Mycelx Technologies (LSE:MYX) — Full Year Figures

0:01 Good afternoon, ladies and gentlemen, and welcome to the MYCELX TECHNOLOGIES Full Year Investor Presentation. Throughout this presentation, investors will be in listen only mode. Questions are encouraged and could be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Please just simply type in your question and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company review all questions submitted today and publish responses where it is appropriate to do so. These will be available via your Investor Meet company dashboard, and we will send you an e mail when they are ready for

0:32 you to review. I would also like to remind you that this presentation is being recorded. Before we begin, we would like to submit the following poll. And if you could give that to your kind attention, we would be most grateful. And I'd now like to hand over to Connie CEO and Kim Slaton, CFO from MYCELX. Good afternoon to you both. Good afternoon. Welcome everyone and thank you for joining us today. I am Connie Mixon, the CEO of MYCELX TECHNOLOGIES and joining me today is Clint Kim Slaton, our Chief Financial Officer. We will be reviewing our 2020 year end financials as well as a short commentary on 2020 operations. But more importantly and certainly more exciting, we're going to be discussing our unique technology, the exciting new market we are currently entering in The US, as well as the benefits our advanced solutions offer to the oil and gas industry as they transition to environmental protection and sustainability goals and in earnest.

1:36 So, what I would like to do is we would like to turn off our cameras. We do have graphs in here that are more difficult to to to read and so we would like to be for the screen to be as large as possible. So I'm going to turn us off now and we will get cracking on the presentation.

1:59 Okay. So, we will start with an introduction of MYCELX technologies. MYCELX is a a clean water company that has patented and unique technology. We have the polymer that was that has been invented by our but by our Chief Science Officer and is now currently continuing to innovate was done on the heels of the Exxon Valdez spill where he was determined to find a better way to manage oil spills and save the world's oceans. Therefore, we come by our mission from the very beginning of the company, which is to reduce the environmental impact of industry through science and technology.

2:53 In commercializing our technology, the oil and gas industry was the strongest had the strongest uptake because they recognize the value of cleaner water from a process as well as a regulatory perspective. What our technology delivers cleaner water and we're meeting environmental goals in a cost effective manner and it improves industry adoption. As companies are increasingly focused on their environmental impact, MYCELX offers the ability to achieve some of the most important ESG goals and also at the same time once again creates cost savings for the customer. The customer the the MYCELX is a company that can accelerate a sustainable future and it also helps industry improve their environmental footprint.

3:44 If you look at the bottom of the of this slide, you'll see Nigeria, Saudi Arabia, US, Australia, and Galapagos. We're just highlighting some of the areas where we where we have been installed and we do business and this is where we are bringing we are bringing great value certainly in the Niger Delta, we're discharged overboard of OLI water has, as you know, been an environmental disaster. In Saudi Arabia, we are in petrochemical plants where we are helping them with their process water with very hazardous air emissions such as benzene. Our new market PFAS which we will get in later on in the presentation is like a hazardous contaminant to drinking water. And then finally, just as a, as a commentary on how we, how well we treat water in the bilge water industry, we are chosen by the Galapagos Islands as the bilge water treatment of choice for all of their ships that sail around the Galapagos Islands because they know that they will have less than five parts per million or non detectable levels into the into their environment, which is one of the most delicate ecosystems in the world.

4:57 I would like to introduce our board. Our board is made up of experienced business leaders as well as our chief science officer. Tim Eggar, our chairman, is currently the chairman of the oil and gas authority in The UK and was formerly a MP and served as in industry and sorry, energy minister. Hal Alper is our inventor and co founder. He has extensive academic record in polymers and environmental technology. Tom Lamb, he has over thirty years experience in leadership roles currently serving as the CEO of a privately held company that services the oil and gas industry globally. Andre Schnabel is a former managing director of Grant Thornton and has enormous audit and advisory experience.

5:48 And finally, Connie Mixon, I'm a former director of global markets at Deutsche Bank and two other banks prior to that. So, we will move on now to to our superior, so how we survive 2020. For the the most important thing is during the pandemic, we were able to continue to perform in Saudi Arabia where we have operations in the petrochemical industry. We were able to do this and to and to provide the the level of performance that they have come to expect from us throughout the pandemic, which was quite a feat given that as you know, most all everything in all over the world was shut down.

6:39 We also grew our footprint in Saudi Arabia with a contract for a new application which was ammonia removal. This is a this is an application that we will be able to use throughout The Middle East as well as a as a another application that we can leverage on our leverage in in The Middle East. Our in house engineering team advanced product development and to enhance the water usage. We have a specific need for the oil and gas industry has a specific need for being able to treat the water in real time during EOR production, is enhanced oil production. We will get to that later in the presentation as well, but we made a very large advancement in the way that we can use our our media in that production case.

7:31 Also, established a formal relationship with our Australian distributor who is an advanced water treatment and systems integrator to pursue the opportunities in PFAS remediation using our technology and we will also get in-depth into PFAS remediation as we go forward as well. This is the technology that we're bringing to The US market. Furthermore, we have continued to develop further MYCELX applications with strategic partners such as an air filtration and in bilge water. We find that using channel partners is a better way to get into the market and we have been using we have been setting up these strategic partnerships as well.

8:22 Well, I'll turn it over to Kim now to go through the financials for year end 2020. Thank you, Connie. We're looking at the profit and loss statement here. The first thing you'll notice, obviously, is that revenue did drop from 2019 to 2020. There's a decrease in revenue of 40% with total revenue at 7,100,000. Our our legacy media sales were actually very consistent. They even increased a bit. The media sales and service revenue was up 17%. So the came from the equipment sales and leases. There was a significant drop in production within our markets last year. And so we did not have other than this ammonia renewal project, there were no real new projects to speak of, no equipment sales. And so that's what drove that decrease in revenue. We didn't have the emergency response units in place. When production is down, there's no, you know, real crisis that they're trying to the customers are trying to handle. And so there was no emergency response systems or other new projects outside of the ammonia removal project.

9:37 Gross profit did decrease from $6,000,000 to $1,600,000 That's a the gross margin dropped to 23. That was due to a large inventory reserve that we posted. The reserve related to some equipment in our Houston warehouse that we built several years ago that is very large specialized equipment and will be needs a very specific kind of project for its application. And so we are still actively that equipment is still in our warehouse, and it's still for sale. We are just waiting for the right project to use it. But because of the amount of time it has been sitting in the warehouse, it is considered slow moving equipment, and U. S. GAAP rules require that we post that reserve. So there was a $1,100,000 reserve that was kind of what I would consider a one off charge. We do have inventory reserves every year, but not to this magnitude.

10:33 So that drop in margin was for this year. We expect it to return to a more normal level moving forward. Total operating expenses dropped by 10%. That was on top of the 12.5% decrease that we recognized in 2019. So if you look at from 2018, total operating expenses are down almost 25%. Operating loss of $6,000,000. We did have a gain on extinguishment of debt of $404,000. That relates to the Small Business Administration's PPP loan that we received back in April. That loan was forgiven, including all of the interest. So, we were able to recognize a gain there.

11:20 So the total net loss for the year came in at negative or loss of $6,100,000 That's a loss per share of $0.31 per share. Moving ahead to the balance sheet. You can see that our net assets did decrease by $6,100,000 That decrease is attributed to the inventory reserve that we just discussed of 1,100,000 Our accounts receivable balance also decreased by 2,400,000 as we collected on some large outstanding invoices.

11:56 We did increase our debt by $1,000,000 with a draw on the our line of credit. And then the fixed assets decreased from our normal depreciation and amortization. Our inventory level at year end was around $5,600,000 That is a relatively large inventory balance. It is made up 50% of that balance is, some finished goods equipment that was sitting in inventory at year end waiting to ship. Those are projects that delivered in 2021. And so that equipment was in our warehouse waiting to ship and did increase our inventory balance. And then we also have a large region inventory balance, and Connie Holt is gonna talk more about our initiative with region.

12:45 But we did spend 2018 and '19 building up our Regen inventory because of the time associated with with getting that product in place and ready ready to move for customers. There is a lengthy time where we have to order the product. It takes several months to get here. The infusion process, takes a bit of time. So it takes three to four months total to get that inventory ready to sell. And then when we do start receiving the in orders that we're anticipating, they will be very, very large orders. So it will take a significant amount of inventory to fill those orders. So that is why and then we then the pandemic in 2020 hit, and so, you know, we've we've lost a little about a year from where we thought we'd be. But we do expect to move that inventory in the next year or so, and that is what is making up that large inventory balance.

13:46 Moving ahead to the cash flow statement. We did have a, we did use one point almost $1,500,000 in cash in operating activities. That decrease in cash from operations was offset by the draw on the line of credit and the PPP funds that we already discussed. So the total drop in cash for the year was only $350,000. However, since year end, we did receive a second round of the PPP loan, another $400,000 that we expect will also be forgiven again. So that was a cash infusion right at the beginning of the year. And then we also sold our property here in Duluth, which enabled the company to right size our office space needs. The space that we have in Duluth is excessively large compared to what we need. It's been we have a lot of vacant space.

14:44 And so there was a lot of demand for properties of our size in this area. And so we were able to capitalize on an opportunity to sell the property for total consideration of $5,400,000 That resulted in a gain of approximately $2,500,000 on the P and L. And then we also received cash proceeds of $2,800,000 after expenses. So at the end of the day, we ended up with no debt and no restricted cash left on the balance sheet and about $6,000,000 in cash. Connie, I would, Thank turn it back over to you very much. So as we move on, our goal is to accelerate a sustainable future and to that end, this slide is showing how application of our technology helps our customers with six of the 17 United Nations sustainable development goals.

15:46 Our systems, as you can see, we're highlighting PFAS removal, our process water, our process in petrochemicals, upstream oil and gas production, marine spill, and air filtration. And the goals that we tick the boxes are down the left hand side. It's a crowded slide, we wanted to make sure that, we had the information that that, was associated with with those sustainable goals. Our systems protect and preserve vital water resources thereby they're safeguarding delicate ecosystems. If they reduce the environmental impact of production such as in petrochemicals because they enable, recycle, and reuse of water. It reduces chemical usage and improves energy efficiency.

16:34 Our PFAS solution helps us to provide clean water for the communities by removing a dangerous contaminant from groundwater that would otherwise enter the drinking water systems. All in all, the the initiatives in The US, the Biden administration is extremely focused on this. In fact, during the new administration EPA director's confirmation, he quoted it was quoted that Biden's EPA will place top priority on PFAS and regulations under Safe Drinking Water Act. So we are confident that the administration and the EPA is going to be dealing with the PFAS crisis.

17:20 So we want to spend some time talking about what is PFAS. PFAS, the acronym is obviously shows that this is a family of compounds that together are all highly toxic and they include PFOS, PFOA, GenX, In other words, they when they started discovering PFAS, they realized that they had broken that that the initial PFAS had broken down into several, many actually, several different compounds. In fact, now on the EPA website, you'll see that they have identified 7,000 of them. Two years ago, it was 2,500. So the the more work they do on this on this issue, the more they realize what a difficult contaminant this is to remove.

18:14 PFAS is a man made synthetic compound and it does not degrade in nature naturally. So it is found, it was actually, it was actually invented in the nineteen thirties and as Teflon, so it is basically anything that has Teflon or Teflon coatings, etcetera is a PFAS is is a PFAS compound. It's used in just about everything now that, takeaway containers, Scotchgard in clothing, anything Teflon coated And another legacy contaminant is AFFF which is firefighting foam and that is found everywhere around airports, training grounds, around, refineries, it's also around naval bases because they they use this in firefighting training and it has created an enormous problem for the US military as far as being able to contain and treat what is being leaching into drinking water.

19:21 It is a very difficult contaminant to remove because it is so soluble in water. It's measured in, I know this this is scientific language, but it is measured in parts per trillion and it is and it's so it is so easily spread through plumes of water and through soil, rain water, and even the air. So the human health risks are huge, they are and it's an endocrine disruptor, it is linked to several cancers, liver damage, and thyroid disease as well. The characteristics of PFAS are are shown in these boxes, in the pictures above.

20:09 To show how difficult, how strong the bonds are of this compound, to incinerate it, it has to be over 1,100 degrees Celsius to actually completely destroy it. It is has a half life of forty years meaning and up to ninety years, so it stays in the soil as we were calling it the forever chemical because it just doesn't break down. It's everywhere because it's gotten into groundwater and into and carried through those plumes to drinking water sources. It was it's been the EPA has said that they have detected PFAS in groundwater in 49 of 50 US states and it is toxic as we were talking about the level that it's measured in parts per trillion, seven parts per trillion which is 70 parts per trillion is which is where The US is currently regulating is less than four drops in a in 20 Olympic size swimming pools, so it is toxic at that level.

21:21 And once again, it it has links to very very dangerous health problems. It bioaccumulates unfortunately in human beings meaning that once you're exposed, when you're exposed to it, you can be constantly exposed to it and it builds up because your body cannot really naturally degrade it and release it. So we're looking at a very difficult to remove contaminant that is a serious health risk even at very low quantities and has become ubiquitous. The hotspots in The US currently are for the most part plants that made this material as well as air force bases. But this is the same all over the world that had that that have been that used for for example firefighting foam which is used all over the world.

22:14 The estimates of clean of cleanup of PFAS range from eight to 20,000,000,000 a year and the numbers are growing. It was estimated at half this much two years ago. So as it expands, we become increasingly aware of PFAS compounds and their risks.

22:39 So what is it that MYCELX why is MYCELX involved in PFAS? We have a definitive competitive advantage, in fact we have very large competitive advantages. But where I'm going to start first is this pyramid, that's the top right graph. Is further explanation of what we're dealing with this compound. At the top of it is two compounds that are already being regulated which is in the yellow, which is PFAS and PFOA, they're called PFOS and PFOA. They're just sub compounds of this family of compounds that come under the umbrella of PFAS.

23:27 As you go down the pyramid, what you'll also see that conventional on the right hand side, you can see that it says conventional. This is this is the early this is where we found the what they have identified as the early contaminants and conventional technologies can remove the PFAS and PFOA and some of the next level of broken down contaminants which is in the orange. If you look to further past that you see another bracket and that says MYCELX. One of the most important competitive advantages is that we can remove all of those contaminants where our competitors and the conventional technologies can remove just the two at the top with some of the next level.

24:17 That is a huge competitive advantage, so we have the broadest spectrum of removal of any technology, that's number one. Number two, the if you look at the bottom picture, that is an aerial view of a PFAS contamination cleanup site and you and it is being cleaned up with carbon and so those circles you see are the tops of all the carbon vessels and some of the tanks that they use to hold water while they're while they're cleaning up cleaning up, but for the most part those are all vats and vessels of carbon. This is the conventional approach. The four red rectangle boxes you see there is the MYCELX equivalent.

25:08 In other words, our footprint to treat the same amount of water to better levels is actually that size versus what you see the carbon footprint. So the second great advantage we have is smaller footprint that's much greater efficiency and what that means is when you're that efficient, you use a lot less media as you can imagine because our media is in those four boxes and you're you are also creating a lot less waste which which must be dealt with. So our solution to this problem right now is unmatched in spectrum of removal, efficiency, footprint, and reduced waste.

26:07 To address this enormous opportunity, we have teamed up with our Australian distributor who for the last nine years has because Australia by the way is the forefront of PFAS remediation efforts, they're ten years ahead of The US. So our distributor in Australia has been dealing with this since 2009 basically, So what we were doing while they were in the field putting together the engineering, doing the trials, etc, etc, we were iterating unique technology based on our core technology so that we had the best treatment in the smallest footprint for this for this issue.

26:54 So over these years, we have gotten to what is now our set technology, It is all done, it's proven. In fact, we have installations along with PFAS Global is the name of our new collaboration. Our Australian distributor has currently proven solutions and installations in air services, which is the aviation branch of the Australian government. They also have installations at global integrated oil companies, which we

27:27 don't release names, Australian Department of Defense locations as well as construction and mining. We have put together recently and launched our PFAS Global website and we have trademarked the name PFAS Global. We are currently marketing in The US and this is going to be the platform for which we launch our new company and our new solution for PFAS into The US market. Let's move on now to what we are doing with the oil and gas industry secure to help them secure a better environmental footprint. And by the way, this is what we've been doing for years, especially as it relates to the petrochemical industry in Saudi Arabia, which is what is is for right for currently the company's biggest market.

28:26 We use our equipment fleet in Saudi Arabia to provide water treatment systems that meet the strict guidelines and regulations that are based on EPA standards in Saudi Arabia. Our solutions reduce water usage, which is very obviously a very valuable commodity in Saudi Arabia. Our solutions treat to levels that allow these customers to recycle and reuse water within the system rather than haul it off.

28:57 This reduces the amount of makeup water required, they're not constantly having to use newly treated desal water to make up for water that they have to haul off, they just are able because the water is kept clean, they're able to reuse it over and over. We also treat wastewater streams at petrochemical plants to reduce the contamination in the water that's discharged to the sea. Our aim currently is to secure a global contract with SABIC that will submit our position not only in Saudi Arabia, but in the pet petrochemical industry at large. We're also working with customers and EPCs to develop large recycle reuse systems based on our technology.

29:46 What you're looking at there in the graphic below that is that it what you're seeing there is oil removal VOCs or volatile organic compounds where they are if you look the top there, that's what the inlet concentration is and you see that it's at 40,000 parts per million at times it spikes. No water stream in a in a plant is ever the contamination, sorry, is never level. It it spikes constantly and the ability to manage those spikes is one of the hallmarks of why we are important in this industry. If you look at the bottom part of the grid, you see this straight line where there's a few little blips that is the outlet which is close to zero. So this is what we can this is the amount of contamination that we can handle in process in real time without any disruption to any performance.

30:46 So, we look to secure this global contract and be able to move to larger recycle reuse systems. Next, we're going to cover EOR production. EOR production is enhanced oil recovery which is which is just a method by which producers get oil out of older fields. In my opinion, this is one of the biggest water plays there is in the oil and gas industry. One of the biggest issues when you're dealing with old fields is that is that there's much more oil left underground and it takes an enormous amount of water treatment to get it out of the ground and then treat the water.

31:38 For example, in these old fields, you will get 10 times more water up during production than you will oil. So you're treating 10 barrels of water for every barrel of oil that you're producing, but there's a but there is a there's a very big benefit to these old fields and that is there's so much oil left in the formation that they don't really need to go and exploit any or develop new reservoirs which is extremely expensive. So if they can continue to get to get product out of these older wells, then they can then they can continue to produce, but they have to be able to treat the water. The biggest issue is that treating the water when they use this polymer, this polymer flood is what it's called an EOR, meaning they're injecting polymer in the well so that so that the oil comes out faster and easier.

32:37 When they're doing that, they have a very difficult time treating the water. So the likes of Schlumberger and SNF, the big the very large polymer producer that's being used in this method,

32:50 believe that we have the only solution and we believe we have the only solution to effectively treat during this type of operation. We have recently won a we won a paid trial in 2020 with a major EOR producer and our aim is to complete this successful pilot, turn it into a major project as a precursor to wider adoption by EOR producers in The Middle East.

33:20 Next in oil and gas is offshore production. Regulations have become more and more strict around the world for discharge of water overboard during offshore production. It is a challenge and it is getting more difficult for incumbent technologies.

33:42 MYCELX already achieves five parts per million discharge for for offshore produced water and we are operating on, for example, Chevron's Jack St. Malo, which is their state of the art platform in the Gulf Of Mexico. We have three other platforms with Chevron in The Gulf Of Mexico and we also work with them in Australia. We are working with customers Chevron for example has self imposed less than 10 parts per million in the Gulf Of Mexico even though the Gulf Of Mexico regulations are 29 parts per million. So as more there's no doubt in my mind that producers are going to follow the leads and the examples of these of the producers that actually have embraced lower discharge, especially in the environment that we're living in now with with the environment first and foremost.

34:36 So we have an opportunity to grow our footprint in the Gulf Of Mexico on the back of our success with Chevron. In addition, we're the only technology approved by the Department of Petroleum Resources in Nigeria for shallow water overboard discharge. This is an effort as I spoke earlier to improve the water quality in the Niger Delta. We have first mover advantage to expand our position and so far we have sold three systems to date and, we look to a bright future there, and certainly with our first mover advantage of being the only one that is approved to for discharge into shallow waters.

35:21 And I think that this is going to give us this gives us a huge competitive advantage.

35:31 Okay. Let's move on to our IP and our targeted R and D efforts. We have 39 global patents within a very secure patent web. And the way that the chief science officer is is a really a brilliant person when it comes to securing and how you build a patent around, oh, sorry, a web around patents that you want to secure and to be able to upgrade and revise and resubmit over time. So we of these 39 global patents that is made up of 16 families of patents that include not only our proprietary polymer, it includes the applications and the field of use in the field of use. So for example, our original patents have been updated, resubmitted and new patents have been granted.

36:23 So in for the most part, our foundational R and D work is complete. Our chief science officer and inventor continues to innovate and upgrade patents as implementation in the field produces better information, more information, we find better ways to do things and it keeps the technology robust. And so we're we believe and we know that even in an ever changing range of MYX TECHNOLOGIES applications such as you can see the ones on the right of the screen, the PFAS removal and the ammonia removal, those came up and we innovated, he innovated to come up with the best answer for those and a small footprint that was cost effective.

37:10 And so we will continue to do that and we are we are that is basically one of the pillars that the company is built on.

37:23 So in conclusion, we are a leading water treatment company that helps companies achieve their ESG goals. We have proven applications in oil and gas and we're expanding into new exciting markets such as PFAS. Our IP is secure and our applications continue to grow in number. We have experienced signs of recovery during the end of twenty twenty and with the oil price stabilizing, you know, dollars 60 plus per barrel, we expect to see more robust bidding activity, that usually takes place, at the kind of due to customer budgets in the second half of the year. That's not to say that we have not had enormous amount of work in bidding in the first part of the year, we have.

38:16 But we what we're looking at is an industries, especially in oil and gas has come off, you know, a 2020 that was, challenging to say the least. So, they're definitely looking at interesting enough even capital projects, not just lease and upgrades. So I'll leave you with this, we have a very hard working team that's been together for years and is a 100% committed to achieving the success of with our technology that we all know

38:48 is possible and we look forward to more interaction with investors and potential investors. Let me go to this last slide, this is a slide that just shows our most significant shareholders that have held position since the IPO. And with that That's brilliant, Connie. Thank you very much indeed both to Connie and Kim for updating investors today. Ladies and gentlemen, please do continue to submit your questions using the Q and A tab situated on the right hand corner of your screen. I just want the company to take a few moments to review those investor questions submitted during the meeting. I'd like to remind you that a copy a recording of this presentation, along with a copy of the slides and the published Q and A can be accessed via your Investor Meet company dashboard. I'd also like to remind you that your feedback is important to the company. And immediately after the presentation has ended, you'll be redirected for the opportunity to provide feedback and all the company can better understand your views and expectations.

39:43 Connie, Kim, obviously, you for that. Investors had the ability to pre submit questions ahead of today's event. And what I'd like to do, if I may, is just start off with those. We received four in total, and then perhaps we can look at those questions that have come in during the live event. The first question reads as follows. How linked to the price of a barrel of crude oil is your revenue stream? I would say that we are definitely linked to the price of oil. During oil price environments which we've weathered three of those that it had an impact on our business. It is one of the reasons that we are diversifying into PFAS and other areas because we know that while we have a significantly better product for the oil and gas industry, oil and gas is slow to adopt new technologies and as we go through these cycles, which I believe are coming closer together on the oil price.

40:46 Need we will it will require us to have base business in other places. But as long as the oil price is this is me, my take is over $50 a barrel over $45 a barrel, most producers are at can actually make money. Some of them that have more difficult production techniques, etcetera, they struggle at above when it's not above $50 $60 a barrel. Thank you very much indeed. The next question reads as follows. What opportunities do you see for MYCELX products and services in industries outside of oil and gas? And do you have plans in that direction? Yes. The PFAS is by far our most promising because of the as you could see the competitive advantages we have. We also have taken on a partner or a collaboration in air filtration, an air filtration services company who who are the ones that actually install air filters in large plants such as automotive plants, etcetera. That's a that's a good market channel for us.

41:54 The same thing with marine bilge water. All of the ships that are over 400,000 tons have to have a bilge water system on them and, it's it's it makes more sense for us to to also collaborate with a company that that is in that industry and sees those opportunities. So we have also done that one as well. And we've also, have a collaboration with the storm water, company, where storm water drains are also a big are becoming more regulated in The US and we have also a very good product for storm water remediation. That's great. Thank you very much indeed. There's another question about PFAS that I think links into a live question. So I'm going to perhaps leave that for later on. The final pre submitted question, if I just jump onto that is, there's a very large inventory write down, which is hopefully a one off in these numbers.

42:42 Could you please confirm this? Inventory levels appear to be very high. Could you explain why this is necessary? Is it linked for forward demand? Yes. The inventory reserve was very large. That was kind of a onetime thing. It's usually 10% of what we have we posted this year, and it was because of that equipment in Houston. We would not expect that to to be to maintain that level of reserve moving forward. The inventory balance is large because of the region inventory that we have built up that we discussed. It is for future demand. Well, that's great. Well, thank you very much indeed. Perhaps I could just ask you both to just open that Q and A box on the right hand side of your screen. You'll see the questions from investors have come in.

43:29 Perhaps if I could ask you to start at the top, if I could ask you to read the question perhaps who it's from and give a response and then I'll pick up from you at the end. Okay. Very good. Here's one question. How do you mitigate the key person risk around your chief scientific officer? You know, there's there are not many people that are skilled as he is, is that is quite that we're quite sure of, but the as I stated in the presentation, most of the r and d work has been completed and we have more technology than than we have commercialized. So while we while he is very, very prolific in in what he can innovate, the reality is our engineering team is very good at implementing them and that is also a very key part.

44:28 So we've all of our most of our patents can because we've got we also have very good legal counsel with our patents. We can keep those we can keep those going. I can say that we that there are people that have his skill sets in certain ways but not always. So while is you could say, well, it's it's a risk, it's not one that's not manageable because we have for years we for years used engineering and to implement, you know, so many different things that they that he has been able to just you know, that he's helped us, but the engineering has been able to implement. And I think that we're well on our way. And, you know, and he will continue to do what he does, but scientists look ten years out.

45:13 That's how that's where they are and that's where kind of where they live. So we are in the here and now and we're using our products to do what we can, you know, to to build the business. Okay. Let's see. What will the cost of market entry for PFAS? How will you manage that cost? The way that we're managing it now, we know that we have to have a certain amount of equipment for trials. We also know that with our partner that we have access to, you know, to some equipment. We are gonna we do have a marketing budget, but I will say if it if this market explodes, you know, then, you know, we will we have we have sufficient cash right now and we would like to see that if we can if we can accelerate it and we can start creating cash flow a lot faster, the quicker we're going to be able to address everything in the in the PFAS market.

46:17 PFAS just in general, PFAS equipment, for example, is not nearly as expensive for us to manufacture as oil and gas because oil and gas is built to non explosion proof, etcetera, standards. And this is groundwater treatment. So, we can build several systems for the price of one system that goes into oil and gas. So we are we have, budgeted for some of these and, it will just be a matter of how quickly we get the uptake. Are you close to signing a global contract with a major petrochemical producer?

47:09 You know, basically the producers where there's always proposals out and we have a pipeline of proposals and, of course, we never know which one is going to come through or the timeline. They have timelines. They only share what they want to share as far as when they're going to pull the trigger and upgrade or buy a new system, etcetera. So all I would say is that we have a robust pipeline and we would expect that out of this basket of opportunities that we would be able to sign, you know, a contract, you know, hopefully within within six months to a year. Okay.

47:56 Let's see. I'm looking for How much of business is consumables as opposed to equipment? How often does the medium need to be replaced? Kim, can you help me with the the percentage of media versus equipment? Yeah. So in terms of legacy media sales, that's probably I mean, it's at least 25, 30% of our revenue. Equipment sales can be chunky. So sometimes we have none, and sometimes we can have a we had a $5,000,000 equipment sale a few years ago into Nigeria.

48:44 So those can be quite large and skew the numbers a little bit. I can say that revenue from the equipment leases is is a is a significant component of the business as well. So and those leases consume media as well. So overall, if you if you include the just legacy media and then also the media consumed in the leases, I mean, that's that's upwards of that's at least 50% of our business, and then the rest would be the the service revenue from those leases, equipment sales, and the lease fee on the equipment. In terms of how often the media has to be replaced, that depends on what's in the water and the volume of water. Sometimes that media has to be changed out very frequently. Sometimes it can last a little longer. That that totally depends on the project. Connie, do you wanna add to that?

49:31 That's true. Yep. That's media consumption is base is is totally dependent on the level of contamination in the water. And we we engineer to that. So if they for example, if a platform doesn't wanna change out media for a month, then we make sure that we size the vessels and to make sure that that's what happens. If they were happy to change out sooner, they'll have a smaller footprint and they change out sooner. Here's another PFAS question, how much of the technical solution is owned by MYCELX, is it a 100% or do oleology contribute any technical aspects? The PFAS solution is owned by MYCELX. MYCELX is the engineering or the equipment is very off the shelf, which is good because that means it's very cost effective and but what goes into that system, the media, the arrangement of that, etcetera, is all MYCELX technology.

50:35 There's a question about cash. You don't appear to have much cash. How long will it last for? Our our cash balance after the sale of the building is up at $6,000,000. That's the highest our cash balance has been since 2015, and we are we are good at preserving the balance sheet and and stretching the cash as long as we need to. So we actually feel very comfortable with the cash balance as we stand today. It will meet our operating needs for for quite a while, expanding into PFAS, and that that will consume some cash. But we do feel like as we stand today, we are in a better position than we have been in a very long time. Yes. How do you retain your employees? How competitive are your salaries and how do you prevent other companies from poaching your employees?

51:29 We generally speaking, we have very low turnover. We have we have employees that have been with us over ten years. For the most part, I believe that that, in engineering in particular, our that the type of engineers that we that we attract don't like working in large companies. They like working in, smaller companies where they get where they have the opportunities to do a lot of different things such as they go out on platforms, they they have access to they travel around the world. So we don't we we don't fight that as much as as a lot of, as as a lot of companies in oil and gas. Currently, we are actually, looking to hire in Houston and because of the amount of talent that is now available because of COVID nineteen and the and, you know, there was so much there was a lot of layoffs of engineers.

52:27 The talent pool is amazing and which is really good for us because when when, you know, we're a small company. So when talent when times are really good, then we have a harder time, you know, finding the, you know, finding the quality of talent that we want. But right now, it's it's it's readily available, which is very good for us. So we expect to be able to hire really good people. Let's see. Kim, do you have anything else there? No. Okay. Could you give an idea of the addressable market for your current product sets and how competitive is the market? There's many been many people that try to give the addressable market size of, of water treatment in, in petrochemicals for example.

53:26 It's it it is such and no one ever will will articulate it and I can't articulate. The same thing goes for offshore platforms. It's the market they'll give the overall market as in the billions and billions of dollars which is which is probably which is probably true. But I've never seen any numbers that where they were even in the close range that that I could say that I would that I would say were absolutely correct. Right now, we know that the addressable market because of the I guess, it's proximity, because the investigation that's been going on for PFAS, we know that it's that it's very large. It's but but but of course, the range is large too, it's 8,000,000,000 to 20,000,000,000 a year and only two years ago it was 4,000,000,000. So, that's US and Australia. So I don't know.

54:15 I I I don't know. I do know that in oil and gas, it is very difficult to come by addressable market numbers when it's just the water treatment because water is just a very, a very small part of all of the activities they do, so they bear they rarely they rarely segment out the water treatment in oil and gas. Colleen, I'm just mindful. Obviously, we're coming, up to the hour. Obviously, I know investor feedback is particularly important to to you both. I don't know if you wanna have a quick just a quick glance to see if there's anything else that potentially that you can address now that hasn't been covered in the presentation. And of course, thank you to all those investors that have submitted questions. And any that we haven't got around to, Connie, we'll make available to you after in case there's anything else that you'd like to add.

55:07 Very good. One question, do we intend to list in The U. S? There's no plans for that at the time for the time being. Well, that's great. Well, then maybe coming, if I could just ask you perhaps for a few closing comments and as soon as that's done, I will, as I said, redirect investors to provide you their thoughts and expectations. Wonderful. Thank you very much for joining us today. It has been our pleasure and we will look to answer all of these questions and get back to you with the answers. Thank you again. Connie, Kim, thank you once again for updating investors. Could I please ask investors not to close the session as you'll now be redirected for the opportunity to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete and is, I'm sure, greatly appreciated by the company.

55:53 On behalf of the management team of MYCELX, I would like to thank you very much for attending today's presentation. That now concludes today's session, and good afternoon to you all. Thank you once again.