UQM Technologies' (UQM) CEO Joe Mitchell on Q1 2017 Results - Earnings Call Transcript

| About: UQM Technologies, (UQM)

UQM Technologies, Inc., (NYSEMKT:UQM)

Q1 2017 Earnings Conference Call

August 4, 2016 4:30 PM ET

Executives

David Rosenthal - Chief Financial Officer

Joe Mitchell - President and Chief Executive Officer

Analysts

Randall Hough - ProEquities, Inc.

Robert Brown - Brill Securities, Inc.

Joe Vidich - Manalapan Oracle Advisors

Operator

Good afternoon, ladies and gentlemen, and welcome to the UQM Technologies, Inc. Conference Call. My name is Mike and I will be your coordinator for today. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session.

[Operator Instructions] As a reminder, this conference call is being recorded for replay purposes. I would now like to turn the presentation over to Mr. David Rosenthal, CFO of UQM Technologies.

David Rosenthal

Good afternoon. Thank you for joining us on UQM’s conference call to discuss our fiscal first quarter 2017 results and provide an update on key business topics. On the call with me today is Joe Mitchell, President and CEO.

Before we get started, I’d like to review our Safe Harbor statement with you. This conference call may contain statements that constitute forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act.

These may include statements regarding our plans, beliefs or current expectations, including those plans, beliefs and expectations of our officers and directors with respect to among other things, completion of the $48 million investment in us by Hybrid Kinetic Group Limited and our operations following such investment, the continued growth of the electric-powered vehicle industry in the Asian market, gaining required certifications, new product developments, future orders to be received from our customers, sales of products from inventory, future financial results, liquidity and the continued growth of the electric-powered vehicle industry.

Important risk factors that could cause actual results to differ from those contained in the forward-looking statements are contained in our Form 10-Q filed today and our annual report on Form 10-K for the fiscal year ended March 31, 2016 both of which are available on our website at www.uqm.com or at www.sec.gov.

Now, I’m going to present the highlights of the first fiscal quarter results.

Revenue in the first quarter was $1.4 million compared to $741,000 in the first quarter of last year, an increase of 94%. Growth in sales was primarily the result of increased shipments of our larger heavy-duty electric propulsion systems. Total gross margins for the quarter were 31% and gross margins from product sales were 35%, consistent with recent quarters. Product margins will likely continue to vary, somewhat quarter-to-quarter depending on product mix.

Total operating expenses for the first quarter were $2.4 million compared to $2.3 million in the same quarter last year. Included in this quarter’s expenses were legal and other costs of about $650,000 related to the stock issuance and purchase agreement with HKG. Excluding these expenses, our based operating expenses were about $1.7 million or 25% lower than the same quarter last year.

We continue to maintain a streamlined infrastructure and look for other efficiencies as we move forward. We recognize the net loss in the fiscal first quarter of $2 million or $0.04 per common share, compared with a net loss of $2.2 million or $0.06 per common share for the first same quarter last year. We ended the quarter with $5.5 million of cash and no debt.

In summary, we are pleased with the results of the quarter and believe we are beginning to see some stabilization in the North American market. In addition to serving our customers and seeking other sales opportunities, we are very focused on preparing for our shareholders meeting to vote on the Hybrid Kinetic investment and executing on our plans to enter and grow in the Asia market.

Now, I’d like to turn the call over to Joe.

Joe Mitchell

Thank you, David, and good afternoon, everyone. I want to begin by saying, how exciting the past few quarters I’ve been for UQM. We have had three transformational events take place, all of which are critical steps in taking UQM to our next phase of growth and creating long-term value for our shareholders.

As a reminder, last October we announced a groundbreaking 10-year supply agreement with ITL. In June of this year, we secured a collaborative agreement with Eaton and Pi Innovo to develop an electric powertrain system for the medium- and heavy-duty commercial EV market, and of course in the same month we can to an agreement with HKG regarding a proposed definitive stock purchase agreement.

In today’s call, I will provide an update in all three of the transformative events as well as an operational update on our fiscal first quarter 2017.

First, let me give you an update on the proposed HKG transaction. I would like to again express how excited we are about the proposed definitive stock purchase agreement with HKG Group in Hong Kong. As a reminder, the stock issuance will generate approximately $48 million in cash to UQM, in addition to providing us a critical manufacturing partner in Hong Kong and complete an unrestricted access to the China EV market.

I believe this transaction is critical to enabling UQM to execute on our global growth strategy. Since the signing, the UQM team has now had the opportunity to spend even more time with HGK Group. And we are already exploring opportunities for us to work together. I am planning another trip to China and Hong Kong later this month to meet with the HK executives to further discuss our business plans.

I will also meet with the Hong Kong government officials regarding the implementation of our manufacturing facility in Hong Kong. While in China, I will also visit ITL on Eastlake to review the status and progress of their bus development with our powertrain along with visiting other potential Chinese customers.

I can say that after working with the HKG organization over the past couple of months, I am even more confident that they will be an excellent partner for UQM and our shareholders.

For those of you who have not already seen it, EnergyTech Investor has interviewed Chairman Yeung about HK’s proposed investment in UQM and their strategic vision. And I would encourage you to review that interview and learn more about HKG. It can be accessed on our website or ETI’s website at www.energytechinvestor.com.

As we have mentioned many times before, China is the largest electric vehicle market in the world and the proposed transaction is critical to enabling UQM to continue to executive on our global growth strategy. I also want to emphasize how important this deal is to us and our ability to maximize the leverage of our alliance with Eaton and Pi Innovo.

As previously mentioned, UQM will continue to support our existing customers around the world. And our headquarters will remain in Colorado. However, with HK as our strategic partner, we will have a second manufacturing facility in Asia that will enable us to supply our Chinese customers directly from Hong Kong, and we will also get all the benefits of being considered a Chinese domestic supplier.

Next, I would like to give you an update on ITL. As a reminder, last October, we announced the deal with ITL Efficiency Corporation in China. The agreement calls for the development test and certification programs continuing through this year 2016, ramping up for the startup production in 2017.

First year’s production will take place out of our Colorado facility with plans to manufacture our UQM products for the China market thereafter. And I would also like to point out, the HKG deal is critical in facilitating this.

With successful closing of the HK transaction, we feel confident that we will be able to supply ITL and other Asian customers from our manufacturing facility in Hong Kong by early 2018. ITL remains on schedule and they are currently working through the certification process for both our powertrain and their six to eight meter bus.

As mentioned earlier, we will be meeting with ITL later this month in Wuhan, China to review the status of the program and discuss other business opportunities.

Also in June of this year we announced our new alliance with Eaton and Pi Innovo as the suppliers of choice for the development and production program to develop a full electric drivetrain system that we are calling the PowerPhaseDT that will be offered globally to the commercial EV market.

This new full-electric drivetrain system will include a motor, inverter and two-speed transmission along with the transmission control unit to support the medium- and heavy-duty EV market. This system is very similar to the highly successful system that Proterra currently uses. And we know this system works very well on the road.

I cannot emphasize enough how important this alliance is to our growth strategy. This system will be a flagship product into the medium- and heavy-duty markets around the world and we strongly believe that this system represents the best available technology on the market today. Customers are increasingly demanding better performance and we now have the full drive system solution to offer.

Currently, subsidy programs such as the one in China, demand higher efficiency ratings and increased range to qualify for the subsidies. Our system provides far more - the far superior performance compared to legacy technologies that simply cannot deliver.

The PowerPhaseDT will enable customers to meet enhanced performance and efficiency targets with the field-proven solution, and reputable and solid supply chain to support this product. We are in the process of identifying a number of beta or test sites for the first systems. And we are targeting from all over the globe including North and South America, China, and India.

HK Motors with their bus program is already confirmed to be one of the beta sites for their China full-size bus. And we look to have all of the beta-sites identified earlier this fall.

We have experienced considerable interest from a number of customers who are interest in participating in this early test program. Our selection criteria will be based on customers who have a definitive interest in working with us to jointly develop the application on their vehicles. Have the opportunity for volume production and provide maximum exposure around the globe. I also want to reinforce that having a strong balance sheet, the financial stability, is paramount to our ability to convert our road trials into commercial orders.

In order to give our customers confidence in our sustainability, we need to show that we are well-capitalized with global manufacturing capabilities. The HKG transaction will provide a solution to both of those points.

Now I would like to mention a couple of highlights in the quarter for each of our focus areas: firstly, propulsion systems; second, auxiliary products; third, engineering services.

Let’s start with propulsion systems, as we recently announced, we are very pleased with the extension of our long-term supply agreement with Proterra. We are happy to share the Proterra zero-emission buses with more than 2.4 million miles of revenue service as more battery electric buses on the road in North America today than any other manufacturer.

Proterra continues to see a growing demand for their vehicles and the extension of our supply agreement further strengthens UQM’s position as the primary supplier for their industry leading zero-emission buses.

We have worked closely with Proterra over the years to create what we believe to be the most technologically advanced heavy-duty electric drivetrain in the marketplace. And we feel confident that our relationship with Proterra will continue to grow and develop for many years to come.

We look forward to continued order-flow and success as we move further into fiscal year 2017. In addition, the extension of the supply agreement with Proterra, UQM received a follow-on order from RAPAC to support the new demand in Israel. The RAPAC vehicle applications are designed for the most demanding environments in the world and our PowerPhase products have proven themselves as exceptional products for their applications and we are pleased to see RAPAC’s forward progress.

As previously announced, this additional order is part of the ongoing MoU signed with RAPAC in September 2015. This week we also received news from Keshi, our mining equipment customer in China. They passed the explosion-proof test. And their systems are now being sent for final performance testing and approval in China.

This is a major milestone for Keshi that’ll allow them to move forward on the commercial implementation of this product in the China mining market, and obviously to move from the prototype to the production stage in their development with our powertrain.

Lastly, we announced during our previous quarterly update call, Kalmar Motor AB successfully completed its trials in the TBL-50 airplane tug, using our PowerPhase HD 220 system. During this quarter, UQM received a follow-on production order for the electric airplane tugs and after Kalmar successfully tested and add its formal product launch with major airlines.

As previously mentioned, Kalmar has been a supplier to a number of the major airlines for the past 40 years and UQM is delighted to be a key supplier to Kalmar as we started seeing increased demand for their application.

Moving on to our auxiliary product sector, we continue to see progress within our auxiliary product sector with a continued order flow from our customer Air Comm, an aerospace manufacturer of OEM air-conditioning and heating systems.

We are pleased with the continued stream of orders and expect more follow-on orders during fiscal year 2017. Additionally, we continue to see interest in our fuel-cell compressor products. We received prototype orders from two major Asian OEMs for delivery this fall.

Unfortunately, we cannot disclose the names of the OEMs due to the confidentiality of their programs, but both the applications have the opportunity for future production volumes as this technology matures.

Now, moving on to our engineering services sector, we are pleased to say that we continue to expand and further strengthen our engineering services sector. Our remanufacturing projects continue with all contracted customers including RTD, Air Comm and Ballard Power.

Our DOE non-rare earth project engineering services will wrap up in September, but we are happy to announce that HKG has indicated an interest to further develop this technology beyond the concept level that has been funded by the DOE.

Additionally, we have submitted another application with the DOE for future funding of advanced motor work to support the DOE’s cost reduction targets. And this project directly supports our technology roadmap. Final decisions on this award are expected later this fall. We continue to see engineering services as a key part of the business and look for opportunities for funding that are in line with our technology strategy.

In summary, it’s been a very exciting quarter for UQM and its shareholders. We formed a new alliance with Eaton and Pi Innovo for our full-drive system. In addition, we have extended our supply agreement with a top domestic EV manufacturer Proterra, and we continue to see growth within other segments and applications along with follow-on orders from a number of previous customers such as Air Comm, Zenith, Kalmar and RAPAC.

However, by far, the most important event for this quarter is the fact that we have found a highly synergistic and strategic partner in Asia. This significantly strengthens our entry into China and the rest of the world. HKG definitely met the three criteria we were looking for in a partner, being capital, infrastructure to support the China market, and access to this market.

Equally important, as the shared vision we hold with HKG of growth in this emerging market and our efforts to maximize shareholder value, being able to successfully negotiate with and supply Tier 1s and leading OEMs requires a strong balance sheet and financial strength. Just having the technology alone is not enough.

I believe, we will have the financial stability and in combination with our alliance with Eaton and Pi, we will become a key systems supplier for commercial vehicles around the world.

The proposed investment also provides us with the best opportunity for growth and the ability to create long-term shareholder value. We truly appreciate all the support that our shareholders have given us over the years. And I believe that we are the most critical inflection point in the company’s history.

Things can often move slowly in this industry, but I think our strategic position and HKG’s investment is the beginning of a new era. UQM shareholders and employees will have the opportunity to be part of a much larger and more valuable global entity. And we look forward to your continued support as we work to close this transaction and drive ahead with our strategic initiative.

In order for this transaction to happen, we need your support and vote to approve the stock purchase agreement with HKG in the upcoming shareholders’ meeting.

In order for the agreement to pass, we need the approval of two-thirds of the outstanding shares or slightly more than 32 million shares. I encourage you and all shareholders to support this effort and help put UQM on a solid path to operational and financial success.

At this point, I would like to turn the call back to the operator for questions. Operator?

Question-and-Answer Session

Operator

We will now begin the question-and-answer session. [Operator Instructions] Our first question is from Thurman Willis [ph], private investor.

Unidentified Analyst

Gentlemen, congratulations, Joe, on all your accomplishments. My first question is the fact that you made extraordinary success in the last year since you took oversee CE with numerous announcements that you had made. Yet our stock traded some $0.63, which is almost unheard of considering the company is doing better than it ever has been.

And so my question is considering all the fundamental success, what do you think you and your - our firm and Shawn has done a good job in what he has laid out so far, especially with the press releases. But on the PR front can you be a little more specific in the IR front as to what we’ll do especially in light of this upcoming vote, which support for the merger with HKG or partnership?

Joe Mitchell

Okay. Yes, definitely, thank you, Thurman. Obviously there is a lot going on and we put the strategy together to make sure we’re getting all the relevant information out to the market in a timely basis. As you can see what’s happened in the last few weeks with the Eaton and Pi Innovo announcement and getting our beta sites in line, all of these are going to be key points that we’re going to be updating our investor presentation with.

So what Shawn is working on that we are going to be having happen in the next couple of months, as we have a number of conferences that we are going to be attending both here in the U.S. and in Europe, and also tradeshows - there is a key tradeshow that we’re just finalizing for Europe that we are going to be there. Eaton is actually going to be demonstrating the product at that tradeshow. So that’s going to be a key point.

Shawn is also working on getting what we would call an active outreach program for investors in key target areas. And actually the first one he’s looking to target will be in Denver. So we expect that to be occurring sometime in probably in September and getting, again, others lined up, so we are definitely going to be promoting the company as much as possible in what’s happening. And I think there is definitely a lot of good news.

And obviously the other element of what’s truly going to drive the value of our stock is going to be the fundamentals. As we start to see the growth and closing on new orders and seeing this revenue increasing that’s where I ultimately see the long-term value coming to play.

Unidentified Analyst

Well, you certainly seem to be executing on the fundamentals. My follow-up question observing the rules, is that you made mention of the fact you’re working with DOE, and I notice that we attended a HTUF conference here not long ago that I believe Adrian took part in. And you mentioned that there would be - I think you said a possible announcement of that award in the fall. Can you give us a little more light on possibly how big that award might be and how Adrian was accepted at the show?

Joe Mitchell

Yes, I think they were probably two separate events. I mean, when Adrian presented at HTUF, he was actually in presenting the new drivetrain system with the Eaton gearbox with Pi Innovo and there was a number of potential new customers in the audience. So it was, again, another great opportunity for us to be able to promote the product to potential customers.

Again on the DOE, we really can’t say what the value of the award would be, but - and I think it would be - I’d say, safe to stay in line with some of the smaller awards that we’ve worked on recently, it’s very targeted.

The DOE has some incredibly aggressive cost reduction targets for electric powertrains. And I think the timing-wise, as they want to be at roughly $8 a kilowatt for a high-volume drive system by about 2020. And the only way you’re truly going to get there is through breakthrough technologies.

We’ve got some key items in our technology roadmap that very much align with these, so we want to work on, that the DOE to this point have said - we’ve moved on to the second round as far as the analysis and evaluation of our proposal and hope to hear some positive news soon on it.

But as far as the dollar value and I really can’t tell you today, because it wouldn’t be official until they determine how much they’re going to give towards it.

Unidentified Analyst

Thank you for taking my question. I do appreciate as long-term shareholder the tremendous amount of fundamental execution that you and management have made. And I know when people hear the story they will be excited as well. Thank you again for taking the question.

Joe Mitchell

You’re very welcome. Thank you.

Operator

The next question is from Randy Hough from ProEquities.

Randall Hough

Good afternoon, fellows, and congratulations on the move in the - rapidly in a positive direction year over year.

Joe Mitchell

Thank you, Randy.

Randall Hough

Sure. My question is going back to the Eaton, Pi Innovo technical development with the PowerPhaseDT. Have you gotten - can you give us some color on the kinds of or numbers, I suppose, I’m looking for - inquiries about this development? I’m sure you’ve been marketing already in terms of - you gave us an overview that you’re going to have your beta test sites, and what have you, around the globe.

But in terms of actual inquires have you seen any significant number of inquiries for possibly start negotiations to develop prototypes or deliver prototypes?

Joe Mitchell

Yes, definitely, Randy. I mean, it’s much higher than anything we’ve ever seen. I mean, typically, we get - maybe an inquiry or two a week. And I think since we’ve made that announcement, we’re probably - I mean, it’s quite an alley. I think we’ve talked to just about everyone that has an interest. But I would I think it would be safe to say, we’d be in probably the 15-to-20 area of major companies that have approached us, that are interested in it.

And I kind of want to stress again, why this is so important to us going into the China market. When you look at our main competition over there, it’s been direct drive. So in essence, that’s a much larger motor than ours to get the same torque without a gearbox driving into a differential.

And when we would go into customers previously when - especially in China, where they’re used to direct drive and we would present our powertrain, and when we would have to put the onus of finding the gearbox on to the customer, it would either slow us down or make it very difficult to get into these markets. So that’s why it’s so critical to bring this whole system solution into these new and emerging customers.

And even mid-sized customers, I would say, in other areas of the world, both North America, Europe, and an area that we’ve been very pleased, there is a lot going on now in India. And we are trying to target at least one of the beta sites, hopefully for an Indian application. And going in and trying to penetrate that market as well.

So now that we are able to going into these customers and again having a partner like Eaton with their name behind it, it adds an awful lot more credibility to the product itself. So I think I’d say the interest has been very high. And as I have said, the criteria that we are looking in selecting the beta partners is, one, their willingness and openness to work with us, because there is going to be some work on both sides as we fine-tune these vehicles.

Secondly would be what type of market do they have after the fact are they just a kind of a one-off or do they have some significant volume behind them. So those are really going to be the key factors as we look to expand into those areas. I’d say the interest has been very good so far.

Randall Hough

Yes. Well, good. Then let me follow up with a little specificity with respect to HKG. Now, that they’ve had an opportunity to look at that offering in little more detail since the announcement, and I speak again of the Eaton, Pi Innovo technology. Can you give us any color on what other collaborations or projects that might have come to the mind, since you’ve been working here lately with the management at HKG?

And I’m thinking specifically of other markets in China that could use the new technology. It might not have been thought of before, anything, any inspirations or some epiphanies occurred, other areas of the commercial market is what I’m looking for.

Joe Mitchell

Yes, definitely. I think as I mentioned in my comments earlier, HK is going to be one of the beta sites. Unfortunately, today, they’re using one of our competitor’s powertrains which is the direct drive. But with this transaction there is a commitment that as soon as we can get certified and get that product on to their buses and get it qualified, we’re going to be the powertrain of choice there. And they’re anxious to work with us on the bus-side.

And if you go back to the interview that Shawn did with Chairman Yeung, he also mentioned that HKG is also working on new energy vehicles. And it’s I think - I’ll give you the exact quote, it’s actually anticipated that HKG new energy vehicles from buses, the passenger vehicles will be using UQM motors.

And with the range extended vehicle that they’re really just kicking off, I mean, obviously the true production is going to be a few years away because in it’s in its infant stages, but that is another market. And again going into the automotive range extended where, again, our advanced technology and efficiency will serve that market very, very well.

And the volume today is in China. And I know HK, when we’ve talked to them earlier is a big believer on the passenger car side, on a range extended vehicle, because they still see that there is going to be limitations on the pure electric on the passenger car side, where I think it fits in very well on the public transportation where you’re on fixed route and control is a little bit better.

One of the things they mentioned right now in China, there is a huge issue with just waiting in line for charging stations to get vehicles charged. So the range extender kind of takes care of that.

Again, that is one other market. And on the next trip over there, HK is already making introductions to other potential customers that we have not come across in the past, because, obviously, they’ve got a much larger sales and marketing team that’s actually based out of Shanghai on their battery side of the business. And so everyone that’s –are talking to with batteries is going to need electric powertrains. So that’s definitely doors that are opening that we couldn’t open in the past on our own.

Randall Hough

Well, that’s exciting. That’s what I was probing for. There must be a lot of connections going on with Mr. Yung Yeung’s background over there as well I was looking for new…

Joe Mitchell

Yes. The more we’re learning he is incredibly well connected and we plan to take full advantage of that.

Randall Hough

Okay.

Joe Mitchell

Okay.

Operator

The next question is from Robert Brown from Brill Securities.

Robert Brown

Joe.

Joe Mitchell

Hi, Bob.

Robert Brown

I want to congratulate you for the work you’re doing for the company. But I and my shareholders which we represent 1,652,000 shares, are concerned about the control going to HKG, where we do not know what could happen to us as shareholders of UQM down the road.

We don’t know whether or not the $48 million will be - how long it will stay in the company. What protection we have about a takeover or of our shares or the sale of our division if we are a division then of another company? We are shareholders and I don’t see the protection for us.

Joe Mitchell

Yes. I think, as we’ve discussed in the past, Bob, I mean, the vision that Chairman Yeung and HK has is definitely in growing the business and having both the current shareholders and a new shareholders sharing in the upside. And we feel that, obviously, there is much stronger and larger potential from that end versus the go it alone side.

Robert Brown

Excuse me. Will we give us a standstill agreement, not to do anything with our shares for two years?

Joe Mitchell

I think the way it’s written in right now is it’s written in for one year. And, again, I really can’t speak on what exactly we could do to modify the agreement beyond the one year that we’re marked in on.

Robert Brown

Well, as a shareholder and as a shepherd for these shares, we want more protection. It’s obvious to me as someone who watches the stock very carefully, that since the deal has been announced the stock has done down and not gone up. Now, people of - that usually means that people are not in favor of the deal.

Joe Mitchell

I wouldn’t know if they’re not - I can’t say they are not in favor, because again I’ve spoken to quite a few and I think as people understand the upside benefits on where we will go as the company, the review has been very positive. And then I’ve spoken to a number of them. And I will definitely relay that message to HK and what else we can get out there to make the shareholders feel more comfortable.

Robert Brown

Well, we’d also like the chairman to buy some stock in the open market at least so we’d be sure about this thing. That would be a good move. I think you can relay that to him. My view is that…

Joe Mitchell

Yeah, I’d definitely relay that to him.

Robert Brown

My view is that we want to see this company be successful. But at the moment we’re drifting along. And I watch it very carefully and there is more of - abundance of selling than buying since the deal has been announced.

Joe Mitchell

Okay. I will definitely pass those messages on.

Robert Brown

Thank you. Okay. Thank you.

Operator

The next question is from Joe Vidich from Manalapan Oracle Advisors.

Joe Vidich

Hello, guys.

Joe Mitchell

Yes, hello…

Joe Vidich

Congratulations on basically everything you’ve been doing.

Joe Mitchell

Thank you.

Joe Vidich

It’s really a great progress. I have a few questions. As a follow-up to the prior caller, I guess, the first question is, this deal requires two-thirds approval. After this deal is consummated, assuming it’s consummated, if there were any other transaction with the company, would a similar two-thirds vote be required? For instance, if a year or two down the road somebody wants to buy the company, would it require two-thirds of vote?

My second question is with regard to the new system, the PowerPhase system are either of the other company is going to share in the marketing costs of - regarding not developing, but just getting it out there? And the third question is you said the DOE is targeting $8 a kilowatt by 2020. What is it currently then?

Joe Mitchell

Okay, all right. Let me go through, I think you’ve got three good questions there. I want to make sure. On the first one, again, any - I shall let David, I mean he is far closer to the details than I am of what’s going to be in the proxy and any other moves on the company. So, David?

David Rosenthal

Sure. Joe, obviously right now, our bylaws require two-thirds of outstanding shares to vote for a transaction of this nature. There will be a number of proposals in the proxy and one of them will relate to the bylaws. And we’re still kind of learning on what we’re going to be putting in. But there probably will be a proposal to change the requirement from two-thirds to something else. And it will do whatever the current law allows us to do.

Joe Vidich

Okay.

Joe Mitchell

And then going on to the marketing side, one of the things as we put this together, we will be the Tier 1 on this product. So we wanted to make sure that we were the lead supplier.

Now, both companies that’s in their best interest to market and something again we’ve been very pleased with is what Eaton is doing. They’ve actually are putting together a display with our motor and their transmission on it. That is going to be actually owned by Eaton and we are working on second one for ourselves for various shows. And the first show that’s going to be at a major commercial vehicle show in Europe in September. And I think it’s the IAA show that we’re going to be participating in.

So Eaton has been incredibly supportive as far as - especially with a company of their size of getting the word out. And they see that there is a lot more potential with this, but they made it quite clear to us that they want us to be the Tier 1 on it.

And then, could you back, what was the third question?

Joe Vidich

The third question is that…

Joe Mitchell

Oh, the DOE, okay, yes, right, okay.

David Rosenthal

DOE, right.

Joe Mitchell

David reminded me. Yes. Where things are today on the DOE is a typical automotive powertrain - and again there is a lot of caveats in there. It has to be at high volume. The assumption is 100,000 units per year. But we know the typical automotive powertrain is around $20 a kilowatt today. Now, getting down to 8 is going to take some major breakthroughs and those are some of the things that we’re looking at.

Obviously, for us to be in that type of range on the commercial side, the volume isn’t there. But those are again some of the reasons that you’ve got to make the investment in the tooling to have, again, high volume die-cast tooling. You’ve got to have efficient - one of the things that I think we have an advantage on the efficiency side is our powetrains are definitely smaller, which is going to take less copper, less magnets, less aluminum and less steel to get the same power out. So again, that’s another large advantage that we have going into that market and then when we tool it properly, we’ve got a lot of technology that supports us on the way to that path if we can get to the right volume.

Joe Vidich

Okay. Anyway, I appreciate it guys and I really think you’re on the right track and best of luck.

Joe Mitchell

Okay. Thank you.

David Rosenthal

Thank you, Joe.

Operator

The next question comes from Bruce Kureski [ph], private investor.

Unidentified Analyst

Yes, hi. I’m also a long-term investor who’s got the stock with us a long period of time. I’m pleased by all the progress that’s being made, it sounds terrific to me.

Joe Mitchell

Thanks.

Unidentified Analyst

I remember a few years ago we had an arrangement with BorgWarner for transmission and that seem to have gone nowhere. Now, what is the difference between the Eaton involvement and the BorgWarner arrangement that we had a few years ago?

Joe Mitchell

I can probably go back, I mean, I think the Borg arrangement was before I was here, but I’ll give you the best of my understanding. The Borg transmission - there was two Borgs out there. One was on the single-speed that again was used on the CODA vehicle and is used on other applications. So Borg, again, make transmissions, they make to our motor.

And one of the things on the single speed, why it’s probably more difficult to pick one transmission is you have to - if you look at the vehicle application and vehicle size, whether it’d be a front-wheel drive or rear-wheel drive, what your top speed would be, what type of –whether it’s going to run into a differential or be a straight in line type application with that. So it just becomes very vehicle-specific without getting into all the technicalities.

So that may be the area that you’re speaking to on the single speed. Now, Borg was doing a multispeed, but it had nowhere near the performance that the Eaton transmission does and was not capable of actually on - do with a multiple speed of driving the size of vehicle such as these small size buses. So I believe they have abandoned that and actually sold that off to another company right now on that multispeed.

Unidentified Analyst

I see. Yes, it seems like Eaton has given a much more - much stronger commitment to this market working with us.

Joe Mitchell

Definitely, again, I was pointing out - the Eaton, the gearbox itself is the same gearbox that Proterra is using today, where the customization with us is going to come in as we were going to make some tooling investment to drive a lot of the cost out of how we make that transmission to our motor. And we also are with Pi Innovo developing a generic controller that can be easily modified to various customers versus what Proterra has today, as it’s totally customized to their bus.

So the nice part there is that product has again 2.5 million miles of field performance on it, which is a huge advantage going into this market that it has proven from a mechanical standpoint.

Unidentified Analyst

Great, thank you.

Joe Mitchell

You’re welcome.

Operator

[Operator Instructions] The next question is from Frank Buchman [ph], private investor.

Unidentified Analyst

Hi, Joe.

Joe Mitchell

Yes, hello, Frank.

Unidentified Analyst

Congratulations also on the developments. I’ve been a long time suffering shareholder over 20 years. Now, I heard this stuff all the time. When are we going to make some profits?

Joe Mitchell

Well, that’s our long-term plan, Frank, obviously…

Unidentified Analyst

I know it is long term; it’s been a long-term for a long, long, long time.

Joe Mitchell

No, I understand, and the key is putting the right pieces in place and why it is so important to be in the China market. Again, North America with Proterra just dominating the market, but it’s in the hundreds.

Unidentified Analyst

I know.

Joe Mitchell

And for us to get to where we need to be we need to be in the thousands and that’s where the market is today. And that’s why again this is so critical to us to get into that market. And, hopefully, the North America and some of these other markets move into those volumes in the thousands, but that is not going to be happening here in the next couple of years. So we got to…

Unidentified Analyst

I mean, we’ve been trying it in the automobile market for a long time. We didn’t land one of them. Is it…

Joe Mitchell

And again, as I mentioned before, what it takes to get into the automobile market as you - you’ve got to have the backing and the stability to be a major player in those markets. I mean, they look at those major Tier 1s and the opportunity today to get into these new markets is in China.

Unidentified Analyst

Okay. What assurance do we have after a year that this company is - Chinese companies don’t want to buy up our stock at a price they specify?

Joe Mitchell

Let’s say, from that end, I mean, which just couldn’t make a lot of sense and they’re looking to maximize the value of the company. They want to…

Unidentified Analyst

I don’t think they can buy it out cheaper - they can buy it out cheaper and then run it up.

David Rosenthal

This investment, HK is doing this from a long-term perspective. They have offered a premium on the stock where it’s been. They are putting together plans to be a global player in the EV market to control the supply chain. We’re part of that process and they’re making this investment to get a return on their investment as our shareholders are looking to do.

Unidentified Analyst

Okay. And will our military do any business with us now, since we are now owned by the Chinese?

Joe Mitchell

I think, number one point, we are not owned by the Chinese. I mean, we still would be a U.S. based company, all right, with a Hong Kong - again, there is a lot of difference between Hong Kong and China from that end, with a major shareholder based out of Hong Kong. We still will be listed on the New York stock exchange.

And what impact that will have? Right now, we have no military business. We haven’t done anything with the military directly for years. And I really don’t see it have a much of an impact right now. I mean our target markets are going to be the commercial vehicle; and then, hopefully, going into the automotive vehicle market.

David Rosenthal

And the other piece on that Frank is that we’re going through a CFIUS approval process right now, and submitting to CFIUS that our products don’t close any security risks. We’re very confident that we’re going to get that approval. And so, that will have a long-term impact on our future business.

Unidentified Analyst

Okay. These motors we shipped over now, these were the CODA motors, are written-off completely. Is that correct?

Joe Mitchell

Well, again, I think the CODA inventory has not been written-off. And that is the product that we are selling again to ITL and Zenith and a number of other customers. So, again, that - the ITL Eastlake announcement was the area that was going to move that inventory down and…

Operator

Your next question is from Robert Hoffman [ph], private investor.

Unidentified Analyst

Good afternoon.

Joe Mitchell

Yes. Hello, Robert.

Unidentified Analyst

Hi, I was going to ask a question about why it was going to be an advantage to our company, when we were technically giving up so much of the stock in the company to where they would have, HKG would have a controlling interest in the company. And that was asked a couple times already. And I didn’t really get a good answer on it.

But I’m more concerned about the fact that if the company is going to be issuing all of this new stock to sell to them, so that they have a controlling interest in the company, is that not going to dilute the value of the current outstanding shares that we all own?

Joe Mitchell

Obviously, the number of shares will be diluted. But, again, we’re also bringing $48 million of cash into the company and access to a much larger market that us alone we’re never going to be able to get into. And I think the other key point as Chairman Yeung pointed out and we’ve discussed earlier too, there is an of a lot of advantages in going into the China market.

And with the pre-trade agreements between Hong Kong and China, the bus being based in Hong Kong and being viewed as a domestic company, it opens up, it really takes a number of barriers of entry a way of getting into that market. So there are many advantages from that side. And I think another key point I want to make. I know I spoke about it when we talked about this deal is when we first opened up and looked at finding a partner, again, our default position was looking for minority shareholder and setting up a joint venture.

We spoke with or reached out to over 50 companies. There was no interest in that arrangement. And as we got further on, we - there are also again a number of drawbacks to the joint venture, because again you would be giving up 50%-plus of the profits of the joint venture to the partner, where here, UQM as an entity will maintain all of that. So that is one big advantage of the new arrangement versus setting up the JV.

I mean, secondly, the - and again for other people if they were interested in the company. The interest was again not paying a premium and buying the company out right, which the shareholders would have had no upside. Again, no one was willing to pay a premium and there are no serious offers whatsoever. So, as we went through this and said where we want to go as a company this was by far the best available offer for all of the key stakeholders.

Unidentified Analyst

Okay. I guess that kind of sort of answered it. Thank you.

Joe Mitchell

You’re welcome.

Operator

Your next question is from Patrick Ater [ph], a private investor.

Unidentified Analyst

Hi, how are you guys doing?

Joe Mitchell

Hi.

Unidentified Analyst

First of all, I want to congratulate you for all the other contracts that you have been getting. But myself personally I am dead-set against HK getting 58% controlling interest of this company. My biggest concern is like what happened to the other companies EnerDel and Eldordot [ph] nanotechnologies they were taken over by Chinese companies. And we no longer get into conference calls and we never know what’s going on and nothing is ever said. And they are still created on NASDAQ.

To me, giving a company controlling interest after all the work you have done and all the patience that we have had I think it’s a mistake.

Joe Mitchell

Well, I appreciate your opinion, Patrick. But I think all indications are that we’re not going to see that. I mean our management is sitting in place. The UQM as an entity is still going to be there, other than a different board in a far greater market. What’s in all of our interest is, obviously, to maximize the value of this company and realize its full potential. And that is definitely my goal personally to do that. And I know with all the discussions I’ve had with HK. There is no indication whatsoever that we want to back off on that at all. We want to grow this globally.

David Rosenthal

And I would just…

Unidentified Analyst

I understand. I didn’t say we want to grow globally, but already even though we are still going to have members from UQM on the board, we are still going to be outnumbered by the number of members from HK on the board. And whatever they’re going to say is what’s going to go once the transaction is completed. And that’s my major concern.

I mean, we put too much work, too much time. We’ve got money from the U.S. government to make this company flourish. You’ve been getting a lot of contracts from other companies and we’re just getting ready to move this company forward. And then, we give controlling interest to somebody else.

Joe Mitchell

Well, again, as I pointed out, I mean, the market that we have to go after is in Asia. And we can be the dominant player in North America and there is not enough there to turn this around. And that’s very key to the strategy we’ve been talking for a long time, how do we get into that Asia market and be a player with it. And even with the ITL contract, we said we’ve got to be there manufacturing, but to be tied into one customer and every other customer we spoken with over there, says, so you got to be here and you got to be in China and you got to have that type of entity to truly be a player on that market.

Unidentified Analyst

Well, like I said, it seems to me like the Chinese are controlling everything. We’ve got a factory here in the U.S. there we got U.S. workers working. And we could supply them with all of the motors that they need, but they’re just dominating us by telling us you have to build a factory here in China and put our people to work instead. Well, but that’s just my opinion. I just want to give somebody else a chance to ask a question. Thank you.

Joe Mitchell

Thanks.

Operator

The next question is from [Harold Webber from Egis] [ph].

Unidentified Analyst

Hello, guys. A couple of things, first, as far as being jointly owned with these guys to get into the market, I’m sure everybody understands that. At the same time, I know there are plenty of joint ownerships that are going on. Why do we need to give them more than 50%? That’s the first thing.

The second thing is I believe that we should be getting some kind of a guarantee standstill agreement that’s well up longer than a year. If this starts to come to life, it’s going to take more than a year. I have been involved in this thing for 30 years. Stock was for $10, $7. It’s now less than $0.70. We are giving away 35 years of work to these guys for a further $0.10 on the dollar. And where is our protection here?

I mean, it’s very nice to say this and that. But if they really believe in it, 50% should do fine. Giving us a standstill agreement for two or three years should be fine. If they really can grow in a business, what’s the - where is their problem with that?

And I hear a lot of other long-term shareholders feel the same way and you know I’ve been involved in this thing forever. And now I’m forgetting the fact that we have a 90% or 8% or a 50% loss on everything that we bought. But let’s say, I get that, we’re sitting here, we’re waiting, we believe in the company.

At the same time, there should be some middle row here. 50% should be more than enough, gives us all the legal connections we need, all the legal rights and considering being an owner in China that gives us all the entrées of manufacturing there and all those things. And the same thing goes for the standstill agreement. Come on, let’s be realistic. What’s a year?

This thing is going to take a year to come off to get off the ground. But a year from now it’s going to start quirking and they’re going to pay us [do the work] [ph] we’re going to get nothing. There should be two or three years minimum, so that we as shareholders who’ve been here half our lives have a chance to recoup some of this money and to finally benefit from the - you’re way ahead in the company, you’ve got to have been there. You’re longer here.

We are lot longer than you, mostly some of these guys on the phone and me included. The company is a way ahead of itself. Now, finally, it’s coming into its time. Lot of companies are way ahead of themselves. But we are now at the junction that the world is interested and the demand is growing and we have a chance finally to make this work.

Now, we’re giving away the store after 35 years of development, that doesn’t seem equitable for us.

Joe Mitchell

Now, I guess on the standstill, I mean, we’ll definitely pass that message on. But I think we would have to again go back. But the main point is UQM is a small company. Now, we have the opportunity to be a much, much larger company versus what we could do on our own.

Operator

Your next question is from Furman Wills [ph], private investor.

Unidentified Analyst

Just as a follow-up. I’ve been in the company 15 years and not to counter what anyone is saying. I know that if I were giving you $50 million, I’d want to be able to control my investment, while at the same time not allowing risk to be greater than reward. Help me out here.

We have this, I count, nine areas which are so positive. We have ITL, HKG. We have Proterra. We have RAPAC. We have Keshi. We have Kalmar. We have Air Comm. We have possibly the DOE and Zenith. I think I named those correctly. And so as - I know, Joe, that you feel so strongly that this is the route that we should take and I am not disagreeing with you, while also not wanting the people from Hong Kong to take advantage of us.

I think you definitely - and you’ve tried, but I think you definitely should point out there is a major difference in Hong Kong and China.

And also I would say that I think if Chairman Yeung listened to the call and what’s being said, he may possibly, even to protect his money that he is putting go to a two-year standstill. And possibly considered going into the open market and buying up some stock. That’s only a suggestion in trying to mitigate to make sure that, I mean, you are there, you know things we don’t, you’re running the company, you’re proving yourself over a year.

We got lot of things from Eric that didn’t come to pay us and I’m not picking there, but you’re convinced of this. And since I have met you about three years ago, I totally trust you. And I trust the fact that you think this is the best for the shareholder and everybody concerned.

While at the same time, I understand and I’m sure Dr. Yeung being a very bright man would also understand that maybe the shareholder does need a little more protection. But I’m going to stand with you with around 4 million shares one way or the other. But I would hope we would do everything we could to let him know that this needs - the way to a sure passage of this is to get the stock off the floor, because there is no reason that this company trade at $0.63. It’s been collared.

There is no reason it trades here. And Dr. Yeung could get that off the floor. And again, with the two-year standstill, we could feel better. And then if he is as truthful as you think he to be and I don’t disagree with that then maybe there could be some give and take here to some degree, because I know that you have worked your tail off. And you want to see this happen and how much you do care about the shareholder. And I don’t say that everyone should know we’re not social friends or anything like that.

I’ve just been doing this for 45 years. And I trust what you’re saying, but there might be a little bit more risk for us, he could take off the table by doing something. And the one thing I know is getting the stock over $1 and $1.25. And those people that may want to sell, they could sell. And so anyway, I’ve been too longwinded.

But I support you, because I trust you. And a lot of CEOs of companies you can’t trust. They tell you one thing. They tell you what you want to hear. And they tell you another and the next thing you’re left out. But I do want everybody to please study, as I have the difference in the Hong Kong market and the China market. And I apologize for being so long.

Joe Mitchell

Yes, thanks, Furman. I appreciate the comments. And really probably one more point to make, I think as following up on some of the other comments. There is one other element that we really haven’t discussed here to grow the business and that’s how the customers look to UQM. And the risk factor that we have brought down significantly with this investment.

Our ability to sign that long-term supply agreement with Proterra, to bring people like Eaton, that are willing to work with us and willing to grow the business, to open some of the doors that we’re starting to talk about with both in China and India, why is that happening.

And one of the big drivers is this proposed investment and the financial stability and the risk factor that has greatly reduced the UQM of where we are today, and will be again taken off the table when we close this deal versus a company when we go in to quote for new business, one of the first things that we’re questioned is how do we guarantee these potential customers that we will be there in three and four years when their programs go to volume production.

And you got to have that financial stability and that is another key point that I can’t over emphasize. And, again, I’ve only been in UQM a few years, but I’ve in the mainstream automotive business my entire career. And I know what purchasing people are looking for and that’s what we need to provide in order to win these major contracts and take us to this next level. Thanks again for the comments.

Operator

The next question is from Robert Hoffman [ph], private investor.

Unidentified Analyst

Hi, again. I just want to have a little follow-up. I just want to state that all the things that have been bought up during this conference call, majority of the people don’t sound like they’re real happy with this new arrangement. And I’m not happy with it, because I do not like you giving away the controlling interest in the company.

And it’s going to be nice that there’s going to be $48 million coming in. But how long is that going to last. You’re going to end up burning through that really fast and I see the value of our stock going down to virtually nothing, because it’s been going down. I’ve been with the company for like eight years. I’m one of the newbies obviously. And I think, I started out at somewhere around $3 a share and now I’m down to $0.63. And I don’t think the company is being run very good, honestly. And that’s all I need to say. Thank you.

Joe Mitchell

You hung up on me.

Operator

The next question is from Joe Vidich with Manalapan Oracle Advisors.

Joe Vidich

Yes. I just like to ask you some questions really more about the actual business. And I don’t know if you guys would be - can answer this, but I was wondering if you had an idea of what you thought your first year you might do with ITL and what sort of volumes or sales targets you have, once you get approval on the system?

Joe Mitchell

Yes. What ITL has targeted the first year is in the 3000 unit range. I mean, that’s what they verbalized us, and that’s why the trip over here in a few weeks to actually see where they are on their development, are they on track. We hope to be test driving the vehicle that our powertrain in it, and see are they going to be on track to hit those numbers.

Again, that’s a fairly large launch, but again for China numbers that’s not huge. And again that’s been the original forecast to us. One of the - again the way that the supply agreement is written up, it’s regardless of the timing, the first 3,000 systems will come out of the Colorado facility, which will burn down that CODA inventory to virtually zero, turn all that into cash and then being up and ready to run support their future business beyond their manufacturing in Hong Kong.

Joe Vidich

So you expect - you think your long-term inventory that you have, that should be - you believe converted within with that 3000 unit volume?

Joe Mitchell

Yes. That would convert the vast majority of it.

Joe Vidich

Okay. I just like to say, in response to a lot of the comments that are going on. Obviously, people are not happy, but in reality the deal is what it is. We need the cash to have a business. It transforms the business dramatically. And if you’re going to do business with large players you have to have a balance sheet to do it. So there is a lot of - I believe the benefits far outweigh the risks.

Joe Mitchell

Yes. Well, obviously, we agree with that completely, Joe, and our board does as well or we wouldn’t be doing the transaction. The benefits far, far exceed the risks that are there.

David Rosenthal

Thank you, Joe.

Joe Vidich

Okay. Thanks very much guys.

Operator

Last question comes from Randy Hough from ProEquities.

Randall Hough

Okay. Let me just make a comment, since everybody is commenting. The statement was made again. The majority of the people on this call do go for the deal. I was on the call. I go for the deal and represent a good bit of stock myself. I think this is the arguments you guys put forward, for the necessity of this are valid and convincing. So I’ll just make that statement and then let me ask a question.

It seems almost insignificant at this point given what’s come down tonight. By the way, I don’t think you mentioned the excellent piece that was put out by EnergyTech Investor just two days ago or three days ago that goes over to an interview with you Joe, on the - it dives deeply into the Eaton Pi Innovo, UQM PowerPhaseDT.

I read it and, boy, I thought I knew a lot about the technology here in the company, but this was mindboggling in terms of its exposure to me, the technical advantages of this new technology. So with that - so you might want to comment so we’re back in the - be made available too.

Joe Mitchell

Yes, definitely. Thanks, Randy. I probably should have mentioned that. I know we put the press release out and I know we had asked about that. But I appreciate, yes, if you go on to our - again to our website or ETI’s, one of the things as we’ve mentioned earlier, we are trying to get as much information out, so people understand as much depth as we can within reason why we’re doing, what we’re doing.

And we talk again about the advantages of this powertrain. So that interview was aimed not just for the shareholders, but for potential customers mainly in Asia, where we’re going to get a lot more exposure and we’ll have it translated that people start to read about the advantages of that powertrain, and how we truly see that that could revolutionize and make us the major player in this commercial market.

Again, the success that Proterra has been having is just generating huge interest. And their bus performance exceeds anything that’s out there on the market today. And again, there are a few contributors, but again our powertrain is one of the main ones in there. Obviously, they’ve got some good battery management technology and done a lot with their composite body and overall performance.

But what moves that bus and continues to set records is the UQM powertrain with the Eaton gearbox. And again as I mentioned, really Proterra has been 100% behind us in expanding this technology, because they realize that they do not have enough volume to sustain UQM and our success is their success. They don’t want to go anywhere else.

But they also want to make sure that this technology is able to expand and as cost come down everybody is going to benefit from it. So again, please take advantage to read that interview, it’s on our website and the ETI website, and a lot of very good information in there around the strategy behind that gearbox.

Randall Hough

Right, then my question, which I haven’t asked yet, I was thinking back as you were talking; in fact, I was reminded when I went on your website during the call; we did some work in supplying our systems and I think the number was the 100 UPS trucks some years ago. And nothing ever came of that. I didn’t notice in the interim that they signed a contract to put a bunch of trucks on the road that were using fuel-cell technology, I believe it was.

But the point here in my rambling, if I get to the point is, is there an opportunity to go back now with this new configuration. Did we lose that business, because we didn’t have a full powertrain deal? Is there chance as to go out in the U.S. market, in the U.S. commercial market, with this technology, the PowerPhaseDT and win business that we might have otherwise lost?

Joe Mitchell

Yes. And again, that definitely opens up those doors. And I think, again, the company that had the UPS business was EDI, who we were a supplier to. And similar, they had a different gearbox on our motor. But now whether it’d be the people that have purchased EDI or anyone else that UPS would go to purchase a vehicle, our powertrain would work on to anyone of those, whether even be fuel-cell powered or battery or full battery system in any electric drive, we can get in there and supply our powertrain.

So I definitely see an opening of doors in that market. And that’s another area in China that people are interested in is those larger delivery vehicle. So that - whether that’d be with our 135 system on some of the smaller delivery vans or on some of the larger ones that this product would fit into, it’s definitely going to open up a number of new markets for us.

Randall Hough

So that’s - well that’s interesting. So the transmission then could be or the mating or tooling, as you call it, can be structured so as to attach a 135 KW motor to the transmission for certain…

Joe Mitchell

Not on this one. Again, this was mainly for the heavy duty, but the 135 again what - that’s what ITL was using. And again that’s our smaller shuttle van, delivery vans that you see, maybe a little bit more of in China, the six to eight meter size vehicle. Guys who go up to the 10 to 12, the more mid to heavy duty, this product will fit into either one of those applications, so all the way from a full-size bus down to the typically UPS type delivery truck.

Randall Hough

Okay, great. Thank you for that and I know probably there are others in the queue, but thank you very much for those answers.

Operator

There are no more questions. Mr. Mitchell, would you like to make any closing remarks?

Joe Mitchell

Yes, definitely. Again, I want to thank everyone for joining the call today. And we definitely appreciate your questions and support. And, I guess, as we stated earlier, we are making very good progress on executing on our strategy to become a leading global E Drive supplier.

And with the alliances that we have formed, new customers we continue to find, growth within our existing customer base and development of our new technology, such as the PowerPhase drivetrain or the PowerPhaseDT, we are very excited about our future and again, I want to personally thank all of our shareholders for their continued interest and support. And thank you again for your time today.

Operator

A replay of today’s call will be available starting today August 4, 2016 and we will be available for seven days. The numbers to dial in for the replay are 855-859-2056 or 404-537-3406. The conference ID number for the replay is 58542553. This concludes today’s conference call. You may now disconnect.

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