Don Weinberger – IR Aldo Petersen – Chairman Sune Mathiesen – CEO.

Eric Stine – Craig-Hallum Joe Gomes – William Smith & Company Richard Dearnley – Longport Partners Gary Zwetchkenbaum – Plum Tree Consulting Walter Schenker – MAZ Partners.

Presentation:.

Greetings, and welcome to the LiqTech International Incorporated Third Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief and question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder this conference is being recorded.

It is now my pleasure to introduce your host, Mr. Don Weinberger. Thank you, sir. You may begin..

So, Aldo Petersen, Chairman; and Sune Mathiesen, CEO will begin their formal remarks shortly. Before I turn the call over to them, let me remind our listeners that following the conference call, there will be an open Q&A session. You should also note that a replay of the conference will be available starting at 3:00 p.m.

Eastern Time today ending on November 27, 2014. To access the replay, please dial 877-407-8029 and enter the conference ID number 13595278. The access number for the replay for international callers is 201-612-7415 with the conference ID number 13595278.

If you do not have the access to the release, please contact my office at 212-370-4500 and we will be pleased to immediate relate the details of the replay either by voice, e-mail or fax to you. In order for all listeners to have the opportunity to ask questions, please limit your question participation initially to one question and one follow-up.

After all the individuals have had the opportunity to ask their question, you’re welcome to ask further questions. Now please bear with me for a minute as I read the forward-looking statements. The press release and conference call contains forward-looking statements.

Although the forward-looking statements reflect a judgment of management, forward-looking statements are inherently subject to known and unknown risks and uncertainties that may cause actual results to be materially different than those discussed in the press release and conference call.

We therefore urge all listeners to careful review and consider the various disclosures made by us in the reports filed with the Securities and Exchange Commission, including the Risk Factors that attempt to advice interested parties of the risks that may affect our business, financial condition and sales of operations and cash flows.

If one or more of these risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected. We therefore urge all listeners not to place undue reliance on these forward-looking statements, which speak only as of the date of this release and conference call.

We assume no obligation to update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this release and call. Having discussed with that, it is now my pleasure to have Aldo Petersen, beginning the conference call with his introductory remarks. Aldo, please begin..

Thank you very much, Don. And good morning, and good afternoon, ladies and gentlemen, and welcome to this conference call to present and discuss LiqTech third quarter results. As you are aware, at the end of July LiqTech completed this acquisition of Provital and the numbers announced today represent two month of impact from the Provital business.

We’re very pleased to report an operating profit for the first time since the first quarter of 2012. And our DPF business has peaked. As expected we saw a continuing improvement in the underlying liquid business and the impact of the Provital business.

We’re also pleased with the progress we have made in integrating the new Provital business into LiqTech, we would spend a great deal of time and efforts during this quarter in readdressing our business strategy going forward. And we will share some of the key elements of that with you today.

Our focus in integrating LiqTech with Provital is to form a much stronger offering to our target markets combining LiqTech’s expertise and silicon carbide membranes with the system applications and expertise of Provital under the leadership of our new CEO Sune Mathiesen.

The new LiqTech is in the progress of streamlining its range of products and systems offerings to our customers.

As we have noted before, the challenges of getting large system integrators to adopt silicon carbide membrane have been more difficult than we expected in the number of our business partnerships like large filtration systems or shell and fracking systems for FMC, we have experienced significant delays from initial test in two commercial units.

We therefore readdressed the future strategy at LiqTech and are now comfortable that we have the right focus going forward. First, we will focus our effort on existing partnerships with large system integrators and end-user customers with a more streamlined range of solutions that have already been proven to work.

Our silicon carbide membranes are very effective in certain applications in the oil and gas industry and we will focus our efforts into application areas. One, is the treatment of brackish water and two is waste water treatment. These are the only application areas that we will presently focus on with our large system integrated business.

Second, we have narrowed the range of target markets and applications. For example, we have developed a number of filtration solutions for coal fire power plants and the fish farm industry and we are spending resources to develop these in customer applications plus a few other similar applications.

System sales from these applications will form the base of much of our future revenue stream along with much higher gross margin potential. Our emphasis in the fourth quarter will be to expand our filtration solutions into our target market applications and to higher dedicated sales people for these markets.

Third, we are expanding our Provital with swimming pool market opportunities and will allocate capital resources and manpower to accelerate our market penetration. Fourth, we intend to expand our U.S.

operations over the next two to three quarters to be able to better service the North American market with our full range of membrane technologies and system integration on top of the diesel particular filter business that currently represents the majority of our U.S. sales.

And fifth, we will continue our efforts to increase sales of DPF filters, even though the anticipated market ramp up for diesel particular filter has still not yet happened.

The integration of the Provital business into LiqTech has clearly shown that LiqTech will more quickly benefit by offering its proven silicon carbide membrane technologies as a small scale system integrator. We will spend resources in the coming quarters to strengthen our offerings in sales to our target market segments.

A lot of effort and resources have gone into the integration of Provital and development of new systems. And we’re pleased in achieving a profitable quarter despite the extra work and the fact that the third quarter is typically a slow quarter due to the European holiday season.

I will now turn over to conference to our CEO, Sune Mathiesen, to discuss the specific business areas.

Sune, please?.

Thank you, Aldo and good morning and good afternoon ladies and gentlemen. It’s a pleasure for me to talk about the Q3 announcement today. In Q3, we had revenue of $4,931,000, against the $2,949,000 in Q3 2013. We had gross margin of $1,467,000 representing 30% against $274,000 or 9% in Q3 2013.

Excluding this depreciation, the gross margin was 37.6% for the quarter. EBITDA in Q3 was $221,000. Q3 was the first quarter since Q1 2012 for us to deliver positive net results. I’ve now been with the company for just over 100 days it has been a busy and interesting period of time.

One of the first things we did was to create a new management team consisting of key employees from both LiqTech and Provital. The discussions and the work in this group have resulted in a new strategy that we have been successfully implementing.

We have narrowed our focus to a limited number of applications being printing water, means treatment of ground water, surface water or other water sources for portable water. We also focus on pre-RO for dissemination.

Industrial applications, we continue to focus on our successful applications within the heavy metal removing from power plants and chemical plants and to continue our work within the oil and gas industry. The tool market, with the increased working capital we can now increase our sales efforts in our existing markets and expanding to new markets.

EPS, we have expanded our focus in the DPF market to two delicate scenarios like power generators and terminal [ph] industry. We are actively seeking to gain market share all those clients. All of these performance and applications, our applications were already proved our product many times. Our offerings of these industries are now complete.

We can offer anything from standalone maintenance or fore system. We can even offer installation and service. By limiting the number of applications, we ensure that we can become specialists within the specific application areas. By doing so, we can guide our customers better and become a more valuable partner to them.

Each of our focus areas are already huge markets. So we’re not afraid that we’ll lose out on business opportunities. But it doesn’t show that we will be busy selling products instead of all existing new applications. As we grow our business, we will expand our focus to include other applications.

We’ve been doing a lot of product development over the past months. We have developed standard units for patent and crossroad [ph] applications to bring down the production cost and the lead time.

We have developed new compact and priced competitive unit for residential swimming pools and most importantly we have developed our newly released LED based UV disinfection system. The UV system will be ready for delivery in Q1 2015 and we’re already starting to receive the first orders.

We’re very excited about this new product and could be sold as standalone system but the ability to combine it with our unique membrane filtration will open new possibilities for us.

It’s important for me to underline that we’re not neglecting the large opportunities like FMC, Shell and the Saudi Arabian water market that you all heard about but we are creating more stable business and a large opportunities will now be the icing on the cake instead of being the base of the business.

By doing so, we expect to improve our gross margin to more satisfactory level. Having said this, I would like to turn the conference back to Aldo. Thank you..

Thank you very much, Sune. And it is important to again underline that this focus area will ensure that instead of us, as we have been doing for the last three years developing the 2.0 versions of system. We now have a range of offerings that we can go directly to market with.

And therefore the current ramp-up in our sales force in North America and in the different business areas is something that is undergoing right now and that we will continue to see a specific impact on. The one impact that we’re not happy about is of course the development of the share price over the last month.

We have seen quite significant drawback on the stock price but at the same time, we have seen the majority of the management of the company continue to buy the stock in the company. And that shows that we and management are very comfortable with the new strategy and where our new management is taking the company.

So, with these remarks from Sune Mathiesen and myself, I would like to turn over the conference to any questions. Please..

[Operator Instructions]. Our first question comes from the line of Eric Stine with Craig-Hallum. Please go ahead with your question..

Good morning guys..

Good morning, Eric..

Hi. So you talked about this new strategy, your narrow focus. I mean is that further than you’ve previously discussed and then in light of that, does that change kind of the outlook on the OpEx side and in that clearly was an area of nice performance in the quarter.

But how should we think about that going forward?.

I will let Sune elaborate but just to say that that what we have been very intrigued about having added Provital to the company is the base of their technology, their software, the knowledge of how to use our membranes. And the ability to come up with quick solutions to a number of new market opportunities.

So, to answer part of your question Eric is, that in developing new system it will not put a burden of any significance on the company to develop these new systems.

It’s an integration of knowledge from Provital using our membrane for a range of new applications and not R&D effort into figuring out how to get these systems to work in specific markets.

But Sune, please elaborate on what we have been doing in this quarter and where you see these applications and the cost of these applications in development go in the future..

Exactly. What we tried to do Eric is that over the past months we’ve been developing a number of standard systems. Much like what Provital system we have for swimming pools that’s the dead-end system.

We now are looking into the business and we’ve been developing a standard crossroad unit that we can easily scale to the applications we are looking into. So, it’s not going to be a big burden on us, in fact we have already developed these systems and they are ready for the market now. And this is exactly why we chose the applications that we chose.

One, we already proved our technology into those applications, two, they fit into the strategy we have to sell standard systems instead of testing and so on, we just felt basically what we already developed..

Got it..

I think Eric, that again underlining from your question, what we see the big change in the business strategy of having added Provital is that LiqTech has very much been on the receiving end from large system integrators on trying to fit their product into very specific designs of applications.

And in doing that have been forced by accommodating a lot of existing structures in systems that some substance and more often unfortunately didn’t fit in perfectly into how our membranes is optimizing the quality.

By now taking the Provital approach, building dead-end systems that are offered to the market but not designed individually into different solution. It gives us we believe a better gross margin. It gives us a much faster approach to market.

And it will enable us to much more efficiently have our sales force dedicate themselves to very specific markets with ready-to-operate systems instead of developing existence into specs..

I mean, does that enable you to – you talked about in the past adding a specific number to the headcount.

Does this new strategy change any of those plans?.

It does not..

No, I would say it emphasizes exactly those plans of hiring sales people instead of hiring engineers to develop systems. So the approach and what is undergoing in LiqTech right now is to hire the specific sales people for the U.S. operation, hire the specific people into the applications that we are providing.

It allows us to, you could say hire more specific people, it allows us to hire people who have some experience with the applications that we now have in hand.

So, if anything, it focuses our ramp-up of sales people into very specific systems so we get more specialized sales people into the company instead of a broader engineering sales oriented number of people..

I can elaborate a little bit on that Eric. The people we are hiring at the moment will be application specialists meaning, when we want somebody to sell to the pool industry, we hire somebody from the pool industry who knows not only about filtration, not only about membranes but knows about the application itself.

And he will be able to support our customers in a much better way and be more valuable to them. The same goes for the business applications that we are looking into like the water industry, drinking water industry, like industrial industry. We hire application specialists we want to be a partner to our customers.

We want to give them support and service. And we believe this is the right approach..

Got it, okay..

And to just add a bit more, and again looking at the numbers, the revenue stream that is generated. Although there is growth in the revenue from the traditional LiqTech business, so membrane sales and DPF has growth compared to the same quarter last year.

But what improves the margin is that we have now come to a stage where the production of our membranes is at a very high quality. So the output is now at a very high level, meaning we have a very low scrap rate. We have a dedicated membrane that goes into very high margin systems that we’re delivering to the market.

So, we think that not only does it allow a small company like LiqTech to eliminate the – you could say deep focus that we have had on trying to do business in all kinds of applications but now focus to specific applications that will drive not only our revenue but it will also drive our gross margin..

Okay, thanks for that color. That is very helpful. Maybe last one from me, just an update on the FMC development or that program. Thank you..

Yes, and again we are working closely with FMC. We are – we have been told that we are expecting to have the first major system for this quarter. Nothing has really changed in that. Although we are hearing from FMC the concerns from the fracking market on the declining oil prices. But again, we’re still confident that we are on track with FMC..

Thank you. Our next question comes from the line of Joe Gomes with William Smith & Company. Please go ahead with your question..

Good morning..

Good morning, Joe..

Good morning..

I understand the focus of booking forward here in a combined company environment. But I just need to trying to go over some of these numbers here. Assuming my math is correct, which could be wrong. If I look at the quarter’s numbers just under $5 million of revenue send the underlying LiqTech business was up 11%.

That means if I back that out, back out the Provital contribution, we were down sequentially on revenues both in membranes and pretty significantly in the DPF business sequentially, which goes against what you guys have been saying especially in the DPF side where you’re seeing significant progress, additional orders in California and China and the U.K.

I’m just trying to get a better understanding of what are we missing here that these – our expectations for these markets just had been off here.

And I was wondering if you might be able to address that?.

I think Joe if we take the different markets we see that the traditional LiqTech membrane sales are up about 14% compared to the last quarter. Our DPF is up 10%. It is not any significant ramp-up. I think what we have said is that we start to see an order flow we have said that, we are seeing DPF bottoming out.

And we start to see that some of that business is coming back. We have said that we do not expect in our financial model that we will see DPF come back to the level for 2011 and early 2012. But we have seen that the decline in the business has stopped.

But not any significant ramp up and what we’re now focusing on is that we are start – we have seen it bottoming out, we start to see some of the business come back. And we are sure that the DPF business has bottomed out. We’re not foreseeing or predicting that the DPF will have any significant growth in the coming quarters.

But that it will steadily continue to improve over the quarters from 2013. When we look at the membrane sales, and again, yes, the strategy of LiqTech has been to get these multi-million orders in South America, in Saudi Arabia with FMC with them. And as we have talked about over the last couple of quarters, those are very much still in the pipeline.

But again still in the pipeline they haven’t materialized. And the reason why we acquired Provital was the understanding that we are now seeing a much better opportunity if you could deliver the end-system to the customer. This is what we are preparing our company for. This is what we have been working on in the third quarter.

This is what we will continue to work on. And then have FMC, Saudi, South America, as large order coming from quarter-to-quarter, not every quarter but the quarter from quarter in 2015..

Yes, I understand the numbers were up year-over-year, it shifted down sequentially.

I mean, in the second quarter, cash balance was $2.1 million in this quarter it looked like they are roughly $1.5 million but just…?.

And the reason and I tried to say that. But let me elaborate. If you look at any third quarter, they are always the weakest quarter of the year due to a full July of holidays. And in Europe, part of August is well. So, there is very low activity in the July-August month in Europe. So always set the quarter.

So, to have it – to have expectations of a higher sequential number for Q3 is very difficult. So, that’s the reason. Also the implementation of Provital and having two-month numbers of Provital into the third quarter also is an impact..

Okay. And on the Provital business, I think originally and correct me if I’m wrong. The expectation was in order to make the earn-out here for the second traunche of the shares you’re going to have to do either $12 million of revenues with 10% EBITDA margin or $10 million of revenue with 20% EBITDA margin.

I’m just trying to figure out how comfortable you guys are with meeting those goals?.

Again, what we are very comfortable on is that we definitely are in a much higher margin business. We also appreciate the focus on developing under the Provital business the new system offerings into the market. So, again the addition of Provital into LiqTech has been a very, very significant help into our business offering.

We are very comfortable that Provital will accumulate very large revenue not only in the pool market which is a very growing market but also with the other applications..

Okay. And one last one and I’ll get back in line, kind of sticking with Provital.

What if you had to give me update on the – pardon me, on some of the test systems you’ve been doing for I think Seaworld and Disney and what’s going with Ritz Carlton these days?.

Sure. Ritz Carlton, we’ve seen that we inspect for number of Ritz Carltons in the Asia Pacific region. So it doesn’t mean that we got it yet, but we are in the specs for nine new builds at the moment. So those are forbidden in the market. Regarding Seaworld, we are conducting an additional testing in Aquatic right now, which is going according to plan.

We will in fact be on site next week to the new Norway installation. And this mean has been brought all, this well. And I’m happy to say that we’re going to be one of the first ones to have delivery of our new UV system..

Great, that sounds great. Thanks. I’ll get back in line..

Thank you. Our next question comes from the line of Arthur [indiscernible]. Please go ahead with your question..

Good morning. I have a question relative to competition by Lockheed Martin, who I understand has a graphing which is supposedly just strong as your carbon membrane cylinder.

Do you have any response to that?.

It’s not something we are seeing as competition in the market really. I must admit that I’m not familiar with the Lockheed Martin price. But we, it’s not something we saw in the marketplace until now anywhere. So definitely we’ll do study on that and see how that compares to our oil price..

Arthur, I think it’s an excellent question because again new membrane technology is will come up in the market and then, it’s a huge market. And of course the question is silicon carbide, second hardest material they come up with products that are equally good or better or close to being as good as ours.

But I think both Lockheed and which is a gigantic company and a small company like LiqTech will again face the longevity in getting these products into end-systems, these products needs to go to significant testing. They need to be implemented into new systems. So it will take time.

And therefore I think again underlying the strategy focus that we have to come up with end-customer solutions to various specific markets.

If we are going to meet Lockheed in those markets that will take some time because their strategy is probably not to be an end-system provider into the pool market or into smaller fish farms or smaller power plants.

So, to have your end-system is a way to have not to eliminate but to have a competitive advantage into the market that will make sure that you cannot just be replaced by another technology..

Yes, well I appreciate that. Go ahead..

Okay. I can actually elaborate a little bit on the Lockheed margin membrane. What we’re developing is racking in membrane for desalination which is something we are at the moment not looking into, what we’re doing is pre-RO or we do other applications.

So of course so, it’s not a direct competitors line, it’s more like a competition for polymer membranes out there..

And you think last there is no that Lockheed Martin long-term and to see it into your area at all into smaller pools and things like that, where going after there would be enough looking for just larger projects?.

I doubt that it will be suited for that. It’s a selective ionic transport membrane.

So it’s soft membranes of course, which means that the fruit which also membrane like the Lockheed Martin on what they are looking, there would be significant investment than what we have, which means that the applications we do within drinking water, within swimming pool business, within the power plant business, they all require very high fleet rate to that square inch.

And this is not something achievable with a technology like that..

So, gentlemen, you are familiar with the Lockheed Martin transaction?.

Yes..

Because I heard earlier someone say they hadn’t known of Lockheed Martin and you’re telling something was different a bit?.

We know about the graphing membranes which is what they’re developing. So that was my mistake. But it’s a graphing membrane which is soft animated membrane and consequently a very low throughput..

Okay, thank you..

Thank you..

Thank you. Our next question comes from the line of Richard Dearnley with Longport Partners. Please go ahead with your question..

Good morning.

Could you update the salesman count and then also what are your targets for adding by year-end or into next year?.

What we’re having right now in our combined companies we have, about currently 15 sales people in the different divisions. We are right now hiring we have a specific target of hiring five sales people to our U.S. operation within the next two quarters. So, by end of first quarter, we should be about eight sales people in the U.S. operation.

We’re hiring five people into the pool operation of Provital. And we are hiring five people into the different new applications. So each application will have dedicated sales responsible. So, we’re looking within mid-2015 to have added another 15 sales people..

Good, thank you.

And then, what was the EBITDA in the quarter as measured by the EBITDA threshold breakpoints for the earn-out?.

To I understand, the EBITDA was $221,000 for the quarter. And compared to, well, that was in case the earn-out EBITDA number was different than reported EBITDA. I was looking for whatever methods that the earn-out was based on not – if that was different than reported EBITDA..

No, again the earn-out is related to the fact that it needs to have a 20% EBITDA on revenue if it’s the lower of the two numbers or a higher EBITDA number. So, it is a 60 million krona [ph] which with a current dollar exchange rate is about $8.5 million with at least 20% EBIT. And we have significantly more than 20% EBITDA margin on Provital business.

I can say that of the revenue for this quarter about close to $1.7 million was from Provital. And they contributed about $530,000 in EBITDA. So, you can see close to 30% EBITDA margin. So they are contributing with a high margin into the company. And so those are the targets..

So, the old LiqTech had a negative $300,000 or so EBITDA?.

Yes. The old LiqTech had an EBITDA in that range. But again compared to 2013, where it was about $1.3 million. So, we are happy to address that. Although the old LiqTech is not at a positive EBITDA yet it has managed to bring down the EBITDA loss quite significantly in the third quarter compared to the quarter of 2013..

Right, okay. Thank you..

Thank you. Our next question comes from the line of Roger Liddell with Clear Harbor Asset Management. Please go ahead with your question. Our next question comes from the line of Gary Zwetchkenbaum with Plum Tree Consulting. Please go ahead with your question..

Congratulations Aldo and Sune on your revenue increases and profitability. From what I’ve heard so far, I want to focus on going forward. We’ve heard about $1.7 million from Provital, we just heard about the EBITDA from Provital. And those are very exciting numbers.

So, if I may, I’d like to ask you regarding Provital and talk about the current quarter, in other words if you would discuss revenue from Provital, the two months that we had focused on the new business, municipal water.

Talk to me about the gross margins that are received and the revenue areas that this acquisition provides? And going forward into 2015, how this gross margin is going to affect gross margin for the company in this integration? And then talk about the segments that you’re focusing on?.

I can start by taking the overall and then you can go into the segments Sune. Thank you very much Gary. Yes, again, for a number of quarters LiqTech has been a loss leader, and you have been following us for a long time. You know how important it is for us as a company to get to profitability because it’s a much safer base to grow your business.

But again, rightfully so focusing on gross margin, and as we stated on the acquisition conference call that we had, what is very exciting from the Provital businesses that they operate with gross margins within 60% to 70% on the systems that they’re providing to be cool market.

We’re very excited to see that on the systems that has been developed and delivered to customers, which is in the fish farm market and in the power plant market we continue to see the same gross margin as we have seen in the pool market. So, the gross margins from system sales are very, very significant.

And which is why we at least try in this conference call to underline the fact that now getting LiqTech and not LiqTech Provital because what we’re seeing is that it’s a much-much better integration between the two companies of being a system provider in a handful of different applications that all are carrying very exciting gross margin.

And again, if we look at this quarter and we look at a combined gross margin of our companies, and we now understand that that Provital is about 35% of the revenue that we generated in this quarter. But the combined gross margin was 37% for this quarter.

It just shows that a third impact increases the gross margin because it was about 30% in the last quarter so, very significantly. Which is why, that I think that having those different applications for 2015 brings for us very exciting opportunity for LiqTech.

And Sune, if you would please, talk about the specific applications and the margin expectations in these different areas?.

As we explained earlier Gary, what we spent the past months doing was developing new systems to fit the applications that we’re now looking into, which means that we have developed new standardized solutions for crossroad filtration, semi dead-end filtration and so on.

This now allows us to go out and approach the customers, selling standardized units and obviously this will drive the gross margins to the level that we would expect to be in the region of 60%. And I also have to say, we do have an ongoing DPF business, we do have a number in sales of membranes at a lower gross margin.

So, combining those figures you would expect something like 50% gross margins in the long-term..

Can I ask you Sune, I’m very excited to see gross margins like this. I’m excited to see standardized products. You’ve been talking about the lengths of the sales process now in this area, meaning months and not years. And talking about potential 50% here you focus on specific areas.

It looks like going forward if you can give us an idea on the areas on Provital, you did $1.7 million which is 35% in two months what you added to EBITDA. I think the new LiqTech is what we should be looking at going forward. I understand the disappointments and what’s going on.

But I’m excited to see Provital the fact that we’re going to be doubling the revenue of this company sometime next year.

If you can talk a little bit about the areas going forward and the sales process and what you saw when got on the synergies with LiqTech?.

Well, what we will do, first of all Provital would still be the pool business and nothing else but that. What we will be doing in Provital as well as building systems for LiqTech customers. So, the Provital business we grow from the pool business and we see a steady growth in that. So, that’s very satisfying.

Then, additionally we develop these new standardized systems for the LiqTech areas going 20 more, which means that we have actually now standardized solutions where we can go to the municipalities and with a standard unit? And treat the water instead of buying central systems and so on.

And we also see that we actually have a very attractive CapEx on those systems, as well as of course the old plant where we are performing outstanding in consent basis. So, that will be one of the major focus areas on the ground water treatment for drinking water.

Then we will also focus a lot into the industrial applications mainly having that removing where we also develop the standardized crossroad systems. And we see that we can apply them very soft in these industries. As far as the significant orders we have for the past months, is instead of these industries and we have a very short lead time in this.

So, by adding the sales force we are doing, specialized sales force into the drinking water industry, specialized sales force into the industrial applications, we can now take these standardized products, go to the customer with a finished solution which they understand better than us coming with a membrane where they have to approach a system integrator to apply that membrane to system.

So, I hope that answers your question Gary?.

Yes. I just have one more. I’m sorry. On industrial applications, we heard about the coal industry and what’s going on in Germany.

Does any of this translate to that initial business and the eon or ion business and the potential of that business to continue what scope, how much is it, can it move to the United States on the coal finding?.

Well, for the coal find plants, we sold membranes to system integrator who will sell the systems to yen [ph]. We have done exactly the same if you look to the press releases we did over the last months we did exactly the same one day each power plant. But with this standard system from us, which means that we already delivered it.

The case in Germany is that the system integrator still believes system. And so, now we have a standardized solution for this industry. There are several hundreds of power plants in Denmark we can approach with this solution. There are close to 1,000 in Germany we can approach and more opportunities in the U.S. as well..

Thank you very much..

What is very important and very key focus area is to expand our U.S. operations of not just being into production of DPF and sale of DPF, but now being also membrane based, there is a lot of activity on the membrane business going on in the U.S. And within the coming quarters, also enable our U.S. operation to be able to build the systems for the U.S.

market. And in doing that we will definitely focus our business on exploring the opportunities that we have seen materialized in specific orders as we have done in Germany and in Denmark. We will have time for one more question so, please..

Thank you. Our next question comes from the line of Walter Schenker with MAZ Partners. Please go ahead with your question..

Thank you. Well, most of the questions obviously had been answered it’s been a long call.

Can we just give us some harder update on when you’re expecting the orders from Saudi Arabia which is moving away from sand filters because of the rate on issue? And where you have demonstrated it better technology in Europe filters?.

Yes, right. There is testing going on with the different applications down there. We have integrated our membranes into the Rex. And our partners down there the Cano Group, is performing these tests. As we have said earlier on, they have a lot of coals out into the market awaiting the acceptance from the Saudi government.

We don’t know exactly when the Saudi government is accepting these. But we are expecting to see order flow starting in the first quarters of 2015..

Okay, thank you..

Ladies and gentlemen, there are no further questions at this time. I would now like to turn the floor back over to management for closing remarks..

I would like to say thank you very much for spending an hour listening into our conference call. We look forward to continued progress. And have a very nice day and a nice evening here in Europe. Thank you very much..

Ladies and gentlemen, this concludes our teleconference for today. You may now disconnect your lines at this time. Thank you for your participation. And have a wonderful day..