ClearSign Technologies Corporation (CLIR) Q3 2017 Earnings Report, Transcript and Summary

Good afternoon and welcome to the ClearSign Combustion Corporation Third Quarter 2017 Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Matthew Selinger with Three Part Advisors. Please go ahead.

Hey, thank you, Chad. Greetings, everyone, and welcome to the ClearSign Combustion Corporation’s third quarter 2017 results conference call. During the course of this conference call, the company will make forward-looking statements. We caution you that any statement that is not a statement of historical fact is a forward-looking statement. This includes remarks about the Company’s projections, expectations, plans, beliefs and prospects. These statements are based on judgments and analysis as of the date of this conference call and are subject to numerous important risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. The risks and uncertainties associated with the forward-looking statements made in this conference call include, but are not limited to whether field testing and sales of ClearSign’s products will be successfully completed, whether ClearSign will be successful in expanding the market for its products and other risks that are described in ClearSign’s public periodic filings with the SEC including a discussion in the Risk Factors of the 2016 Annual Report on Form 10-K. Investors or potential investors should read these risks. ClearSign assumes no responsibility to update these forward-looking statements to reflect future events or actual outcomes and does not intend to do so. On the call with me today are Steve Pirnat, ClearSign’s Chairman and Chief Executive Officer; and Brian Fike, ClearSign’s Chief Financial Officer. So with that, I'm going to turn the call now over to Brian Fike. Brian?

Thank you, Matt, and thank you to everyone joining us here this afternoon. Before I turn the call over to Steve, I want to review our results for the quarter as they are being reported on our Form 10-Q. For the quarter we incurred a loss of $2.5 million compared to a loss of $3.8 million for the same period of 2016 and a loss of $7.1 million for the nine months ending September 30, 2017 compared to the net loss of $8.9 million in the same period of 2016. Our cash reserves were about $3.5 million at the end of the quarter. Our current sales backlog is approximately $850,000, which consists largely of previously reported flare project and a refinery project. And with that, I will turn the remainder of the call over to Steve.

Thank you, Brian for the financial update. And thank you and welcome to the participants on today’s call. We are pleased to have this opportunity to update our shareholders on events that have occurred since our last call and I'm happy to provide insight into the importance to ClearSign and our long-term shareholder value. I would also like to update you on topics discussed during our last call. Now let me go over some of the recent developments that we have announced and discussed what they mean to ClearSign. We are extremely pleased to have successfully completed a critical order from a super major oil company for a series of tests to demonstrate our Duplex technology in our research lab in Seattle. These tests were designated to simulate a series of conditions in our laboratory that will test our Duplex technology’s wide range of capabilities with respect to operational performance, emissions, fuel and safety beyond what can normally be demonstrated in an actual refinery furnace. These tests are prerequisites to installing our Duplex technology in the customer’s actual refinery and if successful we expect will lead to further deployment of our Duplex technology more broadly throughout the super major oil company’s vast refinery operations. The exciting aspects of these tests is that the super major oil company chose to pursue our technology after we were invited to present our Duplex technology at the customer's internal environmental conference where they evaluated ClearSign technology along with combustion equipment and other environmental solutions from a wide variety of suppliers. Further, they reviewed our actual field performance in a refinery in California and reviewed detailed case study information of this installation provided by ClearSign at the American Flame Research Conference. The fact that they were willing to invest in the testing and evaluation of ClearSign technology for their organization reflects the seriousness of their intent and the compelling nature of our technology for them. Of great significance the South Coast Air Quality Management District Technical Committee approved the funding of a ClearSign demonstration project in Southern California this September. ClearSign will be meeting with our Southern California refinery partner and South Coast Air Quality Management District to establish our project execution plan on the timeline for completion. This should happen in the next week or so. Why is this important? Well, let’s look at this on multiple levels. Here we have a regulator who has seen our technology at work and wants to fund and installation at an operation in their district. They see the value and advantages of the solution that our technology brings to the emissions problems in their district. What’s the benefit to ClearSign, first, another successful demonstration with a new customer who has the ability to deploy our technology throughout their operations. Second and probably more importantly the district is considering BACT designation for ClearSign technology based on a successful outcome from this demonstration. BACT stands for Best Available Control Technology and is the top designation issued by regulators for this type of technology. Thus operators would be compelled to use our technology based on this designation. Joining us in this project will be PBF refinery, formerly known as ExxonMobil Torrance. They will participate in the demonstration and proposed funding and provide us with a strong partner. We believe other Southern California refineries will also want to engage in this process at some point. More recently, we've seen a renewed interest from Tesoro for example to join us in this process as well as other refineries in Southern California. Beyond Southern California, we have had keen interest from the San Joaquin Valley Air Quality Management District who has scheduled approval of our Duplex as BACT for OTSG that’s once-through steam generators in November. This approval was previously expected to occur in September, but has been delayed. And frankly as of this morning, we feel that the approval will probably be pushed into early the first quarter of 2018. This is based on my conversation again early this morning. This would be – this would help facilitate multiple OTSG orders for major enhanced oil recovery operators throughout California. Further, California regulators have visited ClearSign refineries and enclosed flare sites for a valuation of additional BACT designation for our technology in these applications. This regulatory interest could drive increased sales of Duplex technology to additional refineries and drive expanded sales of our unique enclosed ground flare technology currently in operation in Central California. Of course continued progress within the refinery and enclosed ground flare space provides interest and incentive for potential licensing agreements and selective discussions with key channel partners are in process. This interest by U.S. environmental regulators in ClearSign technology has even created interest among clients in places like China, which is dealing with a significant air quality issue. Now, let me update you more specifically on the status of certain projects discussed during our last call. The Delek Refinery test of our Duplex Plug and Play burner, which had been delayed for several months has now been successfully completed for the first of six burners ordered by Delek. Further Delek has just decided to increase the output of their process heater and have requested that we increased the heat release of the ClearSign burners to 5 million BTUs per hour from the original 2.6 million BTU an hour, almost doubling the original requirement. The unique design of the Duplex Plug and Play burner will allow us to install these higher output burners in essentially the same footprint is the original burners. Thus Delek can get higher output without major modifications of their heater. We again are focused on reducing flame impingement problems at Delek, not just reducing emissions. The successful demonstration of our ability to eliminate flame impingement and improve furnace throughput could provide a tremendous opportunity at Delek and other refineries for de-bottlenecking key assets like coker heaters and crude furnaces. Regarding the enclosed ground flare retrofit projects underway, we have successfully retrofitted three of the five ground flares and are working with the client to schedule the completion of the final two. During last call, we were told that the same customer would need multiple additional flaring units and are optimistic that we would still see future business from this client. However, they have subsequently reduced their flaring requirements and as we have not been able to identify specific needs or timeframes for these additional flares. Nonetheless, this client very satisfied with ClearSign technology and has been – and we have been requested by the same enhanced oil recovery customer to provide a proposal to retrofit one of several of their once-through steam generators based on our ability to reduce NOx and eliminate the need for FGR thus saving them considerable operating and fuel costs. We expect to receive a contract from this OTSG retrofit shortly. Beyond the projects discussed, our pipeline of proposals and projects interest among customers continues to grow for both refineries once-through steam generators and boiler burners. We have seen customer inquiries in Europe, United States and China. China, in particular had severe air pollution problems for which we believe ClearSign technology could provide an ideal solution. We’re currently retrofitting a large water tube boiler for a major state owned district heating group. This unit is expected to go up and operate within the next 60 days. The ClearSign technical team has been in China for several weeks, working alongside our local service partner. If we are successful and improving the NOx emissions, we have been told by this client that they plan to retrofit numerous additional boilers. This will give ClearSign, a major installation in the procedures Chinese customer – with the procedures Chinese customer and state owned enterprise. As discussed, we are working on a significant retrofit project for Duplex on a large water tube boiler with a major district heating supplier in China. This demonstration project is estimated to be completed within the next 60 days representing a huge opportunity for us to enter the China market. This particular customer has several thousand boilers that would be potential candidates for retrofit and success at the state owned enterprise would provide a great reference for broader deployment of our technology throughout the district heating market within China. If successful, this heating district client has expressed a keen interest in partnering with ClearSign to promote ClearSign technology within China. This opportunity has led to a broader interest by strategic investors among several potential Chinese partners. We continue to make solid progress on our smaller higher volume fire tube boiler burner. We are striving to achieve the same performance with this burner as we have already achieved on a larger once-through steam generators that is sub-five ppm NOx levels at 3% oxygen without FGR. We have several boiler OEMs are ready to license this technology in Europe, U.S. and China once we achieved this performance. Testing within our laboratory continues and we are very confident that we will be able to achieve sub-10 ppm NOx levels at 3% oxygen shortly. This is below the normal standard in most environmental requirements for both China and Europe, while the current performance will meet most requirements in China and Europe. We still believe we can achieve our state-of-the-art stretch goals of five ppm NOx at 3% levels. We are pleased to announce that Stephen M. Sock has joined ClearSign as Senior Vice President Business Development. Steve has a longtime – is a longtime industrial veteran with extensive experience in the energy and combustion space. Steve spent 30 years of increasing responsibility – responsible positions with Amec Foster Wheeler. Steve is taken over for Andy Lee, who has retired in September. Andrew has agreed to provide consulting services to the company to facilitate a smooth transition between himself and Steve Sock. I would like to thank Andy for his years of service and continued contribution to ClearSign. I’m very excited about the many opportunities among key customers, regulators, potential strategic partners like China. Nevertheless, I remain as impatient as ever that these things move faster. It is important to note that some of the delays that we have experienced have been the result of our customer, clients, needs and schedules and ClearSign has consistently be able to adapt to meet these needs. Perfect example, we would probably be Delek. This has enabled us to not only promote our technology, but also to establish strong relationships and advocacy among our customers. With this, I’d like to now pass it back to the operator for questions. Thank you.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] First question will come from Lou Basenese with Disruptive Tech Research. Please go ahead.

Hey, Steve. Hey, Brian, I appreciate the updates. Wanted to see if you could give us a little bit more color around some of these, specifically, if we start with just China, the heating season is set to begin there in the next couple weeks. I just curious, if your timeline of 60 days in the prepared remarks. Is that in reference to the actual installation being completed? Or is it taking into account testing and verification.

Good point, Lou. Heating season starts in a week or so. Of course, this customer is – suggested is got literally hundreds, thousands of boilers. So this particular boiler it's at a service while we retrofit and is not critical to the supply of district heat to this particular city. That said the 60 days refers to not only the – frankly, few weeks we think it will take to get ended up and running. But decline himself would like to see it, which is pretty reasonable run for at least a month before we declare victory.

Okay, all right. That makes sense. And then can you give us some context around what the strategic interest might look like. I mean, is it a $1 million potential interest, $5 million, $10 million plus – and what stage those discussions might be at.

Well, we’re pretty far along. The current framework by which we've had direct conversations with a couple folks is – they would make an investment in our Hong Kong holding company, which would hold the IP for China and that Hong Kong holding company would eventually licensed technology to what – smaller entities in China called WFOE, wholly foreign owned entities. That would be set up around joint ventures and align around field of views. For example, you'd have a joint venture or WFOE that would handle district heating, you might have a joint venture or WFOE would handle the refinery sector. And in each of those joint venture sectors like district heating, we have a specific interest by as I alluded to this district heating company to join us in that joint venture helping facilitate the sale of the technology. With respect to again the types of people we're talking to, there are large multinational conglomerates, who are essentially headquartered in China. Most of these companies are a combination of an end user. They own everything from power plants to steel mills to investment bank and insurance companies. So they're fairly sophisticated investors, they – which encouraging if they looked at a ClearSign as an ideal investment for them in China and they looked at our technology and have vetted our commercial success in a way that they feel confident that we can bring a solution to the air quality problems in China. And they would like to provide incentive through investment. And beyond the incentive from cash investments, the types of companies we're talking to have tremendous market cloud and ability to accelerate the adoption rate that we would see in China, which I'm sure we all appreciate it great technology is fantastic, but accelerating our entrance into the market is also critical to the success to ClearSign. And what we find in China, which is somewhat different in the United States is that the regulators there are leaning forward with respect to bringing in new technology and encouraging with a lot of specific leverage the end users to convert to lower emission solutions.

Okay. So maybe to put it another way, it would be a substantial strategic investment not more of a token one as, we’ve given all that context you provided.

I expect it would be a substantial strategic investment. And just to put some caveats on it. It depends on what they want for their money, so we have to think about that.

Understand. And then maybe – I don't know if I cut in the prepared remarks the testing with the super major on the last call you said it would take about three weeks. Is that testing been completed already? What are the next steps?

Yes. I thought I've said in the prepared remarks opening that we completed the test, successfully completed the test. We've actually issued them a final test report and – frankly, we're lobbying a pretty hard right now to let it at a press release using their name.

Okay. Just one or two quick more questions clarity. On Delek, what is the impact of them going from 2.6 billion BTU/hr to 5 billion BTU/hr on each burner have on your – on the ASPs. I mean is it linear that it would be twice the original expected revenue from that agreement.

It won't be. Because again this is kind of this first order is more of a collaboration where we're –we really, really, really want to have an installation with six of our burners operating at a refinery near the Houston area where we can invite people to say it. But the thing that’s – let’s say behind scenes is the nature of our design allows us to essentially take the original 2.5 million BTU/hr design and make slight modifications to increase its performance to 5 million, which in itself is extraordinary. It's extraordinary because forgetting about the price because – I’d say, in a more normalized commercial relationship we probably charge more for 5 million not twice as much but let's say 30% more for 5 million than 2.5 million. But the point is that the cost to us to modify the burner to the higher heat releases not twice as much. And more importantly to Delek is the fact that these burners will fit in the original opening for the current burners, which are supplied by another company and allow us to take an installation that was arguably 2.5 million BTU/hr installation and bring it up to 5 million without making major modifications in the heater. Cutting big holes in the floor, having to move burners around and the cost of that could be multiples of the cost of the burners in some case.

Okay. And then last question probably for Brian on the backlog number you quoted about $850,000 by my count there's 10 to 12 units in the backlog coming from places like Yara and Tricor in addition to the flare guys. Does that backlog number incorporate that many units or are you looking at it in a different way. And could you just give us some context around what qualifies in the backlog.

That backlog does not include quite that many units but some of it is – just also the fact that for instance on the flares we've actually collected decent portion at upfront. So what’s still holding on them isn't as much as sales total.

Okay. And then the other reasons why you wouldn't include units in the backlog that have already been announced, I'm just trying to reconcile the difference.

Yes. I mean we tend to not show unit sale prices, that’s kind of where you're trying to get…

It seems like compared to how many – by my count, you said, you’ve got two flares and these are all announced additional unit at Yara, a water tube boiler at Tricor another new process either at a refinery in Kern County the five more burners at Delek, the unit in China. And then some revenue associated with the test at the super major. So just – the backlog number came up late – I just trying to reconcile that.

You’re right. The five additional – the change order for the five burners at Delek isn't in the backlog because we're waiting for them to send us a modification to the purchase order reflecting the slight change in price. So that’s not in the backlog.

Okay.

Just to follow it up, just because I appreciate what you're saying – just to emphasize it. What Brian is saying is when we got the original six flares from this client in California, we got a substantial amount of the payment upfront. So of the six, four have been completed and we've been paid and the other two are remain in the backlog.

Okay. All right. Thanks guys, I’ll jump back in the queue.

Yes, sure. Thanks Lou.

The next question will be from Jim McIlree with Chardan Capital. Please go ahead.

Yes. Thanks a lot and good afternoon.

Hi Jim.

What's the process for the South Coast Air Quality Management District and San Joaquin Valley as well? Do you have to do anything to get that process complete or is it all in their hands? And if it's all, either way, what they have to do and what are they have to do.

Let’s just start with leisure one, which is San Joaquin Air Quality Management District. We’ve already done what we had to do, they went to see an installation at one of the refinery in San Joaquin County, which is up and running. And they also visited a site where we just alluded to we have these players operating and they satisfied themselves that our technology has been – as they say, reduce the practice meaning it actually works and it works in the real world. And so they have to have a series of hearings, I guess they draft a new resolution calling for us to be BACT, a circulator among their members. They wait for community feedback and then after that process is completed then the designation is given. Just being quite candid, this was originally going to take place in September and we're now told it's pushed into January-February of 2018. So there really is – there's a process they follow, they're committed to doing it. They continue to reassure us, which that are improving air quality. And our technology is uppermost in their mind. But in terms of the timeline it's up to them to follow this process as I described. And there's nothing for us to do and there's really nothing we can do to make it go faster.

Okay.

And if there was I’d be doing it.

No, I get it, I get it. And when you say Q1 of next year that's for the hearings or the draft resolution or the completion of the BACT designation?

Well. It will begin, Q1 let’s say it’s a three month period, it will begin with them issuing a draft resolution and getting it out to their members. And the reason I say Q1, they're still saying it's going to – they're still saying, they’ll get that out in November. But candidly there's Thanksgiving and there's Christmas and I'm not optimistic since – again, I was told it was going to happen in September. And for them to say, it will happen in November I just don't see it happen in November. I think it's going to happen January, February or March of next year.

I got it. I agree with you. Makes much more sense for your timeline then now, I mean you're absolutely right on the holidays and all that.

I would say, I will say this Jim. The clients we have in the San Joaquin Valley are aware of this process, they talk to regulators. They know that this designation is in the queue and I would say, no such thing as inevitable but inevitable. So I think the behavior we're seeing and the interest we're seeing from people in the Bakersfield area is consistent with people who expect to see us get that designation and who have increased their interest in looking at our technology. That’s one of the reasons that our flare customer has come back to us and said, look, we'd also like to try your technology on our once-through steam generators. We realize that the savings of FGR, the fuel savings we get from Duplex versus our current technology gives us an economic advantage. But we want to future proof – future proof ourselves a little bit. If we can get a technology that can give us arguably Sub-5 PPM, we might so put that in next.

And the South Coast District?

With South Coast and there's a meeting scheduled – I think actually within the next two days with the South Coast and the refinery and ourselves. With Southwest there are things to do. I mean, we have to get with the refinery. Find out when they can take the selected asset at a service, there's some construction work that has to be done. So you're talking about a – let's just say a several month period to install the technology and schedule the work in a convenient way to the refinery. And there will be some period of time and that hasn't been specifically determined, where I'm sure South Coast will want to gather data on this installation and prove to themselves that it works the way it's been represented. And then upon the successful operation of the unit, they will designated BACT. Now just to put some clarity on this, the boiler that we're working with South Coast is from combustion perspective, potentially, the same as the one through steam generators that we've got operating in San Joaquin Valley and the level of the missions that where reporting is somewhat higher than what we've already been able to achieve. So we have a pretty high confidence level that will be successful in this demonstration. But again, the regulators have to see it they have to have access to the site. They have to be able to verify the measurements, there is a process they go through. And I’ve – Jim, I've been – always been unsuccessful and picking a time line when it involves refiners that are busy and regulators, but I would say it's certainly more like six months out than it is 60 days out.

Yes. Okay, thanks. I mean, we've had this conversation before, it's incredibly difficult to make these guys to make large organizations move. It's just – it don’t move at your schedule, so it's always frustrating. And I appreciate that.

Well, but I would say – I will say that in contrast from the limited exposure we've had in China, we don't find that to be the case at all.

Okay.

I mean these guys are you know almost waiting for you at the airplanes stand, if you can clean up my air come see me.

Okay, great. That’s very helpful. Thanks a lot, Steve. Good luck with everything.

The next question will be from Robert Kecseg with Las Colinas Capital Management. Please go ahead.

Yes. Hi Steve.

Hi, Bob.

The thing that’s almost outlined here is the aero orders and further long best user. I didn't hear any comment about the latest one. I might think it was the third OTSG. Could you tell – talk us to us?

The third unit is – we’ve got guys there now. And that’s been a I say a frustrating experience without getting too far into it. But we went out there with extra retrofit this unit. As I mentioned in a previous call, the intention on their part was that – if we could handle well had flare gas on this unit. But they had other opportunities for us that they were going to strongly consider I guess is the term. The first time we were out there, they had a tube leak and there once through steam generator. And they had to take thing at a service and repair leaking tubes. The second time we went back out there, they had a problem with their PLC that controls the combustion process. It was a actually had a device they purchased. And they needed to replace some sensors. And the third time, we were out there, which is now they modified the inside of the once through steam generator to take out some ducting that used to guide the air in the force draft burner that they have, and they found that they really need to put that back to make the thing work properly. So they're in the process of reinstalling stuff they just took out. And we've asked them because we've had people there, not these people – not clear signs people but some of our subcontractors that been at the site. And they haven't been able to give us a specific date as to when they're going to reinstall the equipment. So we really don't know when we're going to be done there. And when I say that I mean it’s a few weeks, it’s not years but it's – bluntly, we were open to have this thing resolved three months ago.

Okay. And then the other interesting thing was a while back, there was talk about the 250 million BTU a prospect in Canada. Is that still something possible?

Yes. That was with that. We didn't disclose at the time, who the client was, but that was with Cenovus. Cenovus paid us to do the engineering study, and the Cenovus made a fairly large acquisition. I think of another midstream company, I think they bought a lot of assets from Philips, and they've had a complete change in view on their drilling and exploration protocols. And so far we have heard nothing that leads us to believe that they're going to move forward with anything specific in the foreseeable future. Not that, it won’t be other opportunities, with the once through steam generators. It's enhanced oil recovery in Western Canada, but not with this customer. And understanding that at times, they were talking about multiple units, they had actually paid us to do a study, and we were successful in doing it. They had a need that was urgent and they don't have the same need.

Okay. I know, you’re going to say so it's less of it’s on the call. Thanks for the way you presented, or familiar with the various prospects and the stages in that, and how they seem to spring out for a long time in each and every case. So I was wondering maybe give people an idea, if there's been this much exposure in these three verticals, the OSTG, the deli like type of heater and then the flares. If you give us some idea, if you’d with based on this much exposure through the industries. Do we have a larger pile of prospects today than say six to 12 months ago? I mean, is it a noticeable larger prospect list, if I was in sales, then I was come in there to help them sell. Do I have that many more people to call on and work on?

The answer is yes we do. Again the cycle time from inquiry to order is fairly long, as we all know. But not only do we have more interest in – domestically, just pick an example. You take a super major, I mean – they have enough refineries need to keep us busy for a pretty long time, therefore successful of demonstrating the technology. But I think more importantly, we've got an enquiry and interests. And some of this is because of the press releases on the successive places like South Coast Air Quality Management. We've gotten interest from operators in Europe and actually some operators in the Middle East. And again, as I mentioned, very specifically a very strong interest in China, and I guess it's a fairly that reasonable to understand that with the air pollution problems that are notoriously effect in China. Their interest is genuine and much more urgent than others. We're perfectly willing to redeploy whatever resource necessary to accommodate that and very interested in the strategic investors that are talking to us but partnerships in both cash and promoting the technology. But the frustrating as it is, and aero is a perfect example. We just have to follow the path that they give us, where we continue to be optimistic that will resolve these issues with this particular project that we talked about and will be successful. And then eventually, that will result in greater volume of retrofit opportunities and concurrent with that, as I've already said, the fact that we expect to see a BACT designation in San Joaquin Valley is also helpful, because we think that will motivate some of the other enhanced oil recovery customers in the area to consider our technology. Again, I’ve probably said this on a few calls just no one is less patient than I am is, it is kind of frustrating. That said, we developed the technology that can revolutionize the ability to reduce emissions and do it in a cost effective and short timeframe. The time it takes to retrofit our technology into a process either is weeks, the delay isn’t – how long does it take to get our stuff in. It’s how long does it take to get the customer to get a quote, make a decision and give us access to the asset.

All right. And then a kind of along those lines, one more thing – I think from our point of view, early as my point of view. It was looked at if you're going to reduce these emissions and it’s that type of a product that drastically reduces the emissions. But from the business point of view, all these prospects and this big operations that they're running, it would seem to me that from their point of view they're much more interested in cost savings or less maintenance of the impingement burner, fairness that less fuel used. But seem like that would be the driver, is that kind of the way it's being presented to these companies now? As opposed to reducing NOx and CO, so I’m kind of differentiating between the two of that.

That's exactly right. And you know – and again to emphasize the contract with Delek was surely based on their interest in seeing if we could reduce flame lengths and flame impingement. They have all class of equipment called the delayed coker heaters where that's a concern the whole industry has those kinds of concerns. And yes, I mean we had estimated that 20% of the demand would be driven by operational challenges with flame impingement and burner to burner interference and not emissions reduction.

Right. And on that topic, since I was reading a little bit more about the delayed coker heaters and the things. Like you have mentioned that if it's more of emission critical component. Could we imagine that they would also want to change the burner in those that would be larger like the one that with installed in and in other words because the flame is shorter and all that less interference, do you think that would be another advantage for them to be able to use a larger BTU installation?

What you know – that's actually very good insight. That's exactly why this is exciting to them, because if you have traditional burner and you significantly increase the heat release in the same heater the flame gets too long and too big to fit it, because our flame short and compact, you can increase the heat and not have the problem. So I guess that along yes. And just anecdotally so happens that that our new ahead of business development Steve Sock work for Foster Wheeler Amec for 30 years and they're one of the largest suppliers of delayed coker heaters in the world. So I mean we know people.

Right. Okay. Is there any way you can kind of quantify the prospects, looking on my earlier question about an increased number of prospects out there. Just to give us an idea if it's 50% more or 30% more that’s going to give us on the some sort of general big picture of thing on prospects today.

Its way more than 50% more, but I hesitate to pick such an arbitrary number. I guess the way we kind of envision doing this is – and maybe that’s too much of a delay, but doing it when we get the booking. When we actually get somebody they says, okay here's the water it's in the backlog, how much is the backlog increased, because this is why I’m qualifying it. We have a lot of interest from people, I mean really people that say, come see us, talk to us, send us a proposal and a lot of it is just budget preparation for the following year. And its good sign – I mean it's a good sign and maybe that’s the thing to do, maybe we should just rather than track bookings, we ought to just track dollars quoted and use that as a metric. But one of the problems with doing at, when you're a startup like ours is, it's difficult sometimes to segregate dollars quoted for clients that really intend to buy something as opposed to dollars quoted to somebody who is just trying to put together a budget or doing some exploratory work. And a case in point is it's a real project, we have an inquiry from a refinery and frankly Israel. And they started out saying we need to retrofit three or four heaters, but eventually we have probably 100 burners we need. And we frankly got pretty excited and started running around looking at that. And the purposes, we were talking to our third party consultants, when you look behind the curtain this guy was getting paid to do a study for a long term capital expenditure analysis. But I can't sit down today and say, well if I do everything they want, sometime in the next two months I'm going to get an order from 10 burners. Now we haven't given up on that or we have a lot of opportunities like that and they eventually materialize, but we're a little bit guided about projecting quotation numbers, because they could be deceptive and don't misrepresent what's really going on.

And then one of thing on the Torrance Refinery – excuse my ignorance – is that already an operating facility or they restart in that…

As I said in the prepared remarks, it's the former ExxonMobil Torrance refinery.

Yes. There was some sort of accident there, something in the past that I was reading about.

I don't know about that maybe, but there was a whole discussion on that at the South Coast Air Quality Management District meeting that on a video link, when they actually talk specifically about that refinery and I think – you might be right and they had an accident, but that's not something unnecessarily familiar with. I know they are keenly interested in reducing their NOx emissions and they see us as a real opportunity for them. And frankly, as a result of their interest we have reengaged with Tesoro and other refiners in Southern California who are interested in pursuing this.

Well, great. I appreciate all your help and look forward to hearing about the last tube boilers in China. Thank you.

Yes. Thanks Bob, me too.

Next up is Walter Schenker with Maz Partners. Please go ahead.

Thank you. I noticed that the company filed and that's one, and it is the end my editorializing finally hopefully raising the capital needs to get it where it needs to go. This financing with the banker on the cover, hopefully, can you give us some sense as to where you think the timing may be and is the capital that you can raise limited in number of shares due to some 20% of the outstanding or something? Question?

What’s that, I mean. Well I we filed S1.

Yes.

So there is no – nothing I’m aware, there's no limit on the amount we can raise. And as far as the timing goes we haven't quite determined the timing. It would certainly be sooner rather than later and as a byproduct of our current balance sheet. But we also have a backlog and some other things – its actual price you’re spending. So we're going to consider all that before we do anything.

Okay. So the amount you raise is not yet been determined to be a function of put in a stock is and how you perceive your capital needs at the time you actually do the offering?

Correct. In a way of housekeeping, where we're getting out there. So we're ready to go when we need to do that.

Okay. Well then there is an editorial comment, hopefully you will raise more not less. So that the issue which continues to weigh on the company, the cash available on the balance sheet will be removed from some fairly long period of time hopefully, as a shareholder I’d like to see that question be taken away for a while, maybe you running the company.

I think there’s, I’d say that’s probably yes.

Okay, thanks a lot, Steve.

And the next question will be from David Brown, a Private Investor. Please go ahead.

Hi, Steve.

Hi, David.

Just wanted a little more clarity on Plug & Play, I know the Delek testing was with that’s a hope that other companies will utilize that. Can you tell me a little more about the ramp put the Plug & Play?

Yes. The project that I alluded to in Israel evolve Plug & Play, the course of whole super major oil company is all Plug & Play. And the reengage discussions we’re having for example with someone like Tesora is all Plug & Play. So for the most part when it comes to let’s say refinery applications 90% of what we do going forward will be Plug & Play.

Thank you. Another question quickly. You had mentioned on the call – this call that the sub-five ppm 3% oxygen testing of trying to get those smaller high volume fire tube boiler licensing hopefully, is you’re getting there and you said the word shortly. Could you give me a little more color on what shortly mean?

Yes. Well, not to be, it’s research, so the thing about research is, if we do a day we publish it, but I shortly I’m saying it certainly inside a year – I was out in the lab this afternoon and guys are running tests. Now, I will provide little more color commentary on that. For example, we could achieve significant reduced level of NOx in the order of five ppm with 3% oxygen, if we are selective about the geometry of the fire tube boilers we deal with. Meaning some of the older boilers had very big fire boxes, which is little bit more information than you want and they run cooler the newer equipment, which was made to be more cost effective and was – because it was made smaller, the heat intensity inside them desire. So we’ve set a standard for us to do. The vast majority of current modern fire tube boilers and an extremely low NOx level with a very high efficiency of 3%. Right now, we have the product that we’re testing is capable of operating at single digit NOx at 3% oxygen in a large portio of the fire tube boilers and that would make it acceptable to regulators in places like Europe, but it’s not so dramatically different than other products that exist that it’s going to give us that kind of command position to negotiate very broad attractive licensing agreements. So we’re trying to you know not rush something to market until we think we’ve really exhausted options with respect to improvements. And our guy as of – and I’ll tell you it was just before launch, we’re some pretty excited that they can continue to make improvements in the performance of this thing, and if they can do it an inside a year, I think it’s well worth waiting. That said, at some point we will launch a product into the market and license it to people who are interested, and again there are people who are interested in some form of the device we have in its current form. So I guess we continue to be optimistic that we’re going to get where we want to be and that we have something right now that’s marketable although it’s not the kind of breakthrough technology that the other clear sign products are.

Just as an aside, so I pop up ads when I was looking at comments on my article on Seeking Alpha from one of your competitors from Japan, Europe, boilers and it’s – I clicked on the ad and they’re saying that their best performance and with advertisers of grain product grade breakthrough kind of product at nine parts per million at 3% NOx. So I’m sure, I remember you saying you wanted to hit a home run on this one and not just be a little bit better than the competition. So I think that’s what I’m hearing.

Yes, that’s an exact point, I mean they can do nine and right now without many hard work we could probably do seven at 3%, but I don’t think we want to launch a product over two ppm let’s hit a home run and have a line around the door trying to license it.

Okay. That’s exactly what I thought, I heard you say. I’m reading between the line, also reading between the lines a little bit on China, I’m hearing myself that what you’re saying is basically China can’t wait, and unfortunately with some of our North American partners they’ve kind of kicked the can down the road we’ve had some frustrations with Sinovas Tesoro era, et cetera. Is that accurate basically once this testing looks good to them and you’re even saying now one month instead of three months, you say at the last call, we’re going to see some business that we hope at least and of course.

Yes, I mean, just to be absolutely precise. We are and I get a text messages from our team in China every morning and as of this morning we’re putting the final touches on this particular boiler that we retrofitted. And assuming it needs the emissions that we anticipate. We’ve been told by this particular state owned enterprise. Who has thousands of boilers that they want to retrofit their inventory of boilers. And we’ve never disclosed for competitive reasons who this customer is, but I can tell you that the President of China when he looks at his window, seize the air in this city. And he’d like to be able to see the ground.

You bet. One final quick question. I’m always been interested in ECC, is and I’ve heard some rumors is there a possibility of some kind of application where we would have like Duplex 2.0 that would be in combination with ECC for certain applications?

Yes. I mean that’s interesting. You might have better contacts than I do. We’re referring to it internally as super Duplex.

Okay. I like that too. All right thanks Steve.

Okay. Good to talking to you.

Ladies and gentlemen this concludes our question-and-answer session. I would like to turn the conference back over to Steve Pirnat for any closing remarks.

Again I’d like to thank our investors for their participation and with that there are no further questions, I’ll end the call.

Thank you the conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.