QS Energy Inc (QSEP)

[alkalinesolution1]

Further thoughts on the TransCanada termination

Another point: the 10Q in March (http://ir.stockpr.com/stwa/all-sec-filings/content/0001019687-14-001739/stwa_10q-033114.htm) modified the timeline for installation: "The Company began manufacturing equipment for delivery to TransCanada in the third quarter of 2013. The equipment was delivered to the installation site in March 2014 and installation was completed and accepted by TransCanada in April 2014."

The testing period was for six months, and the lease termination puts the date of October 15. So I suspect that the beginning date for the lease was April 15, six months before October. Basically they got data from mid-April to mid-July -- a three month period -- and made their decision based on that data. Then they put in the note to cancel the lease (which has a 3 month period before being effectuated.) If we had considered this earlier on, we would have seen this possibility - because the alternative would have been for them to extend the lease for 84 months (a decision that would have had to have happened 60 days before the conclusion, i.e. mid August). The contract was clearly written in such a way as to force TransCanada to make decisions about what it's going to do with this thing. AISI has pointed this out before, but I am discovering it for myself now, and I find it interesting.

In conclusion, this is I suppose the second best scenario we could have hoped for -- but the best scenario, where they purchase the equipment after a month or something, is not likely anyway. The alternative would be that they extended the lease. That would not necessarily have expressed the strongest confidence - it would lock them in to a ~$5m outlay, though one they could cancel anytime. The lease seems clearly to be a testing period lease. It appears designed to give TransCanada an option to try it out and see if they want to buy the technology. Why? Because presumably the equipment is going to last a lot longer than six years ($60k/month for six years = $4.3m) and money is cheap right now, so it is cheaper to buy it. STWA was clever to do that, because they need the cash now.

Around the same time TransCanada canceled the initial term lease, STWA signed a similar trial-period deal with Kinder Morgan, with an even faster timeline. Then they updated their website claiming that the AOT "move[s] oil through pipelines at all-time rapid speeds," (http://www.stwa.com/sustainability), and published a corporate profile which showed that STWA independent director Don Dickson had gone back to Kinder Morgan as Director of Operations, and that the AOT brought flow increases of 10-15%.

We are forced to conclude either that this company is being run by conmen and liars, or honest men who are extremely confident in the technology they've got.

Given the proximity of far superior minds than mine to what is going on -- who actually see the technology working and deal with the people, have access to the data, and are hard to trick on their own turf -- I again strongly suggest it's the latter.