Q1 2020 Clearsign Technologies Corp Earnings Call
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Okay and welcome to the Clearsign Technology Corporation first quarter 2020 results conference call.
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Good afternoon. Thank you operator, and welcome everyone to the critical Technologies Corporation first quarter 2020 results conference call. During this call. It's called the company will make forward looking statements initiated that it's always seem to have extraordinary factories are forward looking statements.
<unk> remarks about the company's projections expectations plans beliefs and process. These statements are based on drug but no. The data. This conference call and are subject to numerous important risks and uncertainties that could cause actual results to differ materially well described in the forward looking statements risks and uncertainties associated with the forward looking Steven you Didnt.
Conference call include but are not limited to whether it's your testing in sale Griffith Park. We successfully completed when of course I will be successful in expanding the market first products and other risks are described in criticized.
With the FCC, including a discussion in the risk factor section of the 2019 excuse me 2019th annual report on form 10-K, except as required by law criticize it's no responsibility to update forward looking statements to reflect future events, where actual outcomes and does not intend to do so.
Well on the coal could with me today, our Jim Taylor, Vice President Chief Executive Officer, Brian CLYC crystals, Chief Financial Officer Rolls off and there's a tremendous board will also be available. During the question answered portion of the call. So with that I wouldn't like announces the color Brian Clark. Please go ahead Brian.
Thank you Matthew and thank you everyone for joining us today.
Our full financial results were released last month on form 10-Q, with the FCC and made the 14th.
The cash burn for the quarter ended March 31, 2020 was $1.5 billion compared to $2.2 million in the same period of 29 team.
This is a reduction of 33% and is representative of the changes made in the company since first quarter of last year.
The Q1 figures are consistent with the increasing efficiency achieved over the past year.
The major saving I've been for me systematic focus on selected and prioritize development project and the very selective and judicious use of outsourced consulting.
This has been combined with more rigorous project planning and budgeting and expenditure approval processes.
Our cash and investment resources or about $7 million at the end of the first quarter of 2020.
Compared to $8.5 billion at the end of the fourth quarter 2019.
Shares outstanding at March 31, 2020, or 26.770 million 260 watt.
On April 21st we received a letter from NASDAQ deferring, the tolling period, where our stock price due to our bid price deficiency for the month of May and June.
This extends the current deadline for meeting the bid price guidelines until September 28, 2020 at which time if necessary.
We can apply for a six month extension.
During the second quarter, we have also received $250000 in funds TPP.
Which are anticipated to be forgiven during Q3.
It is important to note that we have sufficient working capital available as of today to carry us through 2020 and into 2021, even assuming no revenue from any other sources.
With that I would like to travel to call, though over to our Chief Executive Officer, Jim Deller. Please go ahead Jim.
Thank you Brian I'm, good afternoon, everyone and welcome to our first quarter update call for Twentytwenty.
Before getting into the details of up this quarter business update I want to expanded little on the press release just issued.
Confirming that Clearsign has received a purchase order from Exxon Mobil some supply for Clearsign core cross the spend has to be installed that baytown, Texas refinery.
Firstly I would like to thank Exxon Mobil for the order.
For the considerable investment they have made in evaluating Clearsign technology.
The assessment of Clearsign technology from a technical operational and economic perspective has been very alright.
Which for us recognizing the significance of this order and not just.
And equipment supply, but as the final stage at any forward looking program to validate and you environmental technology provides great reassurance that what we provide and the way that we provided.
There was a practical installation meeting the refineries technical needs and also provides them economic value.
He also includes a a full scale multi band of performance test, we expect to be carried out in the coming months and a full scale industrial furnace and the division of a computer models, showing how the baptism flames work and I and the destination furnace.
Both of which we have a range to contract out two world class third parties in Tulsa, Oklahoma experienced in providing these services.
This all that is great news for place on.
And we anticipate the such an endorsement will have beneficial implications for the alliance agreements and general industry engagement stuff we are pursuing.
We also believe that he does a precursor to the more wide scale adoption about technology by Exxon Mobil to meet the upcoming environmental emissions targets.
I would like to start the quarterly review today like going over developments since our last call back on March 12.
At that time, we were observing the disruption caused by cobot 19, social and commercial activities in China and assessing the impact on the development of our business in that region.
As we all know the destruction spray globally I call significant changes to all of our lives.
We have had to modify work practices to accommodate the restrictions required to limit the spread of the disease.
I have.
Also to be flexible in order to accommodate the effects of the virus my customers suppliers and partners.
However, we made plans and preparations early outside of China.
I've been able to keep our internal strategic development and commercialization projects moving forward with minimal delays.
As a supplier to oil and gas refining and delivery industries. We are considered an essential business and accordingly have maintained essential operations in our offices.
We have kept these operations to a minimum.
Well activities that can be done remotely all being done by employees from high.
And this has allowed us to continued running a test equipment and push forward with the commercialization of I technologies.
This has.
In the case for both Seattle, and Tulsa based stuff.
I want to acknowledge and thank our employees that flexibility and creativity in quickly adapting adopting a new work practices, especially those who have continued to keep testing program advancing and the Seattle office.
With that efforts, we have made some significant progress and developments in the past few months despite extraordinary complications.
The development of our process better technology and business has been generally focused on the needs for the commercial deployment of the at some mobile baytown facility.
The other large scale refineries in general I, specifically focused on the operating requirements of the business the order mentioned earlier.
This has involved not just optimizing improving the design to perform the all the foreseen operating scenarios on Walton complex refinery.
Also included such activities as working through all the installation details, making arrangements to meet the performance testing with audience.
In addition, we have had to give consideration to few just that pops needs and the standardization of a better components to ensure that from a customer suspected equipment is easy to maintain a phone clearsigns perspective that the sourcing on provision of ongoing pause coming handled efficiently and cost effectively.
If our install base develops as we expected to.
The provision of aftermarket parts and services will become an increasingly large unimportant thought about business.
So it is necessary that we give careful consideration to the design about pops, the planning about supply chains.
So the aftermarket parts can be sourced stored and shipped quickly and cost effectively.
This will enable us to provide good service our customers and of course in doing that to also provide the maximum potential of this high margin revenue stream will play a sign.
While we are clearly committed to meeting the needs of our immediate projects. We are also cognizant of the steps and decisions that we might now must reflect and support the vision of larger scale and long term operations.
This incidentally is applicable to all our technologies.
Given that this is our first better equipment sale into a major international tier one refinery.
With all the operational procedures and functional reviews that that entails this was a considerable amount of what.
We expect this process will become more streamlined as I future customers and other third parties involved in such installation projects become familiar with class I'm products.
Of course, as we develop a history and experience of supplying our technology into the mainstream refining and petrochemical industries.
Fortunately, we have been able to accomplish this and I look forwards the execution phase of this project.
We're also continuing to work with world oil and the California, South Coast Air quality Management District.
Development about process, but in the technology is advancing our capabilities in general as well as in addition to being specific for this particular project in that regard it is very relevant tall oil project.
Many of the improvements we have made to the process better technology over the last few months are equally applicable to the world oil installation.
Although the demonstration of our process better technology to Exxon Mobil.
And so they utilize the same setup to demonstrate the performance towards oil has popped back continuation of that project.
Well I've been supplies Exxon Mobil has been our primary focus in the process been area over the last months is not the only company we are talking with.
We have lead to progressing with the international top tier refining and gas producing companies and assuming we all successful Emma obtaining the grade the anticipated commitments from them for to making additional announcements related to these.
When discussing our process better technology the development of a commercial alliance will establish spend a manufacturer should also be recognized as a key development milestone.
Well I do not have anything formal to announce today is the shoot is progressing and it is my belief that this sequence of this courtship and the timing of a formal agreement when all into the ultimate adoption of the Clearsign core process better technology in the markets.
As you May remember on the last call. We mentioned that we have the support of a third party, who is enabling us to provide industrial scale Bene testing for Exxon Mobil on world old projects.
It is our expectation this but I would also fabricate the bonus for Exxon Mobil.
Securing the purchase order for these.
Well the supply of badness tweaks on mobile is a recognized milestone and establish place I've been a technology.
Bible solution in the mainstream industry.
As my expectation that this will act as a catalyst as to move into the final phase, including our alliance agreement with the supply.
Well, we are able to announced its alliance it will become clear how transformational this relationship will be for our business model.
Without alliance agreements in place I plan is to continue to sell to major global refineries and other similar companies. In addition to sales obtained through the sales functions of any future Alliance partners with which we do business.
We plan to that future lines partners, how about technologies in that product mix and in that way, we will continue to grow and network and to sell through their organizations as well as our I'm.
To add combined sales affiliates.
So the engineering and tank installation firms like California boiler.
Regarding our board of and a technology.
Opportunity targeted primarily by this business is in China.
We have made good progress here also tend to adapt our original game plan of demonstrating what was essentially a duplicate about fiveg test set up in Seattle.
So taking the performance test accreditation for a technology in China.
Then continue to develop a final commercialization of the Fiveg technology for type testing and to be ready to commercialize other product design.
Well the pandemic has delayed the performance testing about Fiveg better technology, which we hope to have completed by now we use this downtime.
To advance the design and I believe we are ultimately feather head and our progress having a fully commercialized bore the brunt of technology.
The final product that will be sold for installation into new fiveg wireless and replace the existing business in fiveg wireless well need to be a single consolidates units as I have the Evan fuel gas control equipment mounted on that but so the entire assembly common delivered and installed as a single.
One piece assembled Ben.
Rather than demonstrating the technology and obtaining the performance certificates.
Then reconfiguring it to be restored in its final form and then proceeding with the final type testing.
We have now jump directly to the final configuration that fully design the components to convert a banner in China to his final one peaceful.
This will allow us to complete but almost certification and type testing.
Consecutively ultimately getting us to like end goal of having ace sellable product.
On the most efficient schedule.
A testing in Seattle has demonstrated that this new.
One piece, but on a configuration delivers the same performance as I prototype.
Most of these technology and in doing so it exceeds Chinese emission requirements and the performance of all known competing Bennett technologies.
Have a testing partner waiting for us in China.
And have kept this relationship in tact during the Corona virus shutdown Oh through contact my resident Chinese business management and communications from the USA.
At present, we are still not able to get back into China from the USA.
However, it.
The progress this work we need confirmed that our testing PAMA is probably set up an engaged and I project and we also need to keep control of who sees our proprietary designs.
We also want to ensure we protect and foster the relationships on business development plans, we have underway in China.
We are working on special visas and unorthodox troubled routes to get our essential personnel there.
We have developed a selection.
Very capable Chinese consultants and contractors.
So who we are anticipating will enable us to continue with the physical bed installation and optimization in China.
This means we will not need to wait until we can also deploying a technical team to the job site.
We believe the sets up demonstration of a fine cheap oil, but can be fully accomplished with ongoing support five video conference shut technical team needs remain in USA due to travel restrictions.
Additionally, we continue to work with a district heating groups in China for the development of our board that you bought a button.
At the time at the last call, we have demonstrated the Ben 90% to 96% of maximum rate.
Nox below the 10 ppm target and had shutdown.
To prepare the installation ongoing views and to implement the automated control system.
Due to the current a virus on travel restrictions, we have not been able to progress as project further to date.
We have had some preliminary discussions with potential partners that may enable us to a spike configuring this technology to his final commercial.
Of course, we also need to reach agreement on such possible changes to our initial plan with the heating district. So I really cannot elaborate on this more at this time.
Other than to say, we are eager to get back into China and to continue the development. These price significant projects and to progress I relationships, the very capable respected partners with whom we plan to work in the future.
It is probably worth reiterating that the market for Fiveg been is approximately four times the size of toward a few market in China.
The reason Clearsign first entered China, a number of years ago, where they bought a few offering.
Is that we did not at the time heavy find you product so we'll cope with.
Patient has unfortunately affected the water at you.
Project timing effect that we have made such significant progress in the commercialization efforts of the fight you project should be viewed as an avenue to both quicker and more significant.
Revenue opportunities in China.
The reality is the issuing of especial visas all the opening up a travel routes between us and China is ultimately out of our hands.
We are working through some diplomatic channels that we have to do what we can.
Best guess.
And it really is I guess at present as it will be able to get back to some form of on the grounds technical progress in China sometime in the third quarter. This year.
Of course, we all hoping to do this as early as possible, especially considering the upcoming winter heating season starts in mid November.
I will now move onto our fair technology.
We issued a press release on May 14, announcing the sale of all plays fire Alliance partner Asheville by International coal combustion controls a division of our sales installation upon the California boiler.
Customer in Los Angeles region of California.
While relatively modest this was a very significant order for play assigned in a number of respects.
The order was exactly as we envisioned when we first adopted our commercial strategy being an asset light provider of technology and developing a family of original equipment manufacturers have the sales engineering design, a production resources to deliver product containing our valuable technology that's cool.
Rebranded Clearsign call.
The designate inclusion of this technology, a best in class emissions capability.
Secondly.
The Clearsign supply and these old is the core and of course, the special IP that is embedded in it.
This was sold I envision bucket price confirming our intention that through this commercial strategy. We can create business that is beneficial to customers.
Alliance partners.
Sales channel partners and of course clear sign and ultimately our investors.
Then Italy.
Early after embarking on this new strategy, we match cool and soon after California boiler.
These two companies subsequently form the business arrangement and it was tiny through these alliances and relationships that this business was enabled and generated.
It is simply inspiring to see a plan coming together and delivering results.
Execution of this order is progressing well.
To fulfill this order we have extended that product capabilities and validated the technical development with some rapid prototyping and performance validation that was completed recently in Seattle.
This is basically a science business increases that product portfolio, which we believe we'll open the door or more opportunities in the future.
This project is being managed and a critical clear signs applied materials cuts and shipped my team and Tulsa, Oklahoma.
Historically flight emissions of not being closely regulated or regulated us all.
I was processed bed is hoping.
That is changing.
As we have developed a product as a core rather than a new flat the retrofit opportunities within the flat market may become significant.
As I mentioned in my previous call. We are in the process, bringing a new sensing technology to the market.
We believe this disruptive technology has the potential to eliminate the use of playbooks.
The clear sign off my pilot sensor has been designed seamlessly integrate into existing infrastructure and reduced.
Non productive downtime due to pilot sensing equipment failure.
One of the main features of our product is that it can verify the presence of a pilot planes without being in missed in the flame.
We continue to get great positive feedback from potential customers when discussing the development of this product which is very encouraging.
We all working through the final details of our commercial design and fabricating five pilot production units in preparation for upcoming field trials.
Our product will be a system, which includes not just the sensor itself the controls units that accompany it.
This is similar to the existing technologies that it will replace.
Our business plan for this technology is different from that optically assign coal combustion equipment and that this will be a truly standard products that we can have manufactured packaged and shipped by third parties as a class I'm product.
We have established manufacturing vendors unexpected first article pilot production units to be delivered in the third quarter. This year at full field testing.
Our manufacturing partners are currently optimizing the design for large scale manufacturing of the hardware and concluding the reliability testing of the electronic components.
We're also taking talking.
Potential first adopt to customers to identify hosts sites to stall. The first off the line units to give feedback and also to promote and socialize the new technology amongst tend to community within the industry.
In general looking at the stage up business, we are in a time of change.
Side from the external factors such as the credit the virus international travel armies restrictions and political uncertainty. The company is in the process of positive transition.
Engagement with Exxonmobil is almost certainly being watched not only by investors, but also by others in the industry, who seek to benefit from the due diligence taken by Exxon Mobil's Research and Engineering Division.
There's also include other equipment manufacturers.
Likely there will be some feel threatened by the validation of our technology.
But also others with whom we see.
Mutual benefit.
And with whom we have been in serious discussions about collaboration partnerships.
Well it seems to have taken a significant period of time I'm very optimistic that the Exxon Mobil been order and potentially others from additional top tier customers will act as capitalism paved the way to completing the additional.
Collaborative partnerships that we see.
I do believe that we on the precipice of market acceptance moving into industry adoption.
Dri plant technology overall business strategy has been demonstrated a successful and that technology evaluation and pricing model has been validated.
Also we fully believe that.
The installation of before play as currently in production will.
Slide further references by capabilities further raise the awareness of what we offer in the very valuable, California market and also other regions of the country, where the need for the reduction of pollutant emissions our anticipated.
Despite not being able to get back into China, we have developed FRG bore the.
Technology to a commercial form an award that Youve technology orbit reached the maximum farm rate required to be ready performance certification in China.
And a clear sign I sensing technology is on track for commercial release later this year with great anticipation from those familiar with our offering in the industry.
I am sure the everyone. On this call is looking forward to try lives of businesses getting back to full operations.
Clear sign a truly expect the next few months will be excited.
We will of course issue press releases of material developments also post more general news on a linked in signed and his updates to our web site.
Thank you all feel continued loyalty to clear sign and fuel time, joining us on this call today.
That concludes my prepared remarks today.
Operator.
Please open up the lines for questions.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone. If you are using speakerphone. Please pick up your handset before pressing the keno.
To withdraw your question. Please press Star then too.
Our first question today comes from John Reynolds, a private investor.
Hey, Jim how are you great job or you know very.
Paul Tas transforming this but my question is you know you've got enough capital through the next year.
With oil being so volatile and capex spending not being you know on the front burner so to speak.
Are these companies I'm still engaged because this is the technology that is going to be a must have.
And then the second part of that have you been talking to any E.S.G. funds I mean, this seems to fit the bill.
For you know the environment.
You know, particularly and what are your comments on that.
Hi, Jon good afternoon and.
On the RIDEA two questions that.
So certainly the other general market and the news from the refiners is there.
As a discretionary spending on expansion plans, all awesome, what could tailed by the.
I would use oil prices and the volatility.
The.
Projects that we're engaged in all the likes all the Exxon mobile order and slows or others that we appreciate your actually part of a much bigger projects.
We believe full for those refineries and the not seen in that same life say half hopping are progressing.
Yes.
No doubt in the general industry looking out at the at the normal burned a market some of the projects may be delayed but at today.
I don't recall of any projects in the list that we are pursuing.
That have been.
Council, all significantly delayed by any of the.
Oil price volatility.
The.
On the comments about the S.G. funds they all.
Certainly on the Horizon, we are very aware off than we all contacted by.
Why those funds, we have have seen interest from them.
Uh huh.
I think thats really a conversation.
Essentially for the future, but yes, we have have definitely received interest.
Got it got you I just wanted to make sure that was on your radar, but are these companies in the Super majors, obviously do they have a mandate to spend so much per year, you know kind of cleaning up their act so to speak as that has ever you're finding so this is not this is not their capex expenditures obviously undrilled.
The new holes has been curtailed that you don't think that this program will be.
Be adversely affected affected by that.
Okay, and just like I don't see I can't speak for these refineries I don't know what their internal policies are.
We do know about.
Do you feel like your new model is going to compress the sales cycle, how about that I mean.
Obviously, we've had start and stops before with this and you get a great announcement and then months go by without.
New announcements or follow ons is this is sustainable model, that's going to compress the sales cycle and and be more not as lumpy so to speak.
That is a.
A great question so.
This this on this most recent announcement was a very significant step.
In in launching vis.
Based on what will I forget the equipment into these major refineries you know only half the habit a a fundamental technology that does something special.
Uh huh.
Also to develop a product into a full.
That refineries can actually use it safely that they can install that maintain it they have the confidence to do that.
And.
In our case.
On the demand side.
I think it's clear to the refineries, especially in the.
Currently in the California, and the Texas region, they they see the future.
Environmental restrictions only getting tied to reducing Nox emissions.
The the current technology, they have available to them to meet the new requirements, all very expensive SCR laws, which become even more ridiculous they expensive to install on a retrofit basis.
How spacing refinery you've got a couple he's oh, you called on real estate with the complications are huge.
And what we're offering is a in a way for them to avoid having to go through that.
Very elaborate an inexpensive project quite frightening to install a piece of equipment that delivers to them.
No value.
So that's what we believe as the motivation behind these top tier companies like X on investing is and hundreds of as of engineering.
To find a best solution for them going forwards.
So long term this is the start of something great.
But they do have to complete that process. So I can't promise in order every week, but.
But is the store all well I believe it is truly putting our business pines election, and showing them. What we're doing is getting traction within the industry.
Got it. Thank you will well we're rooting for you Jim Thank you.
John I appreciate that.
Our next question comes from Jim Kennedy with Marathon capital.
Hi, Jim you hear me Okay.
Yes, Jim Thank you.
Great Jim could you help me kind of size up this works that a little bit.
Isn't as simple as [laughter] X number refineries, regardless of whether or not its exxon or anyone else times X number of partners I mean, what.
How do you look at that refining market and then.
Beyond the refining market.
What did the size and the other market you talked about China, how does one get a handle on what the size that market is.
Certainly said.
Jim.
I guess best if I can is is to give some tools as well. So so firstly there was a.
Very good resource this is available to everyone.
It's a ASP and will automatically fuel and petrochemical manufacturers they have a.
Well, there a trade trade association, but they have a refining and storage capacity report. If you just a type of into go little pulp dried up.
Thank you if you have other refining capacity all.
All of the states of the U.S. as a total but also individual refineries.
So.
Date, this available like that and and drilling from my experience. The USA has a refining capacity very close to 20 million barrels per day.
Our estimates, which all up based on experience. We believe that there is in the region of 80000 burners.
Employed in refining that 20.
Million barrels per day.
So things that example, when it does go down to Texas. This within Texas that is just over 6 million bout day refining capacity that scale is down to about 25000 bonus used within Texas.
A large refinery tend to be somewhere in the region of 500000 barrels per day. So you can scale that same ratio down and that's a reasonable assessment all.
How many bond is that going to be used in a.
A major top to top tier refinery.
So if we if we took that 80000 for instance would that actually be your total addressable market or there. There are some nuances there where we have to parse it a bit and maybe it is 75% of them with your technology be applicable versus 100% or is it applicable.
Older virtually every burger out there.
I would love to a place every better out there.
But the reality is that.
No. Some pieces are already have SCR was on them.
You know that right now as it was as well we need to look at timings of California, obviously is driving emissions down to a very low level is an immediate market for us.
Oh, we see that the the major forward looking refineries in Texas are very cognizant of what the Tc Q.
Is doing and are preparing for that so I'd, probably say, California, and Texas all.
I'll I'll, probably the first states to go into major adoption.
And and therefore, we looking out a takes us probably have a six year window to complete fats process, but following that then we'll have the east coast and the other regions of the use some pulp possibly other regions of the world.
Well start to.
Deploy their own changes so it will go through.
No.
I'll give you some.
Truly some got numbers I think in terms of the ultimate adoption somewhere between five and 20% of the bonus in the market.
I think I see a very realistic target for Clearsign technology.
Yeah.
Okay and then.
Im sorry, but.
Yeah, the well you asked about the other regions I was just we give you a few numbers.
On on China.
John.
On that in China, the oil about a market.
Target market, they certainly have a very large refining.
Industry, there, which we may come to invest in the future.
But the other emissions targets that are required in China present can be met smaller less by the current technology and it at that price levels.
Just.
Really not with our effort or exposing our technology.
At this time.
It's not the case for the boiler industries, such as 350000 boilers, we believe.
That within China, they're going to need to be converted to a lower Knox home over the next 10 years and that's based on.
Chinese data.
That is a absolutely massive number when you break that down to 35000, Ben as per year, if you average it over those.
Over the 10 years.
Hi, I really hesitant to guess, how the market share in China, but.
I would just by doing the math, if you factor and I, even just a few percent that works out to be very very big number.
Yes, Indeed, and then how would I how would I get to a rough revenue estimate either per burner for refinery up per whaler, if I have a refinery and I'm I want you know for brighter 600 papers.
Are you, giving me a discount because I'm wondering six or eight or it's one price for each burner and no discount I mean, how you are you envisioning that.
Joe Let me ask I've ever worked in a buyer of one of your past lives [laughter].
So.
The.
But I think the best reference that we can give all.
All the information that we can talk about because obviously a lot of the contracts with the individual customers are confidential.
Leave the won't oil order that we had.
Was published.
Full five bed is the value of other what it was five.
Hello.
That did include some installation.
And there was a little bit of controls equipment in the order as well.
But yes.
Next let him, but that would give you a ballpark value for what the place I'm core technology is selling for.
And to date boats and conversations that that price has.
Has been respected Bob by customers quite friendly.
When.
When the customers engaging with us and seriously talking about Clearsign core technology that comparing us.
Two.
No an SCR.
Then comparing us to what other buttons and the market all offsetting pool and on the is really where we have positioned the product at and where we need to maintain.
Because if they are ranked about them in the market.
And the Nox levels that providing can meet the needs of the customer or at least I believe they can.
Ben.
That's just not business. This was placed on pursuing we've we've got much more profitable business to two this year.
So that you.
Ill advised stay this low numbers as a a ballpark some will be higher some will be lower.
Okay great.
Yeah, you may get modest discounts for large orders, but so far what we've seen our intention is that that those prices will be.
Reasonably held.
And.
Jim I'm can I draw a parallel between China and the U.S. in Europe. When it comes to boilers that it would be applicable to those other territories for boilers or you're gonna have your hands fall in China first.
No we've.
Well, we made a a point where the resources, we've got and the interest all make as much money as we can as fast as we can.
To focus on key markets really focusing on the U.S. refining market for the process business.
And the very high density oil in the in China as.
First target is not that that there is certainly a market in the us is not as big as certainly market in Europe.
It's just we can get much more return for our efforts by focusing on that really big market first was not in every case of its is trying to assess the boilers and USA Festival.
That's it.
The the industry.
Central relationship that you've talked about that you're trying to develop.
Do you envision that partner.
Becoming a marketing partner for you I'm would it be on a nonexclusive basis, I mean, what well be you had your druthers what would be.
The way you'd like to see that structure, there what they would be doing for you.
Okay.
So John I'll I'll preface this by saying I'm I'm going to ask a little bit of patients at the end of.
But suddenly.
Our objectives and.
That's a good things come to those that weight.
We've really focused on.
Finding a.
A global partner.
That has a outstanding reputation in the market.
That can truly do the Clearsign technology Justice.
And can provide.
The other technical resources, the project management resources and the sales resources.
And service requirements.
That we need to be successful. So we would certainly include their best sales capability.
As a value when we are considering partners.
Okay got you.
Okay.
Okay very good thank you for taking my questions.
[music].
Hi, Jim.
Yeah.
Our next question comes from Robert catch up with Las Colinas Capital management.
Hi, Jim.
Hi, Robert I, Wouldnt, Hi, I wanted to connect the.
The world oil.
Business.
With the Exxon deal.
I was wondering since you had the experience.
World oil.
I guess they were kind of really closely as you described before closely connected are closely situated.
Burners.
I was wondering if you could maybe share with us what's been learned about that somehow capable. This technology is too.
So appropriately service world oil and how much that maybe helped us a going forward.
It both let's say.
Really good point I really do.
I just had this really neat need just to get some thanks to Jeff Leiden.
Thank you I here in the office up our technical team worked on these patents have worked really hard for out.
I'll try this code at 19.
Period.
One of the valuable things we learned at World oil was that was the first time, we'd have the opportunity to put multiple bed is into the furnace.
A prior to that we've just run a single bothering the test fun is in the Seattle office.
So during this time as we dialed in the technology for the the wide ranging requirements.
Excellent.
We will also be able to.
Build on what we learned at world oil and actually really explore the bed on develop it.
Two.
Address what we saw it won't all will be put into effect is for the first time.
So it.
This is probably the approach on this call to really get into the so fine details of the bed is but we have extensively modify the bona acos envied too.
To meet the wide operating requirements all excellent on and feeling say any large scale refinery.
So the things that we did to address that we're actually very consistent with.
What we wanted to do.
Two onto addressed a little bit as well so that it.
They've been mutually supportive.
And then we look forward to getting them into the test for an especially demonstrate it.
And approve both to twice on doable and of course too.
To all of the other refineries out there.
Yeah.
Thank you Jim that that's exactly what I was getting at is that there had to be a lot learn and modifying.
And making the real Delta change for the burners.
Going forward and so really the the fact that the everything just didn't go perfectly with world oil it actually turns out to be a benefit for the company going forward, which is basically what my question is about.
That's right Yeah weve it as you've made as it will put us in a much better positioned to go forwards with the demonstration fix on mobile but is in confidence when we get a chance to put them into the full scale test facility. So that's exactly right.
Oh, a come back with a question, maybe later and give somebody else to Chad. Thank you.
Thank you Bill.
<unk>.
Our next question comes from Jack Stuart I private Investor.
Hey, guys can you hear me.
Hi, Jack just began.
Hey, Thanks for taking the questions I know that you guys don't have any cell site coverage. After the Q anyway. So that's a little bit weird for a company that's been public so long, but I'll do my best to facilitate a couple of questions here for the other private investors out there. So I'm just gonna rattle them off and then I'll, let you address them in the order that day you choose first I wanted to.
To address the Exxon Mobil Order day, you put out the press release for today I was hoping you could provide a little bit more color around what the timelines are associated with that order and the installation and let us know if there any revenues actually associated with that order and then I also wanted to clarify how is this.
Exxon order different from the order that you guys receipt from them last October that you guys Press released was that prior order not proper validation of your technology for them to move forward. So why do you why do you need a second validation test with them and from what I can tell the Pete the press releases looked like literal copies and.
Hey, so be true.
Each other and so I'm just confused what's what's different or new this time around so any color. There. It's really helpful and it's just it to me it's a bit weird.
That that that same language would come out at the time that there's some NASDAQ listing issue as high as well is it did they need to raise additional cash. So that's my second question is.
Can you help me or help us understand your balance sheet positioning how I will flatout disagree with the first questioners assertion that you've got a year's worth the capital lapped. The fact that it's a plane. We stated in your 10-Q under the going concern language you said in the press release now that you've got about 7 million a cash left as of the end.
The first quarter, which is in March you probably burned another one and a half to 2 million. Since then so I assume you're probably about 5 million in cash.
Currently in burning wanting to have to 2 million a quarter. So my math gets me to you've got about two quarters of runway left so clearly there's going to be more financing needed. So if you could help us understand your passport and the way they do plan to address your cash shortfall that would be Super helpful. And then lastly, my third question is is that if I look at.
At the history of the company. There are numerous orders that you guys had disclosed in press releases over the call. It the past couple of years, but there's still no revenues. So if you could help us understand what does the disconnect between these orders.
And when you expect to receive the first I basically got first dollar of revenue for the company. So I'd assume these are a lot of these projects would you know you know would be booked on percentage of completion booking method.
And then given the market cap I mean, even though the first a little bit of revenue.
It's not enough rights to you I mean, when are we going to see five to 10 million at least of revenue. So any guidance would be helpful. In along the guidance are there any metrics that you can provide to investors like order backlog value book to Bill.
Or maybe anything like average order prices per project, everyone else had left to copper boiler.
That's it thank you.
Pardon me, ladies and gentlemen, we seem to be having some technical difficulties. So just please stay on the line for a moment, while we get our speakers back.
Yes.
It looks like no one else is going to join this call.
If I.
I mean could again, we are experiencing technical difficulties that our speakers are dialing back into that feel just wait a moment, we will join them back in to answer your question.
Hello.
Hello.
Right so muted.
Well, we've got our speakers back in I. Please proceed. Thank you I'm sure the question or do we need to repeat our question there.
We did.
Here's a question earlier question was it.
The third question. It was about any guidance that you could provide around when orders bode well will produce any revenue. So I'm surprised there is no booked what percentage of completion booking on these orders that had been announced for a couple of years. When can you get the $10 million of revenue any kind of guidance is helpful. And then are there any metrics that you can be.
Divide investors like order backlog book to Bill.
Or something maybe like an ASP per boiler. So we can do math on on the T. or are you kind of average order size per customer any details are helpful. Thank you.
Sure.
Yes.
So jacket, if I can I.
I think it makes sense too.
To walk through the.
Almost it.
In reverse so.
I think the.
Difference between this all around and the previous was first we up till now was not recognized revenue in terms all up.
Saying completion.
So with the with the prior orders within the company that.
I think explains why you don't see significant revenue.
As as orders were.
[noise] spread out.
The.
The XOMA orders to too.
You know to address that.
[noise] other tool is all all very strongly related.
The.
The prior order was as you know the as part of the assessments.
That led to the purchase of equipment why it's so we've been working with them for a number of years.
Yes.
I'm just really just.
I think it relates to the important solve this order and why there is so significant when you look at the.
The amount of work and due diligence that X on how well 10.
In assessing this technology really the value of the older is there's certainly monetary value, but the value is what it represents and why eczema doing it and the fact that they have almost certainly spend as much money on their own engineering and assessment resources that I then they all on hardware and these stations.
Hardware.
So the prior order was a precursor it was a payment to class line for us too.
Doing much more detailed engineering study of how a baseline cold better technology.
What fits into this particular he to vacate because Exxon wanted to do and much more far assessment before even engaging in an equipment purchase contracts.
Then led through too.
A much greater refinements opera apartments, and this order.
To the details they passed onto us to achieve without done before they would even consider buying it.
And ultimately through to the purchase orders that we had the pleasure of announcing yesterday afternoon said so those two Riley was very very.
Similar I, if they all two very distinct orders.
And the order for the hardware older than as is the culmination of a.
Very large amount of work both on X on spot.
And clear signs but.
Do drive you deserve very significant press release all of their own.
Can you want me to this is Rob Hoffman I'll I'll take the.
A question about.
Sensing and.
So the ramp.
Obviously.
We can only released the numbers that are on our president.
I think the questioners math is a little off making some some high assumptions on cash burn when we've demonstrated that we are remain in a half a quarter and an hour assessed. It also does not even include any revenue so.
I think that take the short answer is we are comfortable with our cash position, we're comfortable with that prediction, we made sure how long that cash will last.
Even without any revenue.
And.
That's that's the answer.
Yes.
Thank you all.
Just a last point the yes, there is revenue attached with the order.
So like everybody else and valuing our business the way that.
We expect the market too.
She is in.
In line with the are the guidance I gave by comparing to that will all announcement. So I'd say is a very nice order for instance, I am right at the value that it represents in terms of what Exxon Mobil are doing.
And how that plays on go to market strategy is of course huge.
Our next question comes from Michael leg with benchmark. Thanks.
That's on the milestone for the company guys and Jim It's nice to see on the progress you've made since you've joined the company.
Two things I wanted to talk about one.
On the.
Lower oil pricing now and I know, we've talked in the past about how taking down refineries is a key.
Issue when installing your burners. So could you talk about with the current pricing of oil and while that if that may actually be an opportunity for you and then secondly, with the service contract to using on exit Exxon could you talk a little bit about that might actually possibly be a joint venture when I made in flow money into clearsign.
Nine or something of that nature. Thanks.
So let me address the first I'll I'll come back to you on that second question I'm not sure.
Okay understood that the.
The projects to install our equipment are.
Yes.
At least months.
My extending beyond the.
Beyond a year in a planning.
And the also tends to coincide.
With the oil companies not having a lot of all of spend capital.
So.
At this point, we may see a a fuel opportunistic orders.
I think the longer term you the orders were seeing and have a main focus is to get our our equipment established as a.
The best technology for these major refineries to use in the upcoming projects.
And then.
I think taste the beneficial effect of the slowdown if as capital our parties get delayed.
It could actually delay this project slightly to the point that the evaluation has been completed.
And they are ready to actually include the Clearsign technology in a in those plans. So these long term. This is not a bad thing for place on the fall.
I'll be honest I think the the unknown.
And the volatility of what's going on a present is just really hard to predict how that's going to.
The fact, everyone and in the market today.
Okay.
And then just on the.
You talked with a lot of different partners with distribution service perspective.
Any of those type I mean, you mentioned some being extremely large obviously could or any of those the type of may want to take an equity stake in clear sign.
Michael I.
I don't know the anything's off the table.
I certainly.
But I can't speak for them in.
Either hill or in China.
I really can't comment on that at this point.
Okay, that's fine thanks, again and congratulations.
Thank you Mike.
Our next question comes from Sean Hammock, a private investor.
Hey, guys nice job is really exciting to be part of the team.
And I want your stock level today.
Got a question for you as the question bag.
Successful you guys are becoming is proprietary is you have this useful technology.
And you've got patent dollar will place and your small company you got to achieve.
So to speak stock.
And as I've been any conversation with somebody possibly buying you guys out or.
Actually I call once that.
By your technology are you guys for sale.
Okay.
[laughter], Sean I want you noted we.
We now engaged any conversations today im not sure I can really say more than that I mean, obviously, we already publicly traded company. The other she has always.
On the market.
We're not holding any news back.
Okay. Thanks.
Our next question is a follow up from Robert catch up with Las Colinas capital management.
Yes I.
I think Jim it might be helpful to give us some kind of understanding of the existing industry.
Providing burners.
And also the burner boilers on the.
On the fire tube side.
As far as what kind of replacement.
Of burners in say.
Lets say in this refinery areas since we're talking about Exxon Mobil.
As a customer.
What sort of replacement takes place annually.
In the refinery process heater business.
Okay. Thank you bill so.
First let me.
Good space there is I don't want to make any presumptions, specifically about Exxon Mobil and also needs to be careful the what they have.
Told as a part of our interactions are all confidential, but I do have a.
Okay, 20, plus your experience working with refineries.
In the burn of area.
So I think there is.
There's multiple smaller as Steve.
At the market that we are predominantly focused in is essentially driven by the need to my clients to meet.
Current but often more the anticipated emission reduction requirements from local legislation.
So the change out of all this equipment is.
As part of a much larger projects when a refinery we would look at all of their combustion sources.
And lazy workout or their options and all the technologies available to them.
And they will come out with a plan to get our mission is down to whatever that requirement is.
And the most economic way and the way that gives them the.
The best controlling operation.
All of their refinery so that is basically a force chain gaps.
There are.
Equipment. This finally does wear out although typically with an installed burner.
The.
The general practice as long as the banner is meeting the current requirements and the use of the he has not changed such that the the heating or the flame profile needs to be changed.
It's typical with burn is trashy by our replacement parts to keep those burners in.
Operation.
And it's not unusual for better to operate for.
At least 10 15 years.
Book for supply and that as you mentioned in the and the body of the coal.
Planning for that.
Past replacements.
Is very important because actually as you get more equipment out there that actually becomes a very significant additional source of business the grossing point.
Incrementally as your installed base increases.
So for US we already targeting the right by the fourth change outs.
Generally driven by mission requirements at least in USA market.
And then.
Secondly, the.
The work that App.
Offer refining customers have to do.
To keep the burn equipment.
Operation that is going to be an increasing revenue stream as time goes on.
Okay, and I'd like to follow up with this we've been talking about the Chinese.
Issue and others. This.
Inability to be able to go over there and.
Continue work on it what about what about the same type of business the.
The water to the fire too in the in the United States.
It's a very large market as well because it's a smaller type of application to a lot more locations. So as I understand.
Could you speak to any progress that we've made.
In the us in that same type of market that we're trying to do in China.
We do have.
Some leads it in the awareness.
No App I'll focus my focus particularly has been.
Right to build a alleged and sustained ongoing business and that also means building up infrastructure and the partnerships and making the investments to do that.
And.
And yes, there is a significant.
Opportunity in the us.
But the.
The amount of boilers, which are being driven to lower emissions by local regulations.
And the forcefulness with which the Chinese government imposed those new regulations.
Justified so much of a bigger market opportunity in China. So now we've really focused on launching the boiler by the business.
In China.
The delays that we're seeing right now.
Our temporary we do expect to be able to get back out there soon we think that the.
For the ball has passed.
We do have to be selective we are being very judicious that cash you can chase everything so we truly are.
Really trying to chase the big opportunities.
But to do that in a way that we are.
Building, a sustainable business rather than.
Chasing one off opportunities as they come up but with.
We want to make sure that what we're building is is going to deliver for long term.
I was going to say as far as the as far as the priorities now because of.
Trying to kind of being slow down or being able to get over there would you say that the process heaters and the refinery areas is the number one choice or the number one opportunity for the company as far as timing goes because everybody on the call is concerned about timing.
And how long that's going to take.
With with the lack of revenue and so forth. That's obviously a concern.
So what do you think is the the priority as far as the chance for revenue and timing for the business.
I mean, the two or two or very close obviously with right today.
Process burners is getting the.
Top priority, we do have resources to cover both we have specialists mainly based in in Tulsa.
From a process that our industry focused on on that business.
And then you have.
Chinese experts and all of this is focusing on China's we have resources to cover them both.
In terms of what are we doing in the next few weeks.
Certainly the process Burns off.
At the top of our minds.
But I do think that come late Q3, we will be able to get back into China.
And our anticipate I'm anticipating that we will get going very quickly once we can get back into China.
And I.
And get this tight testing done, but we've never had a fine to boiler burner in China ready to test we.
We are to that point now.
Great, Okay, and can I just ask one more thing the comment that you made about.
Cash core and I think the.
The California boiler.
Company did you say that they that they kind of join hands to two market products to the.
So the flower business or the to a larger business, but by combining their efforts is that you were mentioning.
Yes.
Yes, it's.
It is not quite another one to sleep.
For them in detail. So ash core is a manufacturer all flair and thermal oxidizer equipment.
And they are our partner they do build product with clear sign core.
California boiler is a key installation company in California that sells combustion equipment.
And and also installs it.
So we as class I met with ask all formed our agreement with cash call, we met with California boiler and.
Total sales channels and installation in California, we also.
Relayed that we could provide clear sign core product through Asheville, and they then reached out to Asheville, and actually set up a hi, Jay a distribution on installation agreement for Ashcroft products into I believe accounted for the market, but I can guarantee I know will the details all of the agreement that was between.
Ashkelon, California water, but for us to benefit is we have a uninstalled that really lights Clearsign technology, we have a an OEM manufacturer that say.
Alliance partner of Clearsign building product with place on equipment in it.
It was over the coming together when you get a OEM partner.
Forming a eight.
Hey sales aligns.
With an installed in a key territory.
And the two at and work together to sell your product.
Right.
Okay. Thank you Jim I appreciate the info. Thank you.
Thanks, the questions Bob.
Our next question comes from George well, where our private investor.
Hi, Jim This is George will work from Veny capital first of all congratulations its just.
A very exciting company to follow in this space and I know that you guys have dealt with a lot of macro headwinds.
And it just incredible to see sort of interest coming from Exxon.
First question that I kind of wanted to get a read on from you guys is whether you can sort of give any color.
On.
The timeline for where you guys are looking towards progressing on this Exxon deal that you spoke.
Very confidently about.
The fact that this has been two years into making so what is what are you looking for the next steps that will be an optimal outcome for you guys.
Yes, yes, we are really to the library began the last phase.
All this project has been a a lot of work done in the past over a long time.
But now we ought to at this point.
We have a b a performance test of the equipment that is going to be.
In the tail end of the heat of the Oklahoma Summer. So end of Q3 time, if thats, what we got the audience today. So we still got to nail down the exact scheduled this it's going to be around that time frame.
And.
A delivery to the customer.
Okay.
Hopefully before we get slowed down by the Thanksgiving Christmas period.
That will allow the next on.
Relative to install on their schedule.
So I mean, it's a great validation of all the work that you visit when putting out.
Now given given this news I think that some of the earlier colors were sort of being a little borsch mischaracterizing as saying that you guys running out of cash I mean as guys that have been around for a long time that you guys.
Some people are very interested in seeing you guys sort of raise capital to make sure that you see is this opportunity.
You guys see this in the future.
To ramp up the Alex if the sort of.
Partnership with Exxon worse. According to how you guys expect that you.
It seems like you got to strike when the iron as hot is that something that you guys are considering.
Yes.
[music].
Oh, we had the question do you have addressed the cat other question off capital raises but obviously for the long term.
With Exxon, an all refineries, we do see the business.
Turning to profit.
And.
Yes.
Growing from there.
Yeah, absolutely I mean.
For the people that are kind of stuck with the story.
For a couple of years I think that.
It kind of make sense now that this opportunity is presented itself.
I was just wondering whether you guys see see some truth to that idea.
Given that you know now is sort of an inflection point for the business.
And you don't want to be.
Weighed down by a lack of capital.
Yes, I right now as as we said early we've got.
We've got capital to see us through well into next year. We've we've got this we've got this older. We've got some of the sources.
On the Horizon is right now we are we feel comfortable with where we're at today.
Okay.
Hi.
This is that we need.
Would you say that it's fair to say benefited not expect our capital raise for the rest of this year then in that context or do you think that theres. If the opportunity does look very attractive you guys would consider it on for the benefit of shareholders to make sure that you know you guys can move as quickly as possible.
But.
I think at this point, we've we've addressed the capital question.
A couple of times already asked over just leave it there without repeating ourselves sure I appreciate it Jim and I apologize for sort of taking into it obviously, we're very bullish on on clear signs and so just want to make sure.
Got the opportunities to me seed committees are you and I.
I guess the only other question I have is that are you concerned about sort of the you know given that there's been some media coverage about the fact that these markets are fairly sort of retail driven I know we've seen the value for quite some time, but it's kind of eye popping both in a pleasant way and the concerning way to see the stock up 200.
On a certain day on are you guys concerned about the market being overheated or that you know people didn't understand the value proposition here you know a month ago, but now maybe there is there they're competing a little too fast is equity managing that something that you guys are concerned about or is the unrelated to your general business strategy.
Yes, we are really focused on we've got a great products. We've got a really good markets. We've got it really good customers to have chosen a ballot as well.
We are really focused on is making this business successful.
Okay wonderful and on.
I guess the last question is obviously.
That you know.
It is theres theres a lot of promise here and if you could help US you know for those of us for than in traditional finance.
As how we start approaching towards a valuation because you know it's hard no matter, how exciting the opportunity to sort of debt some sort of.
Estimate of like discounted cash flows going into the future arm is there any sort of like that you can shed.
On that and I know that you've mentioned in sort of broad brush strokes that you are sort of looking towards the business turning cash flow positive in revenue positive, but is there sort of like more clarity that you can provide for everyone on the call.
On to turn we know the optimism that we've had over the technology and your expertise in the area towards trying to estimate what sort of revenue ramp up various now I'm not quite sure I'm sort of confused because I've looked at the financials and followed for a couple of years and you know I know that you guys are an exploratory stage now where you.
You are sort of developing those as relationship customers that result, the quarters and so it's going be a big shopping.
In a positive way for us when we start seeing that revenue flow, but it's also sort of very difficult to gauge once the numbers do up here given that we don't currently have numbers. What goes look like so can you give at least.
In your best estimate sort of some sort of ballpark of what you're looking for it you know everything goes according to plan with this excellent deal of what the sort of lower in upper bound czar.
Can you know the first contract that is fine.
Assuming that everything goes according to plan and that Exxon Cesar technology in the same way that you and I do.
Jim You want me to let me take this one.
Hoffman.
As you may or may not know not only in mind, the chairman of the company right.
Together and Investor group to take approximately a 20% position in Clearsign.
Got quite a bit of analysis.
What we thought.
Total addressable market wise, what the business model looks like.
And so obviously.
That is up to individual investors to figure out for themselves and I think what Jim pointed out earlier.
I mean.
Size of the addressable market.
Even if clearsign only gets a relative Smith percentage is still still very monstrous and and that's really that's that's what Incented My investor group to come in and.
Obviously, each individual investor has to has to do their own.
On homework, they make their own predictions and what they believe that can be.
And can be the end result of.
You know of market acceptance. So we're not in that and we're not in a position to make any adding to give any guidance, whether it's on revenues or profitability our margins.
Other than to say that we already technology provider.
That.
With that asset light business model.
We think has a very strong IP.
Portfolio to protect the profits that we we hope to have for long period of time, and so I think were within latent leaving about.
Absolutely and just just ask one last follow up and then I'll jump back in the queue, you know I'm a big believer in the size of the opportunity but is this sort of ship list that the road to Hell is paid with total addressable market numbers and so it's you know, there's there's always an opportunity for or.
Kim.
The thing that I'm curious about is are you guys to sort of say that given how confident you are in the business like what you see a far staff in capturing some of that Tam, but looks like.
Because it's impossible related to multiply can buy a percent that that someone kind of makes up and given that you guys are in the heat of it.
You are the best able to sort of approximate that so is there any sort of color that you can provide.
That clarifies the opportunity a bit more for people like me that are on the same site as you guys, but also want to sort of at least get a starting point for some other things that I can sort of imagine going forward for this business.
Well I think.
To somewhat to answer your question is I have.
And investing professionals are for over 30 years and many of my most successful positions.
About because I've I've, let people who are more expert at a.
Particular category.
Our science.
Yes, My homework for me in other words as it pertains to clear side. When you have an end to handle I like Exxon spending what kind of time and internal money that they did to take.
Our our Clearsign burner to this.
Staged.
Has got to communicate to most people I would think that these guys are some of the best if not the best combustion engineers in the world.
Okay.
I'll take this this next step with us.
I'd say, there's no guarantee that they will convert.
Burners to ours, but but they don't go into it thinking that there are only going to buy for that go into it thinking that that they'd like to buy a lot more and so thats really.
The assessment that anyone estimate is you know who's who's going to depend on to tell you whether the technology works you would depend on thus far we're going to tell you what we believe.
Or do you really want to listen to an independent entity like an excellent that is putting their their resources behind us their decision.
This concludes our question and answer session I would like to turn the conference back over to Jim dollar for any closing remarks.
Thank you operator, and thank you everyone for joining our call today.
This concludes the place on technologies first quarter Twentytwenty conference call. Thank you feel time.
The conference has now concluded. Thank you for attending todays presentation you may now disconnect.