Rick Rutkowski - CEO Jim Harmon - CFO.

Louis Basenese - Disruptive Tech Research.

Good afternoon and welcome to the ClearSign Third Quarter Results Conference Call. All participants will be in listen-only mode. (Operator Instructions) After today’s presentation there will be an opportunity to ask questions.

(Operator Instructions) Before we get started, during the course of this conference call, the Company will be making forward-looking statements. We caution you that any statement that is not a statement of historical fact is a forward-looking statement.

This includes any projections of earnings, revenues, cash or other financial statements, any statements about plans, strategies or objective of management for future operations, any statements concerning proposed new products, any statements regarding expectations for the success of our products in the U.S.

and international markets; the outcome of product research and development; any statements regarding future economic conditions or performance, statements or belief and any statements of assumptions, underlying any of the foregoing.

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

These risks are described in the section of today’s press release titled Cautionary Note on forward-looking statements and in the reports we filed with the Securities and Exchange Commission. Investors or potential investors should read these risks.

ClearSign Combustion Corporation assumes no obligation to update these forward-looking statements to reflect future events or actual outcomes and does not intend to do so. Please note, this event is being recorded. I’d now like to turn the conference over to Rick Rutkowski, CEO. Please go ahead, sir..

Thank you everyone for joining us today. We have got a lot to report and lot to talk about in terms of the -- for going forward here so we’ll jump right into that we’re tremendously excited based on some recent development for their document and the press release so you’ve seen that.

Jim Harmon our Chief Financial Officer is here and I’m going to ask him to walk us through the financials..

Great, thanks Rick and I’ll be brief since that historical results are lot exciting than the forward-looking thoughts that Rick have to share. For the quarter we continue to be on page from prior quarters and under budget by the way, we recorded a loss of $1.7 million for the quarter and roughly $5 million for the nine months ended September 30th.

For the quarter again, our expenses were up by $200,000 primarily related to increased personnel levels on the R&D side and the corresponding increased cost of consumable the testing material.

On the G&A side our cost were up about $140,000 primarily related to two things one is our monthly business development expenditures and secondly we had a $53,000 of intellectual property and write off which is normal pruning of cost that has been capitalized in the past and there is a - time goes by rationalizing them and determining where to put our efforts on good patent.

Our patents hold the intangible pool come to $2.3 million as of September 30, to give you some comparison. Currently, on cash levels at the end of the quarter is just short of $3.3 million our projections are that should loft [ph] beyond the first quarter of 2015. With that I’ll turn it back over to you Rick..

Thank you, Jim. Okay, so I want to jump right in obviously the very exciting news here is that we have demonstrated a duplex style successfully operating at a scale more than 8 times of anything that we have reported previously. So, at 45 million Btus per hour.

We can’t yet disclose all of the detailed data from this initial path other than as we characterize it here, it’s well in to the single digits -- it would comply with existing regulations in many territories certainly in San Joaquin Valley, Southern California we will as we coordinate with our customer and the regulatory authorities they’ll obviously disclose more detail on this data as we go into this.

It’s very fresh that’s all occurred in actually recent days but the project has been delayed somewhat initially by a permitting issue that we fail to recognize or anticipate and thankfully it wasn’t when we could have anticipated because when the customer filed for the experimental permit the regulatory authority also recommended that they obtain a variance which is not strictly necessary but again recommended that have the impact of requiring than a public notice period and a hearing and the hearing are going to make indeed once a month.

So that did this put delay on the front end of the process and then once we actually got going on side things went smoothly for the most part other than that in Monday and things like that there was a power outage on site one day and which delayed some times and at one point we thought we’re going to be able to work through the weekend and that didn’t turn out to be the case.

That said, again this is a really exciting development for us.

And I think as we characterized in the press release what’s important to note here is that we continue to experience what we call scale in variant behavior meaning that the effects the artifacts [ph] or the optimization that we have to do at a larger scale is roughly the same as we see at a smaller scale and the overall behavior of the client is very consistent with what we’ve seen.

And that’s been our experience up to this point. And at this point I think we can say we anticipate that that will likely continue.

In this case and in other cases what we experienced internally actually a lot of the optimization that we do has to do with retrofitting the Duplex to an existing burner place and that’s more complex if they’re an Ultra Low NOx burner because they will tend to introduce some flow effects that we need to work around.

But at the end of the day we’re in a very solid place in terms of performance and frankly we anticipate that it will get substantially better in the weeks ahead.

And I think I’ve alluded to before in these projects there is a baseline goal that has to do with the environmental performance in the case steam generators a key criteria that we want to eliminate Fuel Gas for circulation and that was certainly done in this case.

And as we go forward the variety of other things that we want to test for we want to put the system through its phases and really test for other features that we think are going to be potentially achievable.

We will report sometime in the very near future on some work that we’ve done internally which we think has a very significant bearing on fuel efficiency and correspondingly carbon dioxide reductions as well as NOx reductions. And so more detail on that to come but some again very very powerful results.

And really what we’re finding here is that this architecture this combustion architecture which is really a paradigm shift in design of combustion systems proves to be very very robust.

It’s important again to note that we’re talking about not just Ultra Low and sort of next generation mass emissions levels but we’re able to keep carbon monoxide at or near these low single digit levels and in fact in many cases down very close to zero so that’s important. The other thing I want to comment on is the time scale.

I know to all of us it seems as if bringing so taking an eternity that’s often in case with anticipation Christmas morning to never come fast enough on Christmas eve evening.

But if we put it in perspective the first proof-of-concept for the Duplex style technology was conducted in February of 2013, we demonstrated a little over a year later in May of this year operating at a full refinery scale of 5 million Btus per hour in our test permits here and actually that results in five large parts per million range and then some early in the boiler configuration and have gotten that was reported as low as two parts per million.

So we got an excellent results. But now here in November, we were now at another major scale milestone and in this stage in a system in the field. And this is a one difference to sort of note between process heaters and steam generators or boilers.

This is a process heater tend they’re not always -- this is kind of rule of thumb on an absolute -- tend to be natural draft systems and steam generators tend to be force draft systems or what I’d call power burner. So, again we have that range to cover.

I want to comment a little bit on scale and in the market and sort of what all this means in context so again some simplistic construct that you can overlay on the market to begin to understand it.

From a scale perspective that the process heaters are going to tend to run with burner anywhere from 1 million to 15 million Btus per hour and you will very often see anywhere from one burner in a process heater to nine or in some cases as many as 40 or more.

So there can be large arrays of smaller burners so this can be in a linear configuration it can be in a circular configuration.

With respect to steam generators they tend to fire two boilers in the case of these large steam generators that are second play water tubes it’s very often a single burner firing into a cylinder and in most cases it’s horizontal.

And again with the forced draft and those range from package boilers what we call that you would find in department buildings hotels university campuses food processing plants dairy plants these are pervasive really 100 of 1,000s of method, those kinds of run anywhere from about 3 million to 40 million Btus per hour.

So, if you think about what have to study here effectively we bracketed the whole range of process heaters and package boiler steam generators. If you get into these once through steam generators as you find - enhanced oil recovery, lots up Bakers Field, California, lots up in Alberta.

They will run anywhere from about 40 million Btus per hour and the majority of those in California are in that range of 40 to I think that weighted up to about 62 million that’s tend to fired and the big below that.

Up in Alberta you will find systems as largest 200 million or 250 million Btus per hour and sort of that you can do sort of back at the napkin correlations of Btus per hour and megawatt but as you get up into this range of 45 million Btus per hour that’s roughly 13 megawatts, 12-13 megawatts.

So, as you get into these large steam generators 40 million, 50 to 100 million Btus - you’re also starting to get into utility scale burner and that’s significant because another market that opens up is the market that relates to coal to natural gas conversions four utilities and now you’re talking about very expensive selected catalog reduction and it’s less than potentially be avoided or certainly made far more cost effective.

So, in general, we tend to think about sort of the sweet spot because it’s a [indiscernible] where the population is faster is really in this 40 million or 50 million Btu per hour range and so significance of this effort is that we now have effective bracketed a large segment of the market in terms of validating the technology, the ability to operate at that scale and to operate in a very linear fashion in other words deliver the same kinds of results throughout that range and certainly going below that.

So our process here in terms of go to market and those of you who have been following the company do know that our business strategy has morphed a little bit in response to sort of direct funding market. So right now, we actually have a funnel that is developing of testing valuation opportunities and proposal.

So, the basic process is we will meet with the customer or one of our channel partners will meet with the customer describing technology that request the proposal and we will submit a proposal to them at this stage of the game these proposals because it’s still new technology for them, or sort of try it and buy it and by the way it’s not try it and then if you like it buy it and let’s try it and if meets the criteria you will purchase it.

That’s a little bit different than this first effort.

So, to give you some color on the funnel and I think we tried to do that in the press release a little bit, what’s important here is that we got do have that I’ve just described the range of scales if I’m thinking about the funnel I think the smaller burner in the funnel, smallest heater is actually in the neighborhood of 3 million Btus per hour.

The largest so far is a 130 million Btus per hour but again they sort of cluster more in this 5 to 20 or 30 range and the weighted at this point ironically towards and favorably by the way towards processed heaters and refinery process heaters.

So there is a range of application in heater types and these include as I said refinery process heaters there are also some proposals going out for both fire tube and water tube industrial boilers which is a market that we do intend to address in 2015 and if we look at the companies that own these there are some of them around by small privately-owned companies which are still generating lots of revenue in the oil and gas industry a 20,000 barrel a day refinery for example as an extent of future capital plan, even though it’s small on the small end by industry standards, but they also include some very very large companies and I think that recalls on a recent conference call asking about household names.

So, if we look at our current proposal activity and then higher up in the funnel as well there are half of dozen or more household names large oil and gas companies. So the word is getting out and of course as we establish this reference ability in the field that will just continue to amplify that signal.

So, we think it’s a very exciting picture as we look through the rest of this quarter and into the first quarter and first half of next year, we think an awful lot is going to emerge.

I’m going to talk a little bit and only a little bit about pricing and profitability for obvious reasons but in general terms the way we’re pricing today is again alternative NOx controlled technologies and then again it’s important to appreciate that the market situation here is one in which at these Ultra Low NOx levels they’re really on a lot of great cost effective alternatives essentially you’ve got Ultra Low NOx burners and Selective Catalytic Reduction systems and each have their cost tradeoffs and in both cases they’re typically ongoing cost tradeoffs.

So it’s not just about the price of installation, it’s about the cost of ownership.

So whether that in the case of a natural gas their refinery process heater if you’re experiencing flame impingement or coking on tubes you can be taking your system out of service more frequently than you’d like to you can be replacing process tubes more often than you’d like to in the case of something like a boiler it can be that ongoing cost can be the parasitic load in the drain then of the efficiency that’s imposed by flue gas for circulation.

So, I guess what everyone want to get here is that today we can price competitively at against those existing solution and be pricing at the premium end of the market based just on the emissions control performance.

As we validate and collect data and publish data use case data overtime on total cost of ownership, on for example the impact of increased capacity which is I want to pause for a moment there, increased capacity is potentially an enormous source of leverage for companies that are investing billions of dollars in capital equipment that can cover 100s of acres and there is really in the best case designed to operate as close to 24x7, 365, as it can.

So, as we get more and more of that data, we think we’re going to maintain and potentially increase pricing power and there are some annuity recurring revenue models that come out of this including ongoing optimization that means today for example in a refinery heater would not be unusual to install burners and then to have your engineering construction firm come back in a few months to tune those to get the flame shape back in order.

And we think we’re going to be able to guarantee performance for the longer periods of time and that benefit is something that were near to our customer’s benefit and we think that there is going to be a willingness to compensate us and our partners for that kind of improved stability of operations and reliability as well.

So, again the data from these early installs is going to be extremely important in terms of forming in the basis for these use cases and really validating this total cost of ownership assumptions. We’re in a market where the catalysts that have occurred in the broad market are quite favorable.

In Southern California, in July, South Coast Air Quality Management District introduced for the first time a proposed new NOx standard, the current one is five parts per million NOx. The proposed new standard will be two parts per million NOx, so less than 50% of the current standard.

And they specified 3% O2 which if you grid our press releases about the Duplex technology that’s something that we talk about. We can operate at or below 3% O2 to be technical about the -- they corrected the 3% O2 and won’t get into it with too much detail about that. But the point is it’s a very demanding standard.

And what you’re going to then see with the proposed beginning compliance dates are around the corner we’re talking about 2016 beginning compliance base.

So there will be a wave of capital spending unleashed in Southern California as it relates to the upgrade and retrofit of refinery process heaters, boilers, systems of all types that are our target market.

And so that when that wave enters to the market more broadly and of course we believe that what may just stand out is that at these low NOx levels what’s unique about our technology is the ability to; A, achieve those full stop or something like two parts per million.

It’s not clear the selective catalytic reduction technology will achieve that reliably and consistently for example.

But more importantly to do this at a lower cost of ownership and again I would go back to this notion with the potential to increase production capacity and increasing capacity is a combination of reducing the number of days with heaters are out of service actually increasing the raw capacity of the heater because you have a better flame pattern or a smaller flame high so you can put more heat into the box without impinging and so on.

So, it’s really about aligning the goal of environmental excellence and ultra low emissions with the goal of maximizing productivity of very expensive capital assets, productivity and reliability and life times of those capital assets are all impacted on this line up.

And by the way if anyone would you like to sort of dig into more deeply we’re more than happy to do that if you want to call us and understand us there. And we actually have some written reports that speak to this in some detail as well that were put together by some third parties with substantial experience in refinery operations for example.

So that new wave of regulations was obviously creating an unmet demand scenario in California. And if you really want to sort of put that in context what I would call your attention to is the ozone proposals that the EPA put out is suggesting that they would like to see 75 parts per billion reduced to 60 parts per billion.

Ozone is formed when you have lots of organic compounds NOx and sunlight. And it is typically controlled for by reducing NOx.

So in June or July of this year the National Association of Manufacturers commissioned and published a report I cannot recall the name of the company if you can find it online contact one of us and we will get it for you, on what they said was going to be the impact economic impact of these proposed regulations.

And several points are really worth noting while the first one I’ve mentioned they’re going to be achieved through NOx reduction. But the main report focuses on several things. They suggested the impact to U.S.

GDP would be $250 billion annually or 3.4 trillion over the period from 2017 to 2040 they also suggested this could cause a burden that would cost the economy roughly 2.9 million jobs annually.

But importantly they suggested some other things they say the burden of these new low NOx regulations which fall disproportionately on industrial emitters that has opposed to utility. Then their argument is that utilities are about as low as they’re going to get.

And so really what we’re going to be looking at or the kind of the systems that I’ve described to you boilers that would be in university campuses and hospitals and food processing plants and refinery process heaters and systems of that type in other words exactly the kinds of systems that we’re talking about.

But it actually gets a little bit better than that, they do acknowledge as you’ve probably heard say us often that lower NOx and higher cost and I mentioned that are typically as you push NOx lower it costs more but they take risk that further and they say that actually at these very-very low levels they’re costs were going non-linear it’s not just going to increase marginally it’s going to increase dramatically.

And it will be a multiple of current cost. And the reason they cite as I say it’s going to get better.

They take two thirds of the proposed reductions what actually have to come from they’ve referred to as unknown technology so the known technologies that they referenced in their report as a base line our selected catalytic reduction and low NOx now to low NOx burners.

There is a [indiscernible] acknowledgement here that ultra low NOx of the type that’s being discussed here and by the way this is in line with the kinds of numbers the Southern California is proposing where it relies on technologies that have yet to really be discovered and hence the assumption for the non-linear increase in cost because they say that 2010 EPA report which suggest that NOx at these ultra low levels could cause a substantial increase to a multiple of current cost.

So, that’s pretty compelling, pretty alarming in some ways.

And whether you take increased value the 3.4 trillion and 2.9 million in jobs et cetera, et cetera I think qualitatively the point here is that ultra low NOx levels the market assumes and I believe this report is a reflection of the best knowledge that the market has and the market experience that ultra low NOx next generation low NOx is going to cost a multiple.

Now if you think that what I’ve said here that what we’re able to doing is to align NOx at these kinds of near zero levels NOx emissions at single digit levels, with increased capacity, reductions in operating cost, not increases in cost it really points to what we mean when we referred to our technology as transformative or disruptive.

In other words, this is exactly contrary to the expectations in marketplace and that takes you back to why we’re seeing the kind of pool that we’re seeing across a broad range of small and large system types as well.

And then another key catalyst that you’ve heard us talk about in the past there continues to be a major opportunities for us is air quality in China any of you who were following APAC proceedings after you got through wondering what those funny little some color tunics were probably took note of the fact that in order to get the air quality under control just as they did with the Olympics in Beijing they shutdown 100s of factories for days and weeks at a time to reduce emissions obviously not a sustainable practice.

So, here is why this and I’ll go back to the same notion of cost in Ultra Low NOx and operating cost. So what we’ve seen in China as an environmental policy initiative and you’ve seen this reflected in the headlines as well is let’s try to increase the use of natural gas even though natural gas is substantially more expensive than coal is in China.

And so several things we’ve seen are the Ministry of Environmental Protection proposing conversion of 100s of 1000s of industrial boilers from coal to natural gas indeed the local brands, the regional brands in Beijing has imposed the sanction it says as of 2020 they won’t allow coal to be burned in Beijing any longer.

This is why you saw a $400 billion natural gas deal struck with Vladimir Putin and the construction of a pipeline from Russia to deliver natural gas. And China by the way does have the reserves the fracking technology that we use here though is just not yet suited to the much tougher geology encounter in China. I’ll go back to some punch line.

So when the natural gas is much more expensive these reductions, these economic benefits that we’re talking about in terms of optimizing capacity, reducing maintenance cost, improving fuel efficiency are obviously even more important in anyway.

And this goes right to the heart of the sort of the broad issue for China which is how do we get air quality under control, bring it to the kind of air quality that we see in other parts of the world, the U.S. and so on, without imposing heavy burden on our economy.

In other words, just the argument that the national association manufacturers is putting forth to the perspective proposed new rigs here.

So, what we believe in terms of we have a lot of folks at very senior levels in multiple organizations in China including some of the major oil producers and refineries there paying very close attention to what we’re doing.

And the best way that we can accelerate that activity is to do just what we’re doing here which is demonstrate these systems in the field.

So, just to dial back and talk about sort of this quarter and the next quarter what you’re likely to see is several other testing and valuation contracts signed and additional installations begin at refineries on a variety of different types of heaters.

And as I said, there are some smaller private companies in that pipeline there are some larger public companies in that pipeline and there are some very large global companies in that pipeline that are part of this bigger picture.

All of them are sharing the same challenges and have the same unmet requirements and the same uncertainty when it comes to achieving these next generation NOx levels.

So, a bit briefly just couple of other items that we did mentioned in the press release here, our solid fuel’s consortium which relates to our Electrodynamic Combustion Control technology. We continue to make good progress.

We did signed three I guess additional numbers including Zacks Power, the North Dakota Lignite Council and the National Rural Electric Council which is a -- what's the word I am looking for it’s a group of rural utilities throughout the Midwestern United States.

So we have additional members in addition to Plum Creek Timber and Great River all of whom I think we had previously reported. We continue to make progress on that. I think in weeks ahead we will be able to report some progress and there is some really interesting intellectual property coming out of that effort as well.

So, I want to thank you very much for your time here and we’ll turn it over to the questions..

We will now begin the question-and-answer session (Operator Instructions). Our first question is from Bernt Preston [ph] who is a Private Investor..

Good afternoon. Thanks for the great report. I did not have a chance to read the press release, so I don’t know what the results were in terms of the contract actually been in both based upon performance and whether or not you’ve acquired an income stream here with the results for test if you [multiple speakers]..

In the first test that we agreement to refine is different from than we done since them. So that one did not have an automatic if it performs by the [ex-money] and so on so forth because it was our first. What it did was it gave that customer an option to purchase an additional unit.

So, in this particular case it hasn’t triggered anything that we have absolute certainly on. Having said that, the whole region for the test is again goes to this question of unmet demand and a lack of cost effective alternatives.

So we do anticipate that there is some good business there in the pipeline and then with that customer and also in the broader segment for one steam generators there are 768 of these units throughout the Central valley in California and so we think it’s a major opportunity if you were to install selected catalytic reduction or even conventional Ultra Low-NOx burner technologies, you’re looking at price tags of several $100,000 per unit call it anywhere from $350,000 to $0.5 million or more per unit and again that’s before you get to that recurring cost of and the case of selected catalytic reduction consumables and replacement of the catalyst installment so forth and in the case of Ultra Low-NOx burners the recurring cost of operating high levels of gas or circulation in the loss of energy efficiency.

So we think there is going to be fall in demand we’re replacing terms that we negotiated in the option relate to a specific number of units we’re assuming that they had a rationale for identifying that number of units.

In the other cases and you should see these coming up relatively correctly, we’re encountering latter stages of negotiation and then the contract languages been approved in the feed bases and so on. It’s a different scenario, it’s a well installed at our cost if we hit these performance numbers then you seen this effect.

So we did think we’re beginning to get good visibility on revenue and it will obviously improve, it’s still early days. So as we progress certainly for this quarter and next, we’ll have a lot more visibility.

One thing that I did mention in the press release that I think is worth knowing and I think sort of makes all the sense in the world, if it there is likely to be some lumpiness right as we go through this early stage of that, and I talked about this before that there is bookings and billings side of this.

So, the billing side relates to when those system is installed and operating and so on. So let’s say just take an example because I might make -- if you’re talking about let’s say these refineries as what we want you to do these four or these canaries 18 heaters over some period of time.

On the one hand they’re are going to want to negotiate for volume sort of pricing by saying okay, we’ll give us the best price we can will connect to 10 heaters on the other hand with scheduled for installing those systems in those 10 heaters might be a protected one if you follow me.

And the reason for that is that you’re going to install either one you have a window which is open by a scheduled maintenance or you might install opportunistically when you have unscheduled maintenance services or system shuts down so for example there is a situation with one of the customer who are talking about that recently and [indiscernible] to us yet but they had a heater catch fire and so I had to bring it out of service that would have been the time to sort of running their life of pit crew and install the tile opportunistically because again the real cost for these guys is having the systems out of service so rationale for this.

So we think we’re going to have enough deals in the pipeline and I’m probably talking over time about 20 or 30 and as we progress 30 to 40 deals that will start to smooth out some and then on the flipside that of course as you will have some backlog visibility which is a positive thing as well.

So yes, I think to answer your question broadly speaking we’re very much on the cuts here of revenue beginning to slow and right now we’re very happy with the pricing model that I described which is pricing against the next best alternative over time we see nothing but additional goodness on that side because that doesn’t even yet get into the value of the reduced cost of ownership and increased capacity.

So we think we’re going to be able to sustain that premium pricing and potentially even move price upwards as we go and begin to then have confidence and recurring streams from longer term maintenance contract so in some cases and certain types of systems if you can guarantee performance people can tell you on that basis.

So there is some interesting models to monetize this as the data becomes more visible and there is more of it.

Does that make sense?.

Yes, thank you very much.

As a follow up, does that imply that if you can achieve efficiency improvements that there might be way to monetize those ongoing benefit streams to the customer a little bit of it -- shareholders?.

Absolutely in fact it’s an interesting question because I was in Hong Kong back in July and I met with a very well known here in Hong Kong who is an investor, the primary investor in a fund that does exactly that.

So that will go into a situation like this and also you guys don’t have to spend a dime, we’ll provide all the capital for the equipment and the installation. What we want is exactly that some percentage of the energy savings that we produce.

So, that’s one way in which we could participate in that along with them and yes we’ve actually had folks suggest this to us I had lunch a few weeks ago in Bakersfield with the president of a very large engineering and construction company that is heavily focused on upstream oil and gas activity and he said we’re cautious there is really a process improvement.

So, we’re going to price it on that basis and it’s a little over time I think we can that’s going to require that data history that we’ve just been alluding to here.

But initially because we think it’s a faster sales cycle we’re pricing at against our competing capital equipment cost and of course our bill of materials cost is low probably lower than competing equipment and in some cases substantially lower. And I don’t think our labor costs are any higher.

So, I think we’re -- given the data points here but yes I think as we go over time there will be exactly those kinds of opportunities..

You mentioned Hong Kong I think if you look at that Chinese market that’s so visible to us now how is the progress in there? And do we have still protection of our intellectual property there?.

We do and just like everything else in China you’re seen recently in the last year sort of the anticorruption projects and things of that nature and some moves as recently as conversation with APAC to open up markets and the adherence to intellectual property in [indiscernible] is obviously essential to that becoming a player on the global seat [ph] and it’s been our experience and the experience of the folks that we’re close to and our expert in that domain that like everything else in China that’s changed very rapidly for the better than recent years as well.

So we are very close to the guys that we work with there have deep expertise in this domain one of them was in fact --. So the people represent us in China are two former Chief Trade Negotiators to China so they worked for the U.S.

representatives office reported directly to [indiscernible] and negotiated some very-very important trade agreements over the last 30 years with China including some of those early treaties relating to trademarks intellectual property.

While part of that team is also that their former Chinese government counterparts who are now in private practice including an attorney who is very senior in the Chinese government at the time and wrote many of those trademark and patent treaties.

And in fact he then successfully prosecuted several 100 digital rights infringers when he went into private practice. So they are becoming much better at a holding intellectual property law and then and returning judgments as well in that regard.

With reference to the first part of your question in terms of the kind of traction we’re gaining over there, we’re getting a tremendous reception. We are dealing with C level people at major companies ranging from waste to energy to chemicals to oil and gas industry I met with the CEO of a large boiler company in China as well.

And there is a tremendous receptivity to what we’re doing for all the reasons that you might think and for some of the reasons that I mentioned which is the beauty of this is the path for the assumption is always low emissions environmental excellence cost a lot of money.

And when they learn that you harmonize these goals that’s especially important in China where they’re trying this on a macro scale their two biggest goals are improve the air quality that keep GDP at these high levels and keep producing jobs and building out.

So yes we think that’s a hugely exciting market to us and we think good news, this recent news is going to be very well received there. So, we got folks over there waiting for us to come back for a next round of visit and indeed there is some significant excitement on the refinery side and in boilers because which does tell beautifully with our U.S.

strategy because those have been elements of their environmental platform that has been publicly announced. So, there is a great deal of interest in the technology..

And final question is from Louis Basenese with Disruptive Tech Research. Mr. Basenese..

Rick, just two quick questions congrats on the scale with there. You mentioned you guys got into the well into the single digits.

Can you just confirm whether you got under the stated goal of five parts per million from the August 19th press release?.

I think in the press release we referenced the requirement of nine parts per million and again more on easy about disclosing the actual data without coordinating with our customer there for obvious reasons sensitivity to that because -- so definitely rolling on that regulatory rule do you recall what is at the end of the press release six, seven [indiscernible] do you have it front of you?.

So Louis it’s five….

So I know we’re talked about five the bottom line is I will tell you this we think that number the number - you just mentioned five is very-very attainable and whether we have attained it or not would probably be inappropriate for me to say but what was the wording that shows in the press release to stop short of that well into the single digit.

So please mention [indiscernible]..

Yes, that’s we’ve confident that we will achieve that number in that configuration..

Fair enough, just one other question on the pipeline, is there any way to give us a range maybe $1 range or number of bids outstanding and then I’m assuming competitive winning situation since the competitive technology but just want to confirm that..

No, there are not competitive bids, there is not a broad felicitation, they’re competitive to the extent that in some cases absent our technology these customers would be looking at because in many cases it’s because they’re responding to a regulatory timeline so they have to do something, right and so the alternatives are not necessarily big competitively but -- part of the time of reference.

So the number of heaters in the pipeline at the moment is probably in the neighborhood of dozen or so. The number represented by the customers with that dozen is probably in the neighborhood of six present years or so.

A large heater could be a $2 million job something that might have been now 30 or 40 burners, it could be $2 million for single leader, small one could be a $200,000 and so the range of pricing in that domain. So I think in the aggregate you’re currently looking at sort of low seven figure pipeline what is growing all the time.

So those are ones that our proposals have gone out we’ve just got solicitation for one. There is nine heater system in Texas and we’re getting new inquires all the time and there is somewhere we have sort of an agreement that we’re going to do a test and eval but they haven’t identified which specific heater or so.

There is lot of activity, but I hope that sort of give you some color. What we’re encouraged about is it’s not static and that we continue to see both large and small companies moving into it.

I think I touched on this on the previous call a big opportunity to give you some color that doesn’t specifically address your question, but the way we’re thinking about this is that we’re likely to see the smaller companies they have the faster sale cycle and so that’s more of a sales type of activity and they’ve got folks out there who are acting as distributors and we will formalize those relationships very soon here and recruit on those.

We also have larger sources of referral business in the form of large engineering and construction firms. But we think it as sort of two parallel paths one of which is sales to smaller operators and then strategic accounts meaning large operators with many, many heaters and very, very large facilities.

So that’s -- I hope I touched on what you need into that..

Our next question is from John [indiscernible]..

What I read in the press release to have learn fairly but I see you have enough cash on hand and you mentioned it earlier in the call the year on the first call which means you’re going to have to raise some cash likely sometime in the first quarter in order the business going.

Based on the current stock price, while the last time you raised cash $8 a share that was a private deal. And based on the current stock price actually what we want to do $5 or $6 a share.

My concern, my question is earlier you see that we get some revenue flow, any comment in here?.

So John I think there is several things that can happen, the start has been at $14 previously. The company in my view is far more valuable today. We’ve seen some improvements in market conditions. We’ve seen the variety of other catalyst move the stock in the past and putting news. We think there is going to be plenty of that.

We obviously share your concern and we’re going to do the best we can to get sponsorship we’re very underfollowed right now. And I think if you allow put it back that as we produced this news have the success we may see some appreciation in the shares that’s what we anticipate and we’re working hard to do that.

So thanks very much for the question, but….

No idea when the revenue you can anticipate some decent revenues coming in. .

Rick Rutkowski :.

I’ve spoken to John is that we expected to build over the next several quarters and it’s likely to be waited towards the second half, I got to tell you though I mean we’re talking about something here that is world changing in a massive market and we expect the revenue to ramp in the way that you would expect it to do with an innovation of this kind, at first, somewhat slowly and then dramatic acceleration and we’re perfectly happy with that and we think our investors are going to be extremely happy with that and now I have a lot of stock in this company so I think we share your concerns but thank you very again for the question..

I think I remember the last time -- you said you see some really good ramp up before the end at least I thought you said for the end of the third quarter and the fourth quarter now what I hear is first quarter, second quarter..

This is Jim Harmon, the CFO. So, one of the things that I want to emphasize is as Rick spoke, I’ll reemphasize for you is that the field development process has taken longer than we’ve previously anticipated and I think the sales process is going to take more than simply doing one field test and then having [indiscernible] in technology.

Linking to that as we’re talking about large oil companies, these are process oriented companies, they are very capital intensive that shut down of their processes is extremely expensive to them and so they’re very careful about those shut down.

Additionally, they’re also very careful about implementing some new technology into that process and that would fear an interruption. So they want to take due diligence to assure that it that they don’t have interruption there. As a result, -- you actually have a sale where our technology is incorporated into their process is that more time consuming.

So, this is not a we’ve a field test that’s going favorably as is the case down in Southern California right now and then I sort of do a sale in December.

You understand the nature that I’m communicating?.

I don’t just agree with I don’t - in other words how you step back a whole year, revenue this whole process is taking considerably longer and I think that anybody ever ever anticipated I mean there is a good new story at the front..

Hey John, I want to ask you to do me a favor, would you call Joe Colannino, I’d ask him how long it typically took John [indiscernible] to bring me burners to market based on existing conventional technology because we’re actually going far faster than that and this is I don’t want to get into a debate here it’s not really the purpose of this phone call.

So, if you like to call us offline and we can discuss it in more depth with you.

It’s taking us longer us as well but in my view a quarter too in the context and the size of the picture that we’re talking about is really nothing whatsoever and by the way it took Qualcomm longer as well and I’m not trying to compare us to Qualcomm other than that whenever you bring disruptive technology to market the timing is the most difficult thing, this is not a matured business what we’re going from 30 million to 40 million or 300 million to 400 million in revenue and so visibility is more challenging and the uncertainty if you look at the bell curve that they describe bringing new innovations to market, the reason it has that shape is indicates that uncertainty so yes, -- we would have all love to borrowed popcorn and ice soda and have the movie be over in an hour and a half and be sitting on our piles of cash but in the real world we’re in the factors like Jim mentions come into play and the factor that it’s new, it’s unfamiliar, we’re incredibly pleased with it and if it like discuss the further we’re more than happy to do I think the way that is just call us offline and we’ll be happy to get into it.

So, I want to make sure we’ve time for another question here..

Our next question is from [indiscernible]. .

So my question is I would like to get one I guess let’s say I have two questions.

First one is to understand the area of timeline, I guess what is most important to ask - to me in the rest of the world is the independent third party confirmation and so what we’re based on the standards when you expect in the coming weeks so to ask for the independent testing with the regulator? And then the second question is I guess we had expected that if few of these deals, pipeline deals would have been announced by now, is there a timeline of those?.

Yes, I think it’s timeline I just gave you that we think that this quarter and into the first quarter some of these are - so let me describe a dynamic to you and you can tell me whether you think it’s the right way to handle it or not.

So, let’s say it get under a refinery and they want to purchase one heater and I manage to up sell among 5 which can take a little bit longer to do the up sell because if that got back in authorized the budget for 5x initial spend, were conditional time. I mean it’s a rhetorical question in my view it is.

So I think folks what I’m hearing is, people wanting the kind of predictability that you would typically associate with the company in a later stage of the commercialization effort. We are just making transition from laboratory instantiation of the technology.

By the way as I mentioned moving at lightning speed from a proof-of-concept prototype a year ago to a factor of 450 and scaling in something like that and a year plus kind of timeframe. So what kind of visibility, so if you think about how statistics work -- the predictability and validity of statistical models have to do with sample size.

So every year on the front end of this kind of curve will final you always encounter more challenges associated with that and we do the best we can. We try to be transparent and cause it’s a good thing to do that.

But you think it helps my negotiating faster with these guys and by the way this has come back and hurt us before in negotiations when we’ve been prevailed upon us to get timeline and there is another guy on the other side of the table negotiating with me knows that again my head on the timeline.

So right now it looks as if we’re I have no idea I hear the questions you and John are asking I feel like you’re missing huge pieces of the big picture with all due respect here. .

Don’t misunderstand me I completely appreciate the not wanting to give up any sort of negotiating leverage but understandably as John saying there is a -- a liquidity constraint which perhaps you’ve already accounted for. .

[indiscernible] can I offer you the same suggestion I offer to John given the sensitive nature of the topic and you call us offline and we’ll discuss it..

Absolutely, but I was hoping to understand that there is a plan would be attracting specifically I know you guys want to do --.

I can’t comment on and that would be hugely an appropriate for me to comment on something that occurs between customers like that and a regulatory authority again I hope you appreciate the sensitivity of that..

Okay. Yes, absolutely. Thanks..

In any case. Thanks very much everyone for joining us on the call today. We’re excited about what we think is a major event that promises to deliver huge changes in enormous global market here in the U.S. and overseas especially in China as I mention.

As we’ve said what we thinking we’ll see is a series of really important validation events I mean I hope that John would acknowledge that if we can sign anytime the contract with a major oil company to go and testing the value to system in a refinery and specially having the success behind us that’s likely going to be seen by the market as further evidence that this technology is going to.

And by the way if you do call me I’m big more than happy to share some of the commentary and the color. We’ll get third-party experts that people can talk to you about the significance of the technology. What we’re not trying to build $20 million or $30 million business here.

We’re trying to build something much, much larger than that and trust me I appreciate the need for patience and sometimes with difficulty in doing that.

But we remind ourselves that the value under the curve has to do with the lot of components here and in terms of not just how quickly we move but how fully we value the technology and the pricing models that we use and the monetization models that we use as asked in the earlier question.

So we’re extremely happy from the perspective of people who are trying to build a very large business with the names who are lining up with size of the deals, with size of the upside with any two of those accounts and I think what offset this as I said this period of performance thing is interesting in that let say for example you have booked several dozen heaters which by the way could be $150 million worth of business.

But the period of person if 2.5 year performance, that’s one customer potentially, right. That’s not a bad problem ultimately. In the early days yes, you’ll see some lumpiness, you’ll see some -- but overtime the benefit that you get is visibility further out into the future because of that backlogs that builds up.

And that’s really sort of what we’re trying to achieve is enough deals in the pipeline that we see that smoothing effect as quickly as we can.

But if anyone that ever been an investors in disruptive technology and I’ve been doing this for 20 years it’s my experience that first deals are only hardest ones to predict some of which are obvious and some not as obvious.

So in any case I want to return to the notion in general this a huge milestone for us and we really appreciate the support of all of you folks. Thank you so much..

Conference is now concluded. Thank you for attending today’s presentation. You may now disconnect..