CEO: Joseph Fuda
WSA: Good day from Wall Street. This is Juan Costello, Senior Analyst with the Wall Street Analyzer. Joining us today is Joseph Fuda, the CEO of Micromem Technologies. The company trades on the bulletin board, ticker symbol MMTIF and on the Canadian Stock Exchange, ticker symbol MRM. Thanks for joining us today, Joe.
Joseph Fuda: Juan, thank you very much for the chance to talk to you guys.
WSA: Anytime. Now, starting off, please give us a history and overview there of the company for some of our listeners new to your story.
Joseph Fuda: Sure. Micromem has been developing sensor-based technologies. We — our market has been to build a sensor that integrates infrastructure systems. Things like power lines, utilities, and oil companies. We’ve been very successful in developing a sensor system that’s robust, usable; and with clients, we’ve began the process of building products utilizing the core technology for their specific purposes. These sensors maintain a level of quality that our client base who’s also of the Fortune 50, an example, Chevron, Northeast Utilities, Castrol, Saudi Aramco, Flextronics. We’ve been fortunate that they like the core product.
WSA: Great. And so, you’ve recently provided an update there on some of your patents and activity. Can you talk to us about that?
Joseph Fuda: Sure. We’ve been working with General Motors and Flextronics to build a device that basically is an oil pan plug that is wireless. And the issue a lot of car companies deal with is that the current system they use for assessing oil changes is basic software. A certain amount of time passes or a certain amount of mileage passes, and as a result, they will activate a light or switch, and tell the driver to change. That’s been a problem for them because depending on the driver, depending on the environment, they’ve been getting warranty calls.
Another issue is because the oil — oil is being followed, the recommended manual for changes and the individual driver has either have been abusing the system or in environments that had been much more difficult for the car to operate in, and as a result, the oil, it’s contaminated, and the car companies that are paying big warranty costs.
The system we’ve built for them and with them as a client is a device that in real time measures the condition of the oil in your oil pan, and it alerts the driver, the specific driver to the specific issues in that car. We’ve engaged Flextronics now as the manufacturer and distributor of this device.
The patent we received, and fortunately for us, not only encompasses the ability to detect oil contaminants, or contaminants in oil, but contaminants in all fluids as well. That’s the first of six patents that we’re very proud to have. It gives us a real leg up on the ability to measure and report on a problem that the industry sees as serious in cost.
WSA: Certainly. So, in terms of your recent agreement with Northeast Utilities, though your subsidiary, what is that going to bring to the table?
Joseph Fuda: Northeast Utilities is one of the other projects we’re working on, it’s just fascinating. Basically, the problem there, and you know maybe remember what happened in Boston a couple of years ago over the summer with power failures and brownouts, that’s the result of transformers overheating and burning out. The issue that Northeast Utilities is working with us on is to build a device, again, using our core technology that you can insert in the transformer, and to alert in real time prior to a failure that there are problems. These problems are created by electrical discharges in the transformer, and when they build, they reach to a point where they can actually damage or short out that transformer.
Our device has been designed to be installed into the transformer and wirelessly alert an operator somewhere in the Northeast Utility system, and it has a GPS attached to it that allows them to analyze the performance of the transformer, locate the problem, and deal with it prior to a failure. This device has already now gone from proof of principle to proof of concept. We’ve actually tested, evaluated, and it’s now operating. We’re looking at a manufacturer for design and installation.
All of our solutions are client-driven. We don’t just come up with a product to see what we can sell. It’s the other way around, our core technology is being used by clients for their specific applications.
WSA: Certainly and what are some of the other key trends that you’re targeting right now in the sector and how is the company positioned to capitalize?
Joseph Fuda: Well, fortunately with our partnership with Northeast Utilities, we have three other projects we need to work on with them as well. One is power line monitoring. We’re installing sensor systems on the power line. The second will be gas line monitoring. We’re installing sensor systems in the gas lines that run up to people’s homes because you’ve seen, I’m sure in the news problems of cracked pipes and leaking gas causing explosions. Northeast is very happy with our ability to deliver on the solutions they need.
With Chevron, we’re doing two projects. One is a particle tracer device, which they expect will increase the efficiency of the reserved calculations because it will provide real-time live assessment of the reserves, quality of the reserves, the amount of pressure required. It provides information live, wirelessly, and you’re going to imagine Chevron’s interest in that when this system is deployed, every single well can be connected wirelessly to a system that allows an operator to assess the reserves and the maintenance of those wells globally in real time as opposed to doing some kind of tests, and then getting results two weeks later.
With Chevron, we’re also working on a cement integrity project where we are installing our sensors into the wellbore cement that will be used to monitor the temperature, moisture, fractures, vibrations in the cement in real time so that they can assess, again, if there’s any risk to another cement crack failure where the well could be exposed to leaks.
We’re working with another oil company to build a device to measure corrosion on pipelines in real time as opposed to having people attend the site, remove the insulation, inspect the pipe and equipment, and then replace the insulation. This device is designed to be installed directly under the pipe and left. And they will alert, again, central operators as to what it is that’s happening at that site in real time prior to a failure.
The projects we’ve got with Flextronics are expanding not just from oil pan measurements but to transmission fluids and brake fluids. So, what we’ve been trying to accomplish here is to accommodate the burgeoning internet of things where infrastructure is communicating with the infrastructure to advise in advance of problems as opposed to dealing with a situation after it’s occurred, and we’ve been leading, it and that fortunately, our client base is huge and they’re the ones that have the widest distribution capabilities and a single largest infrastructure problems.
So, our base has been to go after the utility industry, which we now have at Northeast Utilities. The oil industry, which we have with Chevron, the after-market business which we have for Castrol. We’re building a device for them as well to, again, alert certain maintenance issues on equipment that they monitor. This is Castrol BP. And as a result of these contracts, we’ve been given specific products to build, and we’ve been successful at all of our proof of concepts so far. We’ve been lucky with that. It’s worked out well for us.
WSA: Great. And so, what are some of the key goals and milestones that you and your team are hoping to accomplish here over the course of the next year?
Joseph Fuda: Well, over the next year, we’re focusing specifically on eight projects. Three of which, the proof of concept has been approved and we’re now proceeding to manufacturing and distribution to our client. Again, as a client-driven business, so with manufacturing and distribution, it is for their use. We’ll be completing over 2015 the other five proof-of-concepts in which we’ll be delivering the devices where they can evaluate and then, at that point, install and distribute.
The advantage for us is that our clients are looking to redefine their infrastructure in a smart way, and our goal is to get a wider client base, and to be the leaders in smart infrastructure, in wireless communication of infrastructure, and sort of lead the way in the internet of things—that’s what we’re trying to get done in 2015. We’re lucky, we’ve been — we’re clients-funded. We’re doing well with that. We don’t need to raise any money so we’re moving along quite well with that. The company is unsold with technical footing.
We have 26 provisional patents filed. We’ve been granted additional 13 earlier on before. We’ve been sliding the file substantially more patents this year. So, we’ve got a strong national base, we’ve got a strong patent base, we’ve got a great client base, and proof of products, proof of concepts, and I’m looking into production. So, it’s been good for us and 2015 should be the year that the risk that was taken by the inside group — because we never went outside to fund this company, it was handled by the inside group — has now paid off.
WSA: And what are some of the factors you feel make the company unique from some of other players in the sector?
Joseph Fuda: Our technology is very robust. It communicates wirelessly, easily, and because it’s so robust and communicates a wireless system it allows them to be installed in — for example, in the Chevron project those sensors are being installed in two miles of cement, two miles deep. Some of the expense is going down there. So, as a result of that, they selected us because we have the ability to not only survive the environment that we’ve involved in but we’re also being able to scavenge the power for the magnetic fields around the area.
There are no batteries involved. It’s all like you have to install a sensor and a support system, and then try to pull it out the replacement for batteries. They actually operate by scavenging magnetic energy in the area. And as a result of that, you can leave them for years dormant, ping them through a wireless system, and then as a result, get the day-to-day function. The robust niche technology allows it to operate in very high heat, very high humidity, and very high pressures. It can operate with incredible tolerances to vibration and even sometimes with radiation levels.
So, as a result of that robustness, our sensor is not something we designed for retail use. So, for example, like you would find it in your thermos pad at home or at your toaster to activate a switch. This kind of technology is designed around high value use. And our client base love it because it actually has performed flawlessly.
WSA: Great, and perhaps, you can quickly talk about your background and experience, Joe, and some of the key management.
Joseph Fuda: The key management is made up basically of Steven Van Fleet who is our engineer. He’s one of the CTO’s of the company and the President of MAST. His background was International Paper, and he was engineer in International Paper, and a concept of this RFID wireless communication was born about 15 years ago from him.
Brian Von Herzen, he’s our CTO at MAST. He is also senior engineer. He is a fellow for the Hertz Institute, which is basically the highest level you can attain for engineering excellence. Our board is made up of investors, accountants, lawyers, and engineers.
My background is in business. I was a stockbroker at one point, and we own a firm that invested in Micromem, and we took over. We like the project so much, we decided to take control of it, and fund it ourselves.
WSA: Do you believe that the Micromem story and your message upside are completely understood and appreciated by the financial community and investors?
Joseph Fuda: I don’t think so yet. I think the reality of the problem we deal with is that the Internet of things is kind of this feeling that people still don’t understand. The world is moving away from just wireless communications among the retail sect like your iPhone or your car kind of thing, and the idea of infrastructure becoming smart is the next wave. Smart utility systems, smart oil infrastructure, smart automobiles, smart concrete, all of these things are just now beginning to reach kind of like the business consciousness.
I think what people don’t realize is that without sensors, the smart equipment you use does not work. Sensors are the eyes, and ears, and nose, and mouth of the technology. Without the sensor, the technology does not, and even the sensor that you use on your cellphone to interact with the screen, that’s the sensor, without that, the device doesn’t do anything.
And I don’t think the business community yet sort of understands the underlying value of what sensors are going to be to the industry over the next 15 years as smart systems continue to improve and continue to become more widespread. We’re at that turning point now where I hope that people will realize that the sensor market and this is said by Frost & Sullivan is reaching the point by 2018 of one trillion units a year.
So, the growth of the industry will be driven by the smart business. And this is where we’re very fortunate and that our business model shields us from some of the competition with our client base and the products we’re building are designed for them, and we partner with them to do this. They are paying the bills so they own the system. And then we collect the royalty, and we get to distribute through to them. I think we can get the news out or the understanding out that the sensor industry is the growing business over the next decade. I think that’s a good thing. We haven’t been able to do that yet though. I hope people understand that moving forward.
WSA: So, once again, joining us today is Joseph Fuda, the CEO of Micromem Technologies. The company trades on the OTCQX, ticker symbol MMTIF, as well as on the Canadian Stock Exchange, MRM, currently trading at 59 cents a share, market cap is about 110 million. And before we conclude here, to briefly recap your key points, why do you believe investors should consider the company as a good investment opportunity today?
Joseph Fuda: We’re leading in making smart infrastructure systems. Our partners are the Fortune 20 companies, global companies, and they like the system, they’ve vetted it, they feel that we are the selection, and just a real quick perspective, the companies we dealt with have spoken to the other sensor manufacturers including the big players like Philips and Siemens. They selected our alternative as the way to go. If they like it, then we must be on the right track as far as getting everything going. And I think once that word gets out, the business model we selected, I think is going to be unique and advantageous to every investor.
WSA: We certainly look forward to continuing to track the company’s growth and report on your upcoming progress, and we’d like to thank you for taking the time to join us today, Joseph and update our investor audience on Micromem. It was great to have you on.
Joseph Fuda: Well, Juan, thank you very much.