Clear Blue Technologies International Inc.

You're going to record it, right?

Yes.

And it gets posted right away because a lot of people will watch it tonight.

We've got some of our participants are joining now. Okay. I'd just like to welcome everybody to our Q3 2020 earnings call for Clearblue Technologies. Just wanted to let you know that we're going to start in a few minutes just to allow everyone else to join. I will give some housekeeping rules at the beginning just before we're about to start and just hold tight for a few minutes.

Okay, you can start now. I think we're at, what, 1.33? Yep.

Okay, so we're going to get started now. I just wanted to ask everybody to use the Q&A section to put any questions that you have in there, and then we will get to them at the end of the presentation. And other than that, if there are any issues or any additional problems, just throw them in the Q&A or in the chat. Okay, and I'm going to hand it over to Miriam.

Good afternoon, everyone. I'd be pleased to invite to introduce you to Natalie Smith. She is our new director of marketing within the company. This is the first time she's doing this webinar with us. So just bear with us if we have a few technology glitches. I am very excited to be able to present to you and give you an update on our business, our Q3 earnings. Results will be talked about, but we'll also talk about some of the exciting news we've had most recently and an outlook for the go forward prospects from a clear blue perspective. As always, we try to give you the best information we can that is appropriate as a public market company. But we do caution you that we are sometimes giving you forward-looking statements. And as we all would have realized in January of this year before COVID, one never knows what's going to happen in the future and things could change. So please caution your thoughts and perspective with a forward-looking caution statement as part of that analysis. In terms of the Agenda today i'm going to give you a quick overview and update on clear blue just to give you a sense of where we're going and what our. company is all about. We're going to discuss the Q3 results that we've just reported, and then give you a little bit of information about the outlook. We encourage questions. We're interested in getting feedback from shareholders. So please don't hesitate, post questions in the Q&A. Natalie will give them all to me and Paul to answer. And if there's any we can't answer, then we'll get back to you after we have this call. This call is being recorded so that we can post it on the website for people who are having a very busy day and want to watch it later. So I'm going to start with an overview of Clear Blue. And of course, I forgot to turn my phone off. Just one second. Apologies for that. As I said, technology, this is live, this is not recorded. So we deliver clean, managed wireless power anywhere, anytime. And if you think about the telecommunications industry, I used to be president of a large e-commerce division of Bell Canada. And in cable companies, they used to talk about themselves as a cable company or a line company. And when Bell Canada transitioned from being a line telecom company to delivering a telecom service, the biggest part of what they do today is wireless telecommunications, namely cellular, Wi-Fi, et cetera, et cetera. Power is going through that same transition. It's no longer about the grid connecting to the grid. And wireless power is going to be as big or bigger than grid-connected power in the same way that wireless telecom has turned out to be much bigger than wireless. grid connected power. So what we do is focus on delivering clean managed wireless power anywhere, anytime. Our business focus is mission critical infrastructure. So we're not doing, I got an email last night about an Airstream trailer needing wind solar hybrid. That's not our focus. Our focus is mission critical infrastructure, such as telecommunications, lighting, smart city, internet of things, security. And we can deploy that whether it's down the middle of Bloor Street in Toronto, around an airport like the Fahood Airport in Oman, or a telecom site in the Amazon rainforest in multiple countries across Africa, or Wi-Fi satellite sites all around the world. Everything we do has a couple of key functions. In order to deliver this capability, there is a significant amount of technology that is required. You can't just go from grid connected landline based systems to wireless off grid power and deliver the mission critical infrastructure that we need to run today. So our brand promise and everything we do is about delivering maximum op time, longest life, and making it completely easy to install and maintain. Gone are the days where the technician comes to your desktop and installs the next latest version upgrade of the tool that you want to use. All of that is automated. All of that happens through a download process. And yeah, And so we have invested significantly in the technology and the enablers that are required in order to make this happen. Key differentiators when you go off grid and you really disconnect from having to get a generator or having to get unlimited energy through an electricity source. It's all about solar or hybrid systems which may have sun, may not have sun, may have rain, may have high temperatures. And so predictive analytics, energy forecasting and management are very, very key. And of course, it's all about making sure that you can troubleshoot and remediate any of the problems remotely and make sure everything works. And through that built functionality and capability, Even though that we are a Toronto-based team now with operations in multiple areas and in 35 to 37 countries around the world, we can manage every one of them remotely, whether it's remote 15 feet away or remotely at the top of the Amazon rainforest. As of today, we have two verticals. We think there are multiple verticals that we can work on in the marketplace and grow. But I'm a great believer in Jeffrey Moore's Crossing the Chasm and Inside the Tornado. And so we focused specifically in two verticals. And we take a four quadrant approach. So our two verticals are telecommunications in the emerging marketplace for the most part. And these are examples of some of the projects that we have done. We're doing projects in Rwanda and other countries with Vanu. We're working with Telefonica and Facebook and their subsidiary, IPT, and Mayu Telecom. Sorry, we're working with Vanu in Rwanda and other countries. We're working with Telefonica and IPT and Facebook in Peru. And we're working with IHS. Rihanna and other companies also in Nigeria. I've become a great, I'm just a neophyte, but I'm learning all about Africa. And Nigeria is a huge country with a very large population. So it's a significant market for us. We are seeing, as with most marketplaces, there is a race to deploy systems. And so at the highest level, the telecommunications service providers, MTN, Telefonica, Nine Mobile, others like Vodafone, Orange are deploying and operating those systems with their managed network operating partners. and we're part of that entire ecosystem. So we're moving with multiple telecommunications companies and organizations. On the lighting side, that is a business that is mostly focused in North America. We do do lighting projects around the world, but it's a mature marketplace and an emerging marketplace, and we are seeing significant traction. When we started many years ago, we were doing a lot of parks, a lot of schools, now we're doing highways and roadways and major intersections and so you can see the evolution of what we're doing and um while there is a lot of electricity grid in the marketplace as we discovered in blur west uh village getting uh through a store across concrete to the side of the road can cost you even 30 000 per pole and so um it's not just about the top of the amazon rainforest mountain It's about the street corner on Blue Arrest Village. It's about intersections in the middle of North Dakota, of which we have dozens and dozens and dozens now. And many projects actually this year, I don't know why, but New Jersey was just a wonderful hotspot. We have a great partner there and we've got a lot of good projects moving forward in the United States and Canada. Of course, with the election and I think a more accelerated focus on the Paris Accord, you know, you announce agreement, you have to deliver, the deadlines are in a few years and you get two or three years and you start to see this stuff coming to life. So we are seeing good momentum and growth in both business. So what is it that we actually deliver to our customers? We provide a full power service. So to some extent, you can think of us a little bit like an electricity utility. We deliver energy and power. A big part of that is enabled by the technology that we have developed, and there are two key components to that. There's the cloud-based management service, which we call the Lumiance. And that cloud-based service manages every single system we've ever installed anywhere in the world, real-time, pseudo real-time, every few seconds, every few minutes. via communications and control to our control devices this year and we'll be giving an update in a few weeks about our expansion of our technology and r d we've launched a number of additional devices but our core foundation point is a controller the controller is both a power device and a control device so it does energy generation it knows how to work with the solar panel to get the maximum energy out of that solar panel. And there is science there. Battery and energy life is significant. Longer battery life is something we have all dealt with. We don't even think about it now. I have a brand new Mac laptop because I killed my other one from so many hours of work. And yesterday I worked on it for eight hours. And at the end of eight hours, it was showing 88%. percent available battery capacity, which I've never seen before. So these advances are happening more and more and it's all, it's not the chemistry, it's not the lithium that's changed or the lead that's changed. It's the algorithms that manage battery capacity and manage battery energy generation and energy consumption. And those algorithms are a key part of our patented technology that we have in the controller. So making a battery have long battery life is not about the battery. It's about the controller in front of the battery. And that's what we focus on. So we wrap all of that with a management service that uses the tools, that makes it a light-out operation, but every person in this company is dealing with day-to-day operations and management. I've got new installations happening. We have new installations happening in many different places around the world. And our CTO, our CPO, and myself, you know, I'm on it. We're looking at it. I don't look at it very often. But I am watching it. And that sets a culture from top to bottom that this is about delivering the energy, not shipping hardware. And customers are beginning to see the value of that. And we're starting to see, amazingly, that we have customers not only and partners not only giving us, you know, business, we work hard to win a project, etc, etc. But now... them making an effort and that I was on a call at two o'clock in the morning last night making an effort to convince their customer hey even though I proposed this other power solution two three years ago when we first started we really need to change to clear blue and here's why and because they recognize that that the power is the most complicated part to some extent rural telecommunications and they need a reliable partner who's actually managing and delivering it So, we've done a lot of work on our technology we'll come back with you some update on that. But it really is at its foundation the technology this is not a simple business or value proposition and the real reason is because we don't have unlimited solar so how do we guarantee 100% uptime, when it could be cloudy and rainy for the next six days, and climate change is making that worse. talked a little bit about this already we manage and operate the power as a service we have two levels of that service we have the illumiant service offering where we're just doing the managed service component with recurring revenue for the customer and then we have the energy as a service offering which we launched last year in north america and uh in 2021 we expect to expand the offering of energy as a service to the wider market and in energy as a service we're getting more into You pay us an annual fee or a monthly fee and you get the electricity and all of the power and aspects are our responsibility. So we're upping our game to a point where imagine you buy a phone or a laptop or an LED light and you don't ever have to buy new batteries. You just get the batteries when you need them. And we take that risk. So we have pretty strong global traction. We're across Canada. We're in many parts of the United States trying to get all 52 states if we can. Sorry, is it 50? Gosh, sorry about that. And expanding to many countries around the world. I expect that by Q1, you're going to see a lot of new locations on the map in Africa, South America, and other markets. We have more than 5,000 systems shipped, controller units shipped in the marketplace. And if you go back, and this is the biggest part of our value propositions, we have more than 4 million days of operation and data. So when someone says to me, will this work, I'm not just doing the engineering calculation theoretically, we're also validating that engineering calculation through our operations. And if it's not going to work or it's not going to meet the requirement, that's okay as long as you tell them ahead of time and they can adjust what they need to do. So now I'm going to start to work into the 2020 results. We're going to start with our revenue. Paul Cagna, who is our CFO, is here. Paul, I'd like to turn it over to you if you want to take it from here.

Thanks, Miriam. Looking at our top line, Q3 revenues were 940,000, a 40% increase over the same quarter in 2019. This is in spite of the fact that COVID continued to have some impact with supply chain disruptions, as well as customer lockdowns slowing sales and shipments. From a trailing four quarter perspective, this netted a total of 3.9 million, which was a 40% increase over the previous trailing four quarter period. As noted, Clearblue takes a four quadrant approach to its business and revenues. From a vertical perspective, lighting and telecommunications are key sectors. From a geographic perspective, we have made great market potential in both developed and emerging markets. Our U.S. presence continues to grow, and we foresee this being an ongoing trend, along with multiple emerging countries. Our Q3 revenue is primarily driven by strong sales and lighting in Canada and the U.S. Telecom orders in Africa were delayed due to COVID lockdowns in that market. As you have seen from our announcements, they are coming online. Miriam?

So we constantly get asked for forward-looking guidance and forward-looking information and someday we'll be able to tell you exactly what we're you know get the analyst to give you guidance on what our expected revenue earnings etc etc. In the meantime we are always attempting to increase the information that we can share with you from a full disclosure perspective so as of Q2 Because so many of our orders are now increasingly having a larger and larger recurring revenue component, we have started to report on bookings and we are going to, we are being very militant about how we report that. So the first part of our bookings report, and you can see those numbers on the balance sheet, is our recurring revenue. When we get an order for a bunch of streetlights at all the intersections in North Dakota, for example, because that now includes energy as a service, energy as a service is about 40% of the entire sale price. So if we get a purchase order, for example, for $100,000 from North Dakota, Maybe $50,000 to $60,000 of that is one-time revenue that when we ship it a month or two or three later, we will revenue recognize that. But as part of that $100,000 that is prepaid, $40,000 to $50,000 of it is the ongoing revenue that we are going to revenue recognize over the next three years. So our deferred revenue that shows up on the balance sheet, It's been prepaid and pre-contracted for. And then, of course, at the end of the three years, there will be renewals and ongoing basis. So because that number is starting to be material, we thought you would want to see it from a bookings backlog perspective. The second part of our bookings number is basically orders that we have in hand. And sorry, there's an error here. It won't be delivered over the next three years. It'll delivered over the next few months. uh, um, in the case of production orders. So, um, we take the recurring revenue component and then we take that. I've got the purchase order. It's a valid, everything's moving forward and it's in production, uh, getting ready to ship. And we're giving you some visibility to that. Um, and so we're going to be reporting that number on a quarterly basis going forward to give you more visibility. Um, and as of September 30th, that number was 1.4 million, uh, If you want to see the breakdown of how much of it is purchase orders versus recurring revenue, you can look at the balance sheet for the recurring revenue. You will have seen, however, that we have had some subsequent news after the end of Q3. Those are not in these numbers, but they are going to be impacting Q4 and Q1 and going forward. Paul, can I pass it back to you at this point?

As you know, Clear Blue's ongoing management service is a key differentiator and value creator. The company has been building the service and launched its premium energy as a service at the end of Q2 2019. As the graph indicates, notwithstanding the down swing due to COVID in Q2, our recurring revenue is growing significantly. At the same time, our backlog of prepaid recurring revenue services or deferred revenue as it is reported on the balance sheet has grown significantly from a year ago. to a little over a million dollars, doubling in a nine-month period. Gross profit will vary with the lumpiness of our revenue. However, the company has undertaken a number of efforts to ensure strong growth in gross profit. In Q3 2020, gross profit was $375,000, delivering a gross margin of 40%. While there was some continued risk due to increased costs related to COVID, we will be working to continue to grow our gross margin through 2020 and beyond. From a trailing four quarter perspective, gross profit for the trailing four quarters ended September 30th, 2020 was $992,000 or 25.4%. Now slightly from the trailing four quarters of the previous period, gross profit of $704,000 or 26.1%. This is largely the result of relocation of operating expenses to cost of goods sold beginning of Q4 2019. Without this, gross profit for the previous trailing four quarters would have increased to $1.1 million or 29%. Management of operating expenses has been a key focus of the company through this period. Operating expenses increased to $945,000, an increase of $735,000 as compared to Q3 of 2019. This was caused by one-time cost reduction booking of $609,000 in Q3 2019 for government tax credit and bad debt recovery. Both Q3 periods were affected by a one-time transaction. As a result, the trailing four-quarter analysis is more indicative, showing a 4% decrease in expenses for the previous trailing four quarters. In the beginning of 2020, the company started reporting on adjusted EBITDA, a non-IFRS metric. For Q3 2020, adjusted EBITDA was negative $796,000 versus a positive $172,000 for the comparative period in 2019. We chose to keep the government subsidies out of adjusted EBITDA Blue's non-IFRS adjusted EBITDA for the trailing four quarters of U3 2020 was negative 3.8 million as compared to the respective comparative of 4.1 million. Now I'll pass it back to Mary before I open.

Okay thank you so much Paul. I really appreciate it. Paul has been our CFO now for about a year and a half and we have been able to significantly scale the capabilities of the company from a financial governance perspective. So I can't say enough good things about Paul. I'm going to spend a little bit of time on the outlook for the company going forward. In terms of our North American Streetlight business, it doesn't have the big, you know, here's this multi, multimillion dollar project. We do a lot of small and medium-sized projects. And so you don't see the large rollout press release But the impact of the value of this company and where we're going and as an indicator of where we plan on going with the rest of our business, because we started in the streetlight business a few years ahead of when we started in the telecom business, can be seen if you see the results. We launched Energy as a Service in Q2 2019, and it had a material impact. If you take a look at our bookings, just from a plain sales perspective, we had a great year. We grew 150%. more than double the trailing four quarter of the previous four quarters ending Q3 2019. But our ongoing service revenue came up tenfold. And this is because of energy as a service. So you can now see that, you know, we received purchase orders of $2.7 million. We got payment for $2.7 million, but we didn't revenue recognize $2.7 million, $823,000 of that has gone onto the balance sheet and is going to be recognized over time. And of course, at the end of the first three years, all of our contracts are three-year service contracts in the one-time purchase. It just works from a procurement perspective and a capital spending perspective. Once we go into year four, then they will renew. And so you start to see the aggregator effect of this capability as we deliver that ongoing operational service for the customer. They have a known quantified cost of delivering it. They're not going to get, you know, oops, surprise, there's an 80% increase in your power bill. And they don't have to deal with the risks of replacement components for electrical systems and components. We are seeing in the North American marketplace and in the developed market in Europe as well, it's gaining mainstream adoption. We're seeing a lot more roadways and large installs, less parks and demo green systems. The Paris Accord, the US election and accelerated adoption of clean tech is having a strong impact on our North American business. And we are very optimistic that this growth trajectory will continue to go forward. If you look at our historical numbers, we've been in POC and first install, very strategic, very important projects, but small revenue. And they are now moving out of the pilot proof of concept model. By the way, a proof of concept is most often a telecom proof of concept, although the power is part of the solution. It's not a, you know, we just want to try and buy clear blue. Sometimes it is, but sometimes we're the proven power supplier, but we still have to support trialing the technology for telecom. And when you're trying the technology of telecom, you're not just trying, you know, does this work? vendor have good product, that's a proven thing. It's a question of can it get integrated into the network and be optimized and moved into the ether of the entire existing infrastructure, which is a per telco type of thing. Globally, there is a big movement underway to connect the unconnected. We have 3.8 billion people who are still unconnected. As you saw, I remember the week that Rogers launched their BlackBerry service. I was in the middle of negotiating a deal when I was at Bell, and all the lawyers walked in with these Rogers BlackBerrys, and I'm working for Bell, and there's no BlackBerry. But Three weeks later, I got my BlackBerry and I loved my BlackBerry. And so you do see that once something happens, the whole industry moves. So you will have seen that we've done three large rollout announcements, not just one. um uh in in the uh the so far this year uh we see more of them coming and um they are uh diverse they are across multiple countries they are with multiple network telecommunications providers we've got mtn systems um um we've got orange systems uh uh that we're supporting in the marketplace that we've announced We've got companies like Nine Mobile and Vodafone and others coming online. So this is an industry-wide movement. The thing that I love about the telecom industry is that it's kind of like retail Starbucks. How many new stores are you opening this quarter? There is an ongoing, ever-increasing number of towers and point of service presence rolled out on an ongoing basis. We've even had announcements here in North America, certainly in Canada, I believe in the US, about getting telecommunications still to people who are not connected, even in North America. I know, for instance, driving from San Francisco to Yosemite, I'm very happy when I get to Yosemite and there's no cell service or very limited cell service. I'm not so happy when I'm on the way and I'm losing cell service all the time because I'm trying to do those last conference calls before I actually shut down. So the outlook is quite positive. It's diverse. A year ago, we said we were doing four or five different rollout projects that were at the point of rolling out. We've now announced three of those five. We see more of them coming online. And we think the future bodes well for us, and the trajectory is definitely going upwards. So, in summary, you know, we've put a two-year investment in the telecommunications marketplace, both from a market development perspective, validating and proving to the market our value proposition capabilities, doing a lot of technology development work in-house to be able to deliver what needs to be delivered for this very complicated mission critical infrastructure. And we're now winning deals. I was quite surprised to see and quite pleased to see We're actually winning deals against Huawei. Huawei is a telecommunications provider, but they also supply power systems. And we've got customers and partners who are, you know, going Huawei telecom, but using our power or not going Huawei at all because of the whole package solution being better, including the power aspect. I've had a couple of customers tell me that for this next rollout phase, the power aspect is actually the more important and complicated piece versus the telecom side. And we really have made great use of the COVID time to get the next view of our technology to ramp up our business. And we are going to make sure we deliver on everything that we've done. 2020 will be a very transformative year for us, I believe, and I think the entire team believes. So with that, we are finished. I would encourage you to please email me if you have any questions. We have a partner in Monteith who is great on PR. So if there's any sort of investor PR aspects, investor PR aspects, Please don't hesitate to contact Becky. If you have a sales opportunity for us, we would greatly appreciate that. Some of our early investors have actually brought us some great leads. Many of them don't go anywhere and we respond and prioritize according to the business, but some of them have turned out to be fantastic projects. Great call out to Phil. Thank you so much, Phil, and Alan as well. So at this point, I'd like to open it up to any questions. Natalie, do you want to start throwing some questions at us and then we can take it from here?

Sure. We've got a lot of great questions this time. So I'm just going to start going through some of them. So the first one is regarding where our global distribution. So the company is present in around more than 35 countries, although 80% of the business seems to come from about 20% of these countries. Can you comment on that?

Yeah, so we have customers in 35 countries. We don't have distribution channels in 35 countries. As an example, one of our large telco partners is doing a rollout in seven or eight countries in Africa right now. It's one channel partner for us. And they're covering that region or area. So similarly, we have customers that will sell to a certain marketplace, whether it be Central Africa or Europe. So even though we have customers in 35 to 37 countries around the world. We tend to aggregate those channel partners to a smaller number that have more global distribution themselves. So we have a partner, for example, in France with IDSUD. We're doing projects in multiple European countries with them, as well as multiple African countries with them. And they're one partner for us out of Marseille, France.

Okay, thank you. It's been mentioned before the possibility of attracting new strategic investors to increase the company profile and awareness. So is there any progress being made in this area?

So yes, I think that has been impacted a little bit by COVID. The last thing I did before I landed in Toronto in March was to do quite a good roadshow with some institutional investors in Europe. We've been very active in the European marketplace. They look at the African marketplaces as a high growth area and a great land for opportunity. It's in their backyard. Also very clean tech focused. So we've got investors now, I believe, from I've been in Liechtenstein, I've been in Luxembourg, I've been in Austria and Switzerland and Germany and France and the UK. And so some of those are institutional investors. We have always had some small institutional investors in Canada. And I would say that I, you know, we've had great support from Haywood. We've had wonderful support from BMO, CIBC, Echelon, and some activity from TD and Scotiabank. So our hope is that as we are now transitioning to a new level, that we are going to attract some larger institutional investors. Always very interested. Always appreciate the introductions. And similarly, start to get some analyst coverage. If we get to the size, that marketplace is changing quite a bit. The analyst industry is a difficult industry. I wouldn't want to be an analyst. It's a tough market. But once we get big enough, yesterday, we were the number four stock on the Toronto Stock Exchange by trading volume. which was fantastic. So thankful of the support we've gotten. So yes, we're trying to move forward into that direction. Very interested in that.

Okay, great. So we've had two questions on this. Is there a target date for reaching a break-even financial position and specifically EBITDA?

Yes. When we came to the marketplace and announced our targets, we had always talked about 2020 was the year we would cross over to being our first focus is cash flow, neutral and positive. We did a BDC debt round earlier this year in March. At this point in time I don't see the need for us to raise any money in the short term so I believe we are at the point now where we are going to have sufficient revenue by quarter in order to cover our cash flow needs that's not to say we won't do another raise there are huge opportunities in front of us but in terms of funding core operations um it looks like we're at the point now where we're going to get to that positive um cash flow perspective however my timeline of when i thought we would hit that got kicked by a few quarters because of covid um and one does not know what's going to happen in the future uh what i can say is we're very close whereas we were burning you know millions and millions a few years ago we're getting down very small so it's not a you you're negative and then you're positive it gets smaller and smaller and smaller So even though we're not yet cashflow positive, um, the amount that we're needing to raise is, is quite small. Um, and, uh, I think we're going to close out this year, not having done a capital raise, um, because we did the debt raise. Um, and that's probably all we need for the next little while. Um, Large contracts and projects sometimes need large working capital. So we'll figure that out. But that's a kind of a different scenario than funding for base. So I think we're there. But caution on the forward looking statement. The proof will be when we report our results, which I'm very looking forward to delivering. The company is very focused on it.

Okay, great. So the next question concerns the share price. So although the recent contract win has boosted the share price, it's still the same as it was in May of 2019 and 50% down from November of 2018. So can you comment on your vision for the company that might eventually lead to creation of shareholder value, which is particularly relevant to shareholders who've been invested now for some years?

So I've done a number of companies in the virtual capital world before. And VC world's great, works for many different situations. But what tends to happen in a VC world is you do a series, you know, you have the angel investors and then you do a series A and you do a series B and a series C and a series D. And those angel investors are behind the D, behind the C, the behind the B, behind the A. The reason why we, main reason why we decided to go public markets is was because we felt we were going to be able to raise money for all those individual investors. And we wanted the guy that came in the first day to be equal to the guy that comes in, not behind the guy that comes in. Now, obviously, you can buy shares when it's higher and lower. What I will say to you is that... call out to Travis and his wife, for example, our early investors, you know, I really, we really appreciated their investment. And I know exactly where they bought at. And we are working very hard to get us above those numbers. The valuation of the company has on the market, in my opinion, has not been reflective of the value of the company because it's a risk company. It's an early stage company and it's related to attention and to volume and all those kinds of things. But keep your head down, steady as she goes, build the business. This is a billion dollar business. It has the potential to be a billion dollar business. You've seen companies do that. If you look at what Tesla has done, even in their energy business, not in their car business, but in other companies also. And, you know, as soon as we get past the next, you know, I'm already starting to think, you know, this is $100 million business in revenue, profitability, gross margin, and from there 500 million. So I'm very determined to make sure that even the first investors who potentially were a little bit higher than where it settled at in the marketplace, end up being very, very, very happy with their investment. And it's something I think about all the time. I will comment, I was flabbergasted in a private industry. I one day looked at Oracle, which is one of the global companies in the world. Do you know what their revenue was in year seven of the company? $1 million. So it takes time to build a business. If somebody else can come along and build it in five minutes, then we can build it in five minutes. It's taken us eight years, millions of days of operation, lots of R&D. to get ourselves to a point now where we think we're the only, we're certainly the leader, but we're the only viable solution to make this really work in a way that you need to do to have it scale. And that is something that someone else cannot build quickly. And we've had many conversations with people who've looked at acquiring us or talked to us or partnered with us, who've tried to build it themselves. So it's taken a long time. It's continuing to take longer than I would like it to. But it's not forgotten and we are going to do everything in our power to make sure that that investment is, as I've said to those early investors, turns out to be the best investment in their portfolio.

Okay, great. What is the revenue required and of our system sold or installed to achieve breakeven on a quarterly basis?

So somewhere depends always in the mix projects are lumpy, but somewhere around 3 million ish revenue. Now energy as a service is, is changing that. So as you would have seen, you know, we got, um, $900,000 of cash this year. Um, but it did show up in the revenue. So maybe I would say 3 million in bookings, uh, versus 3 million in revenue as we move more to a recurring revenue model. But we're getting to the point where the quarters are going to be cash flow positive. I will say we have significant growth next year coming down the pipe with these large initiatives. And our focus is long term. So if I have to hire one extra QA guy or, you know, one extra production guy to make sure this happens well. I'm joking, kind of half not joking that I'm going to be moving into the production facility and getting a cot in the corner because the next three to four months is all about, you know, it's been about getting the sales, getting the deals, getting the relationships in the next three, four months. You know, we've got to transition into production, a focus significantly. So, you know, going to do what's right for the business long-term, but we are crossing that point now where we have the quarterly revenue to make us cashflow positive.

Okay, and then just a follow-up question to that is, if 3.5 million revenue is recognized in Q1 of 2021, would that lead to a profitable quarter?

I can't give you forward-looking guidance on that and give you any sort of a guarantee, but what I would say is our cash burn is significantly down, and we're close, very close, I believe. Could be. I'd like to say yes, but... We'll have to see what happens. The interesting thing is it's not just a one-quarter thing. As you would have seen in our announcements, these are recurring things. So what we do in Q1 is to deliver in Q1, but also to position for Q2 and Q3. If you look at our inventory balance, for example, we increased our inventory quite significantly at the end of Q3, The inventory in the balance sheet went up a little bit, even though our cash was coming down a bit. But, you know, longer term requirement versus short term requirement. So, you know, we just have to take that into consideration to make sure that we not only deliver for Q1, but Q2 and Q3. That's why I'm hedging a bit. What I can tell you is we are not going to be limited by our cash needs. We've managed through this year. We've managed over the history of the company. And at this point in time, I don't see us needing to raise any cash. we're good for the next four or six months.

Okay. The next question is about financing. So you may have answered this already, but do you have financing in place or willing financiers who would backstop the capital required for a major build-out?

I believe we do. Again, the reason why we went to the capital markets was to get ourselves significant access to multiple invested parties. Echelon has been a great partner of ours. We have some wonderful partners in Europe. Um, and I've spent a lot of time there and, um, we've had great support from BDC, uh, bank of Nova Scotia, um, uh, has been a wonderful bank to us. They've come to the table. I actually, in the beginning, I'm kind of like, well, you're not going to fund us. We're negative cashflow. I don't have three years of thrilling positive cashflow, but they are really moving, um, to be supportive and innovative in providing financing. I needed, uh, some short-term things for this order that we just announced. Um, And Scotiabank responded within a week, backed by EDC as well. So we have some good government and pseudo government agencies to put those things in place. I will add, though, they all, you know, make you up your game as a company. You know, the fact that we have a banking relationship with Scotiabank and we get credit products and trade finance products from them. And with BDC, you know, they are demanding on BDC. you know, cash flow statements and forecasts and forecast, you know, and all of those kinds of things that you want us to have. And we see them as strategic partners as well as not just, you know, giving us the money we need. So we've been managing through that and they are there for us as well. I think we're okay.

Okay, thank you. Going back to the recurring revenue, the November 17th deal involves a sale of 400 units for approximately 5 million U.S., What is the recurring revenue on these systems?

I saw that question come in this morning before we started the call and I didn't have time to check, so I will come back to the person and let them know what that is. What I will say is that that service is a lenient. lumiance service not energy as a service so it is not the 40 to 50 percent recurring revenue it is in around like it's less than 10 i don't know how much it is but it's less than 10 um the reason why we have not launched energy as a service yet is because you know when you have energy as a service you're taking the risk and liability on the battery life and the system life and you know my board says you know what about the warranty and the liability risk there in north america we have enough million days of performance operations experience and management control tools to know that i can manage that risk and i'm very confident because i've got the history to show what my failure rates are going to be we need some data and some operational parameters in the telecom industry and so we do intend to move to energy as a service in that market sometime in 2021 will be selective about the right contracts, projects, et cetera, et cetera. And as we gain confidence in that, we have managed the risk in that. So the potential in a few years is that when we announce a contract of that size, Just take the energy as a service, it could become something that you know it's a $5 million contract of which 2 million is recurring revenue. That's where we want to go, but we're not going to, you know, we have to work with our partners, we have talked about it with those customers and they are very interested in it. telco operators do not want to be in the power business they're not even in the tower business they subcontract it out and the tower guys don't want to be in the power business they call the power utility and say ontario hydro deliver me power to this pole um and so we're going to become the company here's clear blue we're delivering energy to your system and it's not your problem um so less than 10 percent uh if you send me an email i'll get you the the closer number okay thank you uh

Is the recurring revenue model fixed per unit in terms of dollars or is it scalable? And if it's fixed per unit, what's the maximum minimum you would earn from the installation of one system?

So our controller is a unit. And when we're doing a small system in streetlights or in the smaller telecom systems, we're talking about one controller for one unit. As telecommunication systems grow, we have modularity. And so the customer earns more revenue as the systems grow and our technology sale grows and our service grows because what we're managing If I'm managing four microwave hops and six cell systems versus one satellite and one Wi-Fi hotspot, the service is different. So it is a scalable revenue model and a scalable service model. And then as you add different features and options, if you add motion detection or you add a wind turbine or you add a generator, all of those things. So we are growing our revenue model on a per unit basis. So it can vary. Aluma energy as a service is about 40% of the total revenue and it includes the batteries and the solar panels, the entire electrical components, the energy components of the system, so it can change a lot, it can be can be $500 it can be. $5,000 or $8,000 per system. On Illumiant, you are looking at something in the low hundreds. So per telecom site, you would start off with a few hundred dollars and then grow to three, four, five, $600, that type of thing per site. We're talking about thousands and thousands and thousands and thousands of sites. And so that will grow. And then as we convert that to energy as a service, we'll move it from the hundreds of dollars to thousands of dollars per site to grow our business.

Okay. And then just one more question related to that. What is the break even to sell a unit? So regarding the $5 million contract we have for 400 units, The question surrounds, should they assume a 20 unit cost of $20,000 or is it subject to negotiation? What's that breakeven per unit?

So as we announced yesterday, the gross margin contribution margin of that order is in line with our business. It's a higher volume order, which will oftentimes reduce your margin because people will say, look, you're getting higher volume, you know, discount this. But on the other hand, we've added a lot of IP and done a lot of technology rollout. So we reported a 40% gross margin for the quarter. We reported, I can't remember, Paul, but, you know, 25 or 30, 26, 27% gross margin for trailing for quarters. The contribution margin of that deal is in the same ilk of that range. We'll see where it lands as we move through it, et cetera, et cetera. So it's in line and with what we've reported in our financials.

Okay. We've got about six minutes left and about five or six more questions. So if anybody needs to drop off, this will be posted on our website shortly after this meeting concludes, but we'll just keep going through the questions if everyone is okay to continue on. So the next question is, how does management view the company's current state of financing and do you see the need for any additional capital injection?

You always want to raise money when you don't need to raise money. There is a significant amount of growth opportunity in this company, both through organic growth, as well as new vertical new business development growth, as well as acquisition growth, which is again one of the reasons why we looked at going public. I always kind of people say to me like when would you like to retire what's your definition of retiring my definition of retiring is not needing to work. from a money perspective i can't see myself not working but you know i'll get that line so from a company perspective our target has been to when will we get to a point where we don't need to fund the core operation to keep the lights on so to speak And our target has been to get to that point, you know, by the end of this year. I would have liked to have been here earlier, but we're just at that crossover point now where we will not need to fund the company, you know, keep the lights on core operations. But once we've got that checkmark, as I said, it's $100 million business that can grow to $500 million that will grow to a billion. And there are opportunities to invest in strategic partnerships with some customers where we develop specific products for. There are opportunities to get into new verticals. Very lean on sales. I've got a salesperson right now, my VP of sales. I have ordered him to take Friday, Saturday off. I believe he went to bed at midnight and got up at two and has not been asleep yet. So we've got so many opportunities coming in the door. So we want to grow our sales team and we need a Spanish salesperson. We need a French salesperson in some of those markets. So we have two salespeople in this company. for everything we've done. So never say never on raising money. We may raise it for, but we will do it for a use of process that has a specific purpose. Right now, my head is focused on getting the delivery. I don't see us doing anything in the short term. And I don't see us needing to do anything in the immediate short term. So I have no plans that are solidified at this point. But, you know, when you're in a public market, you want to use capital and that can help us grow. So we'll, we'll figure that out as we go forward.

Thank you. You mentioned analyst coverage before. Would management agree it's a good idea to hire some analyst coverage in the near future to give some attention to the company?

I don't know about you, but when I go to Google and I do a search and I get the ad and then I get the natural search, tend to skip the ad and go to the natural search. We try to certainly talk to everyone in the marketplace, but when I say endless coverage, I believe that the marketplace wants independent endless coverage, not uh, related analyst coverage. Um, if there's information we're not providing that we should provide happy to do that. But what we would like to see is the, um, Haywoods, the can accords, the bank, uh, analysts covering us. giving market guidance from their expertise and perspective um and also giving us their perspective you know um uh analysts will as i said the banks do and and and the financing people do and investors do ask tough questions do comparisons you know uh put comparables that of companies that i wouldn't think of um so our focus is really to generate independent analyst coverage that follow us because they want to follow us and they think it's of to their interest.

Okay, thank you. Regarding the announcement yesterday, when will management know if there's an additional 2,000 units needed by that customer?

uh at this point it's a day after the press release i don't have any additional news over what we gave you in the press release yesterday i'm trying to move fast but i can't move that fast gosh um uh uh but uh uh what i can say is this is not a project this is a program uh there are full-time people with full-time job titles uh that are responsible for these rollout programs um we must deliver we must earn the right we must continue to have our leadership um and we don't assume anything on the go forward basis but uh everything is moving in a very positive direction and we'll see what it brings um how uh world factors economic factors all of those things so what we know is what we said yesterday is the plan Um, at this point is, uh, the number that has been shared with us is 2000 units over the next two years, which by the way, did include the first 400. So if they only did the 2000 that they talked about, that would be 400. We've just announced plus 600 next year and then a thousand year after. Um, uh, but, uh, you know, we've. are doing a region with a company that has multiple regions and they also support multiple telcos so if they win additional telcos in the existing region or they get into other regions and as I said we don't just have one partner we have multiple companies doing a rollout It's a bit of a land grab going on. You know, the telco MTN announces that we're going to do 18,000 towers over five years or more. And then they select a bunch of companies in a bunch of different countries to say, okay, I'm going to give you, tell me how you can roll out, how you can get things done. And each one of those companies that are going to be diversified is going to get a certain, you know, okay, you get that spot, you get that spot, you get that spot, you get that spot. He who gets the most spots and he who gets the best spots wins. And there's a race, which is why it was anonymous press release yesterday. So we're working with multiple partners there. And now that MTN is moving, Orange is moving, iMobile is moving, Vodafone is moving, other companies are moving. It's all moving.

OK, just a couple more questions. What segment of products has the highest potential right now for clear blue? And are there any plans for development of new products?

Yes, there are plans for new developments. uh you know i see the uh lighting vertical and the telecom vertical um being slightly different things so you'll see a lot of focus on telecom because of the high growth and the recurring nature of uh of those ongoing orders um but the energy as a service model is huge for the future of this company and it is right now in our lighting division in north america And so it is of the also strategic important to us. I would like to get into supporting IoT I think we might have a really nice water treatment plant project next year. Getting into agriculture, more security, those kinds of initiatives is our next vertical, the IoT vertical. A few years ago, I thought that was going to be our second vertical and telecom would be our third. It's turned out to be flipped the other way. But we do see quite a wide range of opportunity and we have a very busy product roadmap schedule. for next year. If I could take all of my R&D people and just push them into, you know, implementation, operation, production, that would be great, but they've got as busy a schedule as the rest of the company has. We have a number of potential customers who are talking to us about some very strategic partnerships, real OEM integrated offerings. We don't have any yet. We have nothing to announce yet, but we're in discussion on those types of things and early in the sales funnel, please, but still being worked on. So we see great opportunity in the future.

Okay, thank you. Just a couple follow-up questions and clarifications. Question about recurring revenue. So what was the recurring revenue on a monthly basis as of the 30th of September in Canadian dollars? Can you answer that?

It's around $35,000 a month, up from less than $10,000 a month previously and increasing significantly.

Okay, thank you. And then just the question regarding the analyst coverage. was actually in regards to the sell side analyst giving perspective on a fair price of the share because a large aspect of the share price is not showing up as the right value and that may be due to a lack of understanding.

Great question. I don't know how to answer it. Please send me an email and would like to get your perspective and I will go back to our financial advisors, our board and look into that question.

Okay, so I think there's a few follow-ups that Miriam is going to follow up by email to clarify a few questions. And that's all the questions that we have from our participants thus far. So Miriam, I'll leave it back to you to close out the meeting.

Okay. Well, everybody, thank you so much for your time and attention today and for your support in Clear Blue. Myself and the entire team of Clear Blue, we know we serve at the pleasure of the shareholders. We work for you every day. We know that and we remember that. We appreciate your confidence in the company and we will work hard to deliver on the promise and the potential that we have been talking about. Thanks so much and have a great day.