Perma Fix Environmental Services Inc (PESI) Q1 2024 Earnings Call Transcript

Good day, and welcome to the Perma-Fix Fiscal First Quarter 2024 Earnings Conference Call. I would now like to turn the call over to David Waldman, Investor Relations. Please go ahead.

Thank you. Good morning, everyone, and welcome to Perma-Fix Environmental Services First Quarter 2024 Conference Call. On the call with us this morning are Mark Duff, President and CEO; Dr. Louis Centofanti, Executive Vice President of Strategic Initiatives; and Ben Naccarato, Chief Financial Officer. The company issued a press release this morning containing first quarter 2024 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 Crescendo Communications at (212) 671-1020. I'd also like to remind everyone that certain statements contained within the conference call may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and include certain non-GAAP financial measures. 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 as well as this morning's press release. 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. In addition, today's discussion will include references to non-GAAP measures. Perma-Fix believes that such information provides an additional measurement and a consistent historical comparison of its performance. A reconciliation of the non-GAAP measures to the most directly comparable GAAP measures is available in today's news release on our website. I'd now like to turn the call over to Mark Duff. Please go ahead, Mark.

All right. Thanks, David, and good morning. As discussed in our year-end conference call, our financial performance in the first quarter of 2024 was impacted by several temporary headwinds, which had a significant impact on the first quarter and, to a lesser extent, the second quarter. However, we believe these challenges were one-off impacts and are largely behind us now. As a result, we're regaining our momentum with improving Q2 performance and we anticipate a strong second half of 2024. At the same time, we continue to invest in our 2025 vision, which we believe has the potential for significant growth and even transformative performance. The weakness we experienced in Q1 was due in part to delayed project starts, as previously discussed during the fourth quarter of 2023. We completed our two largest service projects at Princeton Plasma Physics Lab and the ex-McKee project for the Navy. These two large projects have completed all field work now. However, they were not replaced in time by new projects due to delays in mobilization activities until late April. We also experienced challenging weather conditions during the first quarter of 2024, which resulted in the closure of two of our facilities for a week, including delays in waste shipments to support backlog. In addition, due to the inability of Congress to pass the federal budget on schedule, the government had been operating under a Continuing Resolution, which contributed to delays in procurements, project starts and waste shipments since government clients were holding back budgets due to uncertainty and the potential of a shutdown last March. However, we used this period for equipment replacement and repairs, treatment program and operational enhancements and testing to support permanent expansion and broader market penetration. We believe these headwinds are now largely behind us. And as things normalize, we remain confident in getting back to and surpassing our business-based goal of $25 million in revenue per quarter. Our earnings during the quarter were also impacted by deliberate investments in research and development. For instance, we are investing in our sorting technology, including the fabrication of a second unit to be deployed this summer and potentially a third unit to be deployed before the end of the year. Most importantly, we're investing in our new technology to treat PFAS contamination. As a result of these investments, we have completed the pilot plant testing the PFAS destruction levels and have seen them exceed anticipated regulatory requirements and are now in the process of final design and the fabrication of the first operational unit in late Q3. We plan to begin accepting PFAS contaminated liquids for destruction before the end of the year. We believe these investments are prudent, and I couldn't be more excited about this new PFAS business line, which I will discuss further in a moment. In addition, as we have discussed in the past, we are advancing several very large initiatives that we expect will begin to materialize in the second half of this year and set the stage for very significant growth beginning late this year and into 2025. But first, let me begin by providing an update on our Services and Treatment segments by addressing some of our recent wins, and then I'll provide updates on some of the larger initiatives that are underway. Within the Services segment, we are benefiting from increased bidding opportunities right now, including both the government and commercial sectors. We're positioned for large ongoing procurements within DOE and the U.S. Navy, as well as other midsized procurement initiatives at DOE, DOD, and EPA. We've been able to secure strong teaming positions for potential awards anticipated through 2025 that would potentially represent substantial increases in sustainable revenue for the next 5 to 10 years. For example, we're participating in large procurement opportunities as part of larger teams on the Operations and Site Mission Support contract, which we referred to in the past as the OSMS bid, along with the West Valley Demonstration Project near Buffalo, New York, and upcoming Navy projects, which are expected to be awarded over the next several quarters. In addition, I'm proud to report that we were recently selected by DOE's Office of Environmental Management to participate in a 10-year small business set-aside multiple award IDIQ contract to provide nationwide deactivation, decommissioning and removal services for the Office of Environmental Management, the National Nuclear Security Administration and the Office of Naval Reactors and Office of Sciences, all within DOE. Perma-Fix's team is among a select group of small businesses chosen, making us eligible to compete for firm fixed price and cost reimbursable task orders, with a maximum ceiling on the overall contract of $2 billion. While this is an IDIQ contract, which means basically that it's a hunting license, we believe this award provides us several opportunities for revenue growth within our base business. Even if we were to win just a proportional share of the award, it would provide meaningful revenue to the company over the next 10 years. That said, we believe that based on our growing reputation, our technical capabilities and our proven track record relative to some of the other small businesses participating in this IDIQ, the potential opportunity could be much greater. We expect that recent wins such as these and numerous projects currently in our pipeline will continue to support our long-term growth plan and help us further diversify our revenue stream. Overall, we're encouraged by the long-term outlook of the Services segment as seven new projects are mobilizing in May to support increased revenues in the latter half of the year. Several of these projects include soil sorting technology deployments, and we continue to realize the growth of these applications on larger projects, both in the U.S. and in Europe. Within our Treatment segment, the backlog for waste treatment has been growing over the past few months, which has resulted in increasing revenues through the second quarter of 2024. This included increased waste shipments within the commercial sector, along with steady sales from our industrial waste programs as well. We've also been implementing facility upgrades at each of our waste treatment facilities to support modernization, new technology deployments and preparation for upcoming target waste streams with larger inventories defined at several client sites. In March, the long-awaited TSCA VTD or vacuum thermal desorption system treatment took place at our Perma-Fix of Florida facility along with members of the U.S. EPA Region 4. While final review and verification analysis are still pending, acknowledgment of successful testing by the EPA in a few months will provide a basis for Perma-Fix of Florida to obtain a TSCA treatment permit to provide generators as a path forward for difficult to treat higher activity task and contaminated waste streams. We estimate this backlog of waste within the industry to generate approximately $10 million in incremental annual revenue beginning in Q4. I'd now like to turn our attention to several of the larger projects we're working towards. As we've discussed previously, we believe that these initiatives should contribute to significant growth in revenue and earnings. First, let me start with the developments at Hanford. As many of you may be aware, DOE has been involved in what is known as holistic negotiations for nearly five years with members of the tri-party agreement at Hanford, which includes state regulators, EPA and the DOE. The purpose of these negotiations, as defined in the Hanford Settlement Agreement, published for public comment just a few weeks ago on April 29, is to develop the strategic commitments by all the parties to clean up Hanford. I'd like to congratulate DOE for defining an agreement that adapts to new technologies to accelerate the tank cleanup program while leveraging existing commercial capabilities to be an integral part of the program over the next several decades. Under the Settlement Agreement, DOE states that the DFLAW hot commissioning program will be completed no later than August of 2025. While this is a few quarters later than anticipated, DOE is committed to the schedule and the legally binding agreement and may complete the milestones sooner. As we've discussed, the DFLAW affluent will be processed by Perma-Fix Northwest to include any potential waste generated during the hot commissioning program as well, and along with supporting the DFLAW operations for at least the initial ten years of its operational life. We believe we are well-positioned to treat all of the affluent waste from the operations as defined in the January 2023 Record of Decision by DOE, which estimates up to 8,000 cubic meters of waste to be generated annually upon hot start-up of the vitrification. As I mentioned in the past, the volume of this waste will be more than double the current production of all of our plants combined on an annual basis. Also defined in the new Settlement Agreement, DOE is committed to complete waste retrievable from 22 tanks within the west tank farm for grouting off-site and disposal off-site by 2040. It's difficult to define the exact quantity of waste to be removed from this inventory during that period, but unofficial estimates include expectations for up to approximately three million gallons of waste to be processed annually to meet these goals for 2040. The agreement is unclear about when these operations would commence. However, the recent Hanford systems 10 document defines retrievable operations beginning in the January '26 timeframe. This is critically important as the DOE has formally recognized grouting's importance relative to the overall closure strategy as a preferred supplement to the current DOE vitrification strategy. And while DOE will continue to develop multiple pathways for grouting, we remain confident that our existing Perma-Fix Northwest facility in Richland, Washington adjacent to the site will continue to provide the lowest risk, best value strategy for grouting this waste for transport in a solid form via rail to out-of-state disposal facilities. We believe that our location is ideally suited to treat a large portion of this waste given its proximity, its permits and our proven track record overall for safety. Moreover, we believe we can provide a highly cost-effective solution for these wastes that could potentially save taxpayers billions of dollars as an alternative to vitrification alone. The Hanford mission and planning that has unfolded to include grouting of tank waste is a huge validation of our capabilities. As such, we plan to increase from our current capacity of 300,000 gallons per year for grouting to levels around three million gallons per year as the program progresses over the next several years. As I mentioned, the agreement is unclear about when these operations would commence. However, the Hanford system's Rev 10 document published in January by DOE is currently being implemented to include two new tank waste removal systems to be installed and operating in late 2025 and early '26. One of these removal systems will be built, installed and operated to support the DFLAW facility, while the other will be dedicated to the removal of tank waste for shipment to commercial grouting facilities for off-site disposal. This is a very significant development and reaffirms our strategy and outlook for our involvement in these transformative projects. Overall, we look forward to working closely with DOE to support this mission of remediating Hanford, both through vitrification and through grouting, as well as leveraging these capabilities at our other critical sites around the country. On a separate note, we're expanding our waste treatment offering within commercial and international markets, including Europe, Mexico and Canada. As announced last year, our joint venture was awarded a EUR 50 million 7-year contract by the Joint Research Council for the European Union at the Ispra facility in Italy. Work on this project is progressing at JRC as we continue to work on the design and business model for our proposed new facility in the U.K., with the initial waste shipments projected for that JRC contract to begin in late Q4 of 2025 to the U.S. until the new facility in the U.K. is commissioned. This award is very important to us and it opens up substantial opportunities throughout Europe. This and other international opportunities in Germany and other European countries, along with Mexico, are expected to generate sustained receipts beginning in 2025, providing combined revenues estimated to be over $10 million annually. On one final note, I'd like to discuss the rapid and significant progress we're making in advancing our new patent-pending technology to treat PFAS contamination, which we recently trademarked as Perma-FAS. Both the White House and EPA have made this a major focus due to the hazards associated with these "forever chemicals". Thousands of sites across the country and the world have large inventories of these chemicals, not to mention all the sites with PFAS contamination that would require remediation. Estimates of this market vary widely. However, the opportunity to provide services and treat PFAS-contaminated waste for government, municipal and commercial applications is estimated to exceed $100 billion over the next 10 years. In addition, initial estimates associated with impact to soils include more than 200 million acres of contaminated farmland in the U.S. alone. In addition to earmarking billions of dollars in federal funding, the EPA has taken decisive action to address this problem, including the recent designation of PFAS as a hazardous substance, which enables the Agency to compel responsible parties to pay for or conduct investigations and cleanup, as well as the addition of seven additional PFAS to the list of chemicals covered by the Toxics Release Inventory. EPA has also issued a CERCLA enforcement discretion policy that makes it clear that EPA will focus enforcement on parties who significantly contribute to the release of PFAS chemicals into the environment, including parties that have manufactured PFAS or used PFAS in the manufacturing process, along with federal facilities and other industrial parties. Importantly, current and former waste producers are now beginning to understand that liability ultimately resides with the generator of the waste and that they are not absolved of this liability if the waste is not properly remediated. In contrast to our process, which offers a sustainable and environmentally responsible solution, traditional disposal methods for PFAS contamination materials such as deep well injection and land-filling pose substantial environmental risk, including the potential for groundwater contamination. Towards this end, we continue to scale the process, and with the pilot plant test now complete, we have a very high degree of confidence in moving forward. And the pilot plant testing was not only successful, but exceeded our expectations. In fact, our process achieved PFAS destruction levels of 99.9999%, exceeding anticipated regulatory requirements. These tests reaffirm our prior bench-scale testing, which indicated our process should effectively destroy these harmful chemicals at high levels of efficiency, and could be applied to a variety of potential markets, including liquids, soils, biosolids and sludges. The initial feedback from potential customers we've been talking to has been extremely positive, given the increasing pressure to treat and dispose of waste for these waste streams. In addition to the costs associated with storing these materials, as I mentioned, there are significant growing legal and regulatory requirements to treat these waste, not to mention the potential liabilities associated with these harmful and dangerous waste streams that have permeated landfills and water supplies. We're now in the process of the final design of the operational unit, and we've also selected a build partner for the fabrication of our initial operational system and look forward to providing updates on this shortly. As a result, we're aiming for start-up in September of a system that can destroy PFAS at approximately 1,000-gallon batches and for up to three times a day. We anticipate this system will receive a variety of modifications and upgrades as we optimize performance and make adjustments to the treatment parameters. We have established goals for additional units to be installed in each of our existing treatment plants in 2025. In parallel with this effort, we're rapidly progressing the development of both soil and bio-sludge applications, which will use the same technology but require different engineering considerations. We have completed bench-scale demonstration successfully on the solids and are now moving towards pilot scale testing at a 55-gallon volume. We also continue to develop partnerships with industry leaders in remediation as well as universities to provide R&D breadth and verification of services and performance while expanding on new ideas and applications. As I mentioned, given the low cost as well as the technological and environmental advantages of our new process, we are already witnessing significant interest from large potential customers as well as regulatory agencies. We expect to begin generating revenue from this process in Q4, and our initial estimate for revenues in '24 is approximately $1 million to $2 million. However, based on discussions with customers, we expect to dramatically expand our revenues from this process in 2025 as we have the ability to ramp up production rapidly. And this process has a very high margin potential. So to wrap up, we're extremely encouraged by the outlook for the business. The foundation we have laid over the past several years and the investments we've undertaken in the first half of 2024 should position Perma-Fix for solid growth in the second half of the year and set the stage for a potential breakout year in 2025 and beyond. We've also trimmed certain costs and have built a highly scalable business model, which we expect will drive very meaningful returns for our shareholders. All right. On that note, I'll now turn it over to Ben, who will discuss the financial results in more detail.

Thank you, Mark. Let me start with revenue. Our total revenue from continuing operations for the first quarter was $13.6 million compared to last year's first quarter of $20.1 million, a decrease of $6.5 million or 32%. Revenue decreased in both our operating segments as treatment was down $885,000 as a result of lower volume of waste treated as well as lower average prices related to the waste mix. In the Services segment, our revenue was down $5.6 million, primarily due to the two large projects which were effectively completed at the end of 2023 and were not replaced by similar sized projects due to the timing of contract wins and delays in start-up of new projects, partly due in part from Continuing Resolution impacts. Our gross profit for the quarter was a negative $620,000 compared to $3 million of gross profit in Q1 of 2023. In both segments, lower revenue had a significant impact on our gross profit with a cumulative total of approximately $2.1 million. In addition, lower-margin waste/project mixes also impacted gross profit by about $1.7 million. As we've previously disclosed, especially in the Treatment segment, we carry significant fixed costs, which have a big impact on our gross profit when revenue is low. Our G&A costs for the quarter were $3.5 million, which is higher than prior year by $58,000. This modest increase in cost was a result of higher business development costs, which offset lower legal fees and utility expenses. Our net loss for the quarter was $3.6 million compared to last year's net loss of $411,000. Total basic and diluted loss per share for the quarter was $0.26 compared to a loss per share of $0.03 in the prior year. EBITDA from continuing operations for the quarter, as defined in this morning's press release, was negative $4 million compared to EBITDA of $171,000. Turning to the balance sheet. Cash on the balance sheet was $2.4 million compared to $7.5 million at year-end 2023. Our current liabilities were down $1.3 million, reflecting decreased costs associated with production as well as the timing of vendor payments. Our waste backlog at the end of March was $10.6 million, up from $8.7 million at the end of last year and up from $9.4 million in March 2023. Our total debt for the quarter is $2.7 million, excluding our debt issuance costs, most of which is owed to PNC Bank. Finally, I'll summarize our cash flow activity for 2024. Our cash used by continuing operations was $4.4 million. Our cash used by discontinued operations, $159,000. Cash used for investing in continuing operations was $244,000, and that relates to capital spending. Cash used for financing was $125,000. This is representative of our monthly payments on our term and capital loans of $259,000 and payments to our finance leases of $75,000, offset by receipts from option and warrant exercises of $209,000.

Mark, Ben, Louis, first of all, congratulations on creating a myriad of opportunities that we're looking at. So congratulations. The Hanford settlement, the state of Washington Department of Ecology, DOE, EPA, Mark, what you were referring to, I've certainly read the documents. I need for you to confirm my understanding that this is a legally binding agreement amongst all these parties. Is that a correct statement?

That is a true statement, Howard. It is a legally binding document. It has taken a long time, as I mentioned, almost five years with a mediator to come to these conclusions and there's a lot of give and take between the regulators and DOE. There's a lot of funding considerations that go into it, schedule considerations. So the commitments in there are really written in stone. However, do keep in mind, it's a draft document. It's going to be coming out for public comment. I can't remember when it comes out, but soon for 60 days. And I do believe it's going to be very well received. I'm sure there'll be many comments, but the reason it's going to be well received is unlike some of the prior agreements between the tri-party, this one has a lot of action in it. And I know I'm talking to DOE that that was their intent is to be able to show real progress, meaningful progress, beginning with this administration and to show that there's an end state or end goal that's defined in a way to get there that recognizes what the technologies they've selected will do. In other words, what vitrification can actually do plus grouting. So to answer your question, yes, it's a legally binding document once it gets to public comment, then it will be commitments on all three parties.

One comment in the document. The parties agreed that the Settlement Agreement is not subject to public comment. And that clearly means that this is effectively locked in stone. And if I refer to the ROD that was put out in January 2023, the other documents that were put in January of '23 and the most recent Settlement Agreement, it basically locks in, first of all, the ROD locks you in Perma-Fix for ten years. But DFLAW and the affluent will be treated from 2025, the latest August possibly earlier to 2060. I know you don't have a contract, but other than the ROD, but effectively, is there any competition in treating the affluent?

So your question is, to make sure I understand. Howard, your question is, is what's the competition associated with treating the effluent from DFLAW?

Right.

Yes, right now, the ROD does commit to ten years and upon start-up. And the reason is less competition for pretty much any of the other opportunities in Hanford relative to waste management is because the waste gets disposed of after we treat the waste or anyone who treats the waste, it gets disposed of at the Hanford landfill locally. So it would not make any sense to have anyone outside of the area ship to and ship it back while we're just ten miles down the road from the actual sites themselves. So yes, it would be very difficult, as I've mentioned before, for someone to get a permit. It takes upwards of ten years to get a permit. It also takes significant investment in the facility itself and citing it and licensing it and going through all the processes to get it commissioned. So it's very solid for ten years. And most likely, I don't see any or very limited risk that the DOE would decide to build these facilities on their site as long as we're providing value and doing the job efficiently.

So effectively, you're going to be treating the affluent for the next 35 years starting no later than August of next year. Is that basically a fair statement?

It's true. Again, I can't comment beyond ten years, but it would be a very high probability that they'll be supporting that plant through the life of the plant, which is 2060.

In addition to the settlement, they are also exploring other opportunities. Specifically, they plan to construct a second vitrification plant for the high-level waste. It's not merely a division between the two facilities. If I understand correctly, the East tanks are designated for vitrification, while the West tanks will be grouted. Have I got that right?

You have that correct. It's confusing, though, Howard. I am glad you brought it up. Yes, there was originally three vitrification plants planned. The first one which is getting rolling up that's designed to do one million gallons a year and that was to do the first 40% on the East tank farm. Then there was going to be one for the West tank farm that was going to be constructed. And there's one that's already started construction, which will do the other 20%, which they're viewing as the high-level waste. High-level waste, if I remember correctly, is supposed to be commissioned or start up in '36 or '34. And that's a whole different ballgame. We're not sure how much we're participating in anything you can do with that yet. It's premature to speculate. So those three plants, the tri-party agreement, or excuse me, the Settlement Agreement which was just approved changes that three vitrification plant approach to two and they take 40% or 50% just about of the West tanks and grout those.

So effectively, if I understand high-level waste is about six million to eight million gallons and they're going to split between the balance twenty-four million gallons to be vitrified and twenty-four million gallons to be grouted. Is that a correct understanding?

It's pretty darn close. That's right, Howard.

So if there's twenty-four million gallons of low-level, plus possibly the high-level waste, this effectively will go on for the next thirty, forty years?

That's right.

And Mark, I would echo Howard's point about establishing an impressive array of opportunities moving forward. There are a couple of things I want to discuss. You've mentioned Central Europe and the opportunities there. We all know that Germany has essentially withdrawn its fleet of nuclear reactors. Can you provide insight into both the timing and scale, in terms of size and financial impact, that you anticipate for those programs? When can we expect to see revenue generated from them? And once revenue starts, how long do you believe that will continue?

Yes. In Germany, there is a central organization managing the waste produced from the decommissioning process, and we are collaborating with them to introduce our treatment technologies from the U.S. that can significantly reduce the waste volumes by 75% to 90%. This will enable storage at the new Konrad facility, which is dedicated to managing radioactive waste for the entire country and is quite substantial in size. They are currently establishing the criteria for waste acceptance, which everyone intending to ship waste to them must meet. We have already completed this process with a major client in Germany, undergoing regulatory reviews and inspections, resulting in approved plans and permits. We are now pursuing the same approvals for our decommissioning program. To answer your question, the initial phase may be slow as everyone in Germany moves cautiously through the permitting process and establishes necessary agreements. We project an increase in German waste revenues of around $5 million to $6 million annually starting in late 2024. Once our proposed plant in the U.K. is operational, we expect this amount to at least double due to increased efficiency. While we do not have definitive contracts yet, we are aware of their significant waste volumes and accelerated timelines for removing waste from storage, converting it into stable forms, and moving it to the Konrad facility, which is anticipated to begin operations around 2028 or 2029. There is a strong urgency to address this issue, so we expect to see growth in this area during the fourth quarter and throughout 2025.

I wanted to ask more about the PFAS opportunity. I've been seeing a lot about it in the news lately, and other companies have been discussing it too. I would like to get a sense of the competition out there for you in that market, especially considering the enormous total addressable market you mentioned.

Right now, there are competitors out there. We've seen press releases from some of the big firms that are going to do incineration which does not necessarily destroy everything and is not preferable for a lot of organizations, particularly the DOE and DOD, which have said they are not allowed to or prohibit consideration as a treatment method. And there's deep well injection, which is largely Texas, which are deep or injecting very, very large quantities, millions of gallons a year into four thousand, five thousand feet into the ground, into the bedrock. Those are both in play. And our options now. There's also filtration, which does not apply to a lot of different waste streams because your filters get gummed up too fast. But those are the kind of the existing technologies now that are in place. The ones that are coming up that are total destruction technologies, we've been able to identify about a half dozen that are coming up that you can see on the Internet plus other colleagues we know. They all have very innovative approaches. We have not seen anything that has our discriminators, which are specifically lower temperature processing with lower pressures. Also with the speed, we can do that. But most importantly, the simplicity of our unit. Our unit is so simple that relies on chemistry and some engineering in the process, but is an inexpensive unit. Once we get this thing fine-tuned, we can have it mobilized and to be operated at much higher levels than we're starting with. And also, as I said before earlier, will translate to soil. So as far as the competition goes, there are several start-ups that you can read about out there, but each one describes their technology has something that we don't have in regards to economic and simplification of process. Louis, do you have anything you want to add to that?

No. Yes, we haven't seen anything that economically, one, that has really destroys the PFAS, just doesn't separate it and does it in such a simple system that we have. So we're very optimistic of where we can go with this process in terms of competition.

As I mentioned, Aaron, the real competitors are those we've talked to a lot. The significance of the EPA press release we had yesterday and the announcements from last week is really important as it sets the foundation for the market and its timing. It’s not just that everyone is aware of PFAS, but now it’s on the verge of being regulated, which will include time-sensitive requirements and acceptance by the EPA, as well as the crucial aspect of enforcement. Once that begins, there will be urgent motivation for everyone to act. We expect the market to really take off, and it will be essential for us to have our systems in place to manage the increased volumes that will result from that.

What sort of independent entities, if any, have verified that your process works besides just what you've mentioned on the call yourself?

Well, we've used two universities for testing and a variety of private companies. Now again, because of the proprietary nature of the technology being so unique, we haven't had white papers done on how it works and what's going on here. So we have filed a variety of patents and we'll be filing a lot more because the further we go with this technology, we see a variety of markets where it could be of value.

So what is the expected timeline on when those would be granted those patents before you start trading in September, October time frame?

We have filed the patents and they are currently pending. The patent review process, particularly for these fundamental chemistry patents, will take some time. Based on our past experience, we anticipate a review period of one to two years for these significant patents.

You mentioned that there is some competition, even though they can't provide what you can. My understanding is that your research and development on the PFAS treatment was motivated by existing customers. Is it accurate to say that you already have clients who are prepared to move forward with this treatment once the plant is operational?

We do, Aaron. We don't have contracts for significant volumes in place is what we have several clients that we deal with on a regular monthly basis that have very defined inventories and are waiting for us to get the system up and running. So when we get closer to operations, we'll be moving towards those contracts. Some of them were actually taking samples from now to make sure that we can perform the way we say we are. And that's been strategic for us. And some of the larger folks that have bigger inventories, they're shooting us or sending us a liquid samples for us to run in our pilot scale testing. So yes, we do have some locked in. We shouldn't say locked in. We have some defined that will be locked in, in the next couple of weeks and some that we're also pursuing grants with to do demonstrations as well.

Wonderful. Last thing, I guess, for me would be any sort of partnership or licensing interest from any of these larger players in the space that you think could be additional source of revenue for you besides your own plant?

Yes. We see licensing to be an option. We have not pursued that. We really had discussions about this specifically yet until we can show performance of our operational system. But we've talked to several companies that would align very well with that and have very far reach in regards to entering the market and have clients that have significant volumes or clients themselves that have the volumes, and that will be a step that we'll be looking to address in the January timeframe.

There are no further questions in queue at this time. I would now like to turn the floor back over to management for any closing remarks.

All right. I'd like to thank everyone for participating in our first quarter conference call. As you can see, hopefully, we are quite confident in the outlook for the business over the next few years. We look forward to providing further updates as we continue to execute our strategy. We appreciate the continued support and patience of our shareholders, and we look forward to providing further updates as developments unfold. Thank you.

Thank you. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.