Perma-Fix Environmental Services - Earnings Call - Q2 2015

Transcript

Speaker 0

Greetings and welcome to the Perma Fix Environmental Second Quarter twenty fifteen Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr.

David Waldman of Crescendo Communications. Thank you, sir. You may begin.

Speaker 1

Thank you, and good morning, everyone, and welcome to Perma Fix Environmental Services second quarter twenty fifteen conference call. On the call with us this are Doctor. Lou Senifani, Chief Executive Officer and Ben Naccaratto, Chief Financial Officer. The company issued a press release this morning containing second quarter twenty fifteen financial results, which is also posted on the company's website. If you have any questions after the call or would like any additional information about the company, please contact Crexendo Communications at (212) 671-1020.

I'd also like to remind everyone that certain statements contained within this call may be deemed forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements on this conference call other than a statement of historical fact are forward looking statements that are subject to known and unknown risks, uncertainties and other factors, which could cause actual results and performance of the company to differ materially from such statements. These risks and uncertainties are detailed in the company's filings with The U. S. Securities And Exchange Commission.

The company makes no commitment to disclose any revisions to forward looking statements or any facts, events or circumstances after the date hereof that bear upon forward looking statements. I'd now like to turn the call over to Doctor. Lou Sinofani. Please go ahead,

Speaker 2

welcome everyone. Very pleased with the dramatic improvement in our results compared to prior year. But I'd also add far from satisfied given the vast landscape of opportunities we are seeing in our unique resources that we have at our disposal. Our business improved during the 2015 with a revenue increase of 29% to $16,400,000 versus second quarter of last year. Much of that growth occurred in the Service segment where revenue increased 61.5%.

This growth indicates we're winning more work and contract awards appear to be picking up. Within the Treatment segment, revenue increased by 18% to $11,100,000 versus same period last year. This was due to higher waste volumes. Due to the timing of shipments, however, some of the revenue we had expected in the second quarter was delayed and came in, in the early part of the third quarter. Nevertheless, our sales pipeline continues to improve.

We anticipate government spending to increase as we approach the government's year end. And we are off to a strong start in the third quarter and extremely encouraged by the outlook for the 2015. As a footnote to that, especially on the treatment side, as a footnote, we were very pleased to see yesterday that the Senate approved the appointment of Monica Rigobolato as Assistant Secretary for the Department of Energy's Office of Environmental Management. We hope this position, has been vacant for close to five years, will provide the leadership for DOE's environmental cleanup efforts. Moving on, we had substantial improvement in our margins with gross profits increasing 159% and gross margin increasing to 24.7% compared to 12.3 for the same period last year.

Additionally, we achieved adjusted EBITDA of $2,000,000 compared to a loss of 400,000 same period last year. We fell slightly short of our EBITDA target for the second quarter, but this was due to the timing of the shipments that I had mentioned earlier. As such, we remain confident in our prior guidance of $67,000,000 for the full year. As we have explained on the previous calls, the last few years have been particularly challenging for the industry as government funding for nuclear waste cleanup was curtailed for various various reasons. And one of the major, again, was just the lack of leadership at the top of DOE's environmental cleanup in the agency.

With the appointment of the new Assistant Secretary, we're somewhat excited that we think we'll see movement on some of our top priority projects. However, we continue to focus on diversifying revenue into non DOE areas. And this we believe this will continue to lead top line growth together with our cost initiatives undertaken to streamline operations, we will continue to see improvement in our bottom line. I'm also pleased to report some new developments on our medical isotope side of our business. In early June, we reached an important milestone in terms of scaling up our prototype generator for commercial production by achieving or demonstrating a four Curie level system.

This was a major achievement within the industry. We not only exceeded industry requirements in many emerging markets, but are now in moving rapidly to demonstrate our superiority over traditional processes in North America and European markets. Based on these results, we remain convinced that our process has the potential to reshape the global supply chain of TEK99M in The U. S. And around the world.

Following our earlier success at the two carry level, we have attracted significant interest from within the industry further validating the significance of our process. Given our latest four carry level and near term plans to scale up even further, we are moving forward aggressively with our plans to formalize additional partnerships, prepare for regulatory submission and ultimately commence commercialization of the process. Also, we finalized our agreement with Digirad, whereby Digirad invested $1,000,000 in our subsidiary Permafix Medical, which is listed on the Warsaw Exchange. I would point out they invested a slight premium to current market, which is further illustration of the growing interest in our process from within the industry. As part of the agreement, Digirad will purchase also agreed to purchase quantities of TEK99M for its nuclear imaging operations upon successful completion of development of the new TEK99M resin.

With all that is going on within the medical side, we've also made some major additions to our senior management team at Permafix Medical. Steve Belcher has been appointed Chief Executive Officer of Permafix Medical. Steve brings nineteen years experience in the nuclear pharmacy sector. By the way of background, Steve was one of the founders and principals and former Vice President of Triad Isotopes, which is the third largest nuclear pharmacy in The U. S.

Steve has also served as an officer and principal architect of multiple ventures and was the Chairman of the Board of Association for Independent Nuclear Pharmacies. As you can imagine, you see his resume brings tremendous network and credibility from within the industry. John Klimico was also appointed Executive VP of Permafix Medical. He is Co Founder and former President and CEO former CEO of Axial Biotech, a molecular diagnostic company. John has served as a member of the Board of Directors of Digirad, InfuSystems Holding and is also a Board member, of course, of Perma Fix.

So as to wrap up, we're encouraged by the outlook for our business given our growing sales pipeline within the Service segment, our improving outlook within the Treatment segment. Looking ahead, we anticipate a strong 2015 and remain confident in our prior guidance. As I mentioned before, we continue to bid on a variety of large contracts and continue to believe we're in a good position to win continue to win contracts. We appreciate the support from our investors and dedicated and the dedication of our employees. At this point, I'd like to turn the call over to Ben, who will go over in more detail the numbers, then I'll be back to answer questions at the conclusion of our formal remarks.

Ben?

Speaker 3

Thank you, Lou. Starting with revenue. Our total revenue from continuing operations for the second quarter was $16,400,000 compared to last year's second quarter of $12,700,000 an increase of $3,700,000 or 29.2%. Our Treatment Segment revenue improved by $1,700,000 primarily due to improved waste volume, while our Services segment improved by $2,000,000 as a result of improved project revenue compared to prior year. For the year to date, our revenues is greater than prior year by 6,800,000 or 29.1%.

Our cost of sales was $12,300,000 in the second quarter compared to $11,100,000 in prior year. At the Treatment Segment, our cost of sales actually decreased $319,000 or 4 percent compared to prior year. Despite the higher waste volume, our variable expenses were lower, primarily due to lower disposal expenses. In addition, we also we were also able to maintain our fixed costs despite the significant revenue increase. Our cost of sales for our Services segment was up 1,500,000 basically related to the variable expenses that go along with the increased revenue.

Our gross profit for the quarter is at $4,000,000 or $4,000,000 compared to the gross profit of $1,500,000 in 2014, an increase of $2,500,000 Gross profit at the Treatment Segment increased $2,000,000 compared to prior year. Again, the increased volume and the higher margin waste streams was were the main contributors increase as we maintained stable fixed costs despite the increased workload. Gross profit at the Service segment increased $465,000 as our current Services segment as it is today improved by $950,000 but was offset by lost gross profit from our Engineering Group, which we sold in July 2014. Year to date, our gross profit at June 30 is higher than prior year by CAD3.9 million. Again, segments have increased their revenue.

They improved their profitability and they fixed their and they've lowered their fixed overhead costs and all of this is contributing to the improvement. At the G and A level, our cost of sale our SG and A costs were CAD2.9 million for the quarter compared to CAD3 million last year. Our labor costs are down, although there's an offset with higher consulting expenses. And for the year, our G and A expenses stand at $5,800,000 compared to $6,200,000 last year. And similarly, lower labor costs have been offset by higher consulting expenses as we continue to focus on administrative cost efficiency.

Our income from continuing operations before taxes for the quarter was $443,000 compared to a $2,300,000 loss last year. And included in these results is $432,000 of expenses and $184,000 from medical isotope business for Q2 twenty fifteen and 2014 respectively. Our loss applicable to common shareholders was $154,000 compared to last year's net income of $11,000 This year's loss includes $281,000 of expenses, which represents our portion of the Permafix medical expenses, but it also includes $713,000 of expenses in our discontinued operations. A couple of unusual hits were the discontinued in our disc ops is $150,000 asset impairment of our Perma Fix Michigan property, which is non cash and a charge of approximately $201,000 in connection with our Georgia facility. Last year's income from DISCOPS also included an insurance settlement gain of $3,500,000 related to our Georgia facility.

Our earnings per share for continuing operations were $0.5 compared to last year's loss of $0.21 Our adjusted EBITDA from continuing operations as we've defined in our morning press release was $2,000,000 compared to a loss of $426,000 last year. For the year, our adjusted EBITDA is currently $1,600,000 compared to a year to date loss of $2,600,000 or a swing of $4,200,000 to the good. On the balance sheet, our cash is down from year end by $2,600,000 and that's primarily related to operating cash needs related to first quarter losses. Our total receivables remain relatively flat including unbilled. Our waste backlog stands at $5,700,000 compared to $9,200,000 at year end and $6,100,000 a year ago.

Our current debt is $3,700,000 which is consistent with prior with year end and our total debt at the quarter end is $11,200,000 broken down as 9,500,000.0 to our lender PNC Bank and $1,700,000 for our shareholder loan and some miscellaneous loans of $35,000 Finally, cash flow summary. Our cash used in continuing ops was $1,300,000 Our cash used by discontinued ops was $800,000 Cash used for investing of $282,000 of which $265,000 is cap spending. And our net financing cash flow used is $223,000 With that, I'll now turn the call over to the operator for questions.

Speaker 0

Thank you. We will now be conducting a question and answer session. Our first question comes from the line of Al Kahshak with Wedbush Securities. Please go ahead with your question.

Speaker 4

Good morning, guys.

Speaker 3

Good morning, Adam. Morning, Adam.

Speaker 4

Ben, could you just a real housekeeping item here. I missed the backlog numbers. Could you repeat those please?

Speaker 3

Yes. 5,700,000.0 is the June 30 backlog, 9,200,000.0 was the year end number and 6,100,000.0 was June 2014.

Speaker 4

And what was it at $3.31

Speaker 3

6.4.

Speaker 4

Okay. So the conversion here for the second half is and as we think about the EBITDA guidance what you've done year to date, I think it's about a $5,000,000 number to get to the midpoint. Is the majority of that going to be in the third quarter? Or is it going to be relatively even across those two quarters? Well,

Speaker 3

as you know, it could be either depending on timing. What we see coming right now, it's a little heavier weighted to third quarter, but not entirely. We think both quarters will be strong. You'll either see a very high EBITDA in third and a lower backlog or a little lower, but then a backlog to support a fourth.

Speaker 4

Okay. But I think Lou made a comment or in the prepared remarks there was commentary about a shipment that was received in July. It was deferred or delayed in Q2. Are there planned? Or do you expect larger shipments?

Or what's the comfort level on the conversion there?

Speaker 3

Yes, not larger, but just more shipments with the year end budget spending and what we've seen with the DOE and their plans.

Speaker 4

Okay. So that could arguably mean higher price point waste therefore the incremental margin?

Speaker 2

Correct.

Speaker 4

Okay. Switching quickly over to the service side. You talked about some project wins. Lou, could you maybe talk about stripping away what happened on the engineering side? But as you look at this business, I view this as more of a steady state business that spins off some puts off some cash flow.

But could you help us understand, A, the nature of the wins B, the duration the confidence level that there's still a fair amount of work to be awarded as we think about the next six months?

Speaker 2

Yes. The business is very much our greatest success is in what's called health physics. We have a very strong technical group that provides health physics support for a variety of projects that also leads us to actually lead some of those projects to be heavily involved in the cleanup. They also generate then of course waste. So we've seen a very steady win on a lot of small projects.

And so the business through the first part of the first half of the year has been a variety of small projects that it's even hard to talk about because of their size. And we continue to see a variety of those kind of projects appearing and many of them aren't even bid. They're pretty much sole source on the private side. So we see that providing lots of singles for that group providing base work. At the same time, we have several larger projects that are out there that we have a lot of confidence we're going to be on the winning teams where again we offer some part either technical services on health physics or the technical service on the waste side.

So as we sit today and they complement again, the reason we've always been interested in them, they very much complement what we do on the waste treatment side. And we've worked hard to try to leverage our facilities into those operations. So as we move ahead here, we continue to focus on that. And that's been really sort of the bread and butter over the last two years with the delays and problems we've seen at DOE. Now with the new appointment here, we're hoping we see a little more leadership there and a little more strength in the programs at DOE, which should help us.

And so we were quite excited about her appointment here yesterday.

Speaker 4

Okay. I don't know if that answers that

Speaker 2

was a long answer, though. I'm not sure that answer your question.

Speaker 4

Well, I guess I want to stay focused on the commentary though I would suggest on the service side that the larger contracts that you have been talking about still haven't converted over to awards. The wins that you did announce are a number of smaller projects. And given what I believe is a renewed focus on bidding correctly or being awarded profitable contracts that this should help the operating profile It of the

Speaker 2

helps the operating profile because it gives us much longer term projects. The ones we're winning are one, two and three year projects, whereas the bigger ones are three to five to ten year projects. So we, of course, like the larger ones because they provide a base that we can really plan ahead on. So we have a variety of those out there, and we're pretty confident we'll see some wins here in the very near future on the bigger ones. But the bread and butter over the last six, eight months have been the all the singles we've been getting.

What

Speaker 4

does near term mean?

Speaker 2

Near term is the next two months.

Speaker 4

Okay. All right. And then just

Speaker 2

No,

Speaker 4

let's see an award in that time frame. I'm sure folks will hold you accountable for that, but let's hopefully that Real quick on the medical side, good progress here. Glad to see the funding. Am I still are we still correct in that? A, what's the now your ownership as a result of this investment?

Where does your ownership percentage go to?

Speaker 3

60% Al, 60.5%.

Speaker 4

Okay. And the funding, you're not funding any cash into this. It's now fully funded or there would be some type of either another investment or some type of equity as it relates to the need for cash here?

Speaker 3

Yes. We are keeping the companies separate. Yes.

Speaker 4

And then All of my

Speaker 3

third in Medical's names.

Speaker 4

Okay. And then Lew, what's the next what are the next mile milestones here, whether they be technical getting from four to six Curry? Or what's the timeframe Over

Speaker 2

the next several months, our next goal is to demonstrate a slightly larger system probably like you had just said about a six curie and that's the system we really want to focus on. So step the next step several technical steps are very much focused on demonstrating that and then developing a base of data around that system, because that will readily compete both in the European and North American markets. That will be a that's a very critical step for us is and we're pretty fairly confident that after the Fort Curie test, we were fairly confident we can design such a system at this point.

Speaker 4

And from a technical standpoint or medical standpoint, could you help me at least the four to six timeframe will get to a size that's

Speaker 2

Probably the largest over the next two to three months. We've already started tests to demonstrate it. We'll build up a base of data and then should be able to demonstrate it in this over the next several months.

Speaker 4

Okay. Thank you very much and good luck. Appreciate it. Take time.

Speaker 0

Thank you. Our next question comes from the line of Robert Manning, a private investor. Please go ahead with your question.

Speaker 5

Could you help us quantify the size of the TEK-ninety nine opportunity and a little more about the steps to get there? Now I understand the world market for TEK-ninety nine generators is something like $500,000,000 in The U. S. And $1,000,000,000 worldwide. And that it's dependent on bomb grade uranium for virtually the entire amount of that.

Are my numbers correct? And what percentage of that market could switch to our technology if we can prove it works?

Speaker 2

Well, as you've done a good job market in terms of its size. And we're confident that we can focus on a very large fraction of that. A six carry system, and that's why we focused on the six carry. We think we can eventually even go to larger units. But whether you send a client two or three of these units or but today with the six QIRI unit, we're very confident we can go after somewhere between 40 to 60% of the existing market, a little more in Europe and a little less in The U.

S. So there are today, they use much larger generators. But again, I think it's mostly the nuclear pharmacies are driven by price. And if you can provide them two units that are cost competitive with one unit, they would go with, I believe, the cheaper route. So we think in the end, have a market we can focus on that would where our unit would be extremely competitive at six carries.

Speaker 5

So does that mean that 40% to 60% that we can see 400,000,000 to $600,000,000 worth of Teck 99 generators using our technology down the road say five No.

Speaker 2

The potential here is mind boggling. You see it in the whole discussion with the Iranian operation and what the U. S. Government has done with Iran and their interest in focusing the Iran systems away from uranium onto some of these non uranium systems. So we see tremendous pressure coming right now from the government to try to get people.

Number one, it's and it's coming and it's going to happen is one, getting people off highly enriched uranium, especially with the closing of the North American reactor in Canada. And then two is the government slowly cutting off everyone from highly enriched uranium and forcing them into non uranium or at least low enriched initially routes. So we see a mind boggling opportunity there. It is a great opportunity for us. And we think we've got a technology that's as good as anything out there that we see today.

So

Speaker 5

We're not trying to quantify mind boggling. I mean 40% to 60% of $1,000,000,000 400 to $600,000,000 I mean that to me is mind boggling. Is that what we're talking about as an opportunity?

Speaker 2

Yes, that's what you're talking about. You look at as we get down the road, we get very little value for this technology today and the value of this company. And it is everyone on this call is knows how to calculate what things are worth. And all you need to look and do is you got a technology that could totally disrupt that whole market and become the centerpiece of what everybody is doing, as yes, the $500,000,000 in revenue would translate into a very dramatic valuation for that technology.

Speaker 5

Now we're not going to sell all these generators ourselves. I mean this means five as I understand, this means somebody is going to sell $500,000,000 worth of Tech 99 generators. We're not going to sell them ourselves, I presume. Maybe I guess there's a lot of ways to get our value for this. I don't know, some of it's maybe license it.

So we obviously don't get the whole, say $05,000,000,000 of revenue here. But on the other hand, we own and have the key technology. So regardless of whether we license it or get somebody else to make the stuff for us or what, we ought to get a pretty good share of that $500,000,000 shouldn't we? And how do I Well, quantify

Speaker 2

we should. And it's really the reason we've brought on a person like Steve Belcher. We need some there are a variety of paths forward here that we need to carefully think through and keep all options open. So in our planning, we've been careful to work with all the existing players because the easiest path is do we have a major partner that already has a distribution system and everything else. But along those lines, we can't depend on that.

We have to look at developing a system where as one of our options, will go it alone and sell the units and go after all that revenue.

Speaker 4

Yes. Yes.

Speaker 2

So we have multiple paths to market here right now. We're exploring and looking at and keeping all avenues open. But one of the paths is that we do what you said is possible is we move forward on our own to market the generators and then sell also auxiliary services that go along with them.

Speaker 5

Now it's obviously a lot you don't know right now and then there's stuff you know that you can't tell us. But what would a knowledgeable observer of this industry say would be the range in license fees that you would get if you decided to do that? I mean, got no idea if it's like 5% or 25% or anything else. And obviously, you can't be too specific, but just what would a knowledgeable observer of this industry say would be the range?

Speaker 2

Well, again, you have multiple paths and multiple opportunities. So it's real hard to say. But 15% is not unusual in depending on what part of it what you 're really doing and what part of it you're looking at.

Speaker 5

Okay. But what we've got is really proprietary and it's dramatic. I mean, this is not something you have to give away for like 2% margins.

Speaker 2

We're not going to do that. No.

Speaker 5

Yes. Now steps from here to there in response to an earlier question, talked about you're to go to six Qures and I guess even though you'll be pushing it ahead to get to improve that, that seems to be good enough to go ahead and compile the data to get FDA approval. What can you tell us about that path? At what point do we begin to accumulate the data? At what point do we have enough to file whatever is the equivalent?

I know it's not called a new drug application in this area, but whenever we what path to filing? And then how long does the FDA have to work on it? I understand they've been sitting on the North Star thing for two years.

Speaker 2

Yes. And we see a little difference between ours and North Star. They have a very complicated system at the client level and which raises issues with the FDA. Our system would be practically identical to an existing unit. Basically, you pour saline in the top and out the bottom comes TEK99, so extreme simplicity and we worked hard to keep it that way.

So we see that part as being a little lower risk to us than what is happening with North Star. But this has taken a little longer than when we initially got into this is novices without leadership like Steve Belcher. I was predicting FDA submittal a little sooner than we've been able to pull that off. And I think with his guidance, we've now much harder at developing background data and going into FDA with very solid case. So right now, we're very focused on getting to a sixth curie.

Number two, and then developing the background data. Will we be able to do that and have something that you can at least show FDA by the end of the year possible, but unlikely as it's now going. In three months, we could have a six tier unit, but then we'll have to go through several months of testing and on that unit. So it will be sometime after the first of the year.

Speaker 5

But it's not unreasonable, it sounds like by mid-twenty sixteen, we've got an FDA submittal. And then how long for them to decide?

Speaker 2

Our feeling is and we have again several options we could take with them depending on which one it could be. The shortest, the most efficient could be three quarters of a year to about one years point depending on what route we go. So about a year give or take, about a year after that. Then once we apply for the FDA, I think that's probably a major milestone. The application to the FDA is a major milestone.

It's it will then attract every we've gotten of attention with the announcements on the four cure unit. And when we are able to talk about a six cure unit, it will even attract more. And to me the big event really is FDA submittal.

Speaker 5

Well, bigger is FDA approval, I guess, but FDA submittal is pretty big.

Speaker 2

Yes. You're right. Exactly. Yes.

Speaker 5

Yes. Okay. And then from then on FDA approval, I mean, you don't then open the door the next day and you're selling 50 of the market. What happens? Then you sign up with a major partner, then you contract with somebody to manufacture the stuff and we sell it.

How long does it take to get from FDA approval to this big revenues?

Speaker 2

Well, the day we apply, we'll be very focused on the next step, which is exactly all the above what you said. There's three or four ways we could go and we've already mapped those all out, but

Speaker 5

Okay. That's great. Yes. Hey, thank you very much for your time. I'm sorry to take so much of it, but thank you.

Speaker 4

Thank

Speaker 0

Our next question comes from the line of Justin Botman with Palantir Investment Group. Please go ahead with your question. Ben, I just have a quick housekeeping question and I apologize if you've already addressed this. But what were the research and development costs related to the medical isotope project for this quarter?

Speaker 3

$432,000 was the total costs. And of course, we at our ownership level, we incurred $281,000 of that.

Speaker 4

The

Speaker 0

first quarter that was around $400,000 your portion?

Speaker 3

First quarter it was $395,000 yes.

Speaker 0

And then going forward, how do you expect that to play out?

Speaker 3

That's probably about where we're going to be that what we're probably about the same on the research and technical side, but with the new management a lot more administrative kind of business development type expenses. So I would say probably through the rest of the year this quarter is probably a good indication.

Speaker 0

But you're portioning about $300,000 or less? Yes. Okay. Perfect. Okay, great.

Thank you very much. Thank you. Our next question comes from the line of Bill Chapman with Morgan Stanley. Please go ahead with your question.

Speaker 4

Lew and Ben, good morning guys.

Speaker 3

Good morning, I

Speaker 4

was curious on the hot cell. Have you guys have that delivered and is it installed?

Speaker 2

We're still working on it. We Okay. Yes. So it's we're very close. We've to finalizing it and move it.

They're working on actually as I may have told you that we're buying a used hot cell and we're going through now the regulatory hurdles to move that hot cell to our facility. And that will help us significantly in terms of our work, of course, having our own unit. Right now, our tests are being done with outside contractors, so outside facilities. So this will allow us at our research operation to actually be run our own tests on the TEC-ninety nine dramatically more efficient and speed up the process.

Speaker 4

Okay. I was going to ask you too on the what you have over $20,000,000 in your sinking fund. Is there any way you could tap into that slightly to help fund the Perma Fix Medical if it had more needs for capital to keep your ownership up?

Speaker 3

The quick answer is no, Bill.

Speaker 4

Okay.

Speaker 3

That $20,000,000 is used to secure $43,000,000 of bonding that we require for our facilities. And even if we were to reduce the number of facilities that number contractually is would stay. It would just the 43 might come down, but the 20 wouldn't. So right now that's pretty much a restricted cash.

Speaker 4

Okay. Yes. Let me ask you one more question on you mentioned you generated substantial interest in your field for the resin. Are you also getting interest from people that aren't in the business on producing the generators?

Speaker 2

Well, we're seeing interest through the whole chain from people who today actually irradiate and make the uranium to people who are users like Digirad. So we are, I guess, to put it slightly almost overwhelmed by the interest right now in working with us. So we see a lot of interest through the whole chain. And including generator distributors and even people throughout the chain, we've become recognized as in the industry.

Speaker 4

Okay. And you still anticipate, let's say, a generator manufacturer that this will be a substantially lower cost alternative for them? Do you still

Speaker 2

anticipate Yes. And the I would just have to explain to you how the system works today. You irradiate uranium with the present system. And with that, you get a dramatic increase in radiation that you must deal with. Uranium system produces extreme radiation.

So you need very, very sophisticated hot cells to process it. You produce waste that has no home that costs a fortune. With our system, it's you're radiating natural moly, which is itself becomes highly radioactive, but does not produce the byproducts and the radiation associated with those byproducts. So you get a much simpler system to work with requiring much simpler equipment, much simpler handling costs. And then the second is it's a very decentralized system.

So you could produce at almost any research reactor. And so there's not a need to make it in Australia and then how to figure out how you're going to get that to The U. S. So with a material that has an extremely short half life, where logistics becomes just the ultimate nightmare. So we see dramatic savings throughout the whole chain using our technology.

And that's why we're so confident here. No matter what other system we have to compete with, the cost savings are dramatic throughout the whole production distribution chain. So we're very confident on our costs, our costs our ability to do this competitively.

Speaker 4

So that's Okay, good. Thank you very much guys.

Speaker 0

All right. Thank you. Ladies and gentlemen, we have no further questions at this time. I would like to turn the floor back over to management for closing remarks.

Speaker 2

Once again, I'd like to thank everyone for participating in the second quarter conference call. Heading into the third quarter and balance of 2015, we expect to continue revenue growth and strong cash flow. We continue to pursue a variety of large contracts and aggressively moving ahead with our Tech ninety nine process. We have been participating in a growing number of investor conferences and keep you informed by press releases where we'll be presenting and our progress in continuing to grow the company. Thank you

Speaker 4

all

Speaker 2

very much.