Dear Shareholder:

I am pleased to have taken on the role of CEO and Chairman of the Board of the Company, and I am excited about the opportunity to address and solve the challenges the Company has faced in its efforts to develop and commercialize its Applied Oil Technology. I, of course, cannot provide any guarantees about the outcome of my efforts or the commercialization of our Applied Oil Technology, except to say that I will be diligent and devoted in my efforts to achieve success for the Company.

As reported in our Form 8-K filed with the SEC on April 16, 2021, we are delinquent in our SEC filing obligations. More particularly, we have failed to file our annual report on Form 10-K for the calendar year ended December 31, 2020. We cannot file our 10-K until we commence and complete the audit of our financial statements for the calendar year ended 2020. We have been unable to do this because we lack funds to pay past due fees owed to our independent auditor, and fees payable to our auditor to cover the 2020 audit. We are seeking to remedy this, but can provide no assurances that we will be able to do so.

So, first, we must garner the required resources to ensure compliance with all SEC rules and filing obligations applicable to us as a public company, including the preparation and filing of our annual report for the year 2020. Second, we must garner and dedicate resources to the continuing development and commercialization of our Applied Oil Technology. (In this regard, please see our website at https://qsenergy.com/updates, reporting the status and problems we have faced in our development and commercialization efforts.) It is our goal to dedicate sufficient resources to Dr. Christopher Gallagher, our lead engineer in the development of our Applied Oil Technology, with the objective of determining whether we have “an AOT design issue or an engineering issue.” We would prefer the latter, as that is where our assumptions currently stand. I believe Dr. Gallagher is very capable and determined to sort out the variables that could lead us to a consistent and reliable commercial proof of concept of AOT. Once we can truly say that we have a commercial product, we plan to swiftly move to prove AOT in the field and to seek commercialization opportunities.

One of the first impressions I had of Dr. Gallagher’s attitude is that it simply comes down to the fact that he enjoys solving problems and winning.

The following is a statement from Dr. Gallagher:

“Heavy oil is a challenge to transport and a device that reduces pressure in a pipeline will allow more oil to be transported at the same cost. I remain excited about the potential of the science behind the AOT to be a novel solution for heavy oil pipelines. Given the interest QS Energy has received recently from prospective customers it seems the industry still wants the AOT unit.

I would like to continue to help QS Energy find and solve the problem with the AOT and help turn the situation around. QS Energy has invested in a great deal of design work and has reported limited successes and failures. Notwithstanding scale up difficulties, the AOT device is fairly-straight forward. Now that QS Energy knows there is an issue, the goal should be to find the cause of the short circuit and fix it.

Last year we found the conductivity of the oil at the pilot site had not been considered in the design and we fixed the AOT after lab and field testing revealed the problem. I am hopeful QS Energy will solve other problems, as well.”

Again, I am pleased to be back with the Company and look forward to keeping you updated on my efforts and the Company’s progress. As always, I thank you for your continuing support.

Sincerely,

Cecil Bond Kyte, CEO

Safe Harbor Statement

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About Applied Oil Technology

QS Energy’s patented Applied Oil Technology (AOT) is a solid-state turn-key system which uses a high volt / low amp electric field to reduce crude oil viscosity. AOT installs inline on crude oil pipelines, operates unattended without interrupting pipeline flow, with full remote monitoring and control. More information is available online here.

About QS Energy

QS Energy, Inc. (OTCQB: QSEP), develops and markets crude oil flow assurance technologies designed to deliver measurable performance improvements to pipeline operations in the midstream and upstream crude oil markets. More information is available here.