company as we move forward.

Next, I'll provide a few comments about monetizing the assets of our Schneider Power Wind business. As many of you know, we have been actively looking for buyers of the assets of Schneider Power. We recently announced that we are close to finalizing the sale of the 1.6-megawatt Providence Bay operating wind farm that will bring in cash proceeds of approximately $400,000 in the near-term.

In addition, we expect to receive approximately $1.3 million near the end of April in connection with the sale of the Trout Creek Wind Farm development project, along with 3 other wind development projects that are located in Ontario, Canada.

We also have interest from multiple potential buyers for the 10-megawatt Zephyr operating wind farm, along with parties interested in other wind development projects located in the Caribbean.

I want to clarify that in connection with the eventual sale of the 2 operating wind farms, all long-term debt financing related to the operating wind farms will be assumed by their respective buyers. The debt currently consists of approximately $1.1 million for the Providence Bay Wind Farm and approximately $23.5 million for the Zephyr Wind Farm. We expect to use the proceeds of the asset sales over the coming months to help fund the capital needs of our continuing business operations.

So with that, let's move to the operating results for the fourth quarter and calendar 2012. I'm going to focus my comments on continuing operations, which includes our Fuel Storage and Vehicle System segment and our Corporate segment.

The company's overall revenues from continuing operations amounted to $5.6 million for the fourth quarter of 2012 and amounted to $22.7 million for the full year. This represents a decline in revenues, compared to prior year amounts, which were $9.8 million for the fourth quarter and $33.9 million for the full calendar year of 2011.

Revenues from our ultralightweight CNG fuel storage tanks and systems increased by $1.3 million or 100% during the fourth quarter of 2012 and increased by $6.3 million or 126% in calendar 2012, as compared to similar periods in calendar 2011. The improved revenues from CNG product sales partially offset the reduction experienced in calendar 2012 related to revenues from component shipments and engineering services provided to Fisker Automotive.

Our fourth quarter revenues consisted of $2.6 million in product shipments related to our CNG storage systems and $3 million in revenue -- in contract revenue related to engineering services provided under customer-funded development programs.

We realized gross margins of 23% on product shipments and 56% on contract services during the fourth quarter of 2012.

We did experience a sequential decline in quarterly product revenues in the fourth quarter, compared to third quarter levels related to shipments of our CNG tanks due to timing of order flow from our customers, capital constraints and a holiday shutdown. However, the level of shipments has ramped up again in the first quarter of 2013, so we expect to report increased product revenues in our next earnings report.

Although product sales to Fisker Automotive slowed and then stalled in connection with Fisker's shut down of production in mid-2012, we experienced strong demand for our CNG storage systems. During calendar 2012, we received $19.1 million in new purchase orders for our CNG fuel storage tanks and systems, representing a 231% increase in the current-year period.

As of December 31, 2012, our backlog for CNG fuel storage tanks and systems was $10.3 million.

We continue to see strong demand for our CNG products in the beginning of 2013, with $9.4 million of new orders received to-date in the first quarter.

Our operating cost include expenses associated with our internally-funded engineering programs. These expenses amounted to $2.6 million in the fourth quarter, of which $900,000 was related to engineering activities for our Ford F-150 PHEV program that we suspended in November 2012. We do not expect to resume efforts on this program until internal funding and supply chain issues can be resolved, and thus, we expect to see a reduction in the levels of internally-funded engineering expenses in 2013.

Our operating costs also include selling, general and administrative expenses of our Fuel Storage and Vehicle Systems segment and our Corporate segment. We recognized a total of $1.4 million of SG&A expenses in the fourth quarter of 2012. However, this reduced level was due in part to a noncash gain of $1.1 million recognized in the fourth quarter, related to a partial reversal of a $1.7 million facility exit charge initially recognized in June 2011 upon execution of a sublease arrangement for a facility in Lake Forest, California. The sublease was amended in October 2012, which allowed us to reoccupy the facility for the remainder of the lease term and required us to reserve -- to reverse substantially all of the remaining balance of the facility exit obligation. The facility that I'm referring to is the building that we are currently expanding our tank manufacturing capacity in.

The improved operating cost also reflects savings from lower executive expenses, along with other cost-cutting initiatives implemented in calendar 2012.

Our consolidated operating loss from continuing operations amounted to $1.8 million in the fourth quarter of 2012 and amounted to a loss of $14.4 million in calendar 2012, compared to the prior-year periods.

As I mentioned earlier, we started to see the benefits of our reduced cost structure in the second half of 2012. After excluding the impact of one-time charges and gains during calendar 2012, the operating loss recognized in the second half of 2012 reflects an approximate 30% improvement over the operating loss recognized in the first half of 2012.

Okay, moving on to results of our discontinued operations. Schneider Power, our wholly-owned subsidiary is classified as discontinued operations held for sale. Schneider Power recognized $0.8 million of revenue in the fourth quarter and $1.6 million for the full calendar year of 2012. The results of operations amounted to a net earnings of about $500,000 in the fourth quarter and a net loss of $1.0 million for the entire year. The net earnings in the fourth quarter included a non-recurring income tax benefit of $0.4 million.

Another discontinued operation that I want to make a few comments on is Quantum Solar Energy Inc. This entity was established in 2008, with the intent to develop a solar power panel distribution and manufacturing operation in Irvine, California. However, due to changes in market conditions within the global solar industry, manufacturing operations have not commenced, nor do we expect them to commence in the future. Due to these market conditions and other considerations related to our German affiliate, Asola, the asset groups associated with the planned manufacturing operations of Quantum Solar have been completely impaired and written off as of December 31, 2012.

This includes an impairment taken in the fourth quarter of 2012, in which we fully wrote off certain assets consisting of prepayments made in prior years to Asola, related to a solar sale supply agreement associated with Quantum Solar's anticipated manufacturing operations. We recognized total charges in the fourth quarter of $4.3 million in connection with this impairment. The fourth quarter impairment charge, along with historical impairments related to solar manufacturing equipment deposits, are now classified as discontinued operations.

Next, I'll provide some comments on non-reporting segment results. First, I just want to clarify the components of interest expense that we report for our continuing operations. Interest expense amounted to $0.8 million in the fourth quarter of 2012 and $5.5 million in calendar 2012. This expense represents both cash payments based on stated contractual rates, and noncash imputed rates associated with equity link characteristics, accelerated maturities and/or other contractual provisions of the debt securities. Approximately 50% of the expense reported for the fourth quarter, and approximately 80% of the expense reported for the full year in 2012 was related to noncash imputed interest cost.

Second, I want to comment further on our German affiliate, Asola. Asola is a solar manufacturing company based in Germany that we own a 25% ownerships stake in. As we have disclosed in our previous filings, Asola has been struggling financially over the past year. And as a result, we took a $5 million charge in the third quarter of 2012 to write down our investments in Asola. Since then, Asola has become insolvent, and in January 2013, filed for bankruptcy protection in Germany. As a result of this deterioration, we recognized a further impairment in the fourth quarter of $0.5 million.

As a result of the third and fourth quarter 2012 impairments for the investments in, the advancements to and the prepayments to Asola, we no longer have any remaining returning value related to solar investments as of December 31, 2012, nor do we believe we have any current or future liabilities associated with solar activities.

So the overall impact of the results of our continuing operations and discontinued operations resulted in a consolidated net loss of $6.6 million that we will report for the fourth quarter of 2012, and a consolidated net loss of $30.9 million that we will report for the full calendar year of 2012. And with that, I will turn it back over to Brian.

William Brian Olson

Okay. Thank you, Brad. Calendar 2012 brought change and redirection to Quantum. And along with it, a renewed focus as we discussed. Through the redirection, much progress is made. New customer and strategic relationships were developed, and are being developed. Our CNG storage tanks were enhanced. Complete system capabilities were refined and refocused and technologies were leveraged. In many respects, 2012 will be marked as a new foundation for a company that has all the underpinnings to lead the natural gas vehicle industry through an unprecedented growth phase and broadscale adoption.

In terms of specific operating performance during calendar 2012, which Brad just highlighted, we did realize strong growth in our production, sales and delivery of natural gas storage systems. We tripled our production capacity and we received several new system integration development programs for natural gas.

Natural gas product sales more than doubled, growing 126%, and our order flow for natural gas tanks growing 231% in 2012. This represents just the beginning, a year defined by growth, emerging opportunities and expanding interest in the natural gas products, technologies, systems and services that have been integral to Quantum's development over the past 2 decades. The growth in top line natural gas product sales has positively impacted operating performance.

As we move through 2012, we realized sequential quarterly improvements, especially in the latter half of 2012. During the last 6 months of calendar 2012 as Brad pointed out, we experienced nearly a 30% decrease in operating loss compared to the first 6 months of 2012. This improvement is reflective of growing natural gas product sales with strong margins, and a renewed focus on cost containment, characteristics that we expect will frame 2013 for Quantum. Our overarching business goal in 2013 is to demonstrate operating profitability toward the latter part of 2013 and set the course for sustainability. This is the defining statement that every employee and every Quantum Director supports and is aligned with.

Building tank and tank system production capacity is at the center of this goal. We tripled our tank production capacity in 2012, and 2013 will be marked by a significant expansion, enabling volume levels to meet growing demand and a revenue base sufficient for this company to reach profitability on CNG tank sales alone.

Our tank expansion and tank production operations are going well. We have added equipment and resources in the past 6 months, and the target is to reach capacity of about 8,000 tanks per year in 2013. Through our expansion, we have maintained our ISO and TS 16949 certification, which is a designation that we have implemented and maintained the highest quality standards available within the automotive industry.

In November 20, 2012, we introduced our new and enhanced Q-Lite line of natural gas storage tanks, which are designed to further maximize vehicle range by means of dematerialization and application of next-generation materials. These advancements demonstrate our expertise and safety-critical structural design, high-strength materials and topology optimization provides intelligent lightweight systems that maximize onboard fuel storage and contribute to superior fuel economy, handling and low emission performance. Our Q-Lite CNG storage is at the core of our business plan, but also a foundation into providing much more. Our customers want low-cost, lightweight and extended range system solutions. So we are excited to combine our innovative, ultralightweight tank technology with our fuel system and storage assembly expertise and decades of experience as an automotive Tier 1 integrator to provide turnkey solutions for our growing customer base.

Quantum's strategy is to continue to expand CNG product sales, leverage our system capabilities to expand our revenue base and deliver value in one-stop shopping to our customers. Innovation has been and will continue to be a driver in our business as we demonstrate our ability to deliver low-cost and cost-effective lightweight and range extending system solutions to our customers.

We are seeing evidence of this strategy take hold. We have multiple CNG development and integration programs underway, with OEMs and integrators with commercialization targeted in 2013 and 2014. We recently announced a new contract for an integrated CNG storage solution for a medium duty customer program, and we are currently working on uniquely designed and fully integrated CNG fuel and storage systems for passenger vehicle platforms from 2 major automotive OEMs. We are forming strategic relationships with a leading CNG engine manufacturer for the development of a natural gas fuel system and specific CNG engine technology. This development program received a proposed award from the California Energy Commission to provide funding. We are working with CNG aftermarket technology leaders in providing complete system solutions. We also have CNG system integration and development programs and strategic efforts with other industry leaders.

Although the pathway to success in 2013 has been defined, it will still require execution. I challenge our employees to execute in 2013. Execution will require hard work and belief, overcoming challenges, but also leveraging our decades of experience. But we are prepared and willing to do what it takes to succeed and reach sustainability this year. We have a strong belief in 2013, but perhaps higher aspirations of what this company can become in the years to come. In essence, we are building a company for the future, position it to maximize the opportunities in front of us and forging relationships in strategic avenues that can take us to new levels. I believe this future is within our grasp.

Before concluding, I want to make some additional comments related to financing this future. I know there is concern about our capitalization. Please note, we have put in place creative, yet minimally dilutive, as Brad mentioned, solutions both on the equity side and debt side to provide for expansion and working capital needs. The reduction in cash used from operations over the past 6 months and the anticipated continued reduction in 2013 is part of the equation. The other part of the equation could include strategic relationship funding, leveraging the strong business partnerships that have been developed over the past 12 months.

I am excited about these developing relationships and I'm also excited about the unprecedented momentum in natural gas and are positioned to capitalize on this momentum, given our leadership in natural gas technology, product offerings and system integration expertise. I stand by the progress we made in 2012, reconstructing and refocusing. I look forward to 2013 and building on this momentum. With that, Stephanie, operator, we'd like to open it up to questions.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of Joe Bess.

Joseph Bess - Roth Capital Partners, LLC, Research Division

Looking at Zephyr Wind Farm more specifically, can you talk about some of the timing that you think that you could potentially divest this business? And some of the other businesses as well?

William Brian Olson

Yes, so like I mentioned earlier, we have multiple parties that are looking at Zephyr, that have made offers on Zephyr. We think that we'll be able to move forward with one of these parties over the next month or so, and we expect that we would be able to close that transaction in the second quarter.

Joseph Bess - Roth Capital Partners, LLC, Research Division

Okay, great. So you're hoping for it to be done in 2013.

William Brian Olson

Yes.

Joseph Bess - Roth Capital Partners, LLC, Research Division

Okay, great. And then, thinking about your CNG sales in 2012, are you able to tell me how many that was on a unit basis?

William Brian Olson

Sure. So for our CNG tank systems, it was approximately about 2,700 units. We also produced tanks on our development programs. But the actual tanks that we shipped related to product revenue was about 2,700.

Joseph Bess - Roth Capital Partners, LLC, Research Division

Okay, great, and then thinking about the backlog, as well as your guidance orders that you have received year-to-date, are you able to give me an idea on that sort of unit volume?

William Brian Olson

Yes, like I said, like our backlog is about $10.3 million today. We have received an additional $9.4 million and, in additional orders in the first quarter, so far. Our ASP on tank systems is right around 4,000.

Joseph Bess - Roth Capital Partners, LLC, Research Division

Okay, and so, on an ASP basis, it's similar to 2012?

William Brian Olson

That we're -- yes, for our -- but we, we obviously -- we expect to get additional orders as we continue through 2013.

Joseph Bess - Roth Capital Partners, LLC, Research Division

Correct. Right. Okay, great. And then, are you able to give me the backlog number for 2011 for CNG tanks?

William Brian Olson

Yes, it was much lower. I don't have in front of me right now. But we -- because we did see a big increase in our order flow during the 2012 period. So it wasn't that significant at the end of 2011.

Joseph Bess - Roth Capital Partners, LLC, Research Division

Okay, and so you have a -- current capacity is about 4,000 tanks and you're hoping to finish 2013 with a run rate of about 8,000 tanks per year, is that correct?

Bradley J. Timon

Yes, and that would be -- the 8,000 would be more of a capacity plan, so we could -- we want to get to a capacity of 8,000 units. And then obviously, we -- at minimum want to be somewhere 80% to 90% of that capacity, even though we could go up to the full 100%. So the 8,000 is the capacity plan for 2013.

Joseph Bess - Roth Capital Partners, LLC, Research Division

Okay, and then, where do you think that you could see that going, heading into '14?

Bradley J. Timon

Yes, I think the nice thing about our 90,000 square foot facility -- so where -- we've been in the 30,000 square-foot facility. That's really where we leveraged in 2012. We -- at the end of 2012 and now into 2013, we have now taken possession of the full 90,000 square feet. Equipment's going in there. We're expanding. We're doing some limited production already in that facility. But that 90,000 square foot facility could potentially bring our volume capacity up to 25,000 units per year. And that would be a facility we could potentially replicate in other parts of the country as a production model that would service either Central United States or Eastern United States. But the plan for 2014 would really be to continue to ramp up on that existing 90,000 square foot facility, to get it to 25,000 unit capacity per year.

Joseph Bess - Roth Capital Partners, LLC, Research Division

Okay. And then, last question, Brian, I'm not sure if you can really give color on it, just yet, but thinking about the financing and you mentioned that there could be funding from strategic partners, are you able to give a little bit of color on what that might look like?

William Brian Olson

Yes, I guess I'm really not. I can just highlight kind of what we intimated before, and that was -- they're just -- we are forging out some very nice relationships due to the technology and capabilities we have inside of this company. It is very much viewed favorably through customer relationships, through supply relationships, that we have much to offer other CNG players in this space that make us -- someone that people want to team up with in a more meaningful fashion. So -- and that's probably to the extent I can comment on that.

Operator

Your next question comes from the line of Jay Randall [ph].

Unknown Analyst

Quick question on the Fisker side of things. Probably shouldn't have had more problems. What direction you guys -- are you going with that, when the rest of the orders start production after the A123 issue gets settled?

Bradley J. Timon

No. We really don't know. I can't -- it's just -- we really can't say. We don't really have privy to inside information there. So we really -- we just don't know. It all depends.

William Brian Olson

Yes, and we -- obviously we wish Fisker the best. We would have upside to the extent Fisker ships vehicles this year. But having said that, our business plan has really -- when we say we're focused on CNG, we are focused on CNG. Our business plan is entirely based on our ability to produce and deliver CNG tanks and tank systems. So we have not allowed for any revenue or cash flow, as it relates to us shipping product to Fisker, to support them in the -- their production or development program. So we've really developed our 2013 plan around CNG and it does not include Fisker Automotive revenues.

Unknown Analyst

If, in theory, if they should straighten things out and start up production again, you guys would reap some benefits on the revenue side, is that correct?

William Brian Olson

We would. Yes, we would, absolutely.

Unknown Analyst

Okay. In regards to -- you made a comment about you can give specifics, talks with 2 major OEMs, through the CNG stuff on the passenger car side of things? Is that something you can give more details on?

William Brian Olson

I cannot.

Unknown Analyst

Other -- more an elephant in the room, being the share price, I suppose you got -- I think it was a couple of conference calls ago when you said there was absolutely no intention of pursuing anything that remotely resembled their reverse split, you're still willing to commit to that?

Bradley J. Timon

Yes, I think all we can say at this point is that we are -- there is obviously several moving parts or several variables and facets and we continue to monitor, evaluate and our -- in the decision process, but we -- that's probably the extent of what we can talk about on this call in terms of different avenues, different options, there is the possibility of seeing on NASDAQ potentially and it may require going through an appeal process and there's a possibility we could end up on a QB or QX OTC exchange or -- and so there's certain things we're evaluating. There's pathways we're going through right now. To the extent I can talk about that's probably -- we should limit our comments to that.

Unknown Analyst

Okay, you also said there are cost-cutting structures, being -- and obviously, a 30% improvement is starting to take hold a little bit. Do you guys, from the executive's side of things, would you guys be willing to trim your salaries a little bit more to help that cost come down until you reach profitability?

Bradley J. Timon

Yes, and actually, I'm in the process of actually taking my salary down right now. There should be news on that probably in the next 2 to 3 weeks. So that is going to happen. There's a couple of other executives that are going to be taking reductions as well. And quite honestly, there's a couple that we have to just realign, maybe going the other way, because it's just the -- it's the appropriate, right thing to do, but I'm personally going to be doing that, so yes. We're going after everything. We're absolutely -- we made a lot of progress, I think Brad hit it on the head with much progress as we've made, there's still things we got to do and we're going to do it. And that's where we get excited, because we can make more traction on the cost side, and with these revenues going up, margins improving in 2013, like Brad highlighted. That is just so critical because if we start driving more positive margin out of our product sales, reduce our cost structure, the things start to really work, and it works well.

Unknown Analyst

Okay, with -- in regards to Asola, you guys are -- you made reference to getting rid of those associations. So this Q4 should be the last time that there's any impairment charges or any negative equity from the Asola side of things?

Bradley J. Timon

Yes, so just as, as I mentioned in my comments, basically we've impaired fully all of our assets related to Asola. So yes, there can be no further impairments there. Everything's at 0 related to Asola.

Unknown Analyst

Okay, and I think I got this far -- with the Zephyr -- debt from that project, also if you guys are able to get a buyer for that, they'll accept the debt side of that equation also, correct?

William Brian Olson

Yes.

Operator

Your next question comes from the line of Terry Hackett.

Unknown Analyst

I wondered what the timing is on the NASDAQ listing issue?

William Brian Olson

Yes, well it just depends on -- it does depend on different pathways and potential appeal processes and so -- I don't know if we can actually define it. There's obviously an April 29 date out there that would require us, potentially to take some actions or find a way to get additional time from NASDAQ. And certain things of that nature are in place, so it's hard to specifically define a specific date at this point.

Operator

Your next question comes from the line of Phil Peters [ph].

Unknown Analyst

This is Phil Peters calling. I got a question, what's the installation charge for a CNG individual cost per unit, say in like an F-150, roughly?

William Brian Olson

The -- you mean the full -- like the full package, including --

Unknown Analyst

Yes.

William Brian Olson

I mean, it could be -- it just depends on potentially tank size, and integration and the shield and the casing around it, but it could be in that, kind of -- probably, could be anywhere from $5,000 to potentially $10,000 per install.

Unknown Analyst

Okay, and -- now how many current employees does Quantum have?

William Brian Olson

We have approximately about 120 employees.

Unknown Analyst

And how many do you expect to hire in the next 6 months, additionally?

William Brian Olson

Yes, we would, we -- the only -- probably there'd be hires -- there'd be new hires in 3 areas. One would obviously be production operators, and that could be in the neighborhood of 15 to 20 production operators between now and the end of the year. We could -- we are going to be enhancing our sales and marketing team, potentially by 1 or 2 individuals. And we would also see potential because of some of the funded development programs that our customers are funding up for. There's some potential engineering positions that we would have to fill out, that would be funded by these programs. So that's -- those are potentially the areas we are looking to add resources. So could we end up at 240 or 250, I'm sorry, 140, 150 by the end of the year? That can be the case.

Unknown Analyst

Okay, now obviously, the concern about being cash-strapped is a significant issue, considering you're looking at a decrease in working capital and the need to raise additional capital is obviously a strong incentive. If that's something that's about to take place, that will probably dilute the shares. Are you looking to doing like a private placement or something of that nature?

William Brian Olson

I don't, yes, we have not made that claim on this call. I think we've outlined that there's many different avenues, both on the equity and the debt side, that we have been putting in place over the last 12 months, and have been really focused on debt more than anything. We obviously talked a lot about strategic opportunities, and we're also, obviously looking at any potential equity and debt structure on the equity side. It has to fall in that category or we're just not being highly dilutive.

Bradley J. Timon

Yes, but we're just trying to be very smart about the decisions we make on financing.

Unknown Analyst

Well, also, 1 other issue regarding that is, you have a point percentage interest in Fisker Automotive, and Fisker Automotive is, I mean quite frankly, in a lot of trouble. Henrik Fisker's just resigned. Back in November, they lost many, many Karma to the Hurricane Sandy destroying them, and catching fire, an issue of fire damaging the electrical systems on the Fisker is a serious issue that's really hurting that company a lot of ways. The question is, with all that going on with the Fisker Automotive, how is that affecting your investment in it, and do you see any more revenue from Fisker of any substance?

Bradley J. Timon

Yes, so we have no carrying value of our investment in Fisker, so there's -- there would be no impact to any assets. We don't carry any assets. We don't carry inventory related to Fisker. So there's really no impact from that. And if Fisker goes back into production at some point, and they build the Karmas we would -- that would just be an upside for us. We don't have any revenues baked into our plan for 2013 related to Fisker.

Unknown Analyst

What is the cash value of Fisker that you invested, originally?

William Brian Olson

We -- naught. 0.

Unknown Analyst

I mean, well I thought you have a percentage ownership of it? Or a cash value of it?

William Brian Olson

We do have a percentage ownership, but it was more the value of our technology.

Unknown Analyst

So you're saying there is no real ownership of anything at Fisker at this point?

Bradley J. Timon

No. We do own a small ownership share, but it doesn't have, we don't have any carrying value on our books related to it.

William Brian Olson

Nor did we -- we did not pay cash for that ownership position.

Bradley J. Timon

We've never invested dollars into Fisker.

Unknown Analyst

And with -- roughly when do you anticipate Quantum becoming -- having a positive balance sheet, cash positive profit?

William Brian Olson

Yes, I think what we -- what I outlined earlier on the call, was that, given where we see our revenue base going, we are targeting a breakeven and even positive operating income towards the second half of this year. So that's something we're -- we've outlined before. It's a target that we believe is very reachable. And obviously, to the extent we can continue to demonstrate that through the first half of this year, and moving much closer to that, I think there is a -- there's just a significant less amount of cash and capital from operations we're going to burn through this year, compared to last year, and we are targeting for kind of a break-even point to occur in the second half of this year.

Unknown Analyst

And just my last question to clarity. The amount of CNG tanks you expect to have produced this year, what's that number?

Bradley J. Timon

For 2012 I reported earlier, was about 2,700 tanks that were shipped.

Unknown Analyst

Right. And at 2013, you're hoping to do how many? Around 8,000 or...?

William Brian Olson

No, we said capacity on 8,000. We haven't specifically identified the actual number of units for 2013. Even though we've outlined expectations. We expect it to more than double this year, and so we're -- that's kind of what we're marching towards right now.

Operator

[Operator Instructions] At this time, there are no additional questions for the conference.

William Brian Olson

Okay, well I'd like to, on behalf of Quantum, thank everyone for joining us today, and we will rejoin everyone at the 2013 for the Q1 earnings call. Thank you.

Operator

Thank you. This concludes today's conference. You may now disconnect.

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

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

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