RE: Q2/2004 Results.The financials only added a little to the information that we previously had, generally and about the order book. I don’t think that the financials are as important as the bigger picture but in my view the significant portions of the release were:
(a) comments about the company’s strong cash (and cash equivalent) position and it working capital at end of the second quarter of $28.8 M);
(b) comments about current demonstration locomotives: “At the end of the quarter, the Company's existing three demonstration locomotives were being serviced and modified to incorporate enhancements developed during the demonstration trials.” Throughout the trial process RailPower has been modifying and enhancing the Green Goat and Green Kid. This is what trials and pilots are all about.
(c) statements about the current focus of the Company, statements which did not provide much new information but confirmed the company’s encouraging prospects.
"Our key focus in the coming quarters is the steady production of locomotives, fulfillment of initial sales orders and the development of a strong order book," added Maier. "We will continue the expansion of our demonstration fleet to fulfill the requirement of a number of potential customers for a short-term demonstration in their operations. We will also look to expand our core technologies into other rail applications. We believe that there are large opportunities for our hybrid technology in branch line, commuter and transit applications."
I’m not at all concerned about the relatively small reduction of revenue or the significant increase of expenses. I expect significant increases in expenses in the formative stages of transition from a R & D business to commercial business. Indeed, increases in expenses are a good sign when the expenses go to the development of a sales and production infrastructure.
All in all, beyond the financials, it seems to me that RailPower has first rate technology, credibility and recognition, both of which are growing quickly, resources to realize its ambitions, an impressive customer list for the stage of development that it is at and very positive momentum. RailPower will need to get customers to buy units on their own and not just with the assistance of subsidies. In my view this will come. TERP, Carl Moyer and other reduction emission subsidy programs subject RailPower’s products to the same or even greater scrutiny than will the railways. Given the high cost of energy in the short, medium and long term, the lower capital and running costs of RailPower products and the increasing awareness of the dangers and costs of an polluting and noisy machinery, I really do like RailPowers chances of big, big success.