Full Year 2020 Aqua Metals Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the Aqua metals full year 2020 results earnings call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask the question. During the session. You will meet the press star one on your telephone please be of.
Today's conference is being recorded if you require any further assistance. Please press star zero I would now like to hand, the conference over to your speaker today, Glenn <unk> Investor Relations. Thank you. Please go ahead Sir.
Oh, I think of Christine and thank you everybody for joining our call today I want to welcome you to Aqua metals fourth quarter and year end 2020 conference call earlier today Aqua metals released financial results for the quarter ended December 31, 2020. This release is available on the investors section of the company's website at Ww.
W Dot Aqua metals Scott Com.
Joining us for today's call from management is Steve Cotton, President and CEO as well as Judd Merrill of the Companys Chief Financial Officer. Today's call will also include a powerpoint presentation, which of the be available via the web portal from the link provided in todays in last week's press releases.
Our non logged in and want to follow the slides along with management's formal comments. Please log into the portal now during today's call management will be making forward looking statements. Please refer to the company's report on form 10-K filed today February 24 of summary of the forward looking statements and the risks uncertainties and other factors.
Cause actual results to differ materially from those forward looking statements of.
<unk> metals cautions investors 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 the new circumstances or unanticipated events as they occur except as required by law and as a reminder, after Stephen just judge formal call.
And then we're going to be taking questions questions will be accepted over the telephone from analysts and all other investors who want to submit a question. Please do please do so using the all light webinar portal provided in today's the last week's press releases, we will take as many questions as we can in our payable tied with that said I'd like to turn the call over to Steve Cotton.
C U E all of Aqua metals. The please go ahead.
Thank you Glenn I appreciate that so here's the safe Harbor, the Glen was referring to for those of you that are following us with the debt.
Move on to the first slide which is the slide about our mission at the company.
And that is to provide sustainable metals recycling for Smith metals that are strategic to the energy storage applications out there in the world and our proven breakthrough technology called Aqua refining delivers raw materials right back into the manufacturing supply chain and of clean and economical way.
That's going to reduce the overreliance of mining to meet demand.
So I'm gonna take everybody through of Horizon, one and of horizon to view of our climate friendly methodology that we see rapid to meet the rapidly growing.
Energy storage and strategic metals demand associated with that the rapidly growing energy storage market.
In horizon, one the backdrop is that the recycled lead market is slated to surpass $19 billion by the year 2026.
More than 6 million tonnes of lead collected for reuse each year is a large volume that's going to continue to increase.
Lead batteries power, one 4 billion automobiles worldwide and take note that many automobiles that are put on the road today have to lead acid batteries in them. If they have an internal combustion engine, which is the start stop for the stop signs and stop lights. So theres more lead in cars that are being produced as well as in the electric vehicles.
Theres lead batteries and in most of electric vehicles that are produced as well and that's feeding the growth of the market.
Over 80% of led in every new lead acid battery is secondary or also known as of recycled lead. It's an amazing circular economy story that the lead recycling industry has achieved by being able to put most of the lead in the old batteries back into the new ones and supplement the market growth of about 20% or so with the minor.
<unk> to feed that market growth.
But if you look at horizon. Two in addition to the led market.
The last year lithium ion batteries containing nearly a $1 billion in multiple strategic metals not just at.
As the singular metal like for the lead acid industry, but multiple metals, which will go through as we talked through the deck today are being landfilled.
If this continues by the year 2025, that's $12 billion with the growth of the lithium ion market that would be landfill of all of those strategic metals not only the loss of the strategic metals, but not of great environmental solution.
30 million the E. D's are expected to be produced annually by the year of 2027, that's going to require 1.8 million metric tons of lithium which is five times what is already mined today, let alone the other metals.
So let's talk about Aqua metals at a glance at the company that's going to be addressing all of these things we've developed aqua refining already which is a commercially available and commercially ready sustainable battery recycling technology.
Aqua refining uses water instead of fire in organic acids that are biodegradable to create a very ultra pure lead in our case 99.9, 96% one Adam at a time, so we actually refine the led as it comes right off of the machines rather than have to refine it in the refinery.
And that feeds into the $20 billion lead recycling industry that we've been talking about earlier.
Speaking on our part to extend Aqua refining into the multiple metal environment of lithium ion batteries.
And we're doing that through prosecution of intellectual property through strategic investment and true research and development, which we intend to continue to accelerate.
We have of transformative technology that really does benefit both industry and the earth. It benefits the environment, a greatly benefits worker safety, which we'll talk about it benefits the battery performance and battery life and the benefits the economics of the entire supply chain the value proposition, which will always.
I'll speak about our take or as most of you know as EQM S run the <unk>.
Now that we are headquartered here in Tahoe, Reno Industrial center, and about 30 minutes East of Reno, Nevada.
The company is not a terribly old it was incorporated in 2014, and we have a strong balance sheet with no debt, which we'll talk about as we go through the financials as well.
So this slide talks about the.
The existing wafer lead recycling versus Aqua refining on the left you see what smelting is and that is the current method and incumbent method of lead acid battery recycling.
At best it's of Dirty process. It uses fire as you can see and it can be dangerous and it can impact worker safety.
Refining it as you see on the right is building the led one of them at the time it behind that Mount of led do you see the rotating disks, which are called our cathodes of the rent of Aqua <unk> the manufacturer the land at room temperature with water right before your eyes and it's clean it uses water that is a net water producer.
Because we get water from the batteries that come in and it's very safe for workers.
Contained in the tanks pipes and pumps versus being concerned about fugitive emissions. The great story about led is at 99 plus percent of all lead acid batteries are already recycled unlike lithium which is close to zero.
And 80% plus of all of those.
Recycled batteries that are put out in the marketplace in the secondary market use that recycled lead as I was describing earlier.
So now we're going to talk about our report card for 2020 and the beginning of 2021, we really outperformed our 2020 guidance that we provided to our shareholders and will take you through each and every measure.
First off as we strengthened the balance sheet and achieved our overall debt free status, which was our initial goal and we have built a very sophisticated pipeline with multiple candidates in our sales funnel and we are seeking to announce our site number one for Aqua refining for the lead recycling industry in Q1.
For Q2 of this year.
We completed production and the product position of the first version one dot two five L electrolyze theirs.
We call Aqua Licensors, and we achieved two times the throughput of.
Our goal was to achieve a 20% improvement from the learnings of our operations in 2018 in 2019, when we embarked on this program and we got 500%. The result of the plan, which is the direct impact on our value proposition from the capital expenditure value proposition to our clientele.
And also the operating cost because if you need less electrolyzed as you need less people and you need.
Not spend as much money on the operations of the machines.
We also established a global deal with the ASF, which is the world's largest chemical company to sell the electrolyte and Inc.
Include the ASF produced electrolyte in our system fills when we deploy aqua refining with our first licensee and beyond and then co market because of the ASF has many relationships with existing battery recyclers of where they sell the of chemicals to do the refining post furnaces and in the environment of the kettles and things like that where they refine the lead.
You don't need to do that with Aqua refining and Theres additional chemical opportunity for ASF to sell obviously, the key ingredient of the Aqua refining electrolyte and Theres, a co marketing opportunity, where we're working together to try to access the market through introductions made in both sides and we also agreed that we're going to work to improve.
<unk> arc refining be ASF. The mantra is about that and I'll talk about that more of a little bit later.
We also completed the transition to capital light very recently with Politico, which stands for lithium nickel cobalt lithium ion Recycler company.
In at least the by deal for our existing Aqua refinery will take you through some of the details of what that is but we are now officially achieving the capital light model.
We expanded research and development and invested in the lithium ion battery recycling opportunities through battery manufacturing streamlining with our Aqua refined for cats, which could go down direct to battery production, which I'll talk about in the subsequent slide we made the 2 million dollar of investment into lytic, though.
Net pursues the formation of of lithium ion recycling Eco network, we think that no. One company can solve the puzzle of the great challenge of lithium ion recycling and great opportunity by going it alone and we believe it's going to take the great minds of multiple companies together to make it work and that's our goal is to form the CECO network.
Ill talk more about that soon.
We also filed a provisional patent very recently for the lithium ion metals recovery using a leveraged <unk>.
Technology of the Aqua refining technology, and making that extensible and the IP front as well.
Our go forward business model is enhanced by a major increase in the total addressable market.
Recently, we were.
Talking about the lead recycling market, which we continue to talk about achieving about a <unk> 19 billion dollar of side by the year 2026, it's an existing very large very mature market thats right for an upgrade for Aqua refining with the cumulative annual growth rate of three 5%. So it was growing at a nice clip the lithium industry is nascent and new but is this.
As expected of dollar value to reach the same metals value.
As led or more by the year 2026, but at a much faster cumulative annual growth rate. So both industries are growing but by getting into the multiple metals in the lithium ion the recycling area. The total addressable market opportunity for Aqua metals equipment licensing and services has just doubled.
So let's move on to what does the equipment supply and licensing look like or.
Our funnel has increased the spans three continents, and we are working diligently with our sales and detailed proposals and technical proposals negotiations and as I've said before expect to announce our first.
Our licensee partnership and the long term, let's talk about what licensing looks like.
The model is built and that pipeline is strong and more robust than it's ever been we.
We are seeking of engineering revenues much like you hire an architect of design of building or an expansion of your house, which would be six to seven figures of revenue per project and then possible equipment supply revenue of over $10 million per project for a project of a significant size it could be much larger than that into the tens of millions and it could be smaller.
And that if it's a trial, where our pilot type of the site.
Once the equipment is deployed and commissioned witness test and goes into production at the licensees facility the.
The recurring revenue.
The company of Aqua metals comes from running royalties and we believe we can achieve a strong running royalty because already we've achieved the 10% rough premium on the lead that we sold when we were producing led proving the technology manufacturing 35000 ingots in the years 2018 in 2019, and we believe that that premium can be shared with license.
These.
And that is a very interesting premium value because of the demand for premium led is going up rapidly as I said before the second of battery and total combustion engines. As an example is an advanced lead acid battery much like what you see in the datacenter of batteries.
And of those require more of a pure lead and there's a very strong growth in demand for ultra pure lead and we see a great opportunity to share that premium with our customers and we think 10% could be a starting point and that there might be upside in in that premium value as aqua refined lead proves itself out in the marketplace further and further.
Additional millions of dollars of revenues could take place after the equipment is.
The old and deployed and could potentially be generated from maintenance and upgrades over the plant lifetime. It's the beginning of the customer journey with Aqua metals. Once they turn on their first set of Aqua <unk> new sites expansions of existing sites equipment upgrades the maintenance programs feature of bidding of capabilities through our peer metrics platform et cetera.
So now moving onto what Aqua fighting looks like in three scenarios. This this slide covers two of them.
One is the bolt on to an existing facility of its already been depreciated in the amortized and the goal there could be to increase the production without increasing the emissions by adding the aqua refining, but keeping the same furnace capacity in running those furnaces much more efficiently in fact, when you divert the paste, which is about 50% of led.
The Aqua refining process the furnaces in the smelting process become more melchers at lower temperatures that run much more efficiently and are much more cost effective to operate it much more safe for the workers, because you're really melting instead of the smelting. Another scenario number two is to keep the total production of the same by adding aqua refining and reducing.
Of the furnished usage, while reducing emissions net.
Provide the ultra pure lead metal opportunity and provides for the environmental bragging rights and the sustainability factors the friendly relationships with the increasingly scrutinizing regulators in court of public opinion that like we'd like to see of change in the existing smelting industry.
There's a third model, which we're gaining quite a bit of momentum on and that is designing aqua refining into greenfield builds if you look at the India market in the Asia Pacific market in particular that is where a lot of high growth in the automobile deployment and battery manufacturing of battery recycling.
He is taking place and there are government sponsored efforts to make sure that those new battery manufacturing facilities in the recycling facilities that are to be built are built with state of the art best available technologies. When you design off refining in Youre not remodeling of kitchen, you're designing the news kitchen into the new home and.
There are some additional benefits that can be achieved and we're seeing great opportunities with greenfield builds.
In the regions I referenced just a moment ago in particular, but also in South America.
So now let's talk about some of our recent announcements for those of you that haven't heard the details we just announced on January 25th the ASF relationship.
I did take you through that a little bit earlier, but again the companies will cooperate to offer the aqua refining to the battery recyclers.
The companies will explore enhanced the ASF made electrolyte and additives for Aqua refining think of tech Ron for Chevron gas think of an additive that improves the performance of Aqua refining and extends the life of Aqua refining equipment and allows for us to put.
Lower cost of bill of materials into the equipment to increase the value proposition because we are after all of them running asset to our equipment and if we can use the proper chemistry upgrades in additives, we can improve and make aqua refining better which is why b a S. S wheelhouse.
Aqua metals will supply.
The ASF electrolyte for Aqua refining and get a additional system fill revenue component.
And that's a really positive thing for us with the global relationship be it would have to be able to offer that and help our customers to enjoy those benefits on the economic side.
And then collaborating on sustainability through improving the chemistry is really the overall goal.
We also announced in January 27th the new process debt.
Replaces a traditional process as an alternative from taking the briquettes to come out of the Aqua refining process that you see in the left with the the gloved hand, holding the the the Aqua refined per cat, which is the compressed spongy lead that you see in the very left and putting that directly into the battery manufacturing process any time you can.
Streamline the production of the commodity that's the Big news and the battery industry is quite excited about this our customer engagements.
This has enhanced greatly because of the value of putting in Aqua refining.
Now allows two products to come out of the Aqua refining for led which is the ingots that you see in the upper right, which is the traditional process or bypass net altogether and going straight to a metal oxide type production and going right into battery manufacturing is particularly useful when the battery recycling is adjacent to the battery.
<unk> facility, which we see in many instances.
With vertically integrated companies or down the road, even because you can transport those briquettes.
<unk>, you and get them into that new process. So we see that as a very promising opportunity with our prospective client base in the industry.
We also announced in February 16th and 17th the sale of the Aqua refining in the form of the least of by agreement and that's actually a real positive for Aqua metals for a bunch of reasons that we'll talk about.
The company's name as Lineker of again, lithium nickel cobalt and they will begin converting the aqua refining to be purpose fit for lithium ion the recycling some of the equipment and the plant they will be purchasing as part of the purchase of the building and some of it we will sell in the third party.
Market to the existing lead acid battery operators, because for example to breaking and separation system is different so we will have a breaker and separation system per sale.
Aqua metals retains the access for the ongoing Aqua lives of research and development program for 18 to 24 months now with no overhead.
Aqua metals avoids the carrying costs and overhead associated with the building and will ultimately receive $14 million to $15 million in change of proceeds from the sale of the building inclusive of non refundable initial material amounts of deposits and step ups of deposits throughout the.
At the time cycle.
Aqua metals gets that capital light ox access to the feedstock and the facility for ongoing product development as we venture into the lithium space and that's actually a really important as we collaborate with the eco network that we've proposed forming.
With Lin It go Green line and Comstock to collaborate together to really provide the best in class technologies and really together solve the lithium ion recycling challenge from a overall mass balance of the facility from input the processing to output.
So it's a very exciting opportunity for us to facilitate getting in the market and fast track it for us because we don't have to buy land. We don't have to build the building we don't have to feed the capital heavy and.
We're already in the partnership with entities with the physical facilities ready to go.
Talking about our IP, we've got $200 million invested in setting up our equipment supply and global licensing opportunity of our IP strategy is broad and deep and very sophisticated and we have as you can see in the map covered for most of the globe any areas that we intend to deploy aqua.
Refining and it's very important if youre going to be the technology and licensing company to secure your intellectual property.
And also trade secrets and know what to put into your patents and what to keep out of them.
And we have 51 patents issued and allowed in 62 more applications that are pending.
And the significant investment that we've made the date really does allow and secure that future growth and opportunity. We will continue to take our patent portfolio very seriously and invest.
The amount of time effort and dollars into this.
The stable of patents.
Our experienced management team and engaged board is really focused on execution.
This is an execution play.
And the execution play.
Associated with Aqua metals is a important stage of the company and the team is there really needs to be strong in our ability to execute on the business plan I myself have a lot of experience in growing businesses in the lead acid battery industry space.
And Judd Merrill our CFO has a lot of experience in the mining and metals and process the space bed tax of our vice President of the engineering and operations comes from Clarion.
The world's largest battery manufacturer of investor in Aqua metals and partner of Aqua metals and was on the the launch team of very large smelter and operations team and understood and picked up and moved his family out of the Tahoe Reno area to help us build and grow Aqua metals are independent directors.
We have our non executive chairman of the board shark use of XI, who held numerous positions of very high levels within Chevron for over 20 years and.
It has brought a great set of governance to the company and they need to veto it.
A very solid share of our audit committee and has been with Aqua metals as long as I have from the get go right around the IPO timeframe.
Stay tuned for more information as we continue to grow the board.
And enhance the management team.
The.
It will all be about execution and the execution focus.
With that I'm going to turn it over to Judd for the financial overview of go ahead Judd.
Alright, Thanks, Steve.
I'm going to go through some financial slides make few comments.
So on the balance sheet as of December 31, 2020 of the cash and work of working capital balances were.
Were $6 5 million of $4 9 million, respectively, and we will report that as of today are unaudited cash balance was approximately $11 4 million.
Fixed assets on our balance sheet as of December 31, 2020 totaled approximately 25 million net book value.
And as a reminder of that concludes the building and the land and other <unk> assets that were of.
Entered into a lease agreement for a cell and also the battery breakers.
In cattle, the killing of the filter presses in the mixing and storage tanks.
We evaluate the need to record impairment during each reporting period.
And with the company's go forward capital light strategy, taking shape and with the lease to purchase of the building.
We determined that the remaining useful lives of the equipment has decreased and as a result, we recognized an impairment of $11 7 million with respect to the write down of equipment to fair values.
25 million fixed asset balance is after we take into account that.
The impairment write down and also represents the catastrophe potential cash inflows once we sell those assets.
Also noted on the balance sheet is the decrease in notes payable of both current and long term.
On December 10, 2020, we announced that we retired the loan with vertex community Bank.
We did that with some insurance proceeds.
We held an escrow account at very tax as well as of the $1 million certificate of deposits held by vertex as collateral for the note to pay the balance of the alone.
And as part of the loan payoff, we expense the remaining on the amortized cost of <unk> 6 million.
In addition, we incurred of prepayment penalty of $1 4 million, which we included in interest expense.
The last item I will note on the balance sheet is the reduction in the asset retirement obligation and this is due to the change in the primary use of the company's facility.
So the written determination issued to the company requiring the facility the facility closure Trust deposit was terminated by the end debt and that was on.
The December 19 2020.
And that's.
Retirement obligation was terminated as well.
I'm going to move now to the income statement.
Okay.
Our lead.
<unk> discussed all year of lead recycling facility with non production during 2020 as the result of the fire that happened in 2019.
And it's part of our acceleration to our licensing strategy.
During the year of any revenue that resulted from the sale of inventory that consisted of the lead compounds that were generated during the pre buy our operations and we still have some more of that inventory.
Cost of product sales includes.
Raw materials and supplies and other related costs is about salaries and benefits and consulting and outside.
Outside services.
This of course decreased by 78% from the 12 months ended.
The December 31, 2020 as compared to the 12 months ended December 31 2019.
Of course this was the.
Increase was due to the just.
Discontinuation of commercial production of the Aqua refining.
You will also see the other big item on the income statement is the impairment loss that I discussed related to our fixed assets and is reported as other expense on the income statement.
Including the impairment loss the company had a net loss of $24 7 million of negative <unk> 41 per basic and diluted share.
Parents of a net loss of $44 eight or a negative <unk> 86.
Per basic and diluted share from the year ended December 31 2019.
If you refer to our press release that came out of the earnings release that came out today, we provided of non-GAAP adjustment.
Adjusted net loss that excludes the effect of <unk>.
First asset impairment expense and also of the prior period effects of the non cash payments.
Based on this reconciliation.
Non-GAAP, we show an adjusted net loss of $13 4 million or negative <unk> 22 per basic and diluted share for the for the year ended December 31 2020.
Now I'll move to the cash flow.
Statement.
Yes.
Net cash used in operating activities for the year for the years ended December 31, 2020, and December 31, 2019 was 11 <unk>.
Zero million and 20 to $25 2 million respectively.
Net cash used in operating activities during each of these periods consisted primarily of our net loss adjusted for noncash items, such as depreciation and amortization of stock based comp charges.
As well of net changes in working capital.
You'll also note that the net cash provided by financing activities for the year ended December 31, 2020 consisted of payments of <unk>.
$9 3 million for the retirement of the vertex loan and that was partially offset by the insurance related escrow and certificate of deposit.
The total approximately $8 7 million that was used to extinguish the note.
In addition, the company received $3 7 million net proceeds from the ATM share ourselves.
If you look at our monthly basic burn rates during the year, which includes basic monthly plan expenses and corporate overhead was approximately 730000 per month in 2020 as compared to $2 million per month in 2019, we.
We anticipate starting in April of.
This year of 2021 of the lease purchase option of the plant and our monthly and our monthly cash needs are estimated to be between 600000 to 650000 per month.
Lease payments and anticipated shared service since the revenue should reduce our go forward cash needs even further.
Since we still have access to the building of the lab and some office space of the company will also realized from savings by not having to move.
Quickly out of the building.
My final comment on the cash flow that we raised approximately.
In total $10 7 million through opportunistic share sales under our aftermarket issuance share.
The sales agreement.
As I stated a little over $3 million last year, the the meaning of this year. We also announced last week. The establish the second exam for up to $30 million the use of the ATM ATM in the prior months.
It was used in the insurance policy and to strengthen the company's balance sheets from secure our transition to licensing.
And also our decision to defer immediate cash flow from an outright plant cell in favor of the strategic relationship of linear cow.
The company has adopted a policy of always having the ATM in place as a go forward approach to ensure that we are prepared to take advantage of strategic opportunities.
And we may have with the licensing.
Lithium recycling goals.
On the ATM in our opinion has the lowest cost of capital and most flexible terms, meaning we don't have to use it unless there is a reason to.
Just a few other updates and financial area of information.
As of December 31, 2020 reported that we received approximately $23 4 million of insurance proceeds from insurance carriers. Just last week, we received the small progress payment of $100000.
We continue to believe based on our estimates and as of.
Today, The news report we believe the.
Additional payments will be made.
Is it going to be related to our cleanup cost engineering work and build the repair work.
We're getting very close we've also.
A significant claim on our business interruption cost recovery.
As we stated in the past, we intend to vigorously pursue receipt of.
The remaining insurance proceeds to satisfy all of our property casualty and our business interruption losses subject to the those coverage limits.
As Steve mentioned and as we announced last week.
Reached an agreement to lease with.
With additional purchase deposits are in Mccarran, Nevada plants.
This non core asset disposition was driven by our accelerated focus on our capital light equipment supply and licensing strategy.
The agreement was reached with many codes and Steve mentioned.
An entity that we're very excited about and focused on sustainable lithium ion battery recycling.
On the lease the lease commences April 1st and expire April 1st of this year and expires on March 31st 2023.
And during the lease terms when it go had the option of the personal land and facilities at a purchase price of $14 5 million.
If the option is exercised and the sales completed by October one 2022.
And then if not it's $15 $2 5 million of the options exercise and the sales completed after October one 2022, but prior to March 31 2023.
As we mentioned the the purchase option subject to political the payment of a non refundable deposits totaling $3 to $5 million.
The lease agreement at the Triple net lease and then of coal being responsible for cost, including maintenance utilities insurance and property tax.
The lease payments started in April and started at 68000 per month, increasing to 100.
6000 in the last six months of the lease if we go for the full two year term the lease payments applied to the purchase price with total debt don't lease payments are not applied to the purchase price, but they would total up to $1 9 million during the contract term again, the not the deposits are non refundable.
The lease to buy structure is beneficial to aqua metals from both the financial and operational perspective.
As it allows the company to continue utilizing facilities.
Our research and development activities, including the lab and office space.
We've also signed the shared services agreement with when it come that will pay off of the metal for services to assist win at Collins initial startup and progression.
The services May include some HR and 19, the accounting drafting.
And the engineering services.
The the least purchase of the plant facilities is really part of our long term business strategy, which includes monetization of non core assets.
With the sale of the plant as a means of financing as.
As we talked about our continued.
The continuing acceleration of our core business of becoming an equipment supplier in the licensor of Lockheed refining technologies.
Additional plant assets.
That were not included in the leased the purchase total up to about $7 million that we could sell of the coming months.
I wanted to state that we ended the year, where the strong cash balance no debt. We began this year with the path of sell the building.
Collect additional <unk>.
The main insurance proceeds blacks lease revenue and sell additional assets.
We were anticipating.
The soon we'll have the revenues from licensing.
<unk> executed on several of financial related goals, which should put us in the strong economic position to ensure that we bridge.
Through our licensing goals that we expect to achieve this year.
And what that will do the final.
Comments on the on the financing slides I'll turn the time over to Glen I think room for questions.
The discussion.
Perfect. Thanks Jud.
Just because the reminder to our audience, we're going to be taking the questions from analysts and institutional investors over the phone and everybody else.
Via the web portal. So if you havent locked in yet and you have a question. Please do so we do have a number of questions in the queue.
Christine I'm going to go to use of the first to take the phone questions.
Task of phone question, you will need the press Star and then one on the telephone to withdraw your question press the pound or hash key please standby, we compile the Q&A roster.
Your first question comes from the line of Colin Rusch from Oppenheimer. Your line is open.
Thanks, So much cash can you just give us a sense of the development timeline on the Chem side. What are you expecting in terms of when you're going to be able to start.
The start showing some results of all of those efforts.
Yes, Thanks Colin.
On the lithium development timeline, we've already done some work and that fed into the the provisional patent filings and we believe that by having access to the facility and getting the.
The <unk> breaker in Shredder system, and Green Lion technology in there in a relatively near term. This year, we will have an opportunity to have a of.
Really great place to continue that research and development in the lithium ion and going after the multiple metals and so we see.
Significant scale up of activity as we get towards the end of this year.
In the physical work and.
And as we get into next year. So it's not so far off and there's a lot of work we can do between now and that physical work with the the mass balances in the chemistry, and the chemical engineering and the design of what an Aqua wiser going after one metal versus another b at lithium nickel cobalt manganese.
Or other things that would come out of that facility. So we see a relatively quick timeline for us to be able to get into the space are much more quickly than some of the other folks that are out there that are trying to find land build the building and get things going we already have some of that physicality that we've sold to let it go through the lease.
But.
Excellent and then can you remind us how many folks youre talking to.
Round the.
The led opportunity.
I know, we've got one one customer of that Scott timeline on when they need to take advantage of the first mover, but how many other folks that you're talking to you at this point.
Yes, so we have a robust sales funnel and it spans the few continents and it's inclusive of <unk>. So we're talking to <unk> all the time and in addition to the the perspective other clients and the sales funnel is progressing both in volume and quality really of the sales funnel, but also in the mature.
Of the of each engagement in the sales funnel and what I mean by that is now that we have the final aspects of one dot two five and some other anticipated improvements that we expect.
We.
Definitely have been able to hone in on the final configurations of what each one of those would look like and the particular sites and.
And feel really good about that sales funnel and I think debt as we as we're guiding here.
Q1, Q2 timeframe is when we expect that we can inform the market.
We've chosen to move forward.
Great. Thanks, so much guys.
Thank you.
Okay.
Christine maybe pull for questions on the phone again and then we'll go from online questions.
Thank you again, if you would like to ask a question. Please press star and then one on the telephone keypad.
Okay and those are coming in Steve We've got a bunch of questions here online.
And a lot of them sort of of repetitive. So I'll try to do my best to summarize it I think of lot of this was answered earlier, but we'll just kick it off of some of this a little bit more detail.
So can you kind of explained the.
Aqua metals load Politico Greenlight relationship and why you chose to.
Go this partnership road versus do it alone strategy when it comes to lithium ion.
Yes so.
It's really Aqua metals is.
<unk> two of capital light philosophy and business model and so.
Of this partnership a group of companies creates a great opportunity for really all parties involved inclusive of Aqua metals to work together.
As we stand here today no single entity has fully sold end to end, what a clean the hydro metallurgical.
Environmentally safe and workers safe lithium ion the recycling world is going to look like in the future, but we've got the the land we've got the Aqua refinery building. We've got <unk> was the aggregator of the technologies from Green line in Aqua metals potentially as well as other suppliers and we've got Comstock.
Who is.
Provided quite a bit of capital to <unk> to stand up the facility and has a lot of great experience in mining and metals I'll also note that Green line has.
Strong technology base in the.
Am I on recycling from battery manufacturing of lithium ion and we have strong lithium experience and our science and technology organization with great experience in the lithium space in the past and so by combining the forces.
And specialties in the areas of focus of each company, we believe collectively that that would create the best outcome and Thats. The approach that we've chosen to take and that's why we've defined it as an ego network and we'll be talking more about what that eco network means and.
Other companies that potentially would.
It would be folding into the eco network to help stand up lithium recycling and the clean way once and for all.
Okay. Thanks for that.
The next question can you provide a little bit more color around the progress of discussions you've had around your first place with the lead recycling customer and maybe remind people about the exclusive relationship that's in place currently and how youre dealing with it.
Sure so the <unk>.
Most of the relationship that is probably being referred to as <unk> investment in Aqua metals of that took place in 2017.
<unk> at that time, we announced invested $10 million of Aqua metals of at the time. They were Johnson controls power systems Division, they're now called <unk>.
And.
That investment.
Included in addition to all of the lead 35000 ingots.
Purchased from Us at a premium in 2018 in 2019 access to the Aqua refining technology to deploy in there or some of their partners facilities.
Our first movers advantage scenario.
That portion of the agreement.
Does come to a close in June of 2021 to June of this year and Thats a good natural timing because as we declared in December of last year, where product ready.
With our version of <unk> to five <unk>, which is the product ties version of what we operated in 2018 in 2019 and so <unk>.
Is evaluating and looking at.
The best option to look at deploying Aqua refining technology.
The way they'd like to do it and in the meantime, we're talking to many others that are in the <unk>.
Spanning those three continents, ranging from Greenfield builds.
Two bolt on type of scenarios and that spans again Asia Pacific and North America, and India, and South America for that matter. So.
There is quite a quite a great sales funnel that's in there and it's up the Aqua metals ultimately to work out what the best deal is for the company and for the shareholders and we're hopeful that we'll be able to work out of deal with everybody in that sales funnel and put that into the right serial order and Thats our plan.
Thank you for that next question, what kind of protection <unk> head start of the provisional patents, you've recently filed.
Give you against possible competition.
So the IP around lithium recycling is getting further along across the board everywhere you look right now of.
Fortunately Aqua refining.
From that <unk> of patents that I was mentioning in the presentation. Some of the some of those processes and things like that can apply.
But the lithium provisional patent allows us to.
<unk> put into place the way provisional patents workers, you have up to a year to enhance that and we'll be working with our eco network that we're forming with these companies to identify how best we worked together and what Aqua metals can continue to pursue we've laid down some particular things around how we played metals.
With the Aqua lighters and again right now we see them playing led but they can place all of these various metals and potentially even get those into of metal oxide for them, but we want to focus where we're going to add the most value and we're working to team up with our partners that we've already established and announced.
Together, we're collectively offering the best solution for the planet and the industry.
Think of it that I think you've touched a little bit on this point during the formal comments, but specific question does the ASF.
<unk> share agreement provide exclusivity to the party.
So.
There is not really the exclusivity element of it other than the ASF made electrolyte will be included with Aqua metals system fills and that's really to the advantage of the licensee for surety of supply.
But also from a cost perspective, we do have of global supply arrangement with the ASF and we can get the best price for the client.
Ultimately when the client begins operating they have the option to continue to purchase the ASF electrolyte workshop around if they so choose but as we continue to work with the ASF with additives and specializing that electrolyte there could be some advantages of putting in.
<unk> made enhanced electrolyte solution.
For the for the Aqua Aqua is just think of that as like the the electrolyte with the tech Ron or the the higher octane.
For our engines, but the clients can put other stuff in there if they so choose.
Thank you Chris.
Question deals with cash and cash flow of Jive provided some commentary regarding how he sees the burn.
Right at the company changing over the next little while.
When it comes to your decision to lease the building versus two given an outright sale what was the primary driver for that given your low cash position.
And how did you sort of think about strategically to offset that.
Yes, I will take that question Glenn.
A lot of what.
What drove it is of strategic opportunity to work with the lithium recycler.
That we wanted to invest in that we did.
So that was that was.
A big consideration of the other pieces.
We are still doing some of our own.
Additional.
R&D and work on our led <unk>.
Process and.
In this arrangement allows us to stay in the building.
And still work on those.
Processes, so that was very attractive as well, we're still doing some cleanup and repair that needs to be done and we will be collecting lease payments.
This year, even though all of that work is being done so that was very attractive we felt like it was a win win situation for both us and many co allows them to get in and start doing some things that they need to do and it allows us to remain.
The the structure of the lease payments and the deposits and.
And the shared services and then just some cost savings of not having to move.
We started adding up all of the economic benefits.
It looked good and it fits into our model.
No.
Those are some of the reasons why we took a look at it that way.
Thank you for debt.
Two questions in the queue that really haven't been addressed on the call yet. So after the next two questions unless there's any others to come in we will end the call, but the next question is.
Given the pipe administration, the push for the U S to be more so speed of self sustaining with regard to supply chain for vital materials.
As well as the push for more Green options do you expect any help from government or what do you see government's role as it pertains to Aqua metals.
Yes, that's of Great question and we.
We agree that the.
The current administration's view on Green technology, and also keeping jobs in the U S is going to be very helpful for Aqua metals, and it's not lost on us that of.
The interaction with the various government institutions.
Like do and DARPA and others that can really help from a not only just the grant funding perspective, but from a policy perspective.
To make sure that the existing battery recycling facilities in the U S get the upgrades. So they can continue to operate and create jobs and keep jobs and.
The concept of build back better does fit because those are depreciated amortize facilities that could potentially.
The Aqua fit and really breathe new life into the future of their contribution not only to the environment, but to the economy in the U S. So we see a great opportunity there.
And also just from a setting the tone perspective on a global stage I think that the.
From a global perspective, the world is more and more in recognition that we have climate change and we don't have much time, and we do need to make some changes in the way that we handle our industrial processes and stored energy as of right in the middle of that and so I think that policies as well as grants and support from government institutions are.
That we welcome and we will seek so hopefully that answers the question.
Super Thank you for that and then your last question Stephen Jud is.
Given the great momentum we've had in 2020 now 2021, what would you consider the biggest obstacle or challenge that you see Inc.
Front of view in terms of executing on your plan for this year.
Really it is the the.
The answer is almost in the question, which is execution. The technology is de risked we've proven the technology and operating commercial environment and produce those 35000 ingots and we've now enhance the technology with our version of <unk> Dot two five with more enhancements to come.
And so now it's about execution.
Some companies failed not because of the technology, but because of execution. So that's what it boils down to what your team and what's your team structure and what's your culture and we believe that we have the team.
To take this forward and to execute both from a.
Managerial perspective, all the way through individual contributors that are pulling us through.
One specific example, which is that the team that we selected to.
Do the one dot two five optimizer program is.
As especially fit team for not only running that program and being able to produce electrolyze Aqua <unk>, but be able to go out in the field and the customer facing types of individuals.
Have had experience in that arena and that's really important when you're executing and you have to think about those things ahead of time. So you are ready when the time comes and so we're that's what we're really focused on and the risk really is can we execute.
The answer that risk is look at our team and decide if you think we've got the team.
Perfect. Thank you Steve there are no further questions in the queue that have not yet been answered so I'm going to ask you for some closing remarks, and then we'll end the call.
Well, great well, thanks, Glenn for that and thanks to everybody and I guess.
To conclude I'm going to take everybody back to our mission and.
And remind everybody that we're striving for licensed Aqua refining technology equipment and services, that's going to play a critical part in the sustainable metals recycling world to get critical metals raw materials right back into the manufacturing chain and of clean and economically advantageous way. That's also going to help reduce overreliance of.
On mining to meet the growing demand and we are very close to completing the commercialization of Aqua refining by way of our first deal and we continue to offer clean capacity expansion upgrades to build cleaner new net new infrastructure. It really in the multibillion dollar and growing lead battery marketplace by.
Seeking to extend off refining into other critical metal metals and energy storage, we see the opportunity to more than double the total addressable market for our offerings of licensed technology equipment services to the lithium ion marketplace as the world accelerates its move towards sustainable energy storage supporting sustainable energy production.
And to create new energy closed loop.
Is really going to be important didn't have a direct positive impact on global climate change our success to date and our team and our growing partnerships and our strong balance sheet. All in my view support our efforts and I look forward to reporting to everybody of the continued updates as they develop and obviously through our next calls and thank you.
The one for attending and for the support and the interest.
Thanks, Steve Thanks, Jud, thanks to our audience from this concludes the call.
Thanks, everybody.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
[music].
Yes.