Amit Dayal: So with respect to Voltrek, now that you’ve run the business for few months, Mike, how should we think about the potential operating leverage? You did mention, you have some synergies and leverage opportunities on the customer side? But on the operating side, how should we think about operating leverage for that business?
Mike Jenkins: Well, I think, clearly, this is an investment year for us. We’re investing heavily in the business. We still think it’ll be EBITDA positive business this year, and we think it’s — we’re looking forward to rapidly scale. As we continue to look out in the horizon, we’ll start getting more and more operating fixed cost leverage as we move forward and continue to grow the top-line.
Amit Dayal: And does the EV charging opportunity now exposing new opportunities in storage, et cetera as well? Or are you not sort of entering or not looking to enter that segment?
Mike Jenkins: Well, we’re not actively in that segment now, but it is definitely a tangential area and could be part of a broader solution. So it may — it’s something for us to look at as we move forward.
Amit Dayal: Just last one for me. Is there any inventory et cetera, that you guys are sitting on related to the DoD and auto project push outs?
Mike Jenkins: There is some. I mentioned in my remarks, Amit, that there is some — a fair amount of inventory for the DoD project, the way that project — I’m sorry, the automotive project, that project is underway and the way that project works is that we actually recognize revenue associated with the service over time. But some of the product does not get recognized until later in the project. So there is over $1 million of inventory just on the books for that project that hasn’t yet been recognized as revenue and cost of sales. So that’s one piece of it. And then another piece I mentioned is, there is the Voltrek inventory that was added in the current year. You can see — you will see in the 10-Q, where you’ll see the opening balance sheet broken out for you in that footnote, the acquisition footnote that when we acquired Voltrek, they had about $880,000 of inventory.
We don’t separately disclose the 12/31 balance, but that’ll give you at least some context of magnitude for inventory in that business. But there’s not meaningful inventory on hand for the DoD project at this time.
Operator: We’ll follow up questions coming from Andrew Shapiro of Lawndale.
Andrew Shapiro: So little follow up on that DoD questions. Your DoD project, is it one of your first as a subcontractor for the DoD? And is there a potential pipeline of additional projects to come based on whatever theme that is driving this DoD project?
Mike Jenkins: Great question, Andrew. No, this is not our first project working for the DoD. And we are working with what we call a super ESCO who has the prime contract and then we are a sub. We have worked with this super ESCO on other DoD projects. There are some others that are in the pipe that we’re working with other super ESCOs as well. So that’s really one of our core models of working with the DoD, is working with ESCO partners.
Andrew Shapiro: And then — go ahead I’m sorry, I didn’t mean to cut you off.
Mike Jenkins: Yes, I was just going to clarify. We do occasionally and have historically done some work direct. We do have the ability to work direct on government contracts. Some we do direct, some we do as a sub.
Per Brodin: We have a GSA.
Andrew Shapiro: And some questions around the Voltrek acquisition and forecasts, supplementing what others have asked here. You have a bunch of costs that are in this quarter’s results that you’ve called out to be part of the — having acquired Voltrek. Of the cost that you have there that you called out, about how much or what’s the range in dollar value of those expenses in the quarter that you would consider one-time related to the acquisition rather than an incremental ramp up that is our ongoing expenses?
Mike Jenkins: I’d say the high-level way to think about the items we put in the acquisition related cost line are things that we don’t believe, are part, are related to the ongoing operations of Voltrek. It’s either part of closing the deal, which is the majority of the costs incurred away from the earnout accrual in this third quarter. So the parts, anything that relates to their ongoing operations would not be included in that line but would be related to closing the transaction, accruing the earnout or some integration costs which are not a big portion of that. And just to clarify one thing for the audience on the earnout, the $1.5 million we accrued in the third quarter, if their performance continues, at the level it is, we would expect to record an additional $1.5 million accrual in the fourth quarter of our fiscal year, and then the expectation would be that, that would be paid sometime mid to late summer.
Andrew Shapiro: So to be clear, then it sounds like the whole line item that you’ve broken out and called acquisition costs, those are all one timers?
Mike Jenkins: I would say yes, with the caveat that some accountants would argue about the definition of one-time.
Andrew Shapiro: And then on the earnout, is the maximum earnout $3 million?
Mike Jenkins: Within this current fiscal year, correct.
Andrew Shapiro: Okay. And how many additional years is there an earnout measurement and subsequent payments?
