ClearSign Technologies Corp (CLIR) 2018 Q3 法說會逐字稿

Good day, and welcome to the ClearSign Combustion Q3 Earnings Conference Call. I would now like to turn the conference over to Lou Basenese to begin.

Thank you, operator, and welcome, everyone, to the ClearSign Combustion Corporation Third 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 Chief Executive Officer; Brian Fike, ClearSign's Chief Financial Officer; Steve Sock, ClearSign’s Senior Vice President of Business Development; and Rob Hoffman, ClearSign’s Chairman of the Board.

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

Thank you, Lou, and thank you to everyone for joining us on the call today. Before I turn the call over to Steve, I’ll review our results for the third quarter of 2018 as they were reported on our Form 10-Q.

For the quarter, we incurred a loss of $2.3 million compared to a loss of $2.5 million for the same period in 2017 and a loss of $7 million for the 9 months ending September 30 of 2018 compared to a net loss of $7.1 million in the same period of 2017. Shares outstanding on September 30 of 2018 were 26,660,980. During the quarter, we completed a stock offering wherein we sold 5,213,543 shares at $2.25 per share, raising a net of approximately $11.6 million. Our cash resources were approximately $18.1 million at the end of the quarter. It is important to note that we have sufficient working capital available as of our filing today to carry us well into 2020, even assuming no revenue.

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 the financial update. And I would like to thank and welcome participants on today’s call. Today we intend to review our progress during the third quarter of 2018 as well as share insight into the remainder of 2018 into 2019 and beyond.

On the last call, we covered the investment via private placement of 5.2 million shares of our common stock at a price of $2.25 a share to ClearSign SPV LLC, which is a single purpose vehicle capitalized by a small group of experienced high net worth and single family office investors created for the sole purpose of acquiring a large portion in ClearSign’s -- in ClearSign in order to benefit from the stock’s long-term appreciation. Proceeds from this offering are being used to accelerate penetration into target vertical in domestic and international markets and continue product development efforts.

As part of the transaction, we added Rob Hoffman to our Board of Directors. Rob comes to ClearSign with more than 30 years of relevant capital markets experience and expertise and prides himself as a fundamental investor. During the comprehensive due diligence process associated with the private placement of our common stock with clirSPV, I had the opportunity to work closely with Rob and was impressed by his knowledge and appreciation of our business model and technology. He specifically took time to meet with key members of the leadership team and familiarized himself with the Clear organization. I think Rob is an excellent addition to our board and his addition fits into the board's plan to refresh its membership.

As we announced previously, we are in a period of management transition. I have recently announced my intention to retire when my contract expires on December 31, 2018. A search for my successor is currently underway with a nationally recognized search firm. I have agreed to stay on as long as necessary to ensure a smooth transition for the company and key customers. We have an impressive list of CEO candidates and I am confident we will find a well-qualified CEO to lead ClearSign in the future. I remain extremely optimistic about the potential for this company and its technology and will offer my complete support and cooperation in the future.

As part of this transaction, the Clear Board of Directors voted on November 6 to separate the role of CEO and Chairman and appoint Rob Hoffman to serve as Chairman effective immediately. Given Rob’s background and commitment to ClearSign, this will greatly contribute to the company's board strength and continuity. Additionally, Jeff Ott has stepped down from the Clear board to focus on his professional and personal responsibilities at Team Industrial Services. Jeff was an extremely valuable member of the board and I will miss his insight and counsel.

Finally, the board recognizes the value of refreshing its memberships and we are casting a wide net in search of new members, including working with the National Association of Corporate Directors to find director candidates who can complement the skills of our new CEO and the board incumbent members.

At a meeting held on October 30, the board considered the annual compensation pay to non-executive directors and intends to change from a cash base to an all equity-based compensation structure. The members of the board have also decided to accelerate scheduling of the company's annual meeting to the earliest practical date in order to introduce the company's shareholders to the new board members.

Finally, we have had a number of questions regarding whether we will extend the terms of the $4.00 warrant that expires in January of 2019. The warrants were issued as part of our rights offering as an incentive to generate interest and participation in the offering. ClearSign went a step further and had the warrants approved for listing on the NASDAQ so they could be freely traded in the market. The board has considered whether to extend the terms of the warrant and has determined not to do so. Some of the factors we considered in making this decision included future dilution, our current capital needs, and the fact that extending the terms of the warrants would benefit only a small group of warrant holders rather than the company's shareholder base as a whole.

With that, I'd like to bring Rob onto the call with some comments. Rob?

Thanks, Steve. The original plan was for me to speak on the last quarterly call but the correct decision was made to allow our business development head, Steve Sock, the opportunity to update investors on the pipeline of interest the company has seen. Furthermore, having the additional time to dig even deeper into the company's prospects provides me with even more confidence into what I'm about to share.

The step back -- the primary goal of the SPV's due diligence process was to verify both the quality of the technology and the market potential. It goes without saying that the results of that due diligence were positive. We also believe that our timing was [proficient] since the 3 major headwinds that had faced the company were actually now turning into tailwinds, more specifically, time, the price of oil, and the regulatory landscape. Let's take them individually.

Time -- investors need to remember that no matter how confident we are in the technology, we are asking customers to install our product in their most valuable asset, a refinery or in the case of an OTSG, their extraction process. Customers are understandably careful when it comes to a new technology, since if it does not work the ramifications are significant from both a safety and a profitability perspective. Since we now have approximately 3 years of Duplex installations that are working to specs, the confidence level of both current and prospective customers has increased, which manifests in the pipeline of opportunity Steve Sock walked through on the last call and Steve Pirnat will update later on this one.

The price of oil -- earlier in my investing career, I was a large investor in the oil energy space and as a consequence I am very familiar with the decision-making process of oil companies when the price of oil plummets. To use the vernacular, they cut first and ask questions later. In other words, CapEx spending is not only cut to the bone but also invariably cuts into the muscle. So while from a rational perspective it would make sense for a company to invest in Duplex since it promises to be both energy and operational efficient while also dramatically reducing emissions, the reality is that only CapEx released during these oil price drops is the minimum needed to keep the process flowing. Looking at a price chart for oil, it was standing at around $70 a barrel when Duplex was first introduced but over the course of the subsequent months and quarters plummeted to under $30 a barrel. It has now been north of $60 for a while and consequently CapEx budgets are being reevaluated and loosened up.

The regulatory landscape -- it is interesting to see that at this time in rough numbers about 50% of the prospects for the companies are for operational improvement, primarily the elimination of flame impingement while the other half are to satisfy regulatory requirements. But for those regulatory-sensitive buyers, experience shows that companies don't want to spend money unless they know exactly what the target is. In the past 6 months, we have seen rules and regs proposed by the 2 major California Air Quality Management District. While both are in the public comment stages, the finish line is now in sight and I believe that the odds are good that the final regs promulgated will be extremely favorable to the adoption of Duplex.

So would I and my SPV investors like to see immediate gratification in the form of specific orders? Of course. But almost more importantly have I learned anything in my short tenure as an insider that has changed my confidence in Duplex's eventual adoption? Not at all. The technology works. The end markets are enormous and the asset licensing business model not only has high operating leverage but can penetrate the different market verticals much faster and with dramatic less investment needed in both fiscal and human capital than ClearSign could ever attempt to do so.

Before I turn back to Steve, I wanted to make a brief comment about the few of the actions that the board recently took. I know that there had been criticisms, including from me by the way, with regard to the pay that board members has historically received in spite of the lack sales for the company. By both reducing the annual director compensation level as well as moving towards awarding equity in the form stock options as the sole compensation, I believe we will more closely align -- we will be more closely aligning the interest of shareholders and directors. Second, with the announcement of Steve's retirement as well as Jeff Ott's resignation from the board, we have the unique opportunity to not only bring in new talent in the form of a new CEO but also refresh the board such that we complement the talents of both incumbent board members and our new CEO.

While I am personally and professionally sorry to see Steve step down as CEO, he has laid a solid foundation by bringing Duplex into commercialization, built a team to carry this through, and we will continue to benefit from his deep industry knowledge and contacts even after he has relinquished the reins as CEO. Given that we are approaching the end of the year and the annual meeting is the forum for shareholder input into board composition, we are have made the decision to accelerate that meeting to as early a date as logistically possible so that we can move forward ASAP with a refreshed board. I am honored and excited to be chosen to lead that board and our goal is to find board members who are willing to commit time to the company and assist in achieving commercial success for ClearSign through their backgrounds and/or contacts.

With that, I'd like to turn the call back over to Steve for a business overview. Steve?

Thank you, Rob. I'd like to continue by going over some of the pipeline projects and Steve Sock is available for commentary here as well. On July 26, ClearSign announced that it engaged with a second unnamed supermajor oil and gas company, which joined the previously announced engagement with ExxonMobil. After recent visits from both supermajors, ClearSign believes that the process of identifying equipment for initial paid installation at their respective refinery locations will be completed in the coming months. The company believes that this development reaffirms the increasing commercial interest from global super majors and serves as an important validation of Duplex technology.

The company continues to move forward on many fronts. The most important of which is expanding our pipeline of commercial opportunities. We are now working on 75 active opportunities up from 68 last quarter with a wide range of customers from large refineries to global super majors to leading industrial boiler manufacturers. While we have not yet disclosed the revenue potential associated with this growing pipeline, I can report that it increased 45% since our last update and if successful, provides a clear path to breakeven and ultimate profitability.

Further, we just completed comprehensive boiler performance testing for a leader North American packaged boiler OEM. We were able to demonstrate industry-leading emissions performance for our new fire tube boiler burner on one of their actual packaged boilers in our test lab. We believe this could lead to supply and licensing agreements for this product.

We have received a commitment letter from a southern California refinery to participate in the previously announced South Coast Air Quality Management District project that should demonstrate Clear's Duplex technology as best available control technology or as the industry term BACT candidate to achieve ultra-low emissions levels in the refinery and process heaters and other types of fired equipment. We successfully installed and are operating a large scale Duplex plug-and-play burner in a southern California refinery, thus creating expanded interest among California refiners in light of the anticipated stricter air quality standards. This burner was in the 6 to 8 million BTU an hour heat release at a 6 ppm NOX level. This satisfies the current permitting and the current BACT performance for refinery heaters.

Regarding the Delek refinery project in Tyler, Texas, the installed Duplex burner is working as expected. However, due to changing in operation directives, the additional burners for this heater are not in their short-term plans.

We are entering the final stages of installation on the Chinese district heating project. The company currently has a team on the ground in China awaiting the go-ahead from the heating district to fire up the Duplex boiler burner in time for their heating season, which begins in a few weeks. We are optimistic that we will be able to demonstrate world-class emissions performance, thus providing a massive opportunity for retrofitting district heating boiler systems throughout China. There are literally thousands of boilers that can be retrofitted in these applications using our technology.

Last but not least, as Rob referenced, the overall regulatory environment continues to look more favorable towards our technology and ClearSign continues to work with various regulators to articulate the economic value of our patented proven and disruptive technology in reducing emissions at an attractive cost in comparison to current alternatives. In the United States, we believe that regulations will drive lower emissions levels and increased fines for non-compliance. Countries like China represent a huge and immediate market opportunity for our technology as China's command and control approach to environmental policy mandates improvement in China's air quality. Simply stated, you get shut down for operating out of compliance in China.

With that, I'd like to open up the call to questions and answers. Operator, can we open the call for questions?

(Operator Instructions)

Our first question comes from [Jeff Feinglas with Retail].

I wanted to ask the question. In the press release, I'm just reading it here on Yahoo Finance, you mentioned that it's a regulated funded demonstration project with the South Coast Air Quality District. Could you expand on that a little bit?

Yes, that's correct. And since Steve Sock is here, I'll let him answer that.

Yes, that's a project that had been previously announced to be jointly funded by the regulatory district themselves, South Coast Air Quality Management District, which for those who don't know is the air regulating authority for greater Los Angeles. We've recently found a host site to partner with and work with on that project. And we're currently going through the process of finalizing the necessary agreements to make that happen.

So one follow-up question, is that normal for a regulator to actually pay for the installation? I'm not an expert in this area, but it seems unique to me that the regulator would actually pay this themselves.

It is somewhat irregular. Many regulatory districts have funds that can be used to advance technologies, often in the form of studies. But rarely is it that they actually invest in actual demonstration projects at this scale. So we're very pleased and honored to be participating with the district and this host site and look to be announcing more about it in the near future, once the appropriate paperwork gets completed.

And one more, I mean, I don't want to put words in your mouth, but I mean would you say that, that sort of speaks volumes for the regulatory district's desire to have this technology, the fact that they're paying for it themselves?

We think it does. We think it represents a win-win for all the parties involved. The regulators see our technology as a opportunity to get to clean air with less barriers, lower cost, quicker installation times, less complexity. The operators see it as a low, less -- a lower cost alternative for a regulatory compliance and obviously ClearSign benefits from commercial demonstration.

Jeff, we just think it's a huge opportunity for us.

Yes, I mean that's super exciting. I appreciate it.

(Operator Instructions) Our next question comes from Michael Brcic with National Securities.

It's great to see a lot more opportunities coming along, but I think the market is sort of looking to close on some of these things. Is there any way you can try to give us some idea of some milestones or some -- what may happen in the near future to actually close some of these deals? For example, in China, how long is that testing going to take and -- before we can see some concrete steps taken?

Well, I'll address the China question. I mean, we think we're -- again we're waiting for the Chinese client to give us approval to start the boiler. So we could be weeks away from being able to demonstrate it. And then the time it will take them to satisfy themselves that the technology is working satisfactorily could be a matter of months.

And just in general, do we have some idea when we're going to start picking up revenue on things? Are there things close in the next few months that you think will start moving the ball forward on getting past the prospect stage to the client stage?

Well, Michael, I'll take that and revenue starts with being selected and awarded contracts. And we do hope that and we do expect that in the short term we'll be able to announce project awards in our favor that will lead to future revenue streams for the company.

Our next question comes from [Lawrence McGovern with Retail].

I missed the beginning, got delayed on getting on the call. But -- and so maybe this has been addressed already, but if not -- we are now approaching the second week of November and a burning question for myself and I'm sure lots of other investors who have been investing in the company for a long time is what is going to happen with the warrants, which are going to be expiring soon, unless they are extended. I fully believe that it would be foolhardy on the part of the company and a slap in the face to the investors who have invested in the company, especially with the warrants, if those are not extended. And I'd like to know what plans there are to extend the warrants because in my opinion it's absolutely necessary.

Okay, well, this was covered in the beginning of the call, but the decision was made not to extend the warrants and probably in simplest terms it was based on the fact that we felt that the decision would benefit a selected group of investors, not all the shareholders.

(Operator Instructions) Our next question comes from [George Sloan], private investor.

With respect to the warrants, you mentioned twice now that it would be for the benefit of a select few warrant holders and not to the benefit of the shareholders as a whole. Could you explain what detriment it would play to the shareholders as a whole if you simply extended the warrant for a year? How would it hurt the company and the shareholders?

Well, just to restate what we'd said that the decision was based on the future dilution and the current capital needs for the company as well as the fact that it benefits a small group of shareholders.

Could you be more specific about the dilution and what detriment it would play to the company as a whole as opposed to basically throwing the warrant holders under the bus?

Well, I think it's, to get into the specifics of the dilution, that would be a little bit of an exercise. But I don't know that we threw anybody under the bus. We -- at the time we offered the rights offering, we offered a tradable warrant which expired. So they got what they were promised.

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

I'd like to further comment on the warrants. You gave us no reasonable time to sell those, Steve, because you failed on every execution of your model for more than 2 years. So I agree with everybody who's echoing my feeling with the poor...

Our next question comes from [James Hettenhouse] with BCEA.

Yes, this is [Hettenhouse] and there's 2.5 million warrants out there and there's 25 million shares roughly. And I concur entirely with the previous spokesman. I would at least like to see some explanation and something filed that would detail the rationale. But I'm extremely disappointed and share it with the view that the management has not delivered our expectations time and time again.

Okay.

Steve, this is Rob Hoffman. Let me just take at a point in terms of the fairness. And by the way, I recused myself from the discussion because the SPV would have benefited as well. But when a warrant is extended, especially a tradable warrant, you're effectively giving a tradable gift to 1 warrant holder versus a shareholder who does not have a warrant or potentially sold that warrant. So I don't -- I think that's the -- that's part of the definition of unfairness is that all shareholders are feeling pain from the current share price, including the SPV, but to extend a warrant and effectively give something of value to a select group of shareholders and those warrant holders may in fact be different than the people who participated in the offering. For example, they may have sold those warrants -- is not necessarily good practice. And as the -- as Steve mentioned in the -- in his initial remarks, there's not a need for capital at this point either. So it doesn’t make a whole lot of financial sense to extend those.

Our next question comes from Bob Kecseg with Las Colinas Capital Management.

Just I think everyone's familiar with my name, maybe Robert Kecseg. Yes, I'm going to change the subject a little bit. I did get late on the call so I kind of missed your presentation. I'll listen to that later. What I'm I guess probably most concerned about is the business and what is the likelihood that we're going to see a new customer anytime soon?

Well, I mean, as I just announced in part of the opening remarks, we just had arguably the largest industrial packaged boiler company in the United States here for 2 days worth of testing. We actually had 1 of their boilers in our test lab and were able to successfully demonstrate our new fire tube boiler burner, which by their own admission has the best emissions and overall operating performance of anything on the market. So we disappointingly didn't leave dinner with an order stuffed in our pocket, but we left with a very enthusiastic customer that we've been working with for over a year to kind of get to the point where they would come in and look at the test and evaluate the product. So I think there's -- you could go through the backlog of the multiple projects we just talked about and look at each one of these jobs and expect that at some point, if you follow the argument that major multinational oil companies don't ask you for price and performance data because they're bored. They do it because they want to eventually buy the equipment. Our assumption and my experience is that these things will convert to orders. But we just don't have the ability using ExxonMobil as an example of making them go faster because the things that drive their decision making are well above our ability to influence it. And just to pick, to paraphrase what the ExxonMobil guys told us, if we sell them a burner for $1, it might cost them $4 or $5 to install and operate it. So their planning cycle and their capital budgeting cycle is far outside the simple cost of our product. And many of these customers as Rob Hoffman mentioned in his discussion are a little bit let's say reticent to move forward with our kinds of technologies in the short term because they're waiting for the new emission standards to come out. When those emission standards come out, given all the influence and discussions we've had, we expect them to be lower and fines to increase. And all of that favors our technology. So the external factors that affect the demand for our business have all been favorable, increased number of quotes, increased dollar value of quotes, continued interest among major customers, improved environmental compliance requirements. So it's I guess frustrating because of the time it's taking. Unfortunately, a lot of that is the nature of the industry. But it's encouraging quite frankly to see the significant increase in opportunities we're seeing and quite bluntly the fact that we've been doing this now for 3 years and we've never had a problem where we said, gees this won't work. We better take our ball and go home.

Well with all the potential customers for that fire tube in the thousands, couldn't we just put it in some place for nothing just to run it in an operational school or hospital or some kind of operation like that and just get it in. And just say, we just want to put this in for nothing.

Well, we don't have -- we don't have a problem at this point with that particular customer, convincing them that the burner has to be put in for nothing. They've already seen it work in a boiler in our lab over 2 days and they've seen it work. So I think they're now persuaded that it works but the steps involved is that we would have to and plan to work with them. This particular company is not only is the largest packaged boiler OEM in the United States, but they also make their own burners. So what would be the next step is our working with their engineers to incorporate Duplex technology into their existing burners and they would design their burners in a way that would incorporate our Duplex capabilities and they would be able to manufacture in their factory a product that essentially licenses or purchases our technology. And that would be the next step. And I think we're -- there's a few things that have to be done with their engineering people and our engineering before that starts. But to the fundamental question, they no longer need to see it working to see it work. We went through the extraordinary step of getting one of their boilers, having it shipped here, having it installed and testing it. And I guess if I gave them one for free, it wouldn't be a sale anyway.

Well, it wouldn't be any different than what we have now. That's the point. It doesn't really cost us anything. It's -- to me it would be a lot more valuable to say this is running at so and so's operation for one month, 2 months, 3 months and it's still running and everything's fine. And just like we did in the lab. Because we all know about the skepticism about the difference between a controlled environment and actual industrial application. I'd like to make a comment about the -- it seems like the agitation that people have about how things are done in relationship to these warrants. I'll tell you an even smaller group that benefits greatly in this organization and that's the top management with all the bonuses that they've gotten year after year after year. And how the board of directors is another small tiny group that benefits from hundred thousand dollars of compensation each and for a company that doesn't generate any money, that's a lot of money going to a very few number of people. If there's anything that's unfair, it's as good thing that I'm not on the board because you'd never hear the end of it. Now Mr. Hoffman's on the board as a new person and I can't believe that anything has not shaken up this board since he's been here in July. We're really in the same place that I can see that we were before. So tell me how that isn't unfair, both of those items that I brought up.

This is Rob. Bob, were you on the call earlier when we talked about the changes that we've made on board compensation going forward?

No, I apologize. I got on maybe I don't know 2, probably 4 minutes before I asked a question. So I was not on very long.

And as I mentioned, it was as an investor prior to my board membership, it was something that stuck in my craw and I think it was just one of those where the previous -- the board perhaps didn't focus on how the perception was. But we agreed at our last board meeting that going forward not only would board compensation be reduced, but it would be completely -- any cash component would be eliminated and it would only be equity based. So we've addressed. And then the comment that the board made the decision is we're refreshing the board and so in the process of doing that, we said well why -- traditionally an annual meeting takes place let's call it the first week of May and that's because you have to wait till your annual report is done and yada, yada, yada. Well, we've said we're going to accelerate that. Our financials aren't very complicated. So as soon as we can get our -- we have a plan for getting the audit completed as soon as possible and then scheduling the annual meeting for a dramatically shorter time period than normal for exactly that reason. So that we can present the new board slate that we will be coming up with.

Okay, I apologize that I got on there late and you had to repeat it.

No, that's okay. Worth repeating.

Our next question comes from Richard Deutsch with National Securities. (Operator Instructions)

Yes, that's National Securities and thank you very much for taking my call. I would also like to just bring forward the comments about the warrants. You are a public company. Your shares trade on expectations and on market -- and you actually pay to be public and to have an IR department. And it's just my opinion but I think you're being tone deaf when you reject a non-dilutive strike price that's basically triple of what the stock's trading for and would result in cash payments $4 a share when you can't even raise money above $2 a share. And I would just request as a -- the board to reconsider your comments about unfairness, cause I think all the unfairness is that the only original warrant holders were your own dedicated original shareholders who got the rights. They've been with you for years and as one of the previous callers have said, the expectations set forth by Mr. Pirnat have never been met. Not only have they not been met, but they've been horribly missed. And to extend the timeframe I think would show flexibility, a return to smart dealings with Wall Street, and be initially very, very much well received in terms of shareholder reaction. And I would just hope as a reconsideration that the time is still there, you do some thinking on it and review your thoughts about unfairness cause I think all the unfairness is not only on your own shareholders but taking it forward, I think the reaction in the marketplace would be extremely well received. On the other side of the coin, I don't think that you want to be around and follow through with your determination to squash these shareholders because you're liable to see yourself not on the board subsequent to your next meeting. And again thank you for taking my comment. I would like to hear your thoughtful response.

Steve, this is Rob Hoffman again. I think it would be -- the board has discussed the proposal at length. And the -- and made its decision and I think the rationale is very rational. I think it would be a disservice to people to hold out hope that we might reconsider the warrant and extension. What I would prefer that we do is focus on the operational progress of the company. The warrants have 3 months, give or take, of expiration left in them and if we can deliver on some good news, then perhaps those warrants will be indeed worth something. But I don't think it would be appropriate for us to do anything other reiterate the board's decision as final.

I hear you. Sorry about the (inaudible) but we'll see what happens.

Our next question is a follow-up from [Jeff Feinglas, Retail].

Yes, and promise this won't be about the warrants. This is related to the second super major that you've announced. Do you see that tracking on the same path as with Exxon or is there kind of the same time. So you've been with Exxon, worked with Exxon for I don't know close to a year, do you see this with the second super major taking the same amount of time? Or is there some leveraging off the Exxon relationship that could go in so that the second super major will be a shorter timeframe than what the full relationship with Exxon has been to this point?

Yes, I kind of think that an operating installation at Exxon would kind of push them along a little faster. But again, the decision making at these, I guess they probably call them super majors for a reason. But their decision making tends to be fairly slow and I think as Steve Sock mentioned, the risk/reward for them is significant. I mean they realize they can -- they will save a fortune with our technology as opposed to SCRs. But they're also always concerned about the safety and reliability of equipment and having worked for Coke Industries which is also a refiner, an event in the refinery that causes a fire could be a $500 million problem.

Our next question is from Walter Schenker with MAZ Partners.

Just for what it's worth I really have a question. I suspect having been involved with maybe 500 financings, many of which have warrants, have owned many, many millions of warrants, I understood they had an expiration, virtually all of them expired. Sort a condition of contest and it is what it is. Not to point. Everyone can come shoot me now because they're upset. But the real question is really to you Rob, when Steve talks about the business and talks about lengthy analysis by Exxon or another super major but also Air Energy, also all the other people he's been dealing with for 3 to 5 years, 50, 75, 100 different people who've evaluated. I understand you put the money in so you believed. It's the big issue for me and I've been a shareholder for a number of years. I participated in rights offering. I bought stock in the open market, is not 1 order but the lack of even 1 order and why with all of these people evaluating it, no one pulls the trigger. I can understand ExxonMobil and you've got giant refinery, but there's a wide range of people who have evaluated and we're still waiting for orders. I realize I'm trying to kill something, Rob, but and I've heard Steve for years. I want to hear you. One more time I apologize, address the total lack of orders in your mind.

Well, thanks for the question, Walter, and thanks for your insight on warrant expirations. One of the things that I've been able to do as a board member is have further granularity into the interest levels. And as I said in my prepared remarks, the lack of consummation of orders has really been a function of those 3 things, time, price of oil, and regulatory environment for the most part. And so you can't push a string. As I reiterated, I have confidence in the breadth and depth of the opportunity pipeline and I think maybe I can ask Steve Sock to join in here, but I think what we're seeing is that as the regulatory clouds start to part or whatever the analogy would be, you have more and more entities that are saying to themselves, hmm, let's make sure we have this operating in our facility so that when the regulations come down, we will be comfortable with going that direction. Is that a good assessment Steve, Steve Sock?

I believe it is. I think the lack of success this year is due in part to the uncertainty of the regulatory changes that have been discussed and published by the different regulatory (inaudible) and also in part people spend in 2018 what was approved in 2017. And sometimes even that approval is further back in time than that. And the crude oil prices and the lack in the freeze on capital spend lags those decisions. And I think we faced a lot of that this year as well. And customers are in their budgeting phase now for 2019. Crude prices are stronger. That should lead to an increased capital expenditure spend and we expect to see some of that in the new year.

This will be the end of the question and answer session. I would like to turn the call back over to management for any closing remarks.

Thank you. If there are no further questions, I'd like to thank our investors for participating in this call and for their continued support of ClearSign. Good afternoon.

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