Question:

When CPST signs a distributor on the other side of the world, do CPST employees go there? Do the distributor employees come here? If we go there how many people go? 

Answer from Capstone Management:

In order to become a Capstone authorized distributor we require a strategic business plan and conduct face to face meetings with the key distributor employees. These meetings can take place at Capstone or at the offices of our potential partner. The potential distributor is also required to fill out an Application for Appointment that outlines current business capabilities, plant, equipment, office locations, markets served, capabilities, balance sheet and other key statistics. Distributors are selected based on the strength of their current business and soundness of their Capstone business plan. Each distributor has annual sale targets and can lose exclusivity or distribution rights if they fail to meet these annual targets.

Question:

Please explain the challenges Capstone is having with UTC and Designline. Also, is there further development, deployment, and/or expanded relationship with IBM for use in Data Centers.

Answer from Capstone Management:

During 2007 and 2008, UTC Power Corporation (“UTC Power”), an affiliate of United Technologies Corporation (“UTC”), was a top five customer for Capstone. UTC Power has also been a strategic partner for the development of our C200 product. UTC has a worldwide OEM agreement to sell private labeled Capstone turbines packaged with double effect Carrier absorption chillers. In December 2008, UTC underwent a significant reorganization, and the Capstone PureComfort product line was moved from UTC Power to the Carrier organization. Most of the personnel and business momentum were lost as a result of that reorganization, and the relationship with the Carrier organization is only now starting to gain traction.

DesignLine builds electric buses for the transit market utilizing Capstone microturbines as range extenders. DesignLine has been very successful in receiving orders for over 500 buses in the U.S. market but has had difficulty raising new capital in the current financial environment to deliver the units in backlog. DesignLine recently completed a round of funding, and we expect them to move toward ramping manufacturing and delivering on their backlog.

IBM has successfully demonstrated Capstone’s Hybrid UPS product at Syracuse University’s new Data Center and is currently working several new data center opportunities as part of its “Smarter Planet” solutions group.

 

Question:

When you issue email alerts on new received orders why aren't you indicating in the article the estimated dollar value of the order(s)?

Answer from Capstone Management:

Capstone typically does not specify the exact dollar amounts for several business reasons. First, from a competition standpoint, we don’t want to tell our competition who our end use customers are and what products we sold them and at what price. Second, because our business model is to sell through distributors, if we published our sales price to the distributor, the end use customer would know the profit or markup put on the product by our distribution partner. Most, if not all, of our distributors wish to keep their profit margins confidential for competitive and commercial reasons.

Question:

You are in danger of being delisted. What are your plans, a reverse split?

Answer from Capstone Management:

The delisting process typically takes more than a year based upon the Nasdaq rules.

Capstone has 180 days from receipt of notification from Nasdaq to regain compliance by achieving a closing bid price of at least $1.00 per share for 10 consecutive days.

An additional 180-day compliance period may be granted to a company listed on the Nasdaq Global Market or the Nasdaq Global Select Market by transferring to the Nasdaq Capital Market (assuming compliance with all listing requirements except minimum bid price). 

Upon expiration of the additional 180-day compliance period, if the Company were still not in compliance, a delisting letter would then be sent by Nasdaq. The company could, upon receipt of such a letter, request review by the hearing panel with a provision of a written request for review (within 7 days of receipt of a delisting letter). The company will stay listed pending review by the hearing panel.

 

Question:

Does Capstone own a patent on the Air Bearing design feature and does it only apply to microturbines?

Answer from Capstone Management:

Capstone has over 120 US and European patents, including the air bearing technology, which can be applied to other similar products like turbo chargers, aircraft engines and high speed compressors.