QS Energy, Inc. (OTC: QSEP)

QS Energy, Inc. develops and seeks to commercialize energy efficiency technologies that assist in meeting increasing global energy demands improving the economics of oil transport and reducing greenhouse gas emissions. The company's primary technology is Applied Oil Technology AOT a commercial grade crude oil pipeline transportation flow assurance product. AOT is a 100 percent solid state system that reduces crude oil viscosity by applying a high intensity electrical field to crude oil while it is in transit. The technology has been tested in laboratory and field settings with the U. S. Department of Energy PetroChina Pipeline R&D Center and ATS RheoSystems demonstrating viscosity reductions and pipeline pressure loss reductions. AOT remains in the development and testing stage and has not yet achieved commercial acceptance. The company continues to refine the design of AOT through value engineering efforts aimed at improving reliability and performance under real world pipeline conditions. QS Energy also maintains a wholly owned subsidiary QS Energy Pool Inc. formed to explore acquisition opportunities and to support potential business development initiatives. To date the subsidiary has not entered into any acquisition transaction.

QS Energy, Inc. has not generated any revenue from its AOT technology to date. The company intends to generate revenue primarily through the sale of AOT units to pipeline operators who seek to increase throughput and reduce operating costs. In addition QS Energy plans to license the AOT technology to third parties allowing them to manufacture and deploy the system under agreed terms. Another revenue stream involves offering a service known as eDiluent which provides electronic viscosity reduction as a substitute for chemical diluents and can be sold on a per use or subscription basis. The company also expects to earn income from distributor agreements such as the arrangement with VIPS Petroleum LLC which grants VIPS the right to promote sell and lease AOT units in specified territories. Under the distributor agreement VIPS may also receive performance based incentives tied to the volume of oil moved using AOT units. To date the company has not received any purchase orders under these arrangements and no revenue has been realized. Management states that securing sufficient capital is essential to begin commercial sales and to fulfill the obligations of any future contracts.

QS Energy, Inc. operates in the competitive field of crude oil pipeline optimization where several established solutions exist. Key competitors include providers of drag reducing agents such as Baker Hughes and LiquidPower Specialty Products Inc. Other competitors offer pipeline heating systems like those from Chromalox which maintain elevated temperatures to lower crude oil viscosity. Ultrasonic and mechanical devices from companies such as Applus+ RTD also aim to improve flow efficiency by reducing friction and preventing buildup inside the pipe. QS Energy differentiates itself through its electrostatic approach which uses a high voltage low amperage electric field to reduce crude oil viscosity without chemical additives or significant thermal input. This method aims to lower energy consumption and operating costs while offering potential environmental benefits compared with traditional techniques. The company believes that its technology can help pipeline operators meet stringent viscosity requirements without relying on costly diluents or heating equipment. By reducing the need for additives AOT may also lower the environmental impact associated with the production transportation and disposal of chemical agents. Furthermore the electrical nature of AOT allows for precise control and real time adjustment of viscosity reduction levels to match varying crude oil properties.

QS Energy, Inc. has engaged with several pipeline operators during testing and development of its AOT technology. Early field trials were conducted with TransCanada Keystone Pipeline L. P. on the Keystone pipeline in Udall Kansas. Subsequent testing occurred with Kinder Morgan Crude & Condensate LLC on a crude oil condensate pipeline in South Texas. More recently the company entered into a letter of intent and a distributor agreement with VIPS Petroleum LLC to explore deployment of AOT units in Malaysia Ghana India and other territories. Under the distributor agreement VIPS is appointed as the exclusive distributor to promote sell and lease AOT products in the agreed regions. Through its collaboration with VIPS the company has also identified Laksel Corporation Pte Ltd as a potential engineering procurement and construction partner for projects in India. Laksel is expected to assist with site preparation installation and commissioning of AOT units should a commercial contract be finalized. Although these relationships have not yet resulted in sales or paid contracts they represent the types of customers the company targets including major midstream transporters and regional EPC firms. QS Energy continues to hold discussions with additional pipeline operators in North America South America and the Middle East to expand its potential customer base.