QS Energy Inc (QSEP)

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we plan to build smaller scale test units which could be commercialized for new markets such as truck, ship and rail crude oil offloading. These smaller-scale units would allow us to test different materials and different design concepts at a much lower cost than full-scale testing and development. Although the crude oil midstream pipeline market would remain our top long-term target, parties both domestically and internationally have expressed interest in the potential benefits in truck, ship and rail offloading. As noted in an article titled “Crude Loves Rock’n’Rail – Heat It! Bitumen By Rail (Part 2)” (Fielden, Sandy. 2013b. RBN Energy LLC. www.rbnenergy.com/crude-loves-rocknrail-bitumen-by-rail-part-2), there are costly challenges to transporting heavy crude oil by rail. In his article, Fielden estimates heavy crude costs $5.00 more per barrel than light crude due to its high viscosity; an added $3,000 per railcar load at an average 600 bbl/car. While the midstream pipeline market is likely our largest target market, there has always been a plan to expand the application base on our AOT technology. Given the reduced cost, and shortened lead times associated with smaller equipment, we believe these markets should be strongly considered.