Q4 2019 Earnings Call

Welcome. Please hold an operator will be with you shortly.

Do the seasonal operation of the Chinese eating facilities?

On a positive note we are able to improve the arrangements of our Fire Water Burn a demonstration and can now complete this without being limited by the Chinese heating season.

This movement similar to The Wall Street projects. The fire to demonstration is also on hold due to the effects of the Coronavirus.

Course calling are you speaking? Which car would you like to join?

However

May I have your name, please?

The test site we have secured is where they boil a manufacturer and potential partner. That is not subject that

Your first name again?

And your company?

Thank you very much. I'll telling you right now will be released later this month before I turn the call over to Jim. I want to take the opportunity to briefly look back over the previous month.

The cash burn for the quarter ended December Thirty One 2019 was one point five million dollars compared to two point two million dollars in the same period of 2018.

This is a reduction of 32% and is representative of the changes made in the company since the first quarter of last year looking back in comparing the last three quarters of 2015 to 2019. The reduction in Casper is 25% and looking at the six months the cash burn reduction is the full 30%

Thank you for figures are consistent with the increasing efficiency that you used over the past year. The major savings have been from systematic focused on selective and prioritized development projects in the very selective and judicious use of outsourced Consulting.

This has been combined with more rigorous project planning and budgeting and expenditure approval process.

Are cash and investment resources? We're about 8.5 million dollars at the end of the fourth quarter of 2019 compared to ten million dollars at the end of the third quarter.

Shares outstanding at the end of 2019. We're 26707261. It is important to note that we have sufficient working capital available. As of now with the carriers through 2020 and into twenty Twenty-One. This is assuming no revenues and assuming no material change in expenditures. I just want to re-emphasize that it assumes no revenues from the clarifying corbert our sales and no revenue from our soon to be deployed clear Sinai products, which we do expect to begin seeing results from during this time window.

And was that I would like to turn the call over to our chief executive officer Jim dealer, please go ahead.

Thank you, Brian and good afternoon everyone and Welcome to our fourth quarter and full-year results call for 2019.

I would like to start the call by giving some commentary on the release that the company issued on January 31st regarding updates on ongoing projects.

Specifically oil demonstrations in China and the initial test firing of the clear sign multi birthing unit at the world all site in California.

Regarding China. The season has been frustrating because you have not been able to reap the fruits of our labor the developments made to our water Tube Technology have enabled the boiler to run up to 96% rate with Knox in compliance and under the ten parts per million the objectives set for this application.

We lost the boiler down to confirm the internal structure was suitable for ongoing operations and to give our query break over the Chinese New Year when the ability to work had to stop anyway.

Of the Chinese New Year the effects of the coronavirus to hold for long.

As we have said in the past the markets were both fired you and water two burners in China is massive.

In addition the test or that we will be retrofitting is none in Service Unit there for the process of installing our burner making adjustments if appropriate and retesting Etc should be accelerated.

What we want and plan to have success in both verticals. The fire chief Market is approximately four times that of a water tube with an addressable Market of approximately 250,000 units in the region slated for emissions reduction.

Soon as travel in China is re-established and safe. We expect to continue this work to improve the performance of this burner and to obtain the necessary performance.

About two shots on goal. We are happy to have a 5G burn and move forward first. We believe that post certification. It could be a short time to commercial sales.

I need to the monkey burn a demonstration of world oil. I would like to start by describing The Upfront challenges associated with this demonstration.

Spacing on arrangement of burners in this particular heater was very tight providing only an extremely small confines for the burner placement and subsequent formation of the flames.

Frankly, this is one of the most challenging environments or any bonus data that I have seen in my career.

Stop being said it is a perfect place to demonstrate the advantages that I place. I call burners have a potential to provide.

Outlined in the press release of the end of January we completed the design delivery and installation of the burners for World oil on schedule and true to expectation of our plug-and-play design off the burners were installed without issue taking just over two days to install the 5 burners.

The bird is Ron robustly from below the minimum design Farm rates. Their maximum rate.

Juicy Knox levels below I guarantee between 3 and 4 parts per million throughout that range.

I want to emphasize those numbers between 3 p.m. And 4 p.m. While I guaranteed not submissions with five parts per million.

In fact, the burners were tested cycling for minimum to maximum rates in an accelerated fashion and the burners performed admirably.

Up to this installation. We have never had the opportunity to optimize the burner configuration for multiple phone applications. This was always uncertainty for this project and ultimately as wage operate all the burners together some pita instability develops, which limited the heat input to the heater.

We even had a number of design modifications. We were prepared to implement. And by the way making design modifications in field installations is not uncommon.

However, in this case the heater in question was a critical charge heater and modification to the burners were delayed getting the entire family back up to full rate as the turnaround schedule was very strong.

As a result the mutually agreed-upon and prudent decision was made to remove the burners and optimize the burners outside of the operating heater.

Overall, the easiest formation of our plug-and-play design went as planned the burners started and ran on automatic control as planned and exceeded their design operating range critically. The nox emissions were comfortably below the five parts per million guarantee an equally valuable. We now know what we need to optimize and have work already underway on Thursday design upgrades.

I will comment. Again this particular heater is one of the most highly fired I have ever seen and so was an extreme application of a new technology.

The point here is that we have made some very significant developments in our process better technology or commercialization in single burner vertical heaters has been achieved by the power of the full commission as I should know about technology and the multi burner situation continues to evolve.

Note here is that we are in the field working on real demonstrations what we learn we will improve on and carry forward to Future demonstrations. This has been the history of clear signs Technologies element and like an asset heavy large incumbents. Please send us how to take our Technologies from the lab and then work on their live in the field.

In my previous life and this is also true with the established oems. We enjoy the luxury of a large capital-intensive infrastructure, like full-scale tests furnaces off. The majority of the Kings can be worked out before going to the field.

Once it's a technical disadvantage in the short-term will be a great financial advantage in the long term for Claire sign.

Bringing us to a natural segue We are continuing to develop a channel partner relationship while I do not have a formal partnership to announce this time. I'm extremely pleased to announce that we have secured the commitment from an industry-leading oem burner manufacturer to host the burner testing that will be conducted as part of fulfilling the anticipated burner supply of from ExxonMobil.

It's not only allows us to prove and demonstrate the burners and they fall scale multi Fern a Bonafide industrial test facility to fall industrial requirements. But we believe that it signifies a confirmed interest on the part of the burner manufacturer to establish the clear side burner technology in the marketplace.

It also provides what we believe is the final provision required to proceed with this higher-profile burn a demonstration project. We have made a commitment to confidentiality wage and Supply Company to please understand but I cannot go into further details here, but we are very grateful for their continued pioneering support.

I have mentioned previously but this is a very conservative industry-leading to comprehensive vetting on the part of perspective partners and customers alike and we are pleased to be making sock forward progress.

In terms of our Global Supply agreement for refining and petrochemical Market. The ExxonMobil demonstration project is the next step that must be completed before we move forward. We expect the testing for this ought to be completed around in 2020.

I believe that this project is Berna testing will in terms of a progress for launch of access and Core Business have a very positive effect as a multi burner demonstration in a world class A few test furnace has always been the key key Milestone and this commitment was this very valuable hurdle on the timeline.

On the last call we debuted and discussed the rebranding of the companies declare sign Technologies.

Because the development of our sensing technology was a significant factor in the decision to Rebrand clear sign as a technology company. I'd like to review the progress in these product lines.

The conversations with numerous potential customers. We have focused and development about flame sensor technology for Claire Sinai on the development of a device that will validate whether the flame of a burning bush pilot is on or off.

Well, it sounds like a simple application is one of extreme importance and the currently available technology with flame rods in the industry are a source of great frustration due to age or liability frequently for replacement and operational delay to our customers.

The prospect of providing an alternative device that avoids the common failures of flame rods was met with unanimous strong support by every customer group consulted.

There's not one customer thinking it's interesting. This is every customer polled saying that it would be outstanding.

Anki failure of the existing technology is that the probe that enables the flame Rod to detect the flame has to be actually immersed in the flame and this leads to frequent basis. However. He advanced technology is that the sensor services are positioned significantly outside of the flame and therefore are not subject to heat-induced deterioration.

In many systems the pilot flame bonds are considered a safety device. Basically, they are required to prove that the pilot flame is on before control system is allowed to that fuel gas flow to the name.

That was not aware of how the system works the pilot flame ignite the main fuel gas.

Unless the pilot flame in a residential water heater only that the pilot claim in the industrial case is 12 to eight inches long and the main flame is likely 10 to 20 feet long and three mm be white.

Obviously, there's a lot of gas driving such a large flame and if the pilot flame is not on spewing gasses the heater is an extremely dangerous situation.

Of course if the flame Rod is not indicating the presence of a flame since it has been compromised sitting in the flame even if not handled by the programming or the combustion controls the operator had a choice to shut the system down.

down time

For maintenance or replacement to Flame loads its profits.

Given the importance of the pilot flame sensors the operation of the overall heater. This clear that improving is reliability that is minimizing the maintenance requirements as well. As the number of times the flame sensor no work. We needed will be a great value to potential customers throughout the refining and petrochemical industries.

Just potential market for by the flame sensor device is truly Global and includes any type of burner originally manufactured by any supplier, including low-emission and non Lo machine burners off you bonus. I meant to fits into existing business.

We anticipate that the first demonstration installations of this technology will be installed in customer equipment in the next few months at the same time. The industrial certification process is underway off which the final product will be formally launched.

We also plan for Claire Sinai to be included in the Exxon Mobil burners on a demonstration basis.

Please find my sensor will be sold by clear sign either to burn a manufacturer's pilot manufacturers or directly to refining and petrochemical petrochemical customers to retro fit into the existing burners.

Anticipate developing Channel Partners as this business progresses.

for those interested in the

specific science behind actually assigned I technology we have some more details on that website. And additionally we have started to market the sensor and those following clear sign on LinkedIn May well have seen the initial promotional parts of a launch plan.

The second General application of our sensing technology is into the transportation Market.

As we indicated in our announcement on Tuesday. We have a contract in place with a major Global Aerospace company to validate the application of our sensor technology as a key component of a new system that we mutually anticipate can lead to increased efficiency and reduce maintenance on Commercial and military aircraft.

Development and subsequent testing and certification of new technology for aircraft is involved and time-consuming process. However, the value and size of the file address will mark it makes this a very appealing opportunity for Clear sign.

Developing this product with a customer from the start is a great advantage and significantly reduces our risk while the same time increases our chances of success.

We anticipate that this technology will provide valuable diversification and business opportunities that clear sign on the heels of the global deployment of a burner related products.

Additionally, we do not see this as requiring a large investment from Clear sign by input will be mainly in the form of limited Manpower without primary contribution in the fall by intellectual property rights for this Market vertical.

Cleveland has

In discussing this possible application of our technology and developing the relationship for a few years. So it's gratifying to finally have a formal business development plan initiated and this investment in clear signs of growth underway.

Please sign today without doubt getting our technology out and proving in the mainstream industrial Arena which includes securing form Supply Partnerships is job number one choice parallel. We are developing additional Promotional and sales channels are Partnerships to grow a business as rapidly as possible when those are established.

One example is creating a partnership where they company of environmental lawyers and Consultants to enable the value of not credits created in Texas to be accepted as payment for Thurs bonus. These emission reduction credits are traded on the market exchange.

In essence this plan will enable customers to avoid the capital outlay for the purchase of our technology by monetizing the value of the nox emissions reduction of achieved by the installation of our cleaning products by customers such emissions reductions may also reduce the future burden of compliance the timing emissions regulations.

We also very pleased to formalize our agreement with California boiler, which is completed on March 5th in their Santa Ana, California office.

Disagreement in gauges California boiling in promoting selling and installing all-clear sign combustion related products in California, especially but also throughout the United States.

We have worked with California border now for almost a year on an informal basis and they have proven to be a very professional Progressive and growth-oriented company and they experience their installation and customer support page on site of a very high-quality. So we are very happy to be working with them for a mutual business growth.

As a final note. I'd like to follow up on our last investor call back in November 2019.

At that time we had just renamed clear sign combustion Corporation to clear sign Technologies Corporation.

The best reflects the players on business model of providing technology rather than being a manufacturer in both of the sensing and burner related sectors and also shortly after the call. We launched the new Club website.

Anticipated development of a flame sensor and especially the aforementioned Aerospace project that we are now able to reveal and other possibilities along the same lines or key considerations in that renaming and rebranding decision.

I also hope you have found the website useful. If you have not seen the new site I encourage you to do so www.quia.com.

Well, our speed-to-market isn't as rapid as I and I am sure any of us would like to see I'm encouraged by the progress. We have made the plans and commitments. We have secured in this past quarter of a process burner or the burner and sensing Technologies and expansion of the products that clear sign provides particularly regarding our sensing Technologies.

Believe that we have made significant progress in our projects with Marquee customers and have secured the development and demonstration path will be used to become successful Ventures.

Looking back over the past year. I joined the company in late February 2019 a lot has happened to clear sign. We have made some great and very significant developments and our key Technologies, especially the developments the process burner developing that technology to operate like a standard burner adding a pilot to light the bone immediately on demand and thus eliminate the need for a startup burn off over my. And when ready transitioning the flame to the ceramics

The consistent development of this technology has continued to extend the operating window to match the needs of those who we believe will be our mainstream customers resulting in the engagement and commitments. We are seeing today.

Developments made to the process better technology have also been transferable to the boiler burners for the same benefits have been demonstrated and we look forward to getting back into China to complete our initial projects there.

The start of my tenure we made a concerted effort to focus on development on what we identified as high-priority projects that we could get to Market quickly.

No way has this been more evident than without sensing technology. This discipline has led to identifying the high-value opportunity and then focusing on the rapid development of the pilot sensor technology package that we anticipate will be launched commercially later this year.

We've also defined and relaunch the clear side business model which included the development and branding of our burner technology as clear sign call.

Baseline call will be included in the high-technology heart or a traditional burner OEM offering thereby enabling player signed to leave reach the value of our technology for that asset light company structure that Partners resources and infrastructure to offer a truly differentiated high-value product. What is traditionally a highly commoditized and price-competitive burner Market?

As mentioned earlier the fruition of this transition in both the burner and sensor technology products, ultimately led to the renaming of the companies to clear sign Technologies.

we have also made some internal and cultural changes to clear sign the work ethic and discipline has improved and the rate of cash burn has significantly decreased by 30% or 2.3 million dollars or productivity in the development of commercialized products has increased

this has been achieved even with the addition of our marketing and customer communication staff and the development of our toaster office, which we added in anticipation of our pending process Burnett collaborative partnership with preparations for the True commercial launch and growth of that product line.

Looking forward we have the commitment from a major OEM to host a performance test for Exxon Mobil and we anticipate that we will receive an equipment order to validate a burner technology in the oems large Town refinery.

Also have a host site in China's to demonstrate a 5G for the burner technology outside the restrictions on the Chinese heating system.

Anticipate the completion of these projects will establish clear same technology as a validated solution to achieve the anticipated future low nox emissions already been requested by customers with a primary target markets of the United States and China.

We have also made Solid progress diversifying a sense of product range by the original Technologies to provide products of Great Value in large addressable markets in the combustion space in the form of a flame sensors off and then I too continued future expansion and growth of the clear sign business in the large transport Market throughout the product development project without recently announced Global Aerospace part.

Give insight into our media activities what you see if you walk through our doors today.

We have three very clear burning projects being led by Engineers the very definite understanding of the task ahead of them and are tight timelines.

A process burner is being optimized to meet the operating requirements of ExxonMobil being scheduled for multi burner test setup and demonstration in Tulsa.

Cancelling a refining and petrochemical business leader and lead engineer is driving this effort. Although base in Tulsa is close to living in Seattle. Recently. We are making good progress. Thursday is continuous. We will not let up until it's done.

I'm fine. She boiler been a technology is being pushed to demonstrate commercial operation in China beyond the original goal of preview performance. As soon as the coronavirus allows us to continue their

what a demonstration is delayed by the coronavirus. Our progress is not long Kendrick. Our chief technical officer has this project and is solely focused on getting this done.

You visited late into the evening. You would very light you see on this team pushing this project four words.

The third project is up on the sensor.

This is at the stage of creating fabrication drawings walking in you'll see one of our cell for conference rooms is converted to what we have called a war room set up for our engineering organization and design teams to finalize this task so we can take the designs Fabricators for final production optimization.

We all set up this way so that any questions related to design or manufacturing options or needs for a quick validation tests to prove. The power function of the design details can be done almost immediately with loss of momentum.

We have already set the clock ticking for the completion of this project with our law and promotion. Everyone is committed to making this a reality.

Finally, I'm in closing. I'd like to thank our loyal investors for your continued support. I look forward to rewarding your patience as we transition to clear some business to commercial operations.

I was the one who acknowledge and thank our employees who see many changes this past year and I responded well to the change in focus and intensity as we pushed to get our project products to Market.

Open up the call for Q&A or basically, please take questions now.

We will now begin the question-and-answer session to ask a question. You may press * then 1 on your touchtone phone. If you are using a speaker phone, please pick up your handset before pressing the keys to assist your question, please press * then two.

Our first question comes from Jeff feinblatt a private investor.

Thank you. Hey, Jim congrats on the accomplishments last year and unfortunate that this hysteria has kept you guys out of finishing in China, but hope that that resumes quickly move away from China just a couple of questions the first I know you're not going to you can't mention who the potential burner manufacturer partner is, but you mentioned that we're going to use their test facility. I mean is that meaningful that they're going to allow us to use our test facility? Is that a sign of the kind of their positive outlook on our burner technology?

Back when I was in my previous employment place. I'm actually approached me and asked if we would be prepared to lend test facility need to clear sign and very distinctly. My aunt has absolutely no because the biggest fear I had was that somehow clearer signed technology would be accepted and probing in the marketplace and I get a foothold

So we we've been working to develop collaborative partnership where they major burner OEM in Tulsa now really sends up doing the company a while. So I already can't speak for them joining the dots.

for them to offer

Baseline the ability to use the world class test facility to demonstrate our berners to a company like Exxon Mobil that they very well know it really going to put clear sign on the road map to for commercialization and to be a real player in the market. You know, I said without speaking that I don't think it takes a lot of dedication to really believe that this is a a very solid sign that that company truly wants clear signed to be part of

All the industry and and of course doing that one would infer that they would fully anticipate that they will be able to benefit from that relationship as well. So so to be off yes, this is extremely uh important and extremely significant both for the launch of clear sign but also the fact that it's faith is a a requirement for Clear signs to provide Burgers to the likes of ExxonMobil. So it allows that project to go ahead we're ultimately going to be a demonstrating our boss is in that facility. So the Exxon Mobil get the chance to validate our burners in their facility for their future use

Yep going to they've spent a lot of time with us in the past as well.

So this is really a cascading benefit to clear sign the establishment of us with the better of it gives a solid channel to market then for Thursday mobile to be able to demonstrate our products in their refinery.

I wish they would not be investing in if they didn't have a a very clear picture of what they intended to use our products pouring in the future. So all of that related is it is a month an extremely significant offering on the part of the burden manufacturer of one that I truly believe they have made with their eyes fully open as to the implications of what they're offering forest's Edge that can do for both us and them on the industry in the future.

Thank you for that also kind of related to that. I mean, so we're going to use a test facility and this is going to potentially lead to an order by Exxon for test learner's. Can you walk me through the timeline on what that looks like, you know to get the test facility order implementation and they're Baytown facility Etc certain age. And and this just look at the whole time that it's really understand the the full context of what this means for the clear sign. Am. I know investors, you've got to go back a couple of years Exxon has been spending a lot of time abetting the place. I'm going to technology they made visits to us out here in Seattle.

A prior to my joining the company and they've also been out while I've been here. They've seen the bone of operating practice range and put it through its paces and simulating. The the fuel gas has an operating requirements that they would see in in their production units. They've got a lot of their key Engineers a lot of man-hours and and time invested in assessing place. I'm not as a solution for excellent.

They placed an engineering order with this last year, which we have completed and and and the main focus all of that order was what was to emerge as the application of the burners into the there specific heater at Baytown.

And to look at the control system and four, excellent to truly understand what it would take to implement. The clear sign technology are the next stage for them is to place an order. We are talking to them at least we're getting a lot of momentum.

So that's the mobile we fully expect to receive that order very soon.

The as soon as we get that we will be doing the final Design Energy building the test burners which then has to be a demonstrated in this multi burn off bonus in Tulsa. We will do that. As soon as we can get that test scheduled and the burns built my best expectation at this point is that that will be around the middle of this year and that is truly going to be a milestone prepare sign the ability to demonstrate a burners for company like Exxon Mobil in the premises of a global partner and basically having everyone sign off on that success is dead is is really everything coming together for us. If not going forwards. We will build the burners for installation on the Exxon refinery.

Likely around the end of the year.

which of course the burners will be started up, but that really is just the start that this is a

A product performance for Exxon as I said by that time they've invested a lot of money in assessing this technology and a lot of time if they didn't have the intention of using this much wider and I've I I really can't speak for X on here, but I'm really drawing conclusions. They would not invest that type of a long time and money on a single heater in Baytown if they truly didn't have the intention of

Deploying the technology much more widely going forward and if they didn't see a really significant use and value of our technology for them.

So I really watch this project has a fairly short time. I think it's really the start of something much bigger that's going to go on a long way into the future.

Got it. Thank you for that. That's all my questions.

again, if you have a question, you can press * then 1

Our next question will come from David Brown a private investor.

Hi Jim, thanks for the encouraging words in the call. I just wanted to ask a question since clear sign is headquartered in what some have called Ground Zero for the United States of this coronavirus and I've seen another company that's just reported earnings and had a huge hit on its stock today. But you know in the Seattle area are there are there effects of this for Clear sign right now or are you seeing anything that can serve you for doing business besides what's obviously happening in China?

China is the is the most immediate and most distinct affect just the delay to the projects. There are obviously very clear.

In the office, we all very focused on getting the projects done and that really requires our employees to be here. Now, we all we all lean everyone has tasks assigned.

And you know, we do instill all the all the precautions with being recommended but work has to go on I think everyone is totally committed to to getting this work. Just be responsible. We are taking all the precautions we can to make sure that we can do the safely.

Great that that's really what I wanted to know and I I congratulate you on the the continued momentum that you're building and also am saving saving money over What expenses were in years past that's showing great discipline. So congratulations on that.

Thank you, David.

This concludes our question-and-answer session. I would like to turn the conference back over to Jim for any closing remarks.

Well, I thank everyone for joining this call if there are no further questions.

Thank you for

participating and we look forward to updating you on our progress as events occur. And who do we very much appreciate your continued support?

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.