QS Energy Inc (QSEP)

[As I See It]

Can you explain to me why TC would not have disconnected the unit
If it were not working . I " DOUBT " they would still have it connected.

That is the elephant in the room for anyone that has doubts of whether the AOT 2.0 works. Whether or not the basic science was going to work should have been apparent almost immediately after being installed in the line. Once that hurdle was met, the rest of this testing period should be more about simply learning to "drive" a complex sophisticated piece of new technology to maximize its benefits. Among other things, testing against dozens of different types of oil takes time. Each new iteration of the AOT has been an improvement over the last one. We are still in the very early stages of this evolving technology and there is still much to be learned.

While some are getting upset about how long this process is taking, I think it is important to step back and look at what has been accomplished since the first prototype test in Oct. of 2011. Remember, STWA is a company with only a handful of employees. I think what they have done in less than three years is remarkable.

Some highlights:
Oct. 2011 first prototype test @ RMOTC
Dec. 2011 Letter of intent with China
Apr. 2012 second prototype test @ RMOTC
May 2012 third prototype test @ RMOTC
June 2012 lab test in China
Aug. 2012 begins to design and engineer a commercial version of the AOT 2.0
Nov. 2012 prototype tested on a commercial pipeline in China with results matching lab expectations
Feb. 2013 AOT 2.0 readied for N. American installations
Apr. 2013 ASME certification of the AOT 2.0
May 2013 first AOT 2.0 off the assembly line
Aug. 2013 TransCanada deal announced
Jan. 2014 design and manufacture of an AOT 2.0 four pack skid for TC completed on time and on budget
Apr. 2014 AOT 2.0 installed on TransCanada pipeline
July 2014 testing of the AOT 2.0 is going into its fourth month

In between those highlights are all of the NDA negotiations,filing of patents, setting up the supply chain, Sarbanes Oxley compliance, renegotiating the Temple deal, raising capital, dealing with shareholders, testing oil samples, bringing in new Directors, advancing the AOT Upstream product along with setting up Joule Heating tests, presenting at high level conferences, etc., etc., etc.

When you look at those dates and the events attached to them you can see that the STWA march toward their goals has been one of steady solid (I would call it spectacular) progress.

Is Greg Bigger a clueless lousy negotiator that TransCanada has taken advantage of? What are a couple dozen engineers from a world class pipeline company worth? Greg got them for free. How much of the IP developed by those engineers do we have to share with TC? That would be none. How much do we have to pay for the use of a high profile 36 inch pipeline to test our product? Oh, wait a minute, they are paying us. Well surely we had to bear the cost of installation and conducting the test. Nope. Well what about the price negotiated for the lease or purchase of the AOT? Gross margins look like they may exceed 75% at a minimum. Did Mr. Bigger have the strength of an Exxon or similar company reputation from which to negotiate? Guess again, we are a penny stock that desperately needed a partner.

What did we give TransCanada in return? I would argue that they should get just about anything they want. STWA has one engineer and one physicist (one more just added recently). How long and at what expense would it take to duplicate, by ourselves, what TransCanada has given us? The correct answer is we simply could not have done it. In exchange TC has some control over the flow of public disclosures, some initial pricing concessions, and presumed front of the line status. Maybe more, but we don't know. I will take that deal every time.

Am I saying that we are home free? No. While it is true that the AOT test with TransCanada has not been cancelled as an outright failure, it is still possible that the AOT benefits are a lot less than we expect.

My personal opinion is that we will have a significantly better idea of where we stand in weeks, maybe a month, but it should not take multiple months. We should also have the announcement of an AOT upstream product partner to look forward to in the current quarter as well.

The STWA story has never been stronger.