LiqTech International, Inc.

To answer your question, please press star then 2. Please note today's event is being recorded. I would now like to turn the conference over to Robert Bloom with Little Partners. Please go ahead.

All right. Thank you very much, Rocco. Good morning, everyone. And as Rocco indicated, thank you for joining us for today's Lick Tech International second quarter 2024 financial results conference call for the period ended June 30th, 2024. Joining us on today's call from the company is Fei Chen, the company's chief executive officer, and Philip Price, the company's interim chief financial officer. Before I turn the call over to management, let me remind listeners that there will be an open Q&A session at the end of the call. If you are dialed into the call through the traditional teleconference line, as the operator indicated, please press star then 1 to ask a question. If you are listening through the webcast portal and would like to ask a question, please You can submit your question through the Ask a Question feature in the webcast player, and we'll do our best to get to as many questions as possible. Before we begin with prepared remarks, we submit for the record the following statement. This conference call may contain forward-looking statements. Although the forward-looking statements reflect a good faith in judgment and management, forward-looking statements are inherently subject to known and unknown risks and uncertainties that may cause X results to be materially different from those discussed during the conference call. The company therefore urges all listeners to carefully review and consider the various disclosures made in the reports filed with the Securities and Exchange Commission, including risk factors that attempt to advise interested parties of risks that may affect our business, financial condition, operations, and cash flows. If one or more of these risks or uncertainties materialize or the underlying assumptions prove incorrect, the company's actual results may vary materially from those expected or projected. The company therefore encourages all listeners not to place undue reliance on these forward-looking statements, which pertain only as of this date and the date of the release and conference call. The company assumes no obligation to update any forward-looking statements to reflect any events or circumstances that may arise after the date of this release and conference call. Now, I'd like to turn the call over to Fei Chen, CEO of LickTech International. Fei, please proceed. Thank you.

Thank you, Robert, and good day to everyone on the call. I'm excited to once again get a chance to speak with you all today and provide an update on the progress we are making. Let me start by diving right into the announcement we made earlier this week, where we announced the receipt of an order from one of the world's leading integrated energy companies to deliver a pilot system for produced water treatment in the U.S. This order is key for LIHTC as it becomes the second significant produced water treatment order we have received in the U.S. in just the past few months, following the order we received in March 2024 from Rieselbach Direct, highlighting the capability our systems provide to the most challenging purification applications. The new pilot system is scheduled to be delivered to the customer in the third quarter of 2024, and it will mark the third consecutive quarter in which we have received and delivered a produced water filtration system for the oil and gas industry. Joining the rateback order I mentioned in quarter one and commercial pilot unit to NASA in quarter two. From a higher level perspective, the border oil and gas industry and the US in particular is increasingly understanding the importance to use produced water to offset fresh water demands both inside and outside the oil field. Our solution can be key to reducing OPEX for our customers and meeting their desire set forth to drive sustainability going forward. As I have stated, each of these three orders are considered pilot orders whereby the initial objective is to demonstrate and document the efficiency of our unique silicon carbon ceramic utilization technology in treating produced water to facilitate reinjection and the beneficial reuse and meet current regulatory requirements with each customer in each specific area. The ResuVac system is currently onsite with the oil and gas customer. To date, the system has been running stably for more than two months with preliminary data highlighting that all requirements are being met. Assuming we are successful in full testing with the new pilot unit, which we estimate would be approximately three to four months, it's our belief that two things will come out of it. Number one, each of the customers who are currently utilizing the systems will deploy new systems widely across their operations with significant larger treatment capacity. Number two, as this fair weather customers deploy them in their operations, we will have strong commercial approval points to convince other companies to adapt our technology for their full commercial systems. When I took over as CEO about two years ago, I stated that oil and gas market would be a tremendous long-term opportunity for Leetech. However, it would take some time to develop. With the progress made over the past three quarters, I firmly believe that we are on the cross of something significant within this key target market for the tech. Another key initiative I laid out when I took over as CEO was to align ourselves with partners that can open up key markets for our solutions. It is a strategy that worked extremely well during my time with TopShop and the ground force. And one that I thought would work well with Leetech, given the unique diversification that our filtration systems can provide. As a small company, we simply cannot have an internal sales team that is aggressively targeting the multiple industry segments that our products can address. To that end, over the past year, we have signed the following distribution agreements. For the produced water oil and the gas industry, we have signed up NASA in the Middle East and the Reserve Direct in the U.S., both of which have been key contributors to our recent progress within the industry I just touched upon. Within the commercial pool system markets, we have bought on Alpsisan, Total Foods, Waterco, Barn Ray, and NAPCOM. Again, each of these partners have driven system sales for LITIC, which I will go into more detail on in a moment. Within the phosphorous acid market, we signed an agreement with Silicon Feature. They are in active dialogue with some food-grade phosphorous acid producers in China. We continued this progress of bringing on partners that can help driving awareness and adoption of our solutions with particular progress made within the marine scrubber market. To that end, in May, we entered into a partnership agreement with Dan Marine Group to expand our presence in Chinese shipbuilding and repair market for marine scrubber water treatment, as well as new exhaust gas recirculation water treatment system for dual-fuel marine vessels. The agreement also includes the servicing by Dan Marine Group of existing LICTEC marine installations, including fast delivery of spare parts and on-site repair work. Also in May, we announced an agreement with Fremen, where established maritime representative to the shipping industry in Greece. Fremen will bring LITIC close to the various influential ship owners through its extensive network. In July, we announced an agreement with Danby Marine and South Korea based maritime representative to the shipping industry for Danby to market our marine cargo water treatment solutions within South Korea the second largest shipbuilding market in the world, after China. We are starting activities to recover the customer-related ships we had in the market. These three new partners, along with our previously signed agreement with Yuyong Focals in China, from whom we received two marine scuba water treatment system orders in the past year, should help us expand our presence in this important market for LITSEC. One other partnership agreement I wanted to touch on was our announcement two weeks ago that we have entered into a MOU with China Haisheng Engineering Company to explore the application of LITSEC's advanced filtration system for the challenged industry water treatment in China. China is a significant market for industry water treatment with environmental protection and sustainability of increasing importance to the government and the enterprises. I am excited about what this collaboration with China Heisman for live industry uses will bring to the table. Partnerships and collaborations will be a key for us going forward. They often take time to materialize, but we are getting to see results with nearly all of them. We have signed up over the past 18 months or so and believe we will see further positive impact in the years to come. As I highlighted in the press release this morning, we successfully delivered five swimming pool systems during the second quarter. The swimming pool market is an important recurring revenue opportunity for Leetex. However, as I stated on the call last quarter, our budget and the expectations we set forth for the second quarter included eight swimming pool systems for delivery. Unfortunately, three systems anticipated to be shifted from municipal applications in the UK and Australia were delayed due to government funding, causing us to fall short by about 500,000 from the outlook we provided. One big deployment that will benefit the swimming pool market for us is the receipt of NSF certification for our systems in the US. For those that are not aware, we are unable to sell our commercial swimming pool solutions in the US as we work through this approval process. With the certification now in hand, we are in conversations with partners that will help drive adoption in the US with the goal to have new agreements in place by the end of the year. So where we are disappointed with the delays from the three planned systems, the pool market continues to remain strong for us and will be a key contributor to our recurring revenue in the future. When you dive deep into the financial results, a few things may not be as obvious, and I think it bears mentioning. All told, we are seeing incremental growth in our system sales. During the second quarter, we reported $1.3 million in system sales, which is up from $1.2 million in the year-ago second quarter and $1.2 million in Q1 of this year. Further, during the second quarter, DPF sales was 1.6 million, a 23% increase compared to the year-ago period and up about 4% sequentially.