Good day, and welcome to the ClearSign Technologies Second Quarter 2020 Conference Call. All participants will be in 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’d now like to turn the conference over to Matthew Selinger, Investor Relations. Please go ahead.

Good afternoon, and thank you, operator. Welcome, everyone, to the ClearSign Technologies Corporation second quarter 2020 results conference call. During this conference call, the company will make forward-looking statements. 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 it’s products and other risks that are described in ClearSign’s public periodic filings with the SEC, including a discussion in the Risk Factors section of the 2019 annual report on Form 10-K. Except as required by law, 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 Jim Deller, ClearSign’s President and Chief Executive Officer; and Brian Fike, ClearSign’s Chief Financial Officer. At this point, I’d like to turn the call over to Brian Fike. Please go ahead, Brian.

Thank you, Matthew, and thank you to everyone for joining us here today. Our financial results were included on the Form 10-Q that the company filed with the SEC on August 14. The cash burn for the quarter ended June 30 of 2020 was $1.4 million compared to $2.1 million in the same period of 2019. This decline reflects the reductions made to operating expenses and is representative of the changes made in the company’s operations since the first quarter of last year. The increased efficiency is directly attributable to the systematic focus on prioritized projects, selective use of outsourced consultants and a more rigorous project planning and budgeting approval process. Our cash and investment resources were about $5.7 million at the end of the second quarter of 2020, compared to $7.5 million at the end of the first quarter of 2020. Shares outstanding on June 30 of 2020 were 26,731,261. On August 24 of 2020, we closed a secondary offering pursuant to which we issued 2,587,500 shares of common stock for a gross proceeds of approximately $5,175,000, or $2 per share. This bolsters the company’s cash position, which we believe will enable us to bring our current product developments to market. Additionally, Clear SPV LLC, our largest shareholder, waived its right to participate in the secondary offering in exchange for a right to purchase approximately 654,000 shares of the company’s unregistered common stock at a price of $2 per share. This purchase right will expire on September 30, of 2020, if not exercised. During the second quarter, we received approximately $250,000 in funds from a PPP loan, which we anticipate will be forgiven in the next few months. It is important to note that with our quarter ending balances, plus the funds raised through the secondary offering, we have sufficient working capital available to carry us comfortably into 2022 and that is without including revenues from any other sources. And with that, I would like to turn the call over to our Chief Executive Officer, Jim Deller. Please go ahead, Jim.

Thank you, Brian, for that financial overview. Hello, everyone, and welcome to our 2020 Q2 conference call. This has been a very busy and productive few months to say the least. At the time of the last call, we had just announced the receipt of the purchase order for burners to be supplied to the ExxonMobil Baytown refinery and a lot has been achieved since then. The work on this process burner order is going well, and I will give an in-depth update on this progress and the continuing development of this technology shortly. We also recently announced on August 12, the formation of our major collaborative alliance with a global combustion equipment company, Zeeco. We expect this relationship to be transformational for ClearSign, and I’ll give more detail on why this is so and what this agreement means for ClearSign a little later. Additionally, we are continuing to progress the commercialization of our sensor technology and anticipate being able to announce the first industrial installations of this new and novel technology very shortly. I’m also happy to report that we have had a breakthrough and are able to get back on the ground in China to progress our China boiler burner projects. I will go into more detail about our program for commercialization there. Before getting into the more detailed update, I want to commend the ClearSign employees for driving the progress of our work despite the inconvenience and restrictions required due to the COVID-19 pandemic. We have made great strides developing and expanding our technology in all product lines, process burners, boiler burners, flares and sensors, in addition to supporting our customers on-site and optimizing plans with our vendors and subcontractors. When looking at the ClearSign process burner business, the ExxonMobil order and the collaborative alliance we have…

And we will now begin the question-and-answer session. [Operator Instructions] And our first question today will come from Jeff Feinglas. Please go ahead.

Hey, Jim, I want to make sure you can hear me.

Hi, Jeff. Yes, I can. Thank you.

Okay. Yes, I have two questions. So the first one is, when you announced the partnership with Zeeco, the market more or less just yawned at that. But from your standpoint, in your remarks today, it seems – do you see it as a bigger deal than, I guess, how the share price reflected it, who is right?

I’m quite confident that I’m right in this case. The – if we compare the two, we had a very huge recognition when Exxon placed the purchase order for burners on ClearSign. And as you said, the impact of announcing our collaboration with Zeeco was much more muted. From my perspective, looking at the strategic development of the company, whilst I will never understate the importance of Exxon. I really believe that the collaboration with Zeeco is the fundamental milestone that we have been seeking really since the middle of last year. This really is the – about the gateway to getting us commercial into maybe in simple terms, if we got a recipe for great bread, and we’ve baked a couple of loaves ourselves to sell, an arrangement with Zeeco is like forming an agreement with a great global bakery chain. It’s truly getting up our process burners into the global market. And I can’t understate how fundamental that is for ClearSign. So, yes, the response was muted. But I really believe the results will be evident in the future business of ClearSign.

Good. All right. Well, thank you. Well, real quick one other question. Regarding your comments regarding Exxon and the testing of the burners. You mentioned that they had expanded some of the requirements on may be putting words in your mouth. But does the expansion of those requirements mean that this is more than just, again, I’m putting words in your mouth, more than just looking forward for Baytown, but they want to find out if this works across their entire heater fleet?

I have to be careful speaking for Exxon. But yes, it was quite clear working with their project team. As these specifications develop, they were looking much more widely than the operating requirements for this single destination heater. Also just putting the pieces together, when we look at the hours and the – in fact, the years that Exxon have been assessing the ClearSign technology and the effort that they have been or they have put into this project and continue to put into this project, we really believe that this is a part of something much bigger with Exxon. And knowing that we have the – the center engineering division of Exxon involved rather than just the Baytown refinery. Escalate – I can’t make statements for Exxon. But from my perspective, all the parts are there for this to be the – and we truly believe it to be the testing of Exxon of our burners for a much wider use globally.

Gotcha, gotcha. Exciting. Okay. Thank you. And I’m sorry, one last piece. I think I missed, when did you say Manny was going to be able to get back into China?

So his Visa, they have a window, it’s the second-half of this month.

Okay.

And then on landing, he has to go into a quarantine on landing, that’s the same for everyone. So we actually expect him to be on the ground around mid of – around mid-October.

Okay, perfect. Thank you. I appreciate it.

Thank you, Jeff.

And our next question will come from Robert Kecseg with Las Colinas Capital Management. Please go ahead.

Hi, Jim, good to talk to you, again.

Hi, Rob.

I’ve – hi. Something I’ve been thinking about for a while. Could you give us some sort of a measuring stick on the durability of the material that you’re using as far as maybe the amount of heat or the amount of time that it’s used? In other words, is it capable of withstanding temperatures far beyond the temperatures that are used in these heaters? Just looking at the refinery heaters. Could you kind of talk about a little bit maybe numerically as far as durability on the heat temperatures and stuff?

I can, Bobby, but I can’t really for – so you’ve got two products that, that will be applicable to and I’ll address them both. So the first is the sensor technology. The incumbent probes, the [Eye nation] [ph] probe actually stick into the flame and really do not last. They – there are very – have a very high maintenance need. They burn up and they’re really prone to losing their electrical connectivity. The ClearSign Eye Sensor, it works through a different technology, but the surface of the metal components closest to the flame, we have measured between 300 and 350 degrees with – on a material that’s actually able to withstand 1,500, 1,600 degrees. So there’s a very great safety margin on that products. We really believe that we have a very, very durable design of ClearSign Eye. The – I think the other technology that maybe you’re referring to the burners. But our experience, we have the ceramic components that we’re using in service now for several years on one installation, in particular, in California. The heater is actually on a daily cycle. So rather than starting the unit up and leaving it to operate at a consistent load, which really doesn’t stress ceramic material that much. That heater is cycled off during night and then brought back on every single day. And so it has probably received 10 lifetime’s worth of work in a year, and we did not see a single failure of any of the ceramic components on that heater. We have sourced the best material available, and we really believe that we have the right material for the job.

And I guess, the other question is, when you do these tests and so forth, are there like 100 of hours, I guess, of testing or operating burners already with the ceramics and your whole design? I guess, I’m just kind of thinking of the drama of this test upcoming test and then the installation afterward. Could you just give us an idea of what kind of duration have the burners already experienced? The ones you’re talking about for the refineries?

I’ll try. I mean, from the duration we’ve experienced at this point has been in the other installations, just as I referred to referencing the other – the burner in California and particularly the cycling. The testing that we have coming up with Zeeco for the Exxon project, the data that we are monitoring and validating there is the emissions performance, the flame length that the burners just turn up and down and operate just like a regular burner. At best the refinery is looking to make sure that the burners do the job for them. Obviously, of course, to make the emissions guarantees, but also to basically to be able to operate and be driven like they need to make their heater work. That is the fundamental requirement of the test. It’s basically making sure the burners do meet the guarantees that were made for the burner performance. Over time, we will see a longevity of the materials, but that will not be evident from the burner testing. The burner testing is a much shorter duration. In fact, the formal witness testing for these burners, when we get to that point, and I’ll preface that by saying that the testing period includes the pre run and the optimization, which is basically like a preparing a play and then going through the dress rehearsal. The actual witness testing is the final performance. But that final performance part when we get there is anticipated to last about a week in total. And from that point, when the burner is getting installed into the refinery, they will bring the heater up to rate as fast as that turnaround schedule allows. Hence, it will be evidence certainly within weeks that the burners are doing, what they are supposed to do. We get that data quite quickly. And then the materials will be proven out truly over years, because the equipment is selected to last at least from one shutdown to another, and we expect it to last longer than that.

Okay, great. Thank you. Thanks, Jim.

Thank you, Rob.

[Operator Instructions] And our next question will come from [Robert Harvey] [ph]. Please go ahead.

Yes. Good afternoon. Do you address – or I guess, have products for the process burner, the boiler burner, sensor and flare markets. Could you just spend a few minutes talking about the largest addressable market within each of those four component areas?

I can. I mean, it’s actually a very interesting question. I mean, the first to mind on – and the first thing on our minds at this point is the process burner business, especially following the collaboration agreement with Zeeco and the fact that, that is so close to truly being launched. Right now, we have the, if you like, the basic burner design as we sold to Exxon, ready to go and being quoted. But that will expand into the other processes throughout all refineries, which is a huge development. But then beyond that, it will also be expanded into the petrochemical plants as well, which include the ethylene burners. So the potential there is absolutely enormous. But thinking beyond that, the boiler burners and we’re predominantly focused in China. And I think on a previous call, we referenced the market that we believe there’s about 350,000 boilers that are due to be retrofit in China over the next 10 years to come into compliance with the latest emission requirements from the Chinese government. So, I obviously don’t have a crystal ball to say exactly which of those markets will develop the most. But those two – either one of those two could be bigger than the other, but both have absolutely huge potential. But then looking even further afield, we have the on/off sensor, which has an extremely high-volume market. I mean, the burner pilots are in burners all around the world. It’s not restricted to emissions tight areas where there is compliance need and the burners need to be retrofit. This is a product that is applicable to every burner that has a pilot with a claim that has to be proven to be in-place globally. So throughout the U.S., but further every country – the volume…

Thank you.

I’m not sure, it’s absolutely – there’s three absolutely huge markets there. And ultimately, when we look back on this to try and project which of those three will actually be the biggest is very difficult to decide and they all have enormous potential.

Well, you must be encouraged that Exxon has asked for the burner to be tested in a wide – I guess, more thoroughly or more broadly, comprehensively tested for potential wider number of heater installations. So – and I guess, you mean that from what you said, that means that they might be installable in the petrochemical plants, as well as the refineries. Are you allowed to comment on the timeframe for the testing when the test will be complete? Is this a first-half of 2021? Or what – are you allowed to say anything about what your testing schedule is and when you might have results?

I can give some approximate data. Point to be honest, we’re not totally in control of the data, especially the actual installation, because that will be done and controlled by Exxon. And when they choose to bring their heater down for a turnaround, it does depend on the operating requirements of the refinery and the other turnaround projects that they have. So I really say that as a caveat. At this time, our expectation is that the burners will be installed in Q1 of next year and brought up and running in that timeframe. Regarding the testing at the Zeeco facility, obviously, to have them down there and installed in Q1 of next year, they will be tested in time for us to go through a final cleanup packaging and shipping to the job site for installation in that timeframe. So from that, without giving exact dates, you can kind of envision that the testing is on our immediate horizon.

Thank you.

Thank you, Robert.

And this will conclude our question-and-answer session. I’d like to turn the conference back over to Jim Deller for any closing remarks.

Thank you, operator, and thank you, everyone, for attending this call today. This concludes the ClearSign Technologies second quarter 2020 results conference call. And we appreciate your interest in ClearSign and look forward to updating you on our business progress.

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect your lines at this time.