Aqua Metals, Inc.
Q1 2017 Earnings Call Transcript

Published: 12 May 2017

[Operator:]

Good afternoon, ladies and gentlemen, thank you for standing by. Welcome to the Aqua Metals first-quarter 2017 corporate update conference call. [Operator Instructions. This conference is being recorded today, May 9, 2017. Before we get started I would like to turn the conference over to Greg Falesnik, Managing Director of MZ North America, the company's investor relations firm, who will read a disclaimer about forward-looking statements.

[Greg Falesnik:]

Thank you, operator. This conference call may contain, in addition to historical information, forward-looking statements concerning Aqua Metals, Inc.; the lead acid battery recycling industry; the intended benefits of its agreements with Johnson Controls and Interstate Batteries; the future of lead acid battery recycling via traditional smelters; the Company's development of its commercial lead acid battery recycling facilities; and the quality, efficiency and profitability of Aqua Metals' proposed lead acid battery recycling operations. Those forward-looking statements involve known and unknown risks and uncertainties and other factors that could cause actual results to differ materially. Among those factors are the fact that the Company has not yet ramped up its initial commercial recycling facility to full-scale operation, thus subjecting the Company to all the risks inherent in a startup; the uncertainties involved in any new commercial relationship; and the risk that Aqua Metals will not receive the intended benefits of its agreements with Johnson Controls and Interstate Batteries; risks related to Aqua Metals' ability to raise sufficient capital as and when needed to expand its recycling facilities; changes in the federal state and foreign laws regulating the recycling of lead acid batteries; the Company's ability to protect its proprietary technology, trade secrets and know how; and these and other risks disclosed in section Risk Factors included in the quarterly report on Form 10-K filed with the SEC on March 1, 2017. Aqua Metals cautions readers not to place undue reliance on any forward-looking statements. The Company does not undertake and specifically disclaims any obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur. At this time I'd like to turn the call over to Dr. Stephen Clarke, the Company's Chairman and CEO. Steve, the floor is yours.

[Dr. Steve Clarke:]

Thank you, Greg, and welcome, everybody, to the 2017 quarter one earnings call for Aqua Metals. And just as Greg has just read through the Safe Harbor statement, I would just put it up there for a few seconds to refresh your memories that this presentation will include forward-looking statements. So I want to start off with a summary of where we are; then on the next slide I'll show you the sequence that we are going to go through a double take you through it. I will hand over to Tom later on in the presentation to talk about the financials and then I will finish up with a summary and then we will take questions. But just to get started, the key points that I am going to go through today are that what we are calling AquaRefinery one, which is our first aqua refining facility, in fact the world's first aqua refining facility located in McCarran, Nevada is now operating and in revenue. We actually began production in quarter one and took truckloads of feedstock to get the facility commissioned and up and running and in a level of steady-state at the front end. Sales to a strategic partner commenced in quarter two using materials that were made in both quarter one and quarter two. And again, we are into the situation of truckloads of feedstock crushed and shipped now. For the remainder of this year we are going to be ramping production to 120 metric tons a day of lead, which we aim to achieve by the end of 2017 or sooner. And we will be going through why that's validating our economic projections and incorporating lessons learned into the operation of our first AquaRefinery. With that said we are planning AquaRefineries 2 to 5 and we are really taking some lessons from the chemical industry and our friends in the data center will -- in looking at how they scale rapidly with new processes and new services. And what we will be talking about is that we are making a little bit of a departure. We are moving away from the opportunistic build out of small standalone facilities that we started out with. If you recall, those of you in at the beginning of our IPO, we were talking about and contemplating the build out of 10 or more 40 to 80 tonne a day facilities located in various parts around the U.S. We are moving more towards a smaller number of clusters centered on logistic nodes and I will talk a little bit about the rationale behind that. Obviously we will be addressing the fact that one of the key milestones for us was that we started our equipment licensing business model and I want to talk about the context of that. Then I want to talk briefly about the acquisition of Ebonex and what that means for us in the short term. Throughout this presentation I'm going to be pulling together a theme, which is a headline of this slide, that strategic relationships have really helped de-risk our startup in a meaningful way. And the bottom line is that those same strategic relationships are providing the stability for us to optimize our business expansion in new ways; in ways that we could only imagine a year ago, and we think will give us a much more efficient rollout. So that's the key messages. Now I'm going to talk about the structure [Indiscernible] which we are going to present this. I'm going to start off with an update on AquaRefinery 1, where we are, lessons learned, what it all means. Then I am going to talk about the planning for AquaRefineries 2 to 5 and our licensing rollout and talk a little bit about the Ebonex acquisition. And I will hand over to Tom who will take you through the financials and then I will round up with a summary of the key takeaways and that we will be heading over for Q&A. So before I get into the details of where we are with AquaRefinery number one, I want to put this into context. There is a slide here, a chart that I have been showing in various forms for a couple of years now, that show what a single AquaRefinery might look like, what [Indiscernible] AquaRefineries might look like, and what licensing might look like. And in the past this has been a slide populated largely by guesswork. Now it's a slide populated with a level of rigor that we've not been able to bring to this before. So if you look at the headings, we are looking at the scale of opportunity delivered through the strategic relationships that we've captured in terms of the first AquaRefinery, The rollout to 800 tonnes a day of production and then licensing initially with JCI and then beyond. And then I'm looking at that in terms of the late capacity in terms of metric tons a day produced. To put that into context I'm showing a column of what that means in terms of AquaRefining modules that need to be deployed into that opportunity. Then we are looking at potential annual revenue and we are looking at the timing of that. So if we look at AquaRefinery number 1, we are planning on having production capacity of 120 metric tons a day by the end of the year and then expanding it to 160 metric tons a day in 2018. And that essentially means that we will have 16 AquaRefining modules on-site and operational at 120 tonnes a day and 32 modules on-site and operational of 160 tonnes a day. For the mathematicians among you that doesn't add up and I will show you why in a couple of slides time. But in terms of what does that mean, at 120 to 160 tonnes a day of lead produced, that represents about $100 million to $120 million a year of revenue and it's operational. We've been talking about the rollout to 800 tonnes a day for more than a year now and initially that was going to be 10 to 15 smaller facilities. Now we are thinking we can achieve that with one to five AquaRefineries if we stop at 800 tonnes a day. And there's really no reason why we should specifically stop at 800 tonnes a day. But at 800 tonnes a day that would mean we have deployed 160 AquaRefining modules and we will be looking at a combined potential annual revenue of $500 million to $600 million a year and we are starting that process this year, that is we are starting that rollout this year. Now if we look at licensing and look at the scale of the opportunity that we think is immediately addressable. If you take the fact that Johnson Controls is the largest battery Company in the world that addresses somewhere -- approximately 30% of the world's lead. And you look at the licensing opportunities that come off that, the other licensees that are brought to us because of the relationship we have with JCI and the credibility that relationship has brought to us. If we look at the short- to medium-term addressable capacity of lead we are looking at 8,000 tonnes of lead production per day and we are looking at deploying 1,600 AquaRefining modules to address that. We can't even begin to put a number on that at the moment, but I'm pretty confident it will be more than $500 million to $600 million a year. I'm also pretty confident we won't get it done in five years time. This is a long-term planning horizon over large-scale adoption of AquaRefining as a replacement and adjunct in addition to AquaRefining that we are roughlyplanning to kick off in 2018 with JCI. That's the level of scale that I still look at and have to pinch myself. It's far beyond anything that any of us that founded Aqua Metals four years ago thought we'd be talking about in 2017. So it's actually caused us to step back and think about our priorities. We've got such an enormous addressable market. And with some level of confidence and some level of stability and an ability to develop a planning window around that, it really means that we need to rethink some of our priorities and how we place our resources. So essentially what I am saying here is that the scale and the amount for additional facilities and licensing means that we really can't wait until facility two to start implementing advances on lessons learned. We're building a first of kind of a brand-new process, a process that operates at a minimum [indiscernible] of 300 tonnes a day of batteries coming in and 160 tonnes a day of lead going out. This isn't a small backyard operation. It is a 130,000 square foot facility consisting of five large subsystems handling very large amounts of material on a daily basis. In the normal scale of things, when people start off with a new first of kind facility, and we have seen this in the chemical industry and we've seen it in the data center industry, it's fairly normal for the rollout to consist of facilities one, two, three, even four being incremental improvements over the last one and then the industry or the people deploying the technology hit their stride around about facility four or five and then start a parallel deployment. Most of that stepwise approach comes out of the fact that there are questions about how well the market will accept that and opportunistic requirements around finding feed, finding markets, finding sites and the rest of it. What we've got with our strategic relationships, both on the battery side and on the equipment supply side, is a much higher level of stability and a much bigger planning window by which we can operate but also a real drive for rollout. So essentially what we are doing and what we have decided to do is instead of waiting until we have got facility two to start implementing advances on lessons we have learned in facility one, we have taken the decision to start retrofitting facility one pretty much as we make an improvement. So that we can get as much time in running those improvements under our belt that we can before we sit down and start planning the rollout into additional facilities and before we start working with JCI on a blueprint of how to start retrofitting or adding AquaRefining into their operations. And another thing that we have decided to do is we have built a talent acquisition function which is recruiting senior and middle management staff from companies that we view as role models and companies that we view as complementary industries. So we've spent this year tapping the lead acid battery and the lead acid battery recycling industry for the remarkable talent that we have brought to bear in Reno. Now we are starting to tap complementary industries and role model companies for talent that we want to bring to bear to help us go from a sequential expansion to more of a phased into a parallel expansion. So that's the context of where we are and it's a theme that runs through this presentation. So now I'm going to go on to where are we with AquaRefining Refinery one. The headline is its running and we are scaling output. We started production in Q1 and we have started actually moving those into sales in Q2. It was a few weeks later than we wanted. We set a target to actually ship some of that product in Q1, but for a number of reasons we weren't able to do that, but it has shipped and we are continuing to produce and are continuing to ship. So the status of the Company or the status of our first facility is that if you look at the various operations, and I will go through them individually on the next slide, I'm going to show you kind of an idealized flowchart of how this fits together. The front end is breaking and separation. That's common to all battery breaking and recycling operations. So the breaking and separation is commissioned and operating. The aqua preparation is the next step, that's essentially where we take the lead compounds, which can be oxides, sulfates and various other lead compounds, but anything that is not plastic, sulfuric acid or metallic lead, we take that, those lead compounds and we turn them into the electrolyte from which we are going to plate and perform our AquaRefining, but it's a separate process. So that process is now operating. We are adding capacity to it and streamlining operations. AquaRefining itself, module 1 is operating, modules two to four are on-site and in startup mode and modules 5 to 16 are being updated to latest specifications and will be installed over the coming weeks and months. Ingot production where we take metallic lead, melt it, pour it into ingots and ship as ingots is currently being commissioned. So our sales now don't include ingots. They do include metallic lead that hasn't been through the ingoting stage. And then in terms of plant staffing, we are planning to have four shifts, A and B shifts are fully staffed, on-site and operating; C and D shifts we are recruiting to a full complement in the next month. So the focus of deployment that developed now for the Company has moved from Alameda being the focus of engineering and product development to Reno being the focus of engineering and product development and we have moved phases implementing next year's improvements now. So I have given you some headlines there; I will move into a bit more context of what does all of that mean and I'm going to talk about some of the lessons learned. So we've put together this info graphic which attempts to show the key processes in an AquaRefinery and the key sources of revenue. And this is where we've seen a lot of confusion out there around what are we selling and trying to make the numbers of AquaRefineries equal tonnes out and all the rest of it. So what we are looking at here in this graphic is batteries arriving, being fed into the battery breaking and separation system, from which we generate salable metallic lead, which started out as the grids and the posts and the connectors in a lead acid battery, and salable recyclable plastic from the cases. Then as a second step we can see a pipe connecting a series of tanks, there are four tanks which produces the electrolyte that we take to the AquaRefinery to make the AquaRefined later on. So about 50% of our lead goes nowhere near the AquaRefinery. 50% of the lead in a lead acid battery is the grids, the top connectors and the posts and various other solid pieces of metal. And because we are not smelting them we are able to capture that led and sell it as is off the breaker. It's not the most effective way of selling it and I will show you what we are going to do to improve that, but that is where we are now. Then the Aqua [Indiscernible] produces the electrolyte to feed the AquaRefinery. So essentially [Indiscernible] started with the very front end of that system and if you can again imagine you are looking at a 130,000 square foot facility with four very large scale operations, the natural process of starting up and scaling up and commissioning any process based business is that you start at the front end and then you progress through. When you do that it naturally creates bottlenecks and imbalances and temporary excesses of process and medias. That is the bane of any Company that's trying to start up a multistep process line. You have to get the front end running properly before you can start the second process. You have to have that running consistently before you can start the third process and so on. And many people -- and we've heard it several times. There was a lot of consternation about how would we get through this process without generating enormous amounts of scrap or waste products that were barriers in working capital requirements and waste processing costs. Well, the key to that is we didn't make any scrap and we didn't make any waste. What we were able to do was to work with our strategic partners to monetize the intermediate products that we were developing and making as we ramped up each process. And that sounds a lot more simple than it really was and the diagram makes the flow process look a lot more simple than it really was. But there was a huge amount of work that went on between ourselves and our strategic partners to organize the ramp up such that we could use those relationships to monetize our product. So right now we are selling and shipping metallic lead, we are selling and shipping plastics. We are selling at shipping lead compounds and we are selling and shipping metallics from the AquaRefining. That's not where we want to be but it's where we are. It's transitioned us from start up to revenue. On the next slide I am going to go through some of the improvements that we developed and some of the issues we faced and the challenges that we had as we ramped up this process. So anybody who has worked in the battery recycling industry knows that breakers break. Breaking and separation is the most challenging process for any battery recycling Company. And what we can say is it took longer than we planned to get the breaking and separation up and running, but actually considerably shorter than industry norms. One of the challenges that was unique to us that we faced is that, because we don't have a smelter, we don't have a furnace, we needed to achieve much higher degree of separation than is normal in this industry. And what I mean by that is our plastic had to be clean plastic with no lead oxide and no lead dust on it. Our metallic lead had to be metallic lead with no plastic and no lead oxide and no lead sulfate on it. Our lead compounds had to be lead oxide, lead sulfate and other lead compounds with no plastic and no metallic lead in it. That's a really tough order and we achieved it. And we worked very closely with Wirtz Engineering who have been tremendous in this operation. We asked them to do things that no other battery breaking Company has ever been asked to do. It took us a while to get there but we achieved it and we developed and implemented numerous, far too numerous to mention, upgrades to support what is essentially an industry-leading level of separation. And we think that's something that we are working actually on developing to know how and maybe even some IP down the line. But when we talk about breaking and separation we are operating at levels of separation that we don't know of anybody else in the industry even close to. One of the other things that we -- well, a couple of other things that we have done in the breaking and separation areas, we figured out fairly early on that to be able to operate over 24 hours and match timing of phasing between breaking and the next stages down the line, we needed to improve and upgrade our holding tanks, which we are doing, with higher capacity holding tanks with better mixing. One of the other issues that we faced, we needed to rethink and rework the input conveyor to the breaker to upgrade it to support the higher feed rates that we want to achieve to manage 160 tonnes a day of lead production. Initially we undersized that because we planned for 80 tonnes a day. And rather than stop when we are at scale we thought we would upgrade it sooner rather than later. Looking at the aqua preparation, which is where we make the electrolyte, we were later -- quite a bit later and slower in being able to bring this online. Initially because of intermittent supply from the breaker, without consistent high quality lead compounds from the breaker it's very difficult to commission the processes that turn that and turn it into electrolyte. We weren't idle though. Whilst we had this spare time and capacity we actually used that to switch to an improved and lower cost chemistry for our desulfurization and separization technology which is a real big benefit down the line. And we learned some tough lessons on tank mixing and filtration which needed to be changed and upgraded to improve reliability, but the aqua preparation now is up and running. Similarly with AquaRefining, those of you who followed us knew that we had a module online in October and we were struggling to -- with intermittent supply from both aqua preparation, which was struggling with intermittent supply from the breaker, to get sufficient electrolyte up and running to commission all of the modules. So we were limited to only have the electrolyte to run a single module until that opportunity, again to learn, to improve and to implement. So we used that delay in commissioning the additional AquaRefining modules to test and implement numerous upgrades that have improved potential liability, lifetime, reduced cost and improved consistency of operation. And last but not least, again, same theme here, we were struggling to commission the ingot casting process because, again, of intermittent supply of processed lead. We've now got all of that and the ingot casting is -- commissioning is underway. So moving on, the AquaRefinery that we are working towards and we are on track to be at 120 metric tons a day by the end of the year, I want to say by the end of the year. We are hoping to be there sooner than that. But essentially where we are at now is modules five to 16 are being assembled to the latest engineering standard. Ingoting is being commissioned. Samples of pure lead from AquaRefining are being delivered for acceptance testing to customers. Ramp up and timing and retrofits of the delays and additional work have all been built into our cash flow planning and we still contemplate to expand to 160 metric tons a day in 2018 and we are evaluating methods for doing that. And last but not least, those improvements that we have made have been captured and they are forming potentially new IP. So if you look at the flow chart on the right, by the end of the year we expect to be shipping lead alloys from our ingot line and monetizing that. It's probable that we will still be selling metallics in a non-ingot form and monetizing that. We are monetizing plastics and expect to be continuing to do that. And we will be monetizing some of the lead compounds, because at 120 tonnes a day we will be generating 80 tonnes a day of lead alloys and metallics from the breaker and we will still have an excess of lead compounds given that we will only have 16 AquaRefining modules which will make us 40 tonnes a day of ultrapure lead in the form of ingots. So we get the 120 tonnes a day from 40 tonnes a day out of our AquaRefinery and 80 tonnes a day out of our lead alloys. What we are not counting in that is up to 40 tonnes a day of additional lead compounds that we will continue to market and sell to our strategic partners. Okay, so where we're at this year is we are preparing ourselves for a rapid buildout and licensing, buildout of our own facilities and to commence licensing rollout in 2018. Everything that we have done so far has validated our business model. We are projecting our financials for a new 160 tonne a day facility. There remain our $54 million of CapEx which would generate $100 million to $120 million in revenue and $20 million to $30 million of EBITDA. And we are going to be reporting our progress on that in our future quarterly earnings. What we are not going to be doing this year is providing forward guidance on ramp up of revenue, products or capacity and there's really two reasons for that. The first one is we've got more than adequate cash on hand and our focus is to be ready for explosive growth in 2018. And to be ready for explosive growth in 2018 we want the flexibility to test and validate multiple potential improvements by the end of this year. So we may choose to temporarily suspend production to support this. And given that, we don't think it's appropriate to provide forward guidance on a month-by-month or a quarter-by-quarter basis. Because the goal isn't to meet month-by-month or quarter-by-quarter earnings projections for 2017. The goal is to be as ready as we can possibly be by the end of the year for an explosive buildout both of our own facilities and for our strategic partners. Now talking about the buildout, so up until now our original plan was to build multiple 40 to 80 tons a day facilities with those distributed around the US. And that thought process and that strategy came out of a simple fact. We were a small startup Company without any partners and we had very limited certainty of supply, the supply of used batteries, and we had planned to be opportunistic about where we would locate. As we developed relationships with individuals battery distribution companies and small potential partners we were looking to build a small number, sorry, a large number of small facilities around the US. The downside of that is it's quite inefficient for design, it's quite inefficient for engineering, and it's quite inefficient for construction. And ultimately to deploy 800 tons a day, that model needs multiple deployment teams. But we are not in that situation anymore. We have got a much higher level of certainty and supply and off take through our strategic relationships. And now we can think and plan optimally. So we took a long hard look at how innovative processes have been deployed through the chemical industry, and also through our friends in the data center industry, how both of those industries have been able to expand while managing capital, resources and risk. And there's a common approach to this and it's exemplified by numerous plays in the data industry. And that is to co-locate in clusters, find a number of logistic nodes where the power, transport, supply, off take all make sense and then build a cluster of facilities around those nodes. And the graphic on the right is our attempt to illustrate that idea. And essentially what we get from that is it reduces the investment required in deployment teams, it dramatically reduces location risk. If you are building in a cluster you are working with the same regulators that you worked with a previous facility. You work possibly potentially with the same construction companies and the same developers as you did with a previous facility. And you can get efficiency out of those relationships because you can plan multiple facilities. And then along with that, if you are building a cluster of facilities it also makes sense to have co-location of regional innovation and training centers which lever that scale. So, one of the things that is important to us is to be able to innovate in a process that's handling 300 tones of dead batteries a day and producing 160 tons of lead, your innovation center needs to be very close to that facility. You need access to the scale of operation; you need access to the scale of the process flows; you need access to the specialty equipment that you are going to modify, improve or change. And if we are going to license and provide our equipment to third parties you need the capability to train other people's operators. We need the capability to train our own operators as we roll out. So our current thinking is that AquaRefineries 2 and up may be built in clusters. We also think that may also work for licensees and potential joint venture partners. So that's kind of what we are thinking about for the future and we are trying to get as efficient as we can for this explosive growth in 2018. So now I'm going to move on and change subjects slightly, well, significantly. I'm going to talk about an acquisition we made that was reported a few weeks ago. And I'm actually going to start off with the bottom line on this. And quite simply put, in an ideal world this is an acquisition that I'd like to be looking at two years from now. It makes sense it's strategic, it's hugely synergistic with what we are doing, but could be seen as a distraction and could in fact be a distraction. So in an ideal world I'd be wanting to do a deal like this two years from now. But the opportunity arose and we took the view that it won't be there in two years, so we executed on it. So Ebonex, what have we acquired? Well, first and foremost we now own Ebonex, which is a unique electrically conducted ceramic material. It's unique in that it conducts electricity better than carbon, but it is massively oxidation resistant, which means it has incredible uses and potential uses as a high performance electrode in a variety of devices including batteries. It's also got a large amount of potential as a performance additive for lead acid batteries [indiscernible] the material has been tested by Penn State, CSIRO and others and it's shown that it can deliver benefits in cycle life, material utilization and other things when mixed in very small quantities in the acid material in a lead acid battery. That makes it potentially very synergistic with our own lead nano fibers, which is something that we want to roll out as a high performance active material for lead acid batteries. It gives us ownership of patents, know how, tooling and equipment to produce high performance battery electrodes. It gives us ownership, patents, know how, tool and equipment to produce an advanced bipolar lead acid battery. And last but not least it gives us access to a pretty sophisticated setup of battery development and test equipment and that important in the short term. So, I'm not going to dwell on where we may take Ebonex in the medium and long term. I am going to focus on how we are going to use it now. So many of you will remember me talking about lead nano fibers. So if we go back to the flow diagram of an AquaRefinery and you see that I've added a product line in the bottom right-hand corner. That is lead nano-fibers coming directly off our AquaRefining equipment. Our AquaRefining equipment is unique, our process is unique and it actually produces lead in the form of lead nano structures, very, very, very high surface area materials, which have been shown in the past to deliver massive performance potential in advanced lead acid batteries. The challenge there is that currently nobody buys lead nano fibers and all of the customers that we work with are buying lead ingots. So right now we take our lead nano fibers and then we will turn them into ingots and we will ship them as ingots of high purity lead. But we have actually taken away some of the functionality or some of the potential functionality of that. So it's been a bit of a frustration on our part in that we couldn't actually initiate development and monetization of that product stream. So we can generate lead nano fibers which have the ability to absolutely transform the performance and battery life of lead acid batteries. To be able to do that in the grown-up world of lead acid batteries we need to characterize and test the nano-fibers before we can market them. So for the past several months we have been working with Cal Poly to develop methods of characterizing them and showing the nature and surface area morphology of those lead nano-fibers. And that's great from an academic standpoint and they are doing phenomenal work for us. But to be able to demonstrate what that means in a lead acid battery we literally have to put them into a lead acid battery and do our own cycle testing. Well, the acquired battery testing capability that we got through our acquisition of Ebonex gives us that capability. It allows us to take our lead nano-fibers, put them in active material in test cells and cycle them and get cycling data. And both of those, the characterizations and the cycling, are absolutely essential to an eventual rollout of lead nano-fibers as a high-performance active material, which we think will have a big impact on the performance and capabilities of lead acid batteries. So, at this point I'm going to hand over to Tom who will take you through the financial slides.

[Tom Murphy:]

Thank you, Steve. As Steve mentioned, we had no revenue in the first quarter. We have, however, begun customer deliveries in April. And I can say with a smile on my face we are no longer a pre-revenue Company. For the three months ended March 31 we had an operating loss of $4.5 million. Net loss was $4.9 million. That's $0.26 per share loss. We had $30.6 million in cash and cash equivalents as of March 31, 2017 compared to $26.6 million as of December 31, 2016. Staff increased from 58 at the end of 2016 to 73 currently of which 44 are in our Nevada plant. We are actively recruiting for the C and D shifts at the plant as well as building our team in Alameda. The outstanding common shares as of today, May 9 is 20.1 million shares. Recently the executives of the Company, and myself included, instituted 10b5-1 plans. For those that don't know, 10b5-1 plans are predetermined stock sale plans that cannot be changed once in place and are administered by a broker. The purpose is to allow stock sales without the influence of material information. The plans in place are for a small portion of our individual holdings in Aqua Metals, but do represent relief from personal financial pressures endured in the formation of this Company. Our annual general meeting will be held May 22 at the Waterfront Hotel in Oakland, California at 10 a.m. Pacific Time. There are three items of business to be voted on by shareholders

[Dr. Steve Clarke:]

Thanks, Tom. So I'm just going to wrap it up now with some key takeaways. So I think you've got the theme now that preparation for large-scale rollout is our priority. We believe that we have broken the back of the commissioning process. We have got some kinks to iron out, but every single one of the processes that we need to operate is operating. Improvements that need to be in place are simple engineering improvements. We have proven that the process overall works. We are not seeing any surprises in costs, bills used, energy used or anything like that. AquaRefinery 1 is commissioning revenue and on track. It continues to be our primary focus and we are using it to prepare for accelerated growth. Strategic partners brought scale and urgency. They derisked our ramp up, they provided stability for efficient scale up and the planning of efficient scale up, and it allowed for a more aggressive [technical difficulty]. We are still looking at additional strategic partners. I think in terms of battery industry partners, I think that tank is full. But I think there are some opportunities in process and equip supply that would be synergistic with the great relationship that we have with Wirtz Manufacturing. We are now beginning early-stage work on higher value products and services. I talked about the nano structured lead. We are also beginning to look at where we may go next in terms of other metals. And we are positioned to leverage existing and future strategic partners. And last but not least, we announced earlier on that we actually are doing some invitational site visits. So we have arranged an invitational for sell side analysts in May that will take place in May. We have been asked not to give out when that date is. I believe the analysts want some time to prepare and publish. Similarly we are arranging an invitational for buy side analysts and investors which will occur in June and beyond. So with that said, I will hand back and we will take questions. Thank you.

[Operator:]

[Operator Instructions] And our first question comes from Colin Rusch of Oppenheimer.

[Colin Rusch:]

Thanks so much, guys. As you look at building the organization to a larger scale, can you talk a little bit about the recruiting process, particularly on the engineering side. As you think about scaling a couple of factors at a time, that seems like a critical bottleneck. If you could address how you are planning to deal with that.

[Dr. Steve Clarke:]

Sure. So the first thing we did was spent some time studying, working with and talking to and challenging people we know and have worked with in the chemical industry, specialty chemical industry and the data center industry and we've got a lot of lessons from there about how you manage the transition from sequential buildout to parallel buildout. We've hired a head of talent acquisition, Maureen Murphy, no relation to Tom. And she has been working with us now for a few months identifying potential candidates for senior engineering and program management roles and some other roles that I can't really talk about yet because it will give away what we have got in our plans. But what is fascinating is that the quality of executive talent that is showing an interest in joining us and the industries from which they are interested in joining us from. Does that help?

[Colin Rusch:]

Yes, that's very helpful. And as you think about the lead nano-fibers and commercializing those products, is that a three-year program for you guys or is that something that's more on the five to seven year timeline?

[Dr. Steve Clarke:]

It's a great question. One of the things that's going on in the lead industry that's really being underreported is that Europe, after 20, 30 years of procrastination appears to be switching rapidly to 48 volt automotive batteries. It will start with high performance vehicles that if anything precedent is to go by it is quite probable that by early -- as early as 2020 or the early 2020s the days of the 12 volt starter battery will be history as vehicle switch to a 48 volt bus. What that's doing is creating the conditions for a revival of interest and a revival of resources into the development of much higher performance lead acid batteries. The characterizing feature of the lead acid industry is that it's largest product by far, the 12 volt starter battery, it is so damn good that pretty much for the last 100 years there's been no need to develop anything better. A starter battery is something that sits in your vehicle, you hit the key, you turn it on, it starts your engine, job done. Well, we are moving now from a time when cars were cars to cars that are mobile smartphones that we ride in. And the electrical load and the electrical challenges in a modern vehicle are way beyond just starting an engine. We have moved to hybrid turbochargers with electric motor generators in them. We have moved to electric power steering, electric power brakes, semiautonomous driving actuators and all the rest of it. And that basically means not only are we moving to 48 volt starter batteries, but we are moving to 48 volt batteries that are not just starter batteries; they are batteries that will be powering the turbocharger to eliminate or reduce turbo lag. They will be taking electricity in when your foot comes off the gas and the turbocharger winds down. They will be powering the actuators and the rest of it. So these batteries are going to be cycling at various states of charge. And that we think -- well, not think, we can see already it's starting a real interest in high-performance electrodes, high performance materials, high performance additives for a whole new generation of high cycle life, high-performance 48 volt lead acid batteries and we want to be in the forefront of that.

[Colin Rusch:]

And then the last one for me is just about site selection for the next facilities. How far along are you in evaluating and in identifying those sites? And can you give us just a sense of the decision-making process for you from a cadence perspective over the balance of the year?

[Dr. Steve Clarke:]

We have made location choices for two nodes and we are discussing land for one of those.

[Operator:]

And we'll take our next question from Bhakti Pavani of Euro Pacific Capital.

[Bhakti Pavani:]

Just a quick question. You just mentioned that there are some improvements that still needs to be done in order to ramp up the production capacity to 120 tonnes per day. Just wondering where in the process do you think improvements need to be done? And also from a dollar standpoint what number are we looking at?

[Dr. Steve Clarke:]

So the improvements are really in throughput capacity in electrolyte production, that's the aqua prep. It's not really an improvement but we need to install and turn on the remaining modules and we need to commission the ingot line. Everything has been installed. In terms of dollars it's not -- it's all built into our budget. There is no additional spend that we haven't already budgeted in that.

[Bhakti Pavani:]

But from a modeling standpoint what do you think would be the ideal or expected CapEx spend through the rest of the quarters?

[Tom Murphy:]

I think for the rest of the year we will have a little over $8 million in capital spend.

[Bhakti Pavani:]

Also I just was curious to know like in the slide, you mentioned that currently you shipped the metallic lead and the secondary lead ingots. And also Steve provided a breakdown of about 120 tonnes per day of lead which will include 80 tonnes of metallics and 40 tonnes of pure lead. Kind of curious to know how is the pricing different between the secondary and the pure lead that will be coming out of AquaRefining facility?

[Dr. Steve Clarke:]

This is lead industry pricing, secondary lead, essentially the stuff that comes out of a smelter is [Technical Difficulty] LME. Lead alloys, which is what we will be shipping from the metallics, follow quite complex pricing calculations depending on whether they are antimonial or calcium or other alloys. But they typically run at a $0.05 to $0.08 premium over LME and it varies. And then the four-nines and above can trade from a 5% to 15% premium. The thing that's fascinating for us is that we are capable of making five-nines purity lead for which there really isn't a price. It's quite a specialized market, delivers the potential for very, very high cycle life, very high performance active material. But it's not broadly used primarily because there is insufficient supply of it historically. One of the things that we think we are in a very interesting position with is to be able to be the world's first to market five-nines pure lead as on actual product and we don't know what the premium for that will be.

[Bhakti Pavani:]

Also, I know you guys mentioned that you are still working on the blueprint with JCI on retrofitting their facility. Has any decision been made on which facility you guys would be working on or still that's being discussed?

[Dr. Steve Clarke:]

We are honing in on a site. I wouldn't want to comment on which site that is. That is for JCI to comment on.

[Operator:]

[Operator Instructions] And we'll take the question from [Steven Webber] of Bentley Capital.

[Unidentified Analyst:]

On the additional facilities, if I saw correctly on one of the charts, you still had 2017 as the dates that you were indicating for additional facilities. And I guess my first question is

[Dr. Steve Clarke:]

I wouldn't go so far as to say we will be breaking ground this year. We will define that facility; we will probably be in a position to acquire the land and announce it and move forward with it. It depends on -- some locations allow us to break ground and then get permits, other locations require that we get permits then break ground. But it will definitely be our plan -- I can't say definite, but our plan is to announce where the additional facilities are going to be built this year.

[Unidentified Analyst:]

And coincident with that I assume would be you wouldn't do that without having the financing fully…

[Dr. Steve Clarke:]

In place.

[Unidentified Analyst:]

…worked out at that point.

[Dr. Steve Clarke:]

Yes, absolutely.

[Unidentified Analyst:]

So the fact that the plant isn't operating yet at 120 tonnes a day and may not be until the end of the year you don't expect that to hamper your ability to receive commitments for financing for additional facilities?

[Dr. Steve Clarke:]

No, we don't expect that to be much of an impediment. And that may sound blase, but the reason we believe that is the financing entities we are talking to understand that it's a modular process. And if we've got the battery breaking working and we've got the ingot line running and we are making electrolyte and we are producing electrolyte into lead and they can see modules operating effectively, that's pretty much enough of a derisk from the perspective of the people we are talking to.

[Operator:]

There are no further questions. I would now like to turn the call back over to management for any closing or additional remarks.

[Dr. Steve Clarke:]

Okay, thank you very much, Bethany. And thank you very much for all of those of you who attended and thanks for the questions. And we look forward to giving you a future update at the next earnings call. Thank you.

[Operator:]

Ladies and gentlemen, this does conclude today's conference. We thank you all for your participation. You may now disconnect.