May 11, 2015
Executives
David Waldman – Investor Relations, Crescendo Communications Lou Centofanti – Chairman and Chief Executive Officer Ben Naccarato – Chief Financial Officer
Analysts
Al Kaschalk – Wedbush Securities Bill Chapman – Morgan Stanley Paul Lucas – Private Investor Robert Manning – Private Investor Joe Bon – Private Investor
Operator
Greetings and welcome to the Perma-Fix Environmental Services First Quarter 2015 Conference Call. At this time all participants are in a listen-only mode.
A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder this conference is being recorded.
I’d now like to turn the conference over to your host Mr. David Waldman with Crescendo Communications.
Thank you. You may begin.
David Waldman
Thank you. Good afternoon, everyone and welcome to Perma-Fix Environmental Services first quarter 2015 conference call.
On the call with us this afternoon are Dr. Lou Centofanti, CEO; and Ben Naccarato, Chief Financial Officer.
The company issued a press release this morning containing first quarter 2015 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 this conference 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 statements 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 Dr.
Lou Centofanti. Please go ahead, Lou.
Lou Centofanti
Thank you, David and welcome everyone. As we’ve indicated in our last that being a small EBITDA loss in the first quarter and that’s what we’ve seen, however when you compare the first quarter financial results same period last year did provide for improved revenue and significant cost reductions.
More importantly our visibility heading into the second quarter is much better than we’ve seen in the last several years and we anticipate a strong second quarter and even a stronger second half. As a result, we’re comfortable providing guidance for both the second quarter and full year.
Second quarter we anticipate adjusted EBITDA in the range of $2.5 million to $3 million. And as I mentioned, this is shaping up to be a very good year.
We currently expect adjusted EBITDA of $6 million to $7 million with positive earnings for the full year. And in fact we feel this guidance is somewhat conservative and that we could achieve these numbers without any large project wins in the service segment.
If we do secure some big wins in the service segment that could definitely be upside. As I’ve mentioned in the past we are currently bidding on some very large contracts that we believe we’re in a strong position to win.
Our overall revenue was up in the first quarter 2015; revenue in the treatment segment increased 27.1%, revenue in the service segment increased 34.1% compared to the same period last year. Same time our gross margin increased 10.9% in the first quarter versus 0.9% same period last year.
We attribute the increase in our gross margin higher revenue and reduction in certain fixed cost. On the treatment side of our business we continue to see Department of Energy shipping waste and our sales pipeline continues to improve.
In the service segment we are bidding on several large sizable projects, some of which are not factored into the guidance, it can be quite significant in our own way. In addition, the service segment helps feed the treatment segment as we have greater visibility into the waste streams when our staff are on site noticing the cleanup effort Also as I mentioned in previous decisions, we continue to advanced our family process to produce Tc-99m.
Our process enables production of this essential medical isotope for diagnostic imaging procedures in a way that is cost-effective and does not require the use of uranium for the production of. We view this as exciting and viable opportunity.
Our process enables production into the essential medical isotope for diagnostic imaging procedures and cost-effective that is not required to use the uranium production of Tc-99m. We continue to view this exciting and very significant opportunities for the company.
As we’ve discussed in the past, we believe we’ve developed a disruptive crosses that would allow us to dominate this market. We have conducted additional tests of the technology with one of our strategic partners that has helped us further validate our process at high levels.
We’ll be disclosing more on this front in the near future. We currently made necessary standards in this requirements because high Tc-99m in emerging markets is, and as we move the higher cure levels we’re confident our process will be extremely well received in both North America, Europe, after FDA and CE [indiscernible].
We are pleased to report that grant we were awarded earlier this year, we have now formally accepted the grant award for the consortium we formed was 2.8 million of which Perma-Fix Medical, our Polish subsidiary would directly receive approximately $800,000. We have scheduled a shareholder meeting for Perma-Fix Medical in Poland for June 2.
At this meeting they will be voting on the approval for Digirad stock acquisition and also a new management team. In terms of Digirad, following the shareholding meeting, we expect to close $1 million strategic investment.
We are pleased to have developed a strong working relationship with Digirad, one of the largest national providers of in-office nuclear cardiology imaging services. Additionally, following the shareholder meeting, we look forward to announcing senior management team that will help run Perma-Fix Medical.
We have assembled a team of leading experts with prudent track records in their respective areas of expertise to help that accelerate our activities going forward. So to wrap up, we’re encouraged by the outlook for 2015, given our sales pipeline within the service segment and our improving outlook within the treatment segment.
Looking ahead, we expect significant improvements second quarter; positive EBITDA for the first half of the year and a second half of 2015 that is much stronger than the first. We again appreciate your support and dedication of – support of our investors and dedication of our employees.
At this point, I’d like to turn the call over to Ben who will go into more details on the numbers and I’ll be back to answer questions at the conclusion of the formal remarks. Ben?
Ben Naccarato
Thank you, Lou. I’ll being with revenue; our total revenue from continuing operations for the quarter was $13.6 million compared to last year's first quarter of $10.5 million, an increase of $3.1 million 29%.
Our improved revenue was the result of increases at both our operating segments; increased volume in our treatment plants resulted in approximately $2.1 million increase in revenue, while our services segment revenue increased approximately $1 million as a result of more project work. Turning to cost of goods sold, our total cost to sales was $12.1 million in the first quarter compared to $10.4 million in the prior year.
Our treatment segment cost were up $952,000 or 12.6% compared to last year. Variable expenses increased by $1.1 million as a result of the higher volume process, but were offset by reduction in fixed cost of $158,000 primarily from lower healthcare and depreciation related expenses.
Our cost of sales from our service segment were up $720,000 compared to prior year or 24.9%. Our incremental project costs related to increased revenue were offset by lower operating cost; fixed operating cost resulted from reductions in our overhead support labor cost.
Our gross profit for the quarter was $1.5 million compared to only $94,000 in 2014, an increase of $1.4 million. Our gross profit in the treatment segment increased by $1.1 million compared to prior year.
Increased volume of waste and lower fixed operating expenses were offset by slightly lower margin weight process. Gross profit from the service segment was $243,000 compared to a loss of $17,000 in 2014, and again our increased revenue and project profitability, along with our lower fixed overhead cost also contributed to the improvement.
G&A costs for the quarter were $2.9 million, down from $3.2 million last year. Lower labor costs were partially offset by higher consulting expenses as we continue to focus on administrative cost efficiency.
Our loss from continuing operations for the quarter was $2 million compared to $3.7 million last year, and included in this loss are a cost of approximately $395,000 and $134,000 related to our Medical Isotope development project for Q1 2015 and Q1 2014 respectively. Loss applicable to common shareholders was $2.1 million compared to last year's net loss of $4 million.
Again the loss included the cost of $395,000 and $134,000 related to Medical Isotope for the two quarters respectively. Our total loss per share for the quarter was $0.18 compared to a loss in prior year of $0.35.
Our adjusted EBITDA from continuing operations as defined in this morning’s press released were the loss of $441,000 compared to a loss of $2.1 million last year. Turning to the balance sheet, our cash was down $2.5 million, primarily from the losses incurred in the quarter and as well the reduction of our deferred revenue built up in prior quarters.
Our waste backlog was $6.4 million compared $9.2 million at the end of the year and $6.5 million in March of 2014. Our current debt was $3.7 million, which is consistent with prior year – our year end.
And our total debt for the quarter stands at $12 million with approximately $10 million coming from our credit facilities and $2 million from our shareholder loan. Finally, a quick summary of our cash flow activity; our cash used in continuing operations was $2.7 million and our cash used from discontinued operation was $232,000.
Cash used by investing was $128,000 of which $121,000 represent cap spending, and our net financing cash flow provided was about $586,000. With that I will now turn the call over the operator for questions.
Operator
[Operator Instructions] Our first question comes from Al Kaschalk with Wedbush Securities.
Al Kaschalk
Good morning Lou and good morning Ben.
Lou Centofanti
Good morning.
Ben Naccarato
Yeah.
Al Kaschalk
I want to focus first on the treatment and the service revenue here, very good performance in the top-line, but the margin, the gross profit margin dollars disappointing. One was a disappointing relative to your forecast and plants, and two, what was the – despite the higher revenue in treatment, it looks like there was a little bit low on the gross profit contribution, could you talk to that please?
Ben Naccarato
Al, as you know we do a lot of our treatment in batches and so really depends on the waste stream or the waste mix that we processed. Fourth quarter for example we did not turn on the boilers out in the Northwest facility, which is where we burn a lot of the lower level wastewater type work, so what you're seeing in the margin is higher volume, little bit lower margin activity, we can't just bleed it through, we sort of try to do this as efficient as possible, and firing up the boilers for example can be expensive, so we do it when there's enough volume.
So it’s really a mix issue. What you’ll see then is that waste coming in, in the first quarter which is a higher-margin waste will just push into second.
So it kind of factors into the year, but as you know at a quarter basis it looks a little bit low.
Al Kaschalk
So from an operating perspective, this is consistent with practices, in other words there is not a, is there some timing or seasonality change in the waste stream that you’re seeing that would affect how we think about this going forward. I think your answer is no, but maybe you guys can answer that?
Lou Centofanti
I think the answer is no Al, but our pricing is holding up and it’s more a mix issue in terms of what you're seeing in the first quarter.
Ben Naccarato
Al, we get liquids like this all the time and it's always blended in a full year, you know, even lower margin cost sometimes when other volumes are down [indiscernible]. So there is no reduction in pricing and there's no deterioration of our overall margin.
Al Kaschalk
Okay. So should I view that the higher-margin, there wasn’t much of a pick-up in – or receipts of higher margin waste stream in the first quarter, but at the end of 2014, end of the first quarter, but you’re going to see that pick up in the second and third quarter?
Lou Centofanti
Correct. Yes, we had, not as much of the higher-margin material coming in, in the first quarter, but we expect everything we’re already receiving significant…
Al Kaschalk
The second question is, I was intrigued by you providing a range of financial guidance; one, hold yourself accountable now for some operating numbers that’s great, but two, is that function of what you literally said in the release on visibility and confidence, sort of why now and why are you putting yourself there for the accountability, which we applaud, but maybe you can just talk a little bit about the composition of that number.
Lou Centofanti
Actually the reality is that we have very good visibility at the moment. Usually have one or two quarters, but with the work we see coming we have very good visibility throughout the year now.
So as we look at it from – so in terms of visibility it’s pretty good. So it's probably better than we've had in a long time back, and this goes back—we’re now almost back to two, three years ago when we could see the waste coming in for an advance.
So we have visibility now with materials coming in.
Al Kaschalk
Okay. Very good.
We look forward to seeing the results and delivering on those numbers. Thank you for your time.
Operator
[Operator Instructions] Our next question comes from the line of Bill Chapman with Morgan Stanley. Your line is open.
Bill Chapman
Lou, Ben, good morning.
Lou Centofanti
Hello Bill, how are you?
Bill Chapman
Hey just fine. Thank you.
I was going to ask do you have your own hot cell installed in Poland yet?
Lou Centofanti
Actually we’re – in Gainesville, Florida, we’re installing. We are in the process of disassembling, we’ve purchased and we’re going through presently decontamination of it and disassembling to move it to Gainesville, so we’re still in the process.
Bill Chapman
And this will I assume will accelerate the testing on the generative designs to try to move this to accelerate this process?
Lou Centofanti
Yes, it will significantly allow us to run tests at our own facilities, higher activities, much more rapidly and efficiently.
Bill Chapman
Okay, is the process on the generator testing, you are going, I’m not quite sure, I’m not clear on how you’re doing this, are you going from let’s say 1 to 1.5 periods, you go two periods and three or is just a process trying to get to 5 to 6 series of building process?
Lou Centofanti
Yeah. We’re slowly working our way up, we’re doing a variety of basic test on the process to build a strong foundation and then move up the activity level.
And we’re doing that through other means right now, and not at our facility, but at other facilities, so those tests are going on as we sit.
Bill Chapman
Okay. For future partners this will more than likely be companies that have a use of isotopes, the Technetium-99m, or will it be just general investors coming in this?
Lou Centofanti
I’m sorry with respect to what now?
Bill Chapman
For future partners, will it be more investors just going in or more likely companies that have a need for the Tech-99m?
Lou Centofanti
Digirad is – was an – our early partner in helping guidance. And so it’s – we’re completing that where they also were very interested in investing in the technology.
So that should occur in June, we’re hoping to be to able to close that in June after the shareholder meeting in Poland. From this point on, most of our focus is on strategic partners at this stage.
We have no plans to – we’re in pretty good shape from a cash point of view in terms of where we need to go and what we need to do when you factor in the cash we have raised and the grant from the Polish government. So between the two of them, it puts us in a good position for the remainder of the year to get to our goals here.
So we have no plans for any other financing at this point. Now to get to the end of FDA approval, we will – we may need to do something, but we have a variety of options that we’re exploring there.
Bill Chapman
Okay. Do you still – if all goes well do you still anticipate FDA filing before the year is up?
Lou Centofanti
It’s a hope, we’ll see how this goes, it’s our goal. That will depend upon the series of testing we do and where we go.
Bill Chapman
Okay. And you still have consultants that had – who can guide you on how to make the application in, is that still accurate?
Lou Centofanti
Oh, yes, yes. We have several FDA consultants we’ve been working with on the best way to do this.
Bill Chapman
Okay. Has anything changed with the Chalk River being closed down next year?
Lou Centofanti
No. They’ve have -- Chalk River, they’ve announced they will start making Tech-99 with uranium.
They have not applied for a new license for the reactors, so in the reactor in 18 will be permanently closed. There will be a short period where they continue to do other research on the reactor and they have announced, they did say that in case of a true emergency in the supply that they might consider redoing it, but that would be somewhat difficult with what they are going through.
So at this point, we still see that a year, year and a half from now there is the NRU reactor will be shut down.
Bill Chapman
And the FDA would still have a mandate to possibly fast-track your application when you make one?
Lou Centofanti
A mandate, the FDA – they’ve said that, but they do have a rigid process they go through. And we’re working with our partners to look at various ways that we can accelerate our process.
Bill Chapman
Okay. Thank you very much.
Operator
Our next question comes from the line of Paul Lucas, a Private Investor.
Paul Lucas
Good morning guys. I had a quick question.
I’m encouraged to hear the confidence about Technetium-99 development, but my basic understanding of the process is that allows a higher concentration of Moly-99 to be held and my basic understanding is, it would even be beneficial to the current process, the current source of Molybdenum-99 and extending the delivery times for hospitals to you and even with potential computing technologies being developed. Could you explain a bit more about how your generator could benefit, fits into the process and would it be…
Lou Centofanti
Probably the key points are that one – number one, you don't start with uranium, so therefore it's a much simpler process, you don't have issues with proliferation, you don't have tremendous radiation fields caused by when you radiate uranium and the other is you don't need a large robust reactor, you could use just about any research reactor in the world. So you would end up with a much more decentralized system the – would be one of the great advantages, and you would not end up with large volumes of high level nuclear waste that’s weapons grade.
So it’s all many social issues. Because of the – and from the cost point of view all the studies we’ve done, it’s very cost competitive and should be even cheaper than the uranium systems.
Uranium systems to carry some tremendous subsidies with them because of the waste and the production of a highly enriched uranium. So the main – so we have tremendous advantages from the cost social distribution point of view.
And where we are in the process, we’ve demonstrated it at lower activities, it's a little low for the North American and European markets that we’re presently in, in the process of stealing the process up to produce larger generators that can carry much more Moly-99 and release much more Tech-99. So that the present pharmacy, hospitals would be – that would more easily fit into the present scheme of how the chain works.
So with all that, that’s basically what we have. We have a very unique system that solves the problem, we start with moly instead of uranium and we think this could have a fairly dramatic effect on the supply chain that occurred with the Tech-99.
That answers your question, but that's sort of quick overview of what we have.
Paul Lucas
Yeah, yeah. So I understand your generator is the part that has kept at the hospital and company has delivered moly to a generator at the hospital now, but your resin has more binding sites.
Lou Centofanti
Yeah. So we can hold much more moly and our generator therefore it overcomes the – when you radiate moly in a reactor versus uranium, you don't get this pure and is concentrated the material.
The advantage of the uranium process is that it produces a very pure highly concentrated moly-99 material. So to overcome that we had to develop a resin that would hold large amounts of molly compared to the existing resins – the existing resins, and we were able to do that, we made a resin that holds 10 to 20 times as much moly is existing resin and that then allows us to overcome the uranium advantage.
Paul Lucas
And given that I see your one competitor NorthStar is working on a method.
Lou Centofanti
Yeah. NorthStar is, I've mentioned this, you around the field there's a variety of people trying to solve this problem.
The one who – one company that's probably the furthest along is NorthStar, which has developed a generator. We think in the end our system is a very good system that could easily compete with theirs or whatever else is.
Paul Lucas
Okay. So your generator, I guess to one final, your generator would even be beneficial to the current process of using highly rick Molybdenum-99 generator?
Lou Centofanti
Well, it might be, but there would be little advantage to using it in the uranium process, at least in the generator. So at least we don't and in developing markets we could, but I'm not sure what the advantage of that would be from a sales point of view.
I think the – because the present resins they use work real well for the Uranium process.
Paul Lucas
Okay. I guess that was my whole crux of my questions, have any advantage of the current process?
Lou Centofanti
Probably, probably not.
Paul Lucas
Okay. It seems like it’s got significantly amount of advantages all around.
Lou Centofanti
Oh yes. Our advantage is, is the conversion to a simpler system.
Paul Lucas
Okay. Great.
That answers my question. Thanks for your time and good luck in the continued advancement of that technology.
Lou Centofanti
Thank you.
Operator
Our next question comes from the line of Robert Manning, Private Investor.
Robert Manning
Hi, I just wanted to be sure that I understand NorthStar as mentioned is a competitor. But I understand NorthStar use low and rick uranium.
They are not a competitor in the sense that they don't – they don’t do what we do which is get the uranium out of the supply chain. Am I correct in that or is NorthStar doing something that also get uranium out of the supply chain.
Lou Centofanti
NorthStar has taken a variety of paths and so not clear in the end where they will end up. They basically have can produce moly through a variety of sources they then collect the Tech-99 and it’s a whole different process.
What they do is they in the central facility they then separate the Tech-99 and send it out, and that causes, they got a very, a much different generator that exists in the present, today compared to the present generator. So it’s a whole different approach.
And they've gone down sort of parallel paths with several different ways to use it and make it.
Paul Lucas
So they do have a process they can get uranium out of the supply chain, is that true?
Lou Centofanti
Yes. They can produce Tech-99 from natural moly and then take it to a central facility concentrated and send that out to the generators.
Paul Lucas
But if they send in Tech-99 out, then they’ve got this six hour or a half-life decayed problem whilst in transit, is that correct?
Lou Centofanti
Well, and also while they’re processing it back at their facility and then there's a variety of issues with their system yes.
Paul Lucas
But my understanding is that, currently what’s shipped to a hospital is Moly-99, we've got, wherever it is a 30 hour half-life and the six hour pathway doesn’t happen until you get in the hospital and it sounds like here they’ve got a much bigger, am I correct or not?
Lou Centofanti
No, and I hate to get into the – they’ve got a very complex technology that they use in their generator system that, I’d hate to get into right now. One because we’re – it’s never been clear exactly how it’s going to work publically, but their system is very complex.
Paul Lucas
Have they applied for FDA approval yet?
Lou Centofanti
Yes. About a year and a half ago.
Paul Lucas
So that’s with this complicated process and where year and a half they haven’t heard that from the FDA.
Lou Centofanti
Well they’ve heard back, I don't know what the…
Paul Lucas
But they haven’t got approved anyway?
Lou Centofanti
No, they’ve not been approved.
Paul Lucas
Okay. Thank you.
Operator
Our next question comes from the line of Joe Bon, Private Investor.
Joe Bon
Yeah. I have a couple of questions.
You may have answered them, but number one, I had the impression, I’ve had the impression that you're going to go to the market to the European market with his first, and I mean you’ve got this European consortium and you’ve got this Polish back in the research. So I'm guessing, I'm assuming that you’re going to sell this product to Europe first and then to United States?
Lou Centofanti
No. That hasn’t been decided yet.
As we are going down the path we are going down parallel path, the two approval processes they’re very similar. Our plot is probably to come back to the U.S.
with the process that first. But that decision hasn't been made.
It’s somewhat of a parallel path as we’re generating the information we’re on parallel paths here both understanding what the EU’s regulatory process is and what the US North American process is.
Paul Lucas
Okay. The other question I had is you are trying to scale up this process right.
I'm just wondering that seems to be the biggest impediment right now, I mean once you get past that hurdle and like you scale it up to whatever scale that you need. I mean that’s pretty clear statement, I’m just wondering how far in the future, what you guy anticipating how long it will take for you to scale this up?
Lou Centofanti
The scale up is, as I’ve described it in the past and let me just do this once more here, so everyone understands is that, what we had found early on was that we had designed our process, initially that we demonstrated – what an existing amount of resin in an existing generator. So we had basically copied the existing units and said we need about a 1 gm of resin in the generator and that's what we went through all our testing with and what we demonstrated with.
Well, Digirad got involved with this, they looked at it and said that's wonderful, but you’re going to have a hard sell in the US and North America with that size generator, which you really need to something much larger. Well, the technology really is that – to get a 1, 1.5 [indiscernible] generator, we needed about 1 gm of material.
So to get a two [indiscernible] generator we need about 2 gm in that generator, which sounds, so in one way it’s kind of a simple scale up, we just need twice as much material, and so of course in these systems nothing is ever simple and what we’re going through is there is several ways we can’t scale the unit up and we’re going through all the different ways to look at what effect that has and to then demonstrate a scaled up unit, which just means you have more resin and more Moly-99 in that generator. And the issues just become because you then have a larger radiation field therefore is there any detrimental effects from the greater radiation field.
We don't think there will be, and so that's where the technology, those are the steps we’re going through today.
Paul Lucas
So it’s not a question of can you do it, it’s a question of how safely and cost-effectively you’re going to do it right?
Lou Centofanti
It’s actually a question of what’s the geometry of the new, of a larger generator with this kind of technology, so how do you put it together, how do you increase the size of the column. If our hope is, all you do is just double the size or triple the size and you have a larger generator.
Paul Lucas
So I mean you're working on this right now, so what do you anticipate, when you’re going to have some idea of how you’re going to proceed?
Lou Centofanti
We’re hoping that we can talk to you in three or months that we've now completed work on a scalable model, right.
Paul Lucas
Okay. And so again once you – this seems to be a major hurdle, once you’ve passed this hurdle, it’s fairly smooth sailing after that?
Lou Centofanti
Nothing has been smooth sailing.
Paul Lucas
Well I mean, so that’s your last major hurdle right?
Lou Centofanti
Well that would be a variety of then issues to deal with, which we think will be simpler dealing them with developing the date that the regulatory agents require, which is really which – where the grant comes in, it will be then the major vehicle to generate that. We’re generating it in Poland, but it will be doing it under kind of standards that North American, either the FDA could accept.
Paul Lucas
Again, I was wondering why the Polish were so receptive to you and why you ended up over there – going on their stock market?
Lou Centofanti
Yeah. It’s an interesting question.
In fact the Polish asked me the same question. There were a variety of reasons.
One number, we had been working with Paul Adam, which is one of the largest reactors in Europe and they have a generator, and they manufacture using uranium. So we have them as a partner too.
When we try to raise money in the US to spin this off we had a very hard time, it was very early in the process the medical field was venture-capital, very, very difficult and almost impossible for us. And then on the grant side there is pretty much, Congress did fund some companies to do this, but when they funded them they said the US government is not funding anymore, so they actually put a ban on the government providing systems for these technologies.
So the opposite is true in Europe, Europe was very focused on biotech and doing work there, so to be honest with you we saw an opportunity there that and so really want to know where the money was, and the technical expertise in Poland.
Paul Lucas
Okay. And my final question, we heard about one competitor this morning and then you just mentioned government funding for companies over year prior to you coming on.
So we heard about one competitor, are there any competitors that has – are there – imagine there is other people working on this, but any of them that you know that are the far along in the process in their development?
Lou Centofanti
No the only one that that NorthStar was funded by DOE, I think DOE gave them $25 million, they’re the furthest along. We think our system is much simpler and will be more cost-effective and more acceptable to the present chain.
The others you know when you look at the others, there's no one who has made much progress, and most of them require a tremendous amount of money. There are people out there that are proposing to build new nuclear reactors in the United States to supply, so you can imagine how much money that’s going to cost and how long it will take, and if they could even never do it.
And then the Canadian government has put a lot of money into cyclotron work, but I don't have a lot of faith that will ever really be a commercial process, and they haven’t made a lot of progress. And there's other technologies that are like that, that require hundreds of millions of dollars worth of money and there’s really not been a lot of progress.
So I only see one real potential competitor out there, well there is two. One is present suppliers are switching to lower enriched uranium, but that still requires uranium and it’s much more expensive than the present process and produce lots more waste and still is the uranium process and the need for a specialized reactor.
So those are the, what we see going on in the market. We really only see NorthStar as a, you might say a real competitor.
Paul Lucas
Does the DOT buy any of this stuff from you? I mean, is there government contracts involved in any of this?
Lou Centofanti
Well, all the government hospitals, and they’ve given special pricing for non-uranium systems and a pricing advantage at the hospitals on the government side.
Paul Lucas
What I was wondering about his, whether the government might in the end approve both you and NorthStar or whether they would just go with the person that has the lowest – the most cost-effective…
Lou Centofanti
Well I don’t think the government – this is a, this will be a private decision. The government will not distinguish, they’ll approve anybody that meets the standards, than really allow the market to decide who's best.
Paul Lucas
Okay. Thank you.
I appreciate it.
Operator
Mr. Lou Centofanti, there are no further questions at this time.
Would you like to make any closing remarks?
Lou Centofanti
Well, thank you all. We look forward to the next call.
And I appreciate your support and confidence at the moment. So thank you very much.