ClearSign Technologies Corp (CLIR) 2017 Q3 法說會逐字稿

Good afternoon and welcome to the ClearSign Combustion Corporation third-quarter 2017 results conference call. (Operator Instructions). Please note this event is being recorded. I would now like to turn the conference over to Matthew Selinger with Three Part Advisors. Please go ahead.

Thank you, Chad. Greetings, everyone, and welcome to the ClearSign Combustion Corporation's third-quarter 2017 results conference call. During the course of this conference call the Company may make forward-looking statements -- excuse me -- will make forward-looking statements. We caution you that any statement that is not a statement of historical fact is a forward-looking statement. This includes remarks about the Company's projections, expectations, plans, beliefs and prospects.

These statements are based on judgments and analysis as of the date of this conference call and are subject to numerous important risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.

The risks and uncertainties associated with the forward-looking statements made in this conference call include, but are not limited to: whether field testing and sales of ClearSign's products will be successfully completed; whether ClearSign will be successful in expanding the market for its products; and other risks that are described in ClearSign's public periodic filings with the SEC, including the discussion in the risk factors of a 2016 annual report on Form 10-K.

Investors or potential investors should review the risks. ClearSign assumes no responsibility to update these forward-looking statements to reflect future events or actual outcomes and does not intend to do so.

On the call with me today are Steve Pirnat, ClearSign's Chairman and Chief Executive Officer, and Brian Fike, ClearSign's Chief Financial Officer. So with that I'm going to turn the call now over to Brian Fike. Brian?

Thank you, Matt, and thank you to everyone joining us here this afternoon. Before I turn the call over to Steve, I want to review our results for the quarter as they are being reported on our Form 10-Q.

For the quarter we incurred a loss of $2.5 million compared to a loss of $3.8 million for the same period of 2016. And a loss of $7.1 million for the nine months ending September 30, 2017 compared to the net loss of $8.9 million in the same period of 2016.

Our cash reserves were about $3.5 million at the end of the quarter. Our current sales backlog is approximately $850,000 which consists largely of previously reported flare projects and a refinery project. And with that I will turn the remainder of the call over to Steve.

Thank you, Brian, for that financial update. And thank you and welcome to the participants on today's call. We are pleased to have this opportunity to update our shareholders on events that have occurred since our last call and I'm happy to provide insight into the importance to ClearSign and our long-term shareholder value.

I would also like to update you on topics discussed during our last call. Now let me go over some of the recent developments that we have announced and discuss what they mean to ClearSign.

We are extremely pleased to have successfully completed a critical order from a super major oil company for a series of tests to demonstrate our Duplex technology in our research lab in Seattle. These tests were designated to simulate a series of conditions in our laboratory that will test our Duplex technology's wide range of capabilities with respect to operational performance, emissions, fuel and safety beyond what can normally be demonstrated in an actual refinery furnace.

These tests are a prerequisite to installing our Duplex technology in the customer's actual refinery. And, if successful, we expect will lead to further deployment of our Duplex technology more broadly throughout the super major oil company's vast refinery operations.

The exciting aspects of these tests is that the super major oil company chose to pursue our technology after we were invited to present our Duplex technology at the customer's internal environmental conference where they evaluated ClearSign technology along with combustion equipment and other environmental solutions from a wide variety of suppliers.

Further, they reviewed our actual field performance in a refinery in California and reviewed detailed case study information of this installation provided by ClearSign at the American Flame Research Conference. The fact that they were willing to invest in the testing and evaluation of ClearSign technology for their organization reflects the seriousness of their intent and the compelling nature of our technology for them.

Of great significance, the South Coast Air Quality Management District's technical committee approved the funding of a ClearSign demonstration project in Southern California this September. ClearSign will be meeting with our Southern California refinery partner and South Coast Air Quality Management District to establish a project execution plan and a timeline for completion. That should happen in the next week or so.

Why is this important? Well, let us look at this on multiple levels. Here we have a regulator who has seen our technology at work and wants to fund an installation at an operation in their district. They see the value and advantages of the solution that our technology brings to the emission's problems in their district.

What's the benefit to ClearSign? First, another successful demonstration with a new customer who has the ability to deploy our technology throughout their operations. Second and probably more importantly, the District is considering BACT designation for ClearSign technology based on a successful outcome from this demonstration.

BACT stands for best available control technology and is the top designation issued by regulators for this type of technology. Thus operators would be compelled to use our technology based on this designation.

Joining us in this project will be PBF Refinery, formerly ExxonMobil Torrance. They will participate in the demonstration and propose funding and provide us with a strong partner.

We believe other Southern California refineries will also want to engage in this process at some point. More recently we have seen a renewed interest from Tesoro, for example, to join us in this process, as well as other refineries in Southern California.

Beyond Southern California we have had keen interest from the San Joaquin Valley Air Quality Management District, who has scheduled approval of our Duplex as BACT for OTSGs, that's Once Through Steam Generators, in November. This approval was previously expected to occur in September but has been delayed. And frankly, as of this morning, we feel the approval will probably be pushed into early in the first quarter of 2018, just based on my conversation, again, earlier this morning.

This would be -- this would help facilitate multiple OTSG orders from major enhanced oil recovery operators throughout California. Further, California regulators have visited ClearSign refineries and enclosed flare sites for evaluation of additional BACT designation for our technology in these applications.

This regulatory interest could drive increased sales of our Duplex technology to additional refineries and drive expanded sales of our unique enclosed ground flare technology currently in operation in Central California.

Of course, continued progress within the refinery and enclosed ground flare space provides interest and incentive for potential licensing agreements and selective discussions with key channel partners are in process. This interest by US environmental regulators in ClearSign technology has even created interest among clients in places like China, which is dealing with a significant air-quality issue.

Now let me update you more specifically on the status of certain projects discussed during our last call.

The Delek refinery test of our Duplex Plug & Play burner, which had been delayed for several months, has now been successfully completed for the first of six burners ordered by Delek. Further, Delek has just decided to increase the output of their process heater and have requested that we increase the heat release of the ClearSign burners to 5 million BTUs per hour from the original 2.6 million BTU an hour, almost doubling the original requirement.

The unique design of the Duplex Plug & Play burner will allow us to install these higher output burners in essentially the same footprint as the original burners. Thus, Delek can get higher output without major modifications of their heater. We again are focused on reducing flame impingement problems at Delek, not just reducing emissions.

The successful demonstration of our ability to eliminate flame impingement and improve furnace throughput could provide a tremendous opportunity at Delek and other refineries for debottlenecking key assets like coker heaters and crude furnaces.

Regarding the enclosed ground flare retrofit product underway, we have successfully retrofitted three of the five ground flares and are working with the client to schedule the completion of the final two.

During the last call we were told by the same customer we would need multiple additional flaring units and were optimistic that we would see future business from this client. However, they have subsequently reduced their flaring requirements and thus we have not been able to identify specific needs or a timeframe for these additional flares.

Nonetheless, this client is very satisfied with ClearSign technology and has been -- and we have been requested by the same enhanced oil recovery customer to provide a proposal to retrofit several of their Once Through Steam Generators based on our ability to reduce NOx and eliminate the need for FTR, thus saving them considerable operating and fuel costs. We expect to receive a contract from this OTSG retrofit shortly.

Beyond the projects discussed, our pipeline of proposals and projects interest among customers continues to grow for both refineries, Once Through Steam Generators and boiler burners. We have seen increased customer [inquiries] in Europe, the United States and China. China in particular has severe air pollution problems for which we believe ClearSign technology could provide an ideal solution.

We are currently retrofitting a large water tube boiler for a major state owned district heating group. This unit is expected to go up and operate within the next 60 days. The ClearSign technical team has been in China for several weeks working alongside our local service partner.

If we are successful in improving the NOx emissions we have been told by this client that they plan to retrofit numerous additional boilers. This will give ClearSign a major installation in the prestigious Chinese -- with a prestigious Chinese customer and a state-owned enterprise.

As discussed, we are working on a significant retrofit project for Duplex on a large water tube boiler with a major district heating supplier in China. This demonstration project is estimated to be completed within the next 60 days representing a huge opportunity for us into the China market.

This particular customer has several thousand boilers that would be potential candidates for retrofit. And success at this state-owned enterprise would provide a great reference for broader deployment of our technology throughout the district heating market within China.

If successful this district heating client has expressed a keen interest in partnering with ClearSign to promote ClearSign technology within China. This opportunity has led to a broader interest by strategic investors among several potential Chinese partners.

We continue to make solid progress on our smaller higher volume fire tube boiler burner. We are striving to achieve the same performance with this burner as we have already achieved on our larger Once Through Steam Generators. That is sub 5 ppm NOx levels at 3% oxygen without FGR. We have several boiler OEMs already to license this technology in Europe, US and China once we achieve this performance.

Testing within our laboratory continues and we are very confident that we'll be able to achieve sub 10 ppm NOx levels that 3% oxygen shortly. This is below the normal standard in most environmental requirements for both China and Europe. While the current performance will meet most requirements in China and Europe, we still believe we can achieve our state-of-the-art stretch goal of 5 ppm NOx at 3% levels.

We are pleased to announce that Stephen M. Sock has joined ClearSign as Senior Vice President of Business Development. Steve has a long time -- is a longtime industrial veteran with extensive experience in the energy and combustion space. Steve spent 30 years in increasing responsibility -- responsible positions with Amec Foster Wheeler. Steve has taken over for Andy Lee who was retired in September.

Andrew has agreed to provide consulting services to the Company to facilitate a smooth transition between himself and Steve Sock. I would like to thank Andy for his years of service and continued contribution to ClearSign.

I'm very excited about the many opportunities among key customers, regulators, potential strategic partners like China. Nevertheless, I remain as impatient as ever that these things move faster. It is important to note that some of the delays that we have experienced have been the result of our customer clients' needs and schedules and ClearSign has consistently been able to adapt to meet these needs. A perfect example would probably be Delek.

This has enabled us to not only promote our technology, but also to establish strong relationships and advocacy among our customers. With this I'd like to now pass it back to the operator for questions. Thank you.

(Operator Instructions). Lou Basenese, Disruptive Tech Research.

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

Good point. The heating season starts in a week or so. Of course this customer, as I had suggested, has got literally hundreds, thousands of boilers. So this particular boiler that's out of service while we retrofit it is not critical to the supply of district heat to this particular city.

That said, the 60 days refers to not only the, frankly, few weeks we think it will take to get the unit up and running, but the client himself would like to see it -- which is pretty reasonable -- run for at least a month before we declare victory.

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

Well, we are pretty far along. The current framework by which we've had direct conversations with a couple folks is that they would make an investment in our Hong Kong holding company, which would hold the IP for China. And that Hong Kong holding company would eventually license technology to smaller entities in China called WFOEs, wholly foreign-owned entities, that would be set up around joint ventures and align around field of use.

For example, you would have a joint venture or a WFOE that would handle district heating. You might have a joint venture or a WFOE that would handle the refinery sector. And in each of those joint venture sectors, like district heating, we have specific interest by; as I alluded to, this district heating company to join us in that joint venture helping facilitate the sale of the technology.

With respect to, again, the types of people we are talking to, they are large multinational conglomerates who are essentially headquartered in China. Most of these companies are a combination of an end-user; they own everything from power plants to steel mills, to investment bank and insurance companies. So they are fairly sophisticated investors.

What's encouraging is they've looked at ClearSign as an ideal investment for them in China and they looked at our technology and have vetted our commercial success in a way that they feel confident that we can bring a solution to the air quality problems in China and they would like to provide incentive through investment.

And beyond the incentive from cash investments, the types of companies we're talking to have tremendous market clout and an ability to accelerate the adoption rate that we would see in China, which I'm sure we would all appreciate that great technology is fantastic, but accelerating our entrance into the market is also critical to the success of ClearSign.

And what we find in China, which is somewhat different than the United States, is that the regulators there are leaning forward with respect to bringing in new technology and encouraging, with a lot of specific leverage, the end-users to convert to lower emissions solutions.

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

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

Understood. And then maybe just -- I didn't know if I caught it in the prepared remarks. The testing with the super major, on the last call you said it would take about three weeks. Has that testing been completed already? And then if so what are the next steps?

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

Okay. Just one or two quick more questions for clarity. On Delek, what is the impact of them going from 2.6 million BTUs an hour to 5 million BTUs an hour on each burner have on the ASPs? Is it linear that it would be twice the original expected revenue from that agreement?

It won't be because, again, this is kind of -- this first order is more of a collaboration where we really, really, really want to have an installation with six of our burners operating in a refinery near the Houston area where we can invite people to see it.

But the thing that let's say behind the scenes is the nature of our design allows us to essentially take the original 2.5 million BTU an hour design and make slight modifications to increase its performance to 5 million, which in itself is extraordinary. It's extraordinary because, forgetting about the price because say in a more normalized commercial relationship we'd probably charge more for 5 million -- not twice as much but let's say 30% more for 5 million than 2.5 million.

But the point is that the cost to us to modify the burner to the higher heat release is not twice as much. And more importantly for Delek is the fact that these burners will fit in the original opening for the current burners which are supplied by another company, and allow us to take an installation that was an arguably 2.5 million BTU an hour installation and bring it up to 5 million without making major modifications in the heater.

Cutting big holes in the floor and having to move burners around -- and the cost of that could be multiples of the cost of the burners in some case.

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

No, that backlog does not include quite that many units, but some of it is just also the fact that, for instance, on the flares, we've actually collected a decent portion of it upfront. So what's still owing on them isn't as much as the sales total.

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

Yes, we tend to not show unit sale prices if that's what you're trying to get (multiple speakers).

No, it seems light compared to how many -- by my count, you've got two flares -- these are all announced -- additional unit at Aera, a water tube boiler at Tricor, another new process heater at a refinery in Kern County, the 5 more burners and Delek, the unit in China, and then some revenue associated with the test at the super major. So just -- the backlog number came up light in my -- just trying to reconcile that.

Well, you're right. The five additional -- the change order for the five burners at Delek isn't in the backlog because we are waiting for them to send us a modification to the purchase order reflecting the slight change in price. So that's not in the backlog, Lou.

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

Okay. All right, thanks, guys. I'll jump back in the queue.

Jim McIlree, Chardan Capital.

Could you tell us what's the process for the South Coast Air Quality Management District and San Joaquin Valley as well? Do you have to do anything to get that process complete or is it all in their hands and if it's all (multiple speakers)? Either way, what do you have to do and what do they have to do?

Let's just start with the easier one which is San Joaquin Air Quality Management District. We have already done what we had to do. They went to see an installation at one of the refineries in San Joaquin County, which has been up and running. And they also visited a site where we just alluded to we had these flares operating. And they satisfied themselves that our technology has been, as they say, reduced to practice. Meaning it actually works and it works in the real world.

And so, they have to have a series of hearings. I guess they draft a new resolution calling for us to be BACT. They circulate it among their members. They wait for community feedback and then, after that process is completed, the designation is given. Just being quite candid, this was originally going to take place in September and we're now told it's pushed into January/February of 2018.

So, there is a process they follow, they are committed to doing it. They continue to reassure us they are interested in improving air quality and that our technology is uppermost in their mind. But in terms of the timeline, it's up to them to follow this process. as I described. There's nothing for us to do and there's nothing we can do to make it go faster. (Multiple speakers) if there was I would be doing it.

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

Well, it will begin -- Q1 is -- let's say it's a three-month period, it will begin with them issuing a draft resolution and getting it out to their members. And the reason I say Q1, they are still saying it's going to -- bluntly they're still saying that they'll get that out in November.

But candidly there's Thanksgiving and there's Christmas, and I'm not optimistic since -- again, I was told it was going to happen in September. And for them to say well, it will happen in November; I just don't see it happening in November. I think it's going to happen January, February, March of next year.

Yes, I get it. I agree with you. It makes much more sense for your timeline than now. But you are absolutely right on the holidays and all that, so --.

I would say this though, Jim, the clients we have in the San Joaquin Valley are aware of this process. They talk to regulators. They know that this designation in the queue and I'd say there's no such thing as inevitable, but inevitable.

So, I think the behavior we are seeing and the interest we are seeing from people in the Bakersfield area is consistent with people who expect to see us get that designation and who have increased their interest in looking at our technology.

That's one of the reasons that our flare customer has come back to us and said, look, we'd also like to try your technology on our Once Through Steam Generators. We realize that the savings of FGR, the fuel savings we get from Duplex versus our current technology gives us an economic advantage. But we want to future proof ourselves a little bit. If we can get a technology that can give us arguably sub 5 ppm we might as well put that in next.

And the South Coast District?

With South Coast -- and there's a meeting scheduled I think actually within the next two days with South Coast and the refinery and ourselves. With South Coast there's things to do. We have to get with the refinery, find out when they can take the selected asset out of service. There's some construction work that has to be done.

So you are talking about a -- let's just say a several month period to install the technology and schedule the work in a convenient way to the refinery. And then there will be some period of time, and that hasn't been specifically determined, where I'm sure South Coast will want to gather data on this installation and prove to themselves that it works the way it's been represented. And then upon the successful operation of the unit they will designate it BACT.

Now just to put some clarity on this, the boiler that we are working with at South Coast is, from a combustion perspective, essentially the same as the Once Through Steam Generators that we have operating in San Joaquin Valley. And the level of emissions that we are reporting is somewhat higher than what we've already been able to achieve.

So, we have a pretty high confidence level that we will be successful in this demonstration. But again, the regulators have to see it, they have to have access to the site, they have to be able to verify the measurements. There's a process they go through and -- Jim, I have always been unsuccessful in picking a timeline when it involves refiners that are busy and regulators, but I would say it's certainly more like six months out than it is 60 days out.

Yes, okay. Thanks. We've had this conversation before. It's incredibly difficult to make these guys -- to make larger organizations move. They don't move at your schedule. It's always frustrating and I appreciate that, so --.

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

Okay.

I mean these guys are almost waiting for you at the airplane saying if you can clean up my air come see me.

Robert Kecseg, Las Colinas Capital Management.

The thing that's most outlying here is the Aera orders since they are the longest user. I didn't hear any comment about the latest one. I think it was the third OTSG. Could you talk us through (multiple speakers)?

Yeah, the third unit is -- we have got guys there now and that's been I'd say a frustrating experience without getting too far into it. But we went out there, were asked to retrofit this unit. As I mentioned in a previous call, the intention on their part was that if we could handle wellhead flare gas on this unit, that they had other opportunities for us that they were going to strongly consider, I guess is the term.

The first time we were out there they had a tube leak in their Once Through Steam Generator and they had to take the thing out of service and repair leaking tubes.

The second time we went back out there they had a problem with their PLC that controls the combustion process. It was actually a device that they purchased and they needed to replace some sensors.

And the third time we were out there, which is now, they modified the inside of the Once Through Generator to take out some ducting that is used to guide the air in the forced draft burner they have. And they found that they really need to put that back to make the thing work properly. So they are in the process of reinstalling stuff they just took out.

And we have asked them, because we've had people there -- not [zinc] people -- not ClearSign people, but some of our subcontractors that have been at the site. And they haven't been able to give us a specific date as to when they are going to reinstall the equipment. So we really don't know when we're going to be done there. And when I say that I mean it's a few weeks, it's not years. But bluntly, we were hoping to have this thing resolved three months ago.

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

Yes, that was with a -- we didn't disclose at the time who the client was, but that was with Synovus. And Synovus paid us to do the engineering study and then Synovus made a fairly large acquisition I think of another midstream company. I think they bought a lot of assets from Phillips. And they've had a complete change in view on their drilling and exploration protocols. And so far we have heard nothing that leads us to believe that they are going to move forward with anything specific in the foreseeable future.

(Multiple speakers).

Not that there won't be other opportunities with these Once Through Steam Generators, this enhanced oil recovery in Western Canada, but not with this customer. And understanding that at the time they were talking about multiple units, they had actually paid us to do a study and we were successful in doing it. They had a need that was urgent and they don't have the same need.

I was going to say since most of us on the call, thanks to the way you presented, are familiar with the various prospects and the stages and how they -- this seems to string out for a long time in each and every case.

So I was wondering maybe give people an idea if there's been this much exposure in these three verticals, the OTSG, the Delek type of heater and the flares, could you give us an idea, based on this much exposure through the industries, do we have a larger pile of prospects today than say 6 to 12 months ago? I mean is it a noticeable larger prospect list? If I was in sales and I was coming in there to help them sell, do I have that many more people to call on and work on?

The answer is yes, we do. Again, the cycle time from inquiry to order is fairly long, as we all know. But not only do we have more interest in -- domestically, and just pick an example, you take a super major. They have enough refinery needs to keep us busy for a pretty long time if we are successful at demonstrating the technology.

But I think more importantly we've gotten inquiries and interest -- and some of this is because of press releases on the success at places like South Coast Air Quality Management. We have gotten interest from operators in Europe and actually from operators in the Middle East. And again as I mentioned, very specifically very strong interest in China.

And I guess it's fairly reasonable to understand that with the air pollution problems that are notoriously affecting China, their interest is genuine and much more urgent than others. So we are perfectly willing to redeploy whatever resource is necessary to accommodate that. And are very interested in strategic investors that are talking to us about partnerships in both cash and promoting the technology.

But as frustrating as it is, and Aera is a perfect example, we just have to follow the path that they give us. We continue to be optimistic that we will resolve these issues with this particular project that we talked about and we'll be successful. And then eventually that will result in a greater volume of retrofit opportunities.

And concurrent with that, as I've already said, the fact that we expect to see a BACT designation in San Joaquin Valley is also helpful because we think that will motivate some of the other enhanced oil recovery customers in the area to consider our technology. Again, I've probably said this on a few calls, just no one is less patients than I am and it's kind of frustrating.

That said, we've developed a technology that can revolutionize the ability to reduce emissions and do it in a cost-effective and short timeframe. The time it takes to retrofit our technology into a process heater is weeks. The delay isn't how long does it take to get our stuff in; it's how long does it take to get the customer to get a quote, make a decision and give us access to the asset.

And kind of along those lines, one more thing. I think from our point of view, or at least my point of view, it was looked at as you're going to reduce these emissions. And it's that type of a product that drastically reduces the emissions.

But from the business point of view, all these prospects and these big operations that they are running, it would seem to me that from their point of view they are much more interested in cost savings, less maintenance, so the impingement, the burner interference, the less fuel used. It seems like that would be the driver.

Is that kind of the way it's being presented to these companies now -- as opposed to just reducing NOx and CO? I'm kind of differentiating between the two of them.

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

Right. And on that topic, since I was reading a little bit more about the delayed coker heaters and the things, like you had mentioned, that it's more of a mission-critical component. Could we imagine that they would also want to change the burner in those? It would be larger like the one that was installed in?

In other words, because the frame is shorter and all that, less interference, do you think that would be another advantage for them to be able to use a larger BTU installation?

That's actually very good insight. That's exactly why this is exciting to them, because if you have a traditional burner and you significantly increase the heat release in the same heater, the flame gets too long and too big to fit in.

Because our flame is short and compact you can increase the heat and not have the problem. So I guess that's a long yes. It just anecdotally so happens that our new Head of Business Development, Steve Sock, worked for Foster Wheeler Amec for 30 years and they're one of the largest suppliers of delayed cokers in the world.

Right. Okay, and (multiple speakers).

We know people.

Okay. Is there any way you can kind of quantify the prospects -- in my earlier question about an increased number of prospects out there just to give us an idea. Is it 50% more, 30% more? Or can you give us some sort of general big picture thing on prospects today?

It's way more than 50% more, but I hesitate to pick such an arbitrary number. I guess the way we envision doing this is -- and maybe that's too much of a delay, but doing it when we get the booking. When we actually get somebody that says, okay, here's an order, it's in the backlog, how much is the backlog increase.

Because -- and this is why I am qualifying it. We have a lot of interest from people. I mean really people that say come see us, talk to us, send us a proposal. And a lot of it is just budget preparation for the following year. So -- and it's a good sign and maybe that's the thing to do. Maybe we should just, rather than track bookings, we ought to just track dollars quoted and use that as a metric.

But one of the problems with doing that when you are a startup like ours is it's difficult sometimes to segregate dollars quoted for clients that really intend to buy something as opposed to dollars quoted to somebody who's just trying to put together a budget or doing some exploratory work.

And a case in point is it's a real project. We have an inquiry from a refinery in frankly Israel. And they started out saying we need to retrofit three to four heaters, but eventually we have probably 100 burners we need. And we frankly got pretty excited and started running around looking at that. And the people we were talking to were third-party consultants.

When you look behind the curtain, this guy was getting paid to do a study for a long-term capital expenditure analysis. But I can't sit down today and say well, if I do everything they want, sometime in the next two months I'm going to get an order for 10 burners.

Now we haven't given up on that and we have a lot of opportunities like that and they eventually materialize. But we are a little bit guarded about projecting quotation numbers because they could be -- they could be deceptive and/or misrepresent what's really going on.

And then one other thing -- on the Torrance refiring refinery, excuse my ignorance, but is that already an operating facility or are they restarting that facility?

Yeah. As I said in the prepared remarks, it's the former ExxonMobil Torrance refinery. And I know (multiple speakers).

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

I don't know about that -- maybe. But there was a whole discussion on that at the South Coast Air Quality Management District meeting that's on a video link where they actually talk specifically about that refiner. And I think -- you might be right that they had an accident, but that's not something I'm necessarily familiar with.

I know they are keenly interested in reducing their NOx emissions and they see us as a real opportunity for them. And frankly, as a result of their interest, we have reengaged with Tesoro and other refiners in Southern California who are interested in pursuing this.

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

Walter Schenker, MAZ Partners.

I noticed that the Company filed the -- an S1 and is, again, my editorializing, finally hopefully raising the capital it needs to get it where it needs to go. This financing with the banker on the cover, hopefully can you give us just some sense as to what you think your timing may be? And is the capital that you can raise limited in number of shares due to some -- 20% of the outstanding or something?

Well, we filed an S1 --.

Yes.

So there's no -- not that I'm aware of, there's no limit on the amount we can raise.

Okay.

And as far as the timing goes, we haven't quite determined the timing. It would certainly be sooner rather than later as a byproduct of our current balance sheet. But we also have a backlog and some other things -- actual projects pending. So, we are going to consider all of that before we do anything.

Okay, so the amount you will raise has not yet been determined and will be a function of where the stock is and how you perceive your capital needs at the time you actually do the offering?

Correct. In a way with housekeeping we are getting it out there so we are ready to go when we need to do that.

Okay. Well, then as an editorial comment hopefully you will raise more, not less so that the issue which continues to weigh on the company of the cash available on the balance sheet will be removed for some fairly long period of time hopefully. As a shareholder I would like to see that question be taken away for a while. Maybe you would to as the guy running the Company.

I think there's -- I'd say that's probably yes.

David Brown, Private Investor.

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

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

Thank you. Another question quickly, you had mentioned on the call -- this call that the sub 5 ppm 3% oxygen testing of trying to get the smaller high-volume fire tube boiler licensing hopefully, is you are getting there and you said the word shortly. Could you give me a little more color on what shortly means?

Yes, not to be -- it's research, so the thing about research is if we knew what day we'd publish it. But shortly I'm saying it's certainly inside a year. And I was out in the lab this afternoon and guys are running tests. I will provide a little more color commentary on that.

For example, we could achieve a significant reduced level of NOx in the order of 5 ppm with 3% oxygen if we are selective about the geometry of the fire tube boilers we deal with. Meaning some of the older boilers had very big fire boxes, which is a little bit more information than you want. And they run cooler than newer equipment which was made to be more cost-effective and was -- because it was made smaller the heat intensity inside them is higher.

So we set a standard for us to do the vast majority of current modern fire tube boilers at an extremely low NOx level with a very high efficiency at 3%. Right now we have the product that we are testing is capable of operating at single-digit NOx at 3% oxygen in a large portion of the fire tube boilers.

And that would make it acceptable to regulators in places like Europe, but it's not so dramatically different than other products that exist that it's going to give us the kind of command position to negotiate very broad attractive licensing agreements.

So we are trying to not rush something to market until we think we've really exhausted options with respect to improvements. And our guys as of -- and I will tell you it was just before lunch -- are still pretty excited that they can continue to make improvements in the performance of this thing. And if they can do it inside a year I think it is well worth waiting.

That said, at some point we will launch a product into the market and license it to people who are interested. And again, there are people who are interested in some form of the device we have in its current form.

So, I guess we continue to be optimistic that we're going to get where we want to be and that we have something right now that's marketable. Although it's not the kind of breakthrough technology that the other ClearSign products are.

Great. Just as an aside, I saw a pop-up ad when I was looking at comments on my article on seeking Alpha from one of your competitors from Japan, Miura Boilers, and I clicked on the ad and they are saying that their best performance, and it was advertised as a green product, a great breakthrough kind of product that 9 parts per million at 3% NOx.

So I'm sure -- I remember you saying you wanted to hit a home run on this one and not just be a little bit better than the competition. So I think that's what I'm hearing.

Yes, use that as an exact point. They can do nine and right now, without any hard work, we could probably do seven at 3%. But I don't think we want to launch a product over 2 ppm. Let's hit a home run and have a line around the door trying to license it.

Okay, that's exactly what I thought I heard you say. I am reading between the lines. Also reading between the lines a little bit on China, I'm hearing myself that what you're saying is basically China can't wait. And unfortunately with some of our North American partners, they've kind of kicked the can down the road. We've had some frustrations with Synovus, Tesoro, Aera, etc.

Is that accurate, that basically once this testing looks good to them -- and you're even saying now one month instead of three months that you said the last call -- we are going to see some business -- we hope at least and of course.

Yes, just to be absolutely precise, we are -- and I get text messages from our team in China every morning. And as of this morning we are putting the final touches on this particular boiler that we've retrofitted.

And assuming it meets the emissions that we anticipate, we've been told by this particular state-owned enterprise, who has thousands of boilers, that they want to retrofit their inventory of boilers. And we've never disclosed, for competitive reasons, who this customer is. But I can tell you the President of China, when he looks out his window, sees the air in the city and he'd like to be able to see the ground.

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

Yeah, I mean that's interesting. You might have better contacts than I do. We are referring to it internally as super Duplex.

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

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

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

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