ClearSign Technologies Corp (CLIR) 2018 Q2 法說會逐字稿

Good afternoon, and welcome to the ClearSign Combustion Corporation Second Quarter 2018 Conference Call. (Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to Lou Basenese, Vice President of Corporate Communications. Please go ahead.

Thank you, operator, and welcome everyone to the ClearSign Combustion Corporation Second Quarter 2018 Results Conference Call.

During this conference call, the company will make forward-looking statements. We caution you that any statement that is not a statement of historical fact is a forward-looking statement. This includes remarks about the company's projections, expectations, plans, beliefs and prospects. These statements are based on judgments and analysis as of the date of this conference call and are subject to numerous important risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. The risks and uncertainties associated with the forward-looking statements made in this conference call include, but are not limited to, whether field testing and sales of ClearSign's products will be successfully completed, whether ClearSign will be successful in expanding the market for its products, and other risks that are described in ClearSign's public periodic filings with the SEC, including the discussion in the risk factor section of the 2017 annual report on Form 10-K. Investors or potential investors should read these risks. ClearSign assumes no responsibility to update these forward-looking statements to reflect future events or actual outcomes and does not intend to do so. On the call with me today are Steve Pirnat, ClearSign's Chairman and Chief Executive Officer; Brian Fike, ClearSign's Chief Financial Officer; and Steve Sock, Senior Vice President of Business Development.

With that, now I would like to turn the call over to Brian Fike. Please go ahead, Brian.

Thank you, Lou, and thank you to everyone who has joined us on this call today. Before I turn the main portion of the call over to Steve, I will review our results for the second quarter of 2018 as they've been reported on our Form 10-Q. For the quarter, we incurred a loss of $2.4 million compared to a loss of $2.2 million for the same period in 2017 and a loss of $4.7 million for the 6 months ended June 30, 2018, compared to a net loss of $4.6 million in the same period of 2017. Shares outstanding at June 30 were 23,361,353.

As most of you know, we completed a stock offering on July 20, wherein we sold 5,213,543 shares at $2.25 each, raising a net of approximately $11.6 million. Our cash resources were about $8.3 million at the end of the quarter, which was supplemented after the end of the quarter, by the net proceeds of the stock offerings adding the extra $11.6 million. With a combination of those 2 items of cash on hand, we have working capital available to us as of our filing today that carries us well into 2020, assuming no revenues or changes in expenditures.

And with that, I would like to turn the call over to our Chief Executive Officer, Steve Pirnat. Please go ahead, Steve.

Thank you, Brian, for that financial update. And I would like to thank and welcome participants on today's call. Today, we intend to review our progress during the second quarter of 2018 as well as share insight into future activities for 2018 and beyond. First, I want to add to Brian's comments regarding our recent offering via a private placement to clirSPV, which is a single-purpose vehicle capitalized by a small group of experienced high net worth and single-family office investors, with the sole purpose to acquire a large equity position in ClearSign and benefit from the stock's long-term appreciation potential.

We are pleased to have been approached unsolicited by this group for consideration and strategic investment. They spent months completing their diligence. During that time, they made multiple visits -- site visits and spoke with a number of combustion and environmental regulator experts. In the end, they came to the same conclusion that we reached. ClearSign's technology and intellectual property are capable of touching billions of dollars in total addressable market. We are thankful for their support, and we believe the capital they provide will allow us to execute on the company's growth plan without the distraction of future capital raises. As part of the transaction, we also strengthened our Board of Directors with the addition of Mr. Rob Hoffman.

Rob comes to ClearSign with more than 30 years of relevant capital markets experience and expertise. He has served as managing director, portfolio manager, state investment council chairman, assistant state treasurer, merger and acquisitions analysis, and throughout his entire career, a fundamental investor.

We are fortunate to have such an experienced individual join our board, and I look forward to working with him to capitalize on the tremendous market opportunities in front of ClearSign.

Speaking of which, we all know that emissions control is a massive, urgent and global need. We remain convinced that ClearSign is uniquely positioned to meet the needs of our target markets, thanks to our technology that can provide improved energy and operational efficiencies, while dramatically reducing emissions.

On our last call, we shared 3 key initiatives that focused on -- and focusing on, which I would like to remind you of today. The first is the accelerated penetration into our existing markets where we've already demonstrated best-in-class emission-control performance with our patented Duplex technology. These markets include refinery, process heaters, commercial and industrial boilers, Once Through Steam Generators, and Enclosed Ground Flares. The second is expanding into new international markets, including China as well as Europe and the Middle East. The third is continually investing in technical developments to protect and enhance the company's competitive advantage as well as enable expansion into new markets.

During the second quarter, I'm happy to report that we continued to make progress in all 3 fronts, which I would like to review at this time. As we recently announced, we entered into active negotiations with a second unnamed super major oil and gas company. ClearSign is actively working with the super major to identify equipment and an initial installation at one of its many refinery locations. This comes on the heels of the ExxonMobil completing a comprehensive set of qualification tests on the ClearSign Duplex Technology.

ClearSign is now ready to work with both super majors to identify equipment for initial paid installation at their refinery location in the coming months. While we are limited about what we can say because of confidentiality agreements, I want to make some important clarifications about our work with both super majors. An initial installation does not necessarily mean a single unit sale for ClearSign. Various locations and pieces of equipment under consideration contain multiple process heaters with multiple burners in each unit. What's more, both super majors have expressed interest in standardizing the Duplex technology into existing heaters within the United States and abroad where the Duplex platform is suitable for deployment at the successful installation and operation on the first unit. The revenue potential for the company here cannot be overstated.

Understandably, we are encouraged by the addition of a second super major in our pipeline, and believe it demonstrates the increased commercial interest from our global super majors, and serves as an important validation of Duplex technology. Once locations and installation schedules have been finalized, we will surely notify our shareholders on the progress. Also, in our refinery segment, we are working with our repeat customers in California to expand the capacity of our existing Plug & Play burner technology to achieve a greater share of the low emissions retrofit business. This is significant because it enables us to scale up Duplex Plug & Play technology without the costly capital outlay required to expand our existing test facility at our Seattle headquarters. Successful results, which we expect, will also enable us to accelerate penetration in the key refinery segments by offering a product suite of Duplex Plug & Play burners, which meet the majority of burner configurations in the field. In terms of overall commercial momentum, we do not believe our reported results accurately demonstrate the significant progress we've made in the last quarter. We realize that it's difficult -- the difficulties in predicting the timing of orders, and it's frustrating. But let me assure you that a lot of positive progress has been made. Last quarter, we shared that we were experiencing a meaningful uptick in new business opportunities in our established verticals. That momentum has continued into the second quarter.

At this time, I would like to turn the call over to Steve Sock, our Senior Vice President of Business Development to provide more details on this front. Steve?

Thank you, Steve, and thank you for the opportunity to provide an update on the encouraging progress we're witnessing in our commercial pipeline. Before I discuss the details of our pipeline, I want to talk about changes we've made to our sales team over the past year. I joined the company roughly 1 year ago. About the same time, we added Clarence Payet to cover Europe, and we also added Manny Menendez to cover China and Asia Pacific, including establishment of the necessary business units to facilitate transactions in those regions. The current business development team each have at least 25 years of relevant industry experience, and I'm convinced that these changes have significantly upgraded our direct sales ability, as demonstrated by the improvement in both the quantity and quality of our commercial pipeline.

As we shared in our quarterly press release, since December 2017, ClearSign's business development efforts have resulted in more than doubling of the commercial opportunities to approximately 70 active engagements, not including the Asia market. This represents a significant acceleration in the last 6 months, and is a direct result of the broadening market awareness and technical acceptance of our Duplex technology, especially with regard to the Plug & Play product.

It's important to clarify what we consider an active engagement. An active engagement includes specific client requests for technical and commercial information about our product in advance of making a purchase. As examples, this could include a formal request for proposal, a request for a budgetary quotation, a request for advanced engineering services or a technical evaluation of project feasibility, depending upon the customer's project execution process.

Most importantly, these engagements are for specific identified services where a need has been identified and our technology is being considered as the solution. It's also worthwhile to share the types of opportunities that comprise these engagements we've identified. These include: single burner boilers, steam generators, flares or process heaters that have repeat order potential; more complicated multi-burner process heaters, such as delayed poker heaters or Steam Methane Reformers that may have 50 or more burners per unit; client-wide multisite programs encompassing 30 or more units of varying sizes, types and burner counts. While the precise timing of orders is difficult to determine, we believe the sizable increase since the end of last year demonstrates we're making significant progress towards broad-based commercialization. And we remain optimistic about the prospect of converting these opportunities into meaningful revenue. In fact, multiple engagements are in the final stages of this process. So in summary, we're extremely encouraged by the continued opportunity and high probability of follow-on orders in our existing markets. I will be happy to answer any questions regarding our commercial pipeline during the Q&A session later in the call.

At this point, I would like to turn the call back over to our CEO, Steve Pirnat. Please go ahead, Steve.

Yes. Thank you, Steve. With those additional details, I'm hopeful shareholders now understand why the entire team of ClearSign is so optimistic about the potential for meaningful sales in our existing markets in the coming months ahead. As a reminder, we have 12 operating installations in our domestic market with existing customers. Our Duplex technology is proven and achieving best-in-class performance as expected. We're excited about the tangible follow-on and new order potential of these markets based on the requests in our pipeline. Customer interest is not going away; to the contrary, it keeps increasing.

Moving outside our existing markets, you recall over the second area of focus is expanding internationally. We remain focused on international opportunities that represent the fastest path to revenue for the company.

The most notable of such opportunities remains China. We continue to work with a large state-owned enterprise on the retrofit of a large district heating facility, which alone, if successful, would represent literally thousands of retrofit opportunities for us. To that end, our President of ClearSign Asia, Manny Menendez, is headed back to China in the coming weeks to finalize the next steps to satisfy the testing requirements before the beginning of the heating season this year. It is important to note the heating district projects represent one of several opportunities for ClearSign in China as well as relevant last quarter, we talked about the advances -- discussions we're having in refinery and petrochemical industries. What's more, potentially strategic investment partners like CITIC and others remain interested in helping us accelerate our development efforts in China. Beyond China, during the quarter, we experienced a notable uptick in the number of commercial discussions with blue-chip customers in other parts of Asia and Europe and in the Middle East, underscoring the long-term market opportunity and demand for our technology.

A final focus area is technology development. A recent key milestone during the quarter in our working development is a Pre-Engineered Fire Tube Boiler Burner. You'll recall this product has been in laboratory development stages for quite some time. Last quarter, we announced that we're able to achieve NOx emissions of less than 8 PPM, corrected for 3% oxygen concentration. This represents a notable improvement versus the previous profile 10 PPM at 5% NOx concentration -- oxygen concentration rather, and gave our team confidence that we could reach our stretch goal of 5 PPM NOx at 3% oxygen. I'm very pleased to report that we did indeed reach this stretch goal. This is a truly breakthrough emissions profile for the industry and represents $1 billion market opportunity worldwide for ClearSign. We believe, it allows ClearSign to meet the strictest existing and upcoming environmental regulations in the world, and we can do it with an incredibly -- incredible value proposition for the market. The cost to implement our technology in this vertical is a fraction of the cost of SCRs or competing technology. In addition, our technology can be retrofitted in a matter of days whereas competing technology can take several months to install. Based on the latest success, the final step is to move out of the lab into the field to demonstrate the performance of this unit. To that end, the company has progressed -- is in the process of securing a test site for the unit. At the same time, we engaged in multiple commercial discussions per our original plans for this vertical market to license the technology to a major global boiler manufacturer.

The latest success on the fire tube boiler underscores our commitment to advancing our technology through regular research and development investment. Our team continues to make technical advances, which could facilitate expansion into new end markets. At the appropriate time, we will provide more details on these expansion opportunities. Our ongoing commitment to research and development has led to 8 additional patents granted in the second quarter, bringing our total patent portfolio to 49 granted in the U.S., and 112 pending applications as of June 30, 2018.

Before the question-and-answer session, I'd like to provide an update on the regulatory front. We continue to work with South Coast Air Quality Management District to finalize a partner for the demonstration site in Southern California. We have several candidates interested in participating and believe we're close to making an announcement on this front shortly. As mentioned in previous calls, emission rules are being revisited in multiple jurisdictions in our core markets. The San Joaquin Valley Air Pollution Control District recently issued a draft of its proposed regulations. They call for lower emissions and for the potential to increase fees for noncompliance and eliminate the grandfathering of existing sites. While these regulations will go through an extensive review process before they are being finalized, lower emissions requirements would obviously favor our business, and our lower-cost technology over the competition.

I want to let the shareholders know that we are taking a proactive approach of regularly communicating and meeting with the regulatory agencies to ensure they have the most current operational data as they work towards finalizing these new regulations. We will continue to be engaged in the process and provide relevant updates as they become available.

In closing, I'd like to reiterate that ClearSign made significant progress towards broad-based commercialization of our Duplex technology during the quarter, as evidenced by the more than doubling of our business development pipeline. The increase clearly demonstrates a serious interest in our technology on the part of customers, including multiple super majors in our key markets. We're confident we will soon see this pipeline convert into meaningful revenues, and we remain laser focused on this objective.

At this time, I would like to turn the call over to the operator for questions.

(Operator Instructions) The first question comes from [David Brown], a private investor.

Congratulations on reaching the goal of 5 parts per million at 3% oxygen, that sounds very exciting.

Yes, thank you. I'll pass it onto the R&D guys, who did most of the work.

So if I am recalling correctly, in my middle-aged mind, I believe you at 1 conference call had said that once we reach 5 parts per million at 3% oxygen, a licensing deal would be -- I think your words were a slam dunk. So could you expand a little more on what the next steps are going to be? I think you mentioned putting it from the lab into the field, and you are in discussions with a major global boiler manufacturer. Am I remembering correctly your words?

You are remembering absolutely correctly. I think just to provide some color, the value of a 5 PPM NOx burner at 3% corrected oxygen stands on its own merits, I mean, it's attractive to just about everybody in the industry. I think before we sign on the dotted line with a license agreement, we have to see who would be the best partner for that. We have several candidates around the world, and I also think it would be prudent to get the burner beyond our laboratory testing and out into a couple of field installations. And we're actively looking at sites, one in the U.S. and actually one in China, to demonstrate the technology, again, in a real-life field installation.

Sounds very exciting. Second question quickly. As far as our international markets go, most notably China, I believe in the last conference call, you mentioned a couple of names like Sinopec and BASF as opportunities, besides the current unnamed customer. So kind of 2 parts to the question. Where are we in the progress with the unnamed customer? Is it not much progress because the heating season is just getting geared back up again in a couple of months? Or is there other progress that has been made? And secondly, our -- is there any color on work with BASF and Sinopec?

Well, I mean, the heating season will kick off again in, let's say, October, late September. So we're getting back in the queue with the customer in terms of coordinating some additional testing in the field. And that's what Manny Menendez is working on, and he's actually in China and will be for several weeks. But separately, -- separate to the district heating business, people like Sinopec, which is really a refinery, the national refinery, and people like BASF, which actually has a joint venture with Sinopec, are a chemical company. We have independent discussions going on with them for multiple heaters. And like what we go through in the U.S., they have to identify the asset, and identify what's an appropriate time to take the asset out of service and then put their own project team in place and decide what kind of results they want. In some cases, they clearly want emissions reductions, but in other cases, which is unique to our technology, they see opportunities to improve throughput through the asset by eliminating flame impingement. So there's a multifaceted decision-making process with the Sinopecs and the BASFs regarding when they select the asset and when they pull the trigger. But of course, as soon as we get a hard order and a shipment date, we will announce it because we're chomping at the bit to get that over the goal line.

And just, I'll jump back in the queue, just one quick follow-up question. Are there any -- in China, are there any concerns that -- or things that you've noted as a company that the so-called trade-war issues between the Trump administration and China are causing for the company?

It's funny to say this, but I'm not really concerned about it for ClearSign because we're planning on working with a state-owned enterprise, as a Chinese partner, and we have considerable interest, as I alluded to in the script, with people like CITIC who is a state-owned investment bank, who are actively supporting an investment in ClearSign Technology. I guess, the short version of it is they'd rather have clean air than a fight with the U.S.

(Operator Instructions) The next question comes from Robert Kecseg with Las Colinas Capital Management.

I have to say that I'm about as optimistic as what I see in the stock quote. When you use the word validation, it sounds like something really significant has happened. In the November press release with Exxon it says that it represents a critical step in the validation and rapid deployment of the technology in process heaters. That was 10 months ago. So these announcements that we have them committed to put one in, doesn't relate to any revenue. To me, revenue would be a validation, because than it's operating, you're able to book it, and what we have is, we have a lot of announcements, but we really don't have any revenue. The only revenue for the year was something that concluded the flare thing from a long time ago that got booked in this year. So we're now -- it's great that you've got the financing from another group, but it isn't -- it doesn't represent a validation of anything. And that's absolutely reflected in the scoreboard. The scoreboard is where the stock resides. So we just sold a lot of stock at this $2 and something price, and we just can't get revenue. Plug & Play has been around the productization for a while. And I believe, if I'm right, there is a one burner at Delek that has Plug & Play in it with 5 more burners waiting, but nobody seems to want to put it in. So tell me how we get real validation and get real revenue?

Well, there is Plug & Play burners at 2 other refineries in California who won't allow us to use their name. So -- but your point is well taken. I think the issue with an ExxonMobil in terms of validation is, it's typical of the somewhat contracted decision-making process that you deal with, with a super major. And by that I mean, it was a significant effort on our part to convince the top technical experts from ExxonMobil to pay for, which is unusual for them to pay for anything, a demonstration test where we really ran all the traps with a burner in our test lab, and it was based on their impression that the technology really held promise that they were willing to pick an absolute location in a refinery in Texas, install it in an actual refinery. And that process, it probably took us 6 or 8 months to get the nondisclosure agreement signed and another 6 or 8 months to get the testing done with Exxon, and we now have the scheduled date to do a walk down in their refinery, which I think is the end of August. And you're probably a few months out before they pick an actual location shutoff the heater, let it cool down, put the unit in. So I don't completely disagree -- of course, I can't disagree with what you're saying, more orders would be better. There's nobody here that isn't passionately trying to make that happen, but when you look at, what I call, the validation of the process of working with a super major, getting them to pick an installation, install the unit, and get it up and operating, which is the next logical step for Exxon. And the other super major, who we haven't been able to name, that's just the protracted nature of the way this thing works. The general rule of thumb with someone like an Exxon, if it has an operator for 2 years, it doesn't exist as far as they're concerned. And we've been able to shortcut that process because of the compelling nature of the technology. It's a cheap solution to a tremendous environmental problem, and to Exxon's credit, and you've probably seen these ads, whether you're watching a golf tournament or soccer game, where Exxon has been very aggressive at promoting their investment in new technology to improve air quality. And good for them.

I was going to say, if and when that occurs with them, it's certainly credible once it's installed and it's functioning. But is that going to be an installation of a Plug & Play unit? Or is it going to be some sort of a retrofit of an existing situation like we got tangled up with in China?

No, it's going to be a Plug & Play. We already know what asset they're talking about, and we already know what size burner they're talking about. So we're pretty far along on that, but it will be a replacement Plug & Play burner.

And if you had it to do over again on the Chinese thing, would it not have been better to have an installation of this unit rather than the retrofit? I mean, in the frustration and the length of time that was expended in that? I mean, it had to cost the company a lot of money for the length of time you were trying to retrofit.

Well, the specific district heating opportunity that took the time I think you're referring to, is a major water-tube boiler retrofit. So it's not a comparable or comparative situation. An installation with a Sinopec or a BASF would likely result in a potential for a Plug & Play solution, but these large district heating systems are large stationary water-tube boilers, and that's a completely different product variation. It's a lot more -- in fact, it's almost identical to what we did in the Once Through Steam Generators at AERA. And the reason we choose to do what we did was because the customer was telling us that's what they wanted, and the customer said once you make this thing work, there is thousands of these things. So I wish it would've been simpler, and I wish it would have gone faster, and I wish I was printing orders for 200 of these right now rather than explaining why we need more time. I know I get all that, but I think our decision to go forward with the district heating, the way we did was really a byproduct of that's what the customer wanted us to do. And then separately, we could do a Plug & Play refinery-oriented solution in China or any place else in Asia for that matter in a refinery or a petrochemical plant.

But the only problem with that is, the customer was very wrong because they don't even have the installation in. So they have no operating results, and of course, we have, obviously, 0 revenue. So no matter if there was 1 billion boilers or burners or whatever, it doesn't make any difference. If we don't get 1 in, then you could turn to the other side of the page, and you take the oldest customer as AERA Energy, and I think, we've put in 3 for them.

Yes, we have 3.

But there seems to be no consideration of that in terms of any additional business. It's been a long time since that order was given and recently completed the third installation. But there is a customer that has 3 apparently satisfactory operating units in OTSG, but there doesn't seem to be any motivation or whatever that shows us that we have -- we have a chance at additional business, but we don't have any business pending that's announceable. Then in the third area is the flares, which I thought maybe the flares would work better because maybe you don't have to shut down a facility like with the process heaters, but we've only had 1 single customer in the flare installation thing, and haven't heard of any other prospects. And when you overlay that with the amount of money that we're expending every year, or every quarter, I would look at it quarterly, $2.7 million a quarter, we're just getting killed without getting any business in. I mean, we don't even have $1 million worth of annual revenue, and the flare thing, to me, is really astounding. They're constantly drilling wells, they're constantly out there with hundreds and hundreds of wells, and one customer is the only one that we've put an installation, and I think it was 6 actual units, if I recall. So how is it that, that hasn't mustered anything else from any other customers beside a single company we've dealt with?

So Rob, this is Steve Sock, I can answer both those questions for you. And the answer comes down to the air quality district where both the flare customer and other flare customers and AERA operate, which is the San Joaquin Valley. And in that district, the regulators had been in a 1.5 year long process of developing new rules. And on July 31, they actually published those new rules, they call it their PM2.5 Plan, and I attended that workshop presentation of the rules on that date, and then followed that up with meetings with AERA and other potential customers and existing customers in the San Joaquin Valley. Clients aren't going to make a decision to meet an environmental regulatory target that they don't know. It's like throwing at an invisible or moving dartboard. So part of their hesitation to date has been largely associated with this moving target and the regulator's delay in publishing these new emissions targets. That has now been issued. Their plan has been issued, and they will now go through the detail of the rewriting each of the rules and finalizing these rules. And we're optimistic that this will lead to additional opportunities for us, as Steve had mentioned previously in this call.

The next question comes from [Michael Bercik] with National Securities.

I missed a little bit at the beginning, so forgive me if I'm going over something you already said. But on the release, you mentioned you engaged a second super major for Duplex evaluation. Now the first one, I think you said that you're actively working with both of them to look at orders and et cetera. What sort of numbers are they talking at this point? The, I guess, it's ExxonMobil. Are they -- say, hey, we're looking at 1 or 2 more to see how it goes? We're looking at 20 to 50, we're look looking at 100, we're looking at doing everything. Any color on where the talk is? I know you don't have any orders yet, and I know that actual dollar numbers and things like that probably are very confidential, but is there a way you can give us a sense of what we're talking about?

Well, we kind of alluded to this in the prepared remarks, but to be specific, the next step is for them to identify, which they have, an actual installation refinery, and get it up and running in an actual refinery. Prior to that, we did a lot of testing for them to get to that phase, but we did it in our lab. And embedded in the discussion is the fact that if the technology works the way they hope, they've got hundreds of heaters and thousands of burners that are potential opportunities for us. In fact -- and I know you don't follow this as closely as perhaps I do, but the initial press release, and I was somewhat astounded, ExxonMobil rewrote it to include not only their refineries, but their chemical plants and their assets around the world reflecting the size of the opportunity within ExxonMobil. And the other super major -- these giant multinational refineries are very similar -- has a similar opportunity. Once we get it in this refinery, get it up and running, then the ability to sell hundreds of burners to these customers is kind of fairly obvious. And beyond that, we've dealt with, as you can imagine, a lot of the smaller refineries who were more willing to take risks and work with us because they see it as a good economic solution to some of their more complicated emissions problems. Once you get a ExxonMobil or 2 or 3 super majors standardizing on your technology, all of these smaller refineries become amenable to using the technology because they've got ExxonMobil, who's told them it works.

Okay. Now -- so the second super major, they're not looking at you going through the lab stuff again. I assume they're familiar with the result of the lab stuff with ExxonMobil?

Yes, I think they've read the press release...

Are they technically both at the same level now?

They're both -- were both looking for an installation in a real refinery.

And then did they give you a sense of how long they want to see it working on -- in their -- in the real-world environment before they are ready to pull the trigger?

They really haven't. And that tends to be subjective, it will depend on the refinery manager and, what they call, the subject matter expert. But they really haven't. And I think -- now I'll be in their position, I think when they put the thing in, if they absolutely fall in love with what they see, it'll happen pretty quickly. And if there are some questions about well, I don't necessarily like this and I don't necessarily like that, it might take longer. And when you say, well what are those characteristics that you're -- I'm referring to, it's flame color and flame shape and turn down and how does it operate on different degrees of hydrogen, there is a lot of nuances to the product and how it behaves in a heater that are all part of the decision making that these refineries make. So it's not like a plug-and-play printer where you plug it into to your PC, and if you hit print, then it comes out the other end in color, you're done.

Right, exactly. Now -- let me make sure I understand, you said some of the smaller refineries, are they using it in real world yet?

Yes, we have an asset we've had -- we've had burners operating in 3 different refinery applications throughout the United States.

Okay. And do the big guys know this?

Yes, that's how they decided to try it.

Okay. The -- so where do we see -- first of all, these both guys are going to pay for the installations, right?

Yes, absolutely.

Okay. So what are we talking revenue roughly from each one of the single deals?

Well, when we know the size of the heater and the size of the burners, then we'll now. But it could be from several thousand dollars to, I don't know, $50,000.

Got it, okay. When should we expect to see the first significant revenue? In which products? And what sort of loose time frame? Because I think -- the problem is and I think I said this last time, there are so many different things going on, that I think the market's confused. It's like okay, this and this -- so it's hard for them to focus. It's like okay, where do you see the shortest runway on your products?

Well, as we said in the prepared remarks, and this is perhaps obvious, given the background, it's difficult to predict when we're going to start to see any particular order. But given the dramatic increase in the backlog of orders. And again, in last 6 months, the number of inquiries doubled, and the trajectory continues to be fairly robust, you would assume that at that pace that you're months away from starting to see relevant revenue, not years away.

Right, that's sort of what I meant by rough. Now what about capacity? Like let's say ExxonMobil 3 months from now says, we love this crap -- sorry, I didn't mean it in that sense, we love this stuff, we're just crazy about it, we want 1,000, how quickly can you get us 1,000?

Well, as you might recall, we have what we call, kind of an asset-light model. And by that I mean, we control the IP and the design, but we subcontract the actual manufacturing and assembly of our burners. So if they called up and said jeez, I want 1,000, which is a problem I would, believe me, figure out, even if they called it crap.

We didn't mean it as a bad...

No, no, no, I -- believe me, burner guys are hard to offend, but I think we would have the bandwidth to go to a series of proven subcontractors and increase the volume of our business fairly quickly. And then not to go too far down this road, but we've always maintained our interest in licensing the technology to the existing market incumbents. So if something -- and frankly, now just to make -- paint a story here, if an ExxonMobil and an XYZ super major came to us tomorrow, and said, look, we love you guys, we want 1,000 of them. How are you going to get those? I would probably knock on the door of a couple of very large existing burner companies and talk them into building these for me under license. And I happen to know that the 2 biggest guys in the industry have hardly any business, so they would be very inclined to do that.

Got it. Or I guess, alternatively, the super majors could go there and say, hey, we want this stuff in your products. How can we get them?

No, absolutely. And we would be fine with that.

The next question comes from [John Reynolds], a private investor.

That answered a lot of concerns that I have as a long-term shareholder. No one has asked about the warrants that are set to expire at the end of this year. Has there been any talk about extending those?

Yes, there's been -- the issue has been raised by several of our investors, and it's something that's being considered by certainly management and the board.

When are they set to expire? It's the end of this year, correct?

Yes.

December?

Yes. I think it's January 25.

Got you. So when would you communicate that?

As soon as we decide.

The next question is a follow-up from [David Brown], a private investor.

Steve, just a couple, little follow-up on some of the questions that have been asked. And just the frustration with the ramp, and the speed of it and things like Exxon taking a very long time. So I'm just wanting to confirm here that the story remains the same. Like for instance, the data in the flares was a 90% reduction over the existing technology of NOx, and it's working. And everything is good, the customer is happy. So that's correct, right?

Yes, that's correct. Again, I think Steve's answer was related more to the environmental regulations, and the need that the customer has to invest in additional low emissions flares in the backdrop of uncertainty as to what the regulations will be or not be.

No, but I'm getting to a little bit different point here. I'm just wanting to -- I mean, this -- the confirmation of the -- I'm wanting to just have the public hear from the company that all of the milestones and all of the data that's been reported continues to be solid. If it is, I want them -- if it's not, we need to -- I need to hear what's going on? For instance, I think, if I remember -- I go back a long way here, we had AERA Energy was -- a lot of the super majors were going to go and see the first couple installations at AERA and see what was going on and confirm that here we have NOx at these levels and working application and the Norton study came out and showed tremendous cost savings without ammonia slip, without flame impingement, without a lot of different things going on. All of this is still advantages that have been out there for years, correct?

Yes. And they are consistently true. And that from a materialistic -- from a material standpoint, the product performance and its ability to deliver on those attributes still is true.

Right. Okay, excellent. And so help me understand the industry a little better. I'm not an industry -- in the industry, oil and gas industry or combustion industry. So why is it that everyone seems to want to have their own installation and -- when do they start just trusting? I guess, maybe Exxon will be the one, they'll start trusting Exxon, but -- is -- I don't know, help me out here.

Well, this is Steve Sock, again, [David]. It's a good question because I understand the frustration. But the refining and petrochemical industry is a major industry that is predicated on reliability and onstream factor. They, honestly, do not take down units in some cases for 5 or 6 years between shutdowns for maintenance. So they have a very long execution process with many phases and gates. And we're injected and inserted into those execution processes with multiple different customers at multiple different stages. Some of them are getting very close to the point of purchase. Other ones are still in earlier planning phases, but it's not uncommon for projects in this industry to take 3, 4, 5 or more years to develop, test, engineer and then ultimately, install. And that's what we're dealing with, with this customer base, who's all about onstream factor and not taking their units down until they absolutely have to.

And if I could Steve, let me make this comment, because you alluded to it. It's not a coincidence that AERA is a joint venture including ExxonMobil. And so a point of fact, ExxonMobil got on this path years ago, because they actually went to AERA at our insistence, and spent days looking at this unit at 62.5 million BTUs an hour, which is really 10x the scale of the burner they're currently looking at. And with all of that, and you kind of say trust me, here is Exxon people calling other Exxon people at AERA, who are happy with the product. And it still took them months to say okay, I guess, we can believe you. Now even I can't explain that, I'm just telling you, I've been in the industry a long time, and that's the way it is.

Okay. And just one other grain of doubt in my mind that I want to get rid of. So there is nothing -- I mean, there have been some technical issues here and there, obviously, with specific applications and especially when a customer like in China wants you to retrofit a certain particular unit, and then you have to figure out how that unit works and it's a European complicated machine and those kind of things. But there -- is there anything -- is there any major problem or minor problem or intermediate problem in our installation process that is delaying things more than -- much more than we expected? Is there anything in there? Or is it just a matter of the way this industry works? Is that pretty much been it or do we have a different problem?

To get to the heart of your question, I've said this a few times before and my colleague reminds me, in the 3 years I have been CEO, we have never had to take our ball and go home. We have never encountered a customer installation, a set of conditions, an opportunity, an application where we said can't do it, never going to happen, we're sorry we bothered you, give us our Duplex burner, we're leaving. So I know the heart of your concern is, what don't I know about why this doesn't work, because if it really worked as good as they say, then we would be full with business. And that's really not the problem. The problem isn't it doesn't work, it's the decision making among the clients is very, very methodical. And I defend them, even though they make me crazy frankly, but they look at it like if we make a mistake, we could destroy a $3 billion refinery. Now I think somewhere the lines cross between bold innovation and conservative to the point of no return, but Steve Sock and I and our management team, we live with the decision-making processes of our customer. And one of the prior callers, and I admire his comment, when a large Chinese national state-owned enterprise says, I want you to retrofit my crazy European burner, because if you're successful, I'm going to give you 1,000 boilers, even though I don't want to do that, I don't tell him no. I send a bunch of guys, who would prefer to be home with their families, to China for 2 months, and we try to figure it out.

Right. All right. Well, I've been thinking the inflection point is right around the corner for a number of years now, but I still -- frankly, I see no big holes in the story, just a matter of timing.

I think you might finally be right here.

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

Thank you. If there are no further questions, I'd like to thank our investors for participating on this call and for their continued support for ClearSign. As we've discussed earlier, the rapid acceleration in our pipeline of commercial opportunities over the last 6 months, demonstrate the company is making significant progress towards broad-based commercialization, and we remain optimistic about the strong prospects for converting multiple opportunities into meaningful revenues in the near term. Thank you, everybody.

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