Aqua Metals, Inc.

Thank you for standing by. This is the conference operator. Welcome to the Aqua Metals first quarter 2019 corporate update call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star 0. I would now like to turn the conference over to Ms. Alison Zegler, Managing Director of Darrow Associates. Please go ahead.

Thank you, Operator. Welcome to Aqua Metals' first quarter 2019 conference call. Last Thursday, Aqua Metals released financial results for the quarter ended March 31, 2019. This release is available on the Investors section of the company's website at www.aquametals.com. Joining us for today's call from management is Steve Cotton, President and CEO, as well as Judd Merrill, the company's Chief Financial Officer. During today's call, management will be making forward-looking statements. Please refer to the company's quarterly report on Form 10-Q, filed Thursday, May 9th, for a summary of the forward-looking statements and the risks, uncertainties, and other factors that could cause actual results to differ materially from those forward-looking statements. AquaMetals 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 new circumstances or unanticipated events as they occur, except as required by law. And with that, I'd like to turn the call over to Steve Cotton, CEO of AquaMetals. Steve, go ahead.

Thanks, Allison. Good afternoon, everyone, and welcome. Before I review the significant operational progress we achieved in the first quarter and into the first half of the second quarter, I would like to comment on the financing we closed earlier today. As most of you know, we announced this financing in conjunction with our Q1 results last Thursday. So to answer the question, why we did what we did and when we did it. As you saw in our first quarter press release, we ended the quarter with a cash position of $15.3 million, which we had previously stated would be just enough to complete the rollout of 16 modules. Thank you for joining us. to limit shareholder dilution. However, with this offering's net proceeds of roughly $20.2 million before the effect of the shoe, we enter the remainder of 2019 with approximately $35 million in cash. With the ability to leverage the $5 million in leasing newly authorized by Green Bank, we have approximately $40 million at our disposal on a go-forward basis. We believe the strengthening of our balance sheet achieves a few key goals. First, Thank you. Thank you. achieving full-scale 24-hour-a-day by 7-day-a-week production with our initial four modules. Just to reiterate some of our operational milestones during the first quarter, we completed installation of a membrane press, which should improve electrolyte recovery and throughput. We've installed a centrifuge to increase throughput and quality of concentrate sent to the aqua refining modules. We also completed a key plant-wide electrical power upgrade, We installed and are commissioning water recovery equipment and process improvements that bring water usage at the aqua refinery to near neutral, an additional positive impact to our contribution margin. We made shipping cost improvements for some offtake materials, and we completed enhancements to our breaking and separation operations, allowing us to complete commissioning of our third cattle to process the metallic lead that does not go through the aqua refining process and to recover more material for aqua refining. We also ordered the full-size dryer equipment, which is part of Phase 2 of our capital program in the quarter, which is expected to further boost electrolyte recovery, increase yield, and add contribution margin later in 2019. Throughout the first quarter, we ran one or two modules 24 hours a day, four days a week to conserve cash and allow safe time for some of the key plan upgrades to be completed for our contribution margin improvement projects. Beginning in March, we expanded our production team by hiring and training key employees, and on April 15th, we moved to 24 by 7 operations with our first four modules and are operating two to four modules at a time. This has enabled us to achieve weekly production records every week as we scale. The company is also focused on increasing the percentage of lead metal from battery feedstock and converted into high-value aqua refined and lead bullion ingot form right at the aqua refinery. Importantly, we have increased the amount of lead units we can process into products in ingot form throughout the plant from approximately half in January of 2019 to two-thirds conversion in April 2019. This includes the installation of a third kettle to begin to allow the processing of the other 50% of the battery, which is the hard metallic lead, resulting in a significant improvement in lead unit recovery and contribution margin. The first shipment of lead bullion from this kettle was shipped at the end of the first quarter. we have projects underway to further process the hard metallic lead, which could bring today's approximately 70% conversion to 80% or more by year-end, which could generate considerable additional plant-wide gross margin for our aqua refinery. So now moving on to our partnership with Clarios. In May of 2019, the assets and operations of Johnson Controls Battery Group, Inc., including our agreements and collaboration with Johnson Controls, were sold to Clarios. which is a newly organized battery and power solutions company formed by Brookfield Business Partners, LP. During the first week of April, we met with Clarios at their nominated first facility to commence discussions of the proposed development program to supply aqua refining equipment and know-how, as well as licensing and ongoing support services for that particular location or an alternate first location. As a result of these discussions, we agreed on specific performance metrics for the existing aqua refinery as conditions precedent to shipping equipment. These include things like module performance and uptime, electrolyte usage, feed rates of aqua refined material, and emissions. In addition, Aqua Metals will provide a detailed technical proposal in June 2019, and upon completion of the general performance metrics and agreement on the technical proposal, moved to execute the development program agreement inclusive of a licensing agreement and an engineering package for final design of that first location. We believe we are on track to achieve target performance metrics during the remainder of 2019, and as we execute on our planned ramp of our refinery, this continued progress should lead to our first licensing revenue and first shipment of aqua refining equipment to Clarios as early as 2021. Thank you, Steve.