STWA's (ZERO) CEO Gregg Bigger on Q2 2014 Results - Earnings Call Transcript

Aug.11.14 | About: QS Energy, (QSEP)

Save The World Air, Inc. (ZERO) Q2 2014 Earnings Conference Call August 8, 2014 4:30 PM ET

Executives

Gregg Bigger - Chairman of the Board, Chief Executive Officer

Operator

Greetings. And welcome to the STWA Second Quarter 2014 Business Update Conference Call. STWA also reported financial result today for the second quarter ended June 30, 2014. If you did not receive the release, it is available on the Investor Relations section of the company's website at www.stwa.com. This call will be available on the website for 60 days. Please note that some of the information contained in this conference call contains forward-looking statements that involve risks, uncertainties and assumptions that are difficult to predict. Words and reflections reflecting optimism, satisfaction with current prospects as well as word such belief, intent, expect, plan, anticipate and similar variations within forward looking statements. But the action did not mean as the same is not forward looking. Such forward-looking statements are not a guarantee of performance and company's actual result could differ materially from those contained in such statements. Several factors that could cause or contribute such differences are defined in detail in the risk factors section of STWA's Form 10-K filed on March 17, 2014. These forward looking statements speak only as of the date of this call and the company undertakes no obligation to publicly update any forward looking statements or supply new information regarding circumstances after the date of this call.

It is now my pleasure to turn the call over to CEO and Chairman of the Board of STWA, Gregg Bigger.

Gregg Bigger

Thank you. I am very please to be hosting the business update call and to spend some time reporting to you on the company's progress. This call is intended to allow investors to hear our progress first hand and to provide further color to the information we filed with the SEC today on our Form 10-Q as well as the information from other SEC filings including our Form 10-K for the year ended December 31, 2013.

In terms of key developments, I am pleased to be able to announce we estimate generating revenues from the company's Applied Oil Technology. In August 2013, the company entered into a lease agreement with the major North American pipeline operator under which the operator agree to lease our AOT equipment at a cost of $60,000 per month to test the effectiveness of our technology on one of their operating pipeline during the initial six month term of the lease. The equipment provided under the lease is configured as a four pack with four AOT midstream pressure vessel installed in parallel with accumulative maximum flow capacity of 20,000 gallons per minute. And capable of processing more than 600,000 barrels of oil per day. In June of this year installation was complete, our equipment was commissioned and the lease was expected by the pipeline operator, full scale testing commence in July. On July 15, we were notified by the pipeline operator that they believe before term of the lease would not be necessary to successfully complete testing as such they would be terminating in 90 days in accordance with the terms of lease, the lease continues to be effective through October 15, 2014 and testing of AOT equipment on the pipeline is ongoing. Although testing and operational details are protected under a non-disclosure agreement, I can say we are very encouraged by preliminary test results. We will report ongoing test results to you in future. Also in July 15, the company entered into a lease agreement with the second North American oil pipeline operator under which the operators agree to lease and test the effectiveness of the company's AOT technology on a pipeline located in the Eagle Ford Shale, which delivers crude, condensate to refinery's petrochemical plant Ford facilities on the Texas South Coast. The equipment provided under this lease is configured as a single AOT midstream pressure vessel with a maximum flow capacity of 5,000 gallons per minute. Capable of treating more than 150,000 barrels of oil per day. We plan to deliver the equipment and initiate the lease no later than December 31, 2014. The initial term of this lease is for four months with a next option to extend the lease for up to a maximum eight per months, payments will be $20,000 per month with a standby provision dropping rent to $5000 per month, the equipment is temporarily removed from the service for pre location. For complete details on this lease I point you to our 8-K filed with the SEC on July 21. Comparing our first two leases provide an interesting perspective on our market opportunity and development strategy. Each of these pipelines is operate under vastly different tolerating, conditions, rapid, turbulent, oil versus forward diameter flow, pumping crude oil versus condensate with equipment configured to process between 150,000 to 600,000 barrels of oil per day. We have the ability to optimize our equipment configuration with a set of operating conditions and characteristics unique to each pipeline and each operator. Leveraging these capabilities we are actively seeking opportunity in the U.S., Europe, Canada and Africa. Today, we have non disclosure agreement with five energy companies. While this doesn't guarantee we will sign lease or sales agreement with these firms, our progress today demonstrates there is market demand for AOT. And that we are proven to build, we have the proven ability to design, sale and deliver equipment certified at the high quality standards demanded by the oil pipeline industry. As a company, our goal is to commercialize innovated solutions for improving a flow of oil from relative point of sale. To this end, our flow assurance system has shown in laboratory and operational setting that it can significantly reduce viscosity of oil in transit. Reduce viscosity has the direct effect of reducing operating pressures and the energy and cost required to transport oil. Indirectly, our technology have a capability of unlocking pipeline chowk lines, increasing pipeline capacity and reducing pressure induced temperature increases all at significant cost savings to oil producers and operators. AOL system utilizes a technology originally developed by Temple University which do a process of the dielectrophoresis engages the paraffin and asphalt content in crude oil. Organizing these randomly distributed particles into tightly packed bundle which passed more efficiently through a pipeline. STWA has commercialized this technology in collaboration with Temple University and holds worldwide exclusive licenses to Temple's related patents. The company has also filed for patent on a new technology developed exclusively by STWA which is utilize process knows as joule heat on which low voltage electric current is used to directly heat oil to electrical resistance. Small scale testing has been performed by STWA, confirming its efficacy of the joule heat system. We are now in the process of commercializing this technology specifically targeting the upstream pipeline market. Vast network of smaller pipeline which typically deliver oil to midstream transport hub. We are very excited by the potential of the joule heat system. The upstream is a massive market compared to the AOT the size of the joule heat system is much smaller; the price point will be significantly lower, greatly decreasing our expected time to market sale cycle. We are currently working under non-disclosure with a major upstream pipeline operator to move our first joule heat system to operational certified testing. We have assembled the comprehensive team of suppliers and manufacturing companies, each with the proven ability, strong relationships with STWA's current and potential customers, all STWA equipment is manufactured in U.S. with approved raw material and components and meets or exceeds all quality control and import and export compliance requirements. In collaboration with our supply chain, we have the proven ability to design and build customer specification and comply with independent oversight other regulation. Over the course of the past year, the company's management board has undergone a substantial upgrade. Today, we have a new management team, strong independent board of directors, each of whom has deep expertise and business acumen. They are highly regarded in their field and bring a broad range of skills and industry experience, and streamline the company to a core team of employees, contractors and suppliers, needed to operate at optimal capacity. There is always room for improvement of course. But today I am pleased to report where we are. We are operating high performance levels with a great degree of professionalism. Our achievement of serving draft before compliance also support my goal to have a stable foundation on which we can deliver robust growth going forward. Under this new leadership, we have the strategic direction for our future success.

Looking ahead, our goals include: continuing testing with our midstream partners and installing the second AOT system in the Eagle Ford Shale and installing a joule heat system with a potential client for testing, continuing to look at our capital allocation and fund raising efforts, global awareness of our company and the investment potential through concerted and well orchestrated investor relations programming. Continue to explore opportunities for acquisitions that could be complimentary to our core operations and drive revenue that is previous to our business model. Continue to make in roads for potential customers in the U.S., Europe and Canada and Africa.

Turning to the report of our financial condition at June 30, 2014, I'll be comparing the six months ended June 30, 2014 with the six months ended June 30, 2013 unless otherwise stated. For details, please refer to our Form 10-Q filed today August 11, 2014. Again, I am pleased to announce we are generating revenue. Today, total revenue for six months ended June 30, 2014 was $60,000. We did not record revenue in the prior six months period. We have successfully implemented many cost cutting measures. As a result our operating expenses are down by 33% at $1.8 million in 2014 versus $2.7 million in 2013, a decrease of $900,000. This decrease is an attributable decrease in non-cash expenses of $540,000 and in cash expenses of $360,000. A decrease non-cash expense is attributable to reduction in grants of stock options and warrants to consultants, employees and, reducing the vested expense by $535,000 in 2014 versus 2013. In addition, we had a non cash reduction of $5,000 in deprecation of non cash expenses. Cash based operating expenses have been reduced by 30% at $1.4 million in 2014 versus $1.77 million at 2013. The decrease in cash expenses is attributable to reduction in salaries of $168,000 corporate expenses of $21,000, consultant professional fees of $15,000, rents and utilities of $71,000, travel expenses of $14,000 and office and other expenses of nearly $76,000. In addition, our research and development cost are down by 22% at $595,000 in 2014 versus $759,000 in 2013. A reduction of $164,000. We reported a net loss of $2.4 million or $0.01 per share for the six months period ended June 30, 2014. Our cash balance at June 30, 2014 was $3.4 million. Taking into current cost cutting measures, our cash balance is sufficient to take us through June 2015. Management is currently exploring additional working capital resources.

In summary, we have successfully completed the first commercial installation of 110 tons of AOT commercial equipment to one of the largest pipeline company in North America. And our second installation is pending. We are well on our way to bring what we believe a new high growth investment opportunity in the market where oil and gas and clean tech industry intersect. Thank you for your continued interest in STWA. And I look forward to updating you on our progress again next quarter.

Question-and-Answer Session

No Q&A

Operator

This concludes today's teleconference. You may disconnect your line at this time. Thank you for your participation.

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