QS Energy Inc (QSEP)

[Agoura Guy]

Its impressive QS Energy Inc., a Pink Sheet company, actually built something that's real:



That's some serious engineering!

Most Pink Sheet companies are nothing but some paper in a drawer.

June 26, 2020: Demonstration Project Update
Please read this and all website updates in context with the Cautionary Statement above.

Our engineering team was on site at the Demonstration Project this week to complete the system installation, startup testing, and commissioning, with the intention of achieving treatment voltage levels. During the startup cycle, the system initially established a baseline (below operating/treatment level) high voltage. However, once a baseline voltage was achieved, system voltage would decay well below the baseline value. When powered up to a baseline level, voltage and amperage measurements were within expected levels, generally indicating the newly installed grid pack and blind flange assembly have been properly specified and configured, and that the new power supply should have sufficient power to achieve treatment voltages. In repeated tests, once that baseline level was achieved, voltage decayed well below the baseline.

It does not seem likely the problem we are experiencing with voltage decay is related to the short circuit indicated in previous tests since voltage can now be repeatably applied to the AOT while operated under pressure with crude oil flowing through the system. When we experienced the short circuit while operating under pressure in previous tests, it was not possible to apply voltage to the AOT without the system exhibiting characteristics of a “dead short”, or electrical short-circuit.

It is unclear at this time if the voltage decay experienced in our startup testing cycle is due to power supply operations or is occurring internally to the AOT. Our engineers gathered data while on site and are reviewing data and observations with third-party experts, and we are working with the manufacturer of the power supply to gain their assistance in diagnosing the problem.

We plan to return to the site next week to further test and troubleshoot the system.

June 18, 2020: AOT Demonstration Project Brief Update
Please read this and all website updates in context with the Cautionary Statement above.

Modified AOT InstallationInstallation of the modified AOT grid pack and blind flange assembly has commenced. As noted in yesterday’s update, the equipment arrived at the demonstration site on Tuesday, June 16th. Our pipeline partner installed the grid pack and blind flange assembly this afternoon, June 18th, overseen by Christopher Gallagher and Shannon Rasmussen of QS Energy. During the assembly and pre-installation procedure, our engineers conducted a series of high voltage impedance tests to verify both electrical continuity and the impedance of the assembled grid pack and blind flange. These tests showed that the system continues to test at high levels of impedance indicating the new insulating materials are performing as expected, consistent with earlier tests on the newly modified design described in the June 17, 2020 update.

Early next week, our pipeline partner is scheduled to complete the electrical hookup and install additional SCADA (system control and data acquisition) equipment at the site. Based on our most recent schedule, we plan to complete installation, start-up testing and commissioning next week (see the June 17, 2020 update for a description the startup and commissioning test cycle). Assuming successful commissioning, demonstration AOT test operations should begin by the end of next week, or shortly thereafter.

We look forward to providing you with status updates in near future.

June 17, 2020: AOT Demonstration Project Update
Please read this and all website updates in context with the Cautionary Statement above.

After successfully working through a series of supply chain disruptions caused by COVID-19, our vendors and our engineering team worked overtime to complete repairs and modifications to our AOT demonstration unit with minimal impact on our schedule. Modifications to the AOT grid pack and blind flange assembly were completed over the weekend. The equipment was carefully packed and shipped from Houston on Monday and arrived at the demonstration site yesterday, Tuesday June 16th. Our engineers will be on site this week to oversee final preparation and installation of the equipment which, barring weather or other unforeseen delays, should be completed by the end of the week.

Prior to shipping the equipment, our engineers conducted high voltage impedance testing on the grid pack, the blind flange, and the assembly to verify that the modified design and new insulating materials are performing as expected. All tests yielded good results with higher insulation values recorded than those measured in previous tests. We believe this is the result of the reliability engineering changes that were implemented during the rebuild process.

Tests performed prior to shipment were performed under dry (open-air) conditions and at ambient pressure. Additional tests will be performed under dry (no crude oil), flooded (filled with crude oil), closed-in (not under pressure), and open (operating pressure) conditions during installation and commissioning to further assess design modifications prior to testing under commercial operating conditions. Assuming the system passes all tests performed during the start-up and commissioning process, demonstration test operations may begin as early as next week.

Our engineers have made several modifications to the design based on engineering efforts to improve quality control, electrical insulation, and overall system performance and reliability. Many of these modifications were designed to mitigate the electrical short experienced in prior tests as described in previous updates. Based on best information and analysis to date, we believe the modifications to the grid pack and blind flange assembly should improve the insulative properties and may resolve the short circuit issue. However, no assurances can be made that these design changes will resolve the electrical short issue, that the demonstration project will perform as expected, or that additional design modifications will not be required.

As noted in this and previous updates, COVID-19 has both directly and indirectly impacted our supply chain and our ability to obtain working capital. It remains unclear what continued impact COVID-19 may have on our ability to test at the demonstration project site. Based on our limited current capital resources, the Company will need to raise additional capital to fund continued operations and testing at the demonstration site. We can provide no assurances that such funding will be available to us, or that any such funding would be at acceptable terms.

With these cautions in mind, we are excited to be back out in the field. Our engineers have done amazing work under unique and challenging conditions to modify and prepare our equipment for this critical test cycle. We will continue to keep you posted on our progress with updates on this website.

May 22, 2020: Shareholder Update: Don Dickson, Interim CEO
Please read this and all website updates in context with the Cautionary Statement above.

AOT Demonstration Project Installation Dear Shareholders,

Since taking on the role of interim CEO on April 15th I have had the chance to roll up my sleeves and work with our exceptionally talented and dedicated management and engineering team. They are focused on taking decisive actions to transform the business, continuing to innovate and improve our product in new and diverse ways, and unlocking future growth opportunities. Our supply chain is working efficiently and after adjustments largely due to COVID-19 restrictions is on target to deliver upgraded AOT equipment to the demonstration site in early June.

Over the past few weeks, I have developed a much deeper understanding of our AOT technology, the many challenges our engineers have faced over its development cycle, and design changes that are being implemented in our latest configuration. You likely know from reading prior reports that our technology has had multiple issues with what appear to be short circuits developing when treating the crude oil transported through the pipeline at the demonstration site. In our most recent test, a short circuit developed when operated at pressure under typical commercial operating conditions. Our engineers traced the most likely cause of this short to the blind flange at the top of the AOT unit and are now in the final stage of implementing changes to this component designed to mitigate the effects of pipeline operating pressure. We have also taken this opportunity to implement relatively minor changes to the internal grid pack designed to improve system reliability and quality control.

COVID-19 and other unforeseen circumstances could affect our schedule, but with only one week remaining in the month of May, I am confident in our timeline to restart testing in June and believe we are taking the right steps to move our business and testing forward.

I wish you all a fun, safe and healthy Memorial Day weekend, and look forward to updating you in June with activity at the demonstration site. As always, I recommend you read this Shareholder Update in context with previous updates on this website (qsenergy.com/updates) and SEC filings including our Form 10-K filed on March 31, 2020.

Best Regards,
Don Dickson
CEO, QS Energy