Aqua Metals, Inc. (AQMS) Q2 2017 Earnings Report, Transcript and Summary

Good afternoon, ladies and gentlemen, thank you for standing by. Welcome to the Aqua Metals Second Quarter 2017 Corporate Update Conference Call. [Operator Instructions] This conference is being recorded today, August 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.

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 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 the 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.

Thank you, Greg, and welcome everybody to Aqua Metals Q2 earnings call for 2017. I'm going to really start off with a few highlights from this quarter and let me just give you an outline of how I proposed to go through the remainder - remaining of the call and then I get on with it. So we just finished quarter two and there is number of big successes that I'm going to talk about today. The first one is that we recognized our first revenue from our first AquaRefinery, in fact the world's first AquaRefinery this year. We now have full AquaRefining modules up and running and so we’re now producing AquaRefining like again a world's first. In this quarter we have secured our first two international patents. The first of those been in Korea and the second one following shortly after within Australia. We made our first acquisition, we acquired U.K. based Ebonex IPR limited. We've just appointed Mark Weinswig as the CFO effective tomorrow. We’ve hosted several analyst and investor visits to our first AquaRefinery and we received several accolades including our second Platts Global Metals Award and then award by the San Francisco Business Times Technology and Innovation Award which is really pleasing to win. So those are the highlights and I'm going to expand on some of those, and I put together the following agenda to structure the earnings call. So I'm going to start off with an operational update what we have done, where we were, where we are going to go next. Then I’m going to talk about business expansion, I’m going to talk about intellectual property, I’m going to talk about CFO succession. Tom Murphy our current CFO is going to go to the financial and then I’ll summarize but you’ll see there on the second line, on the second bullet point, is I call it about 48 volt vehicle batteries. We believe that there is - revolution in the early stages of taking place in the lead industry and then talk a little bit about after the operational update is, what I believe is an important context for where we are as company, where we are going as a company, and the scale of magnitude of the opportunity in front of us. So with that said, I’ll move on. And I'm going to start off with a summary of the operational update for the facility. So the headlines there are that, breaking and separation is now operational. We mentioned before in previous earnings calls that we would indentified some issues around conventional breaking and we were making some improvements - and we've done that, they are installed successfully on - and I’m pleased to say that breaking this operation is operated reliably. Following on from that we were able to commission and scale up the Aqua preparation, that’s where we made the electrolyte for the AquaRefinng and again we've installed some upgrades. And then the main use really is that after some delay we've had - the success in commissioning and moving up modules 1 to 4 into operation and we've got modules 5 to 16 in various stages of assembling. Modules 1 to 4 being used to validate operating parameters right now and we plan to have modules 5 to 16 installed during October and then operational by the end of the year. And with the front end and the various streams operating now, producing lead in sufficient quantities to warrant the commissioning and operation of being at line that's taking place this week. So I’m going to expand on some of those points. Now I'm going to start off with the breaking and separation area, and I will move to the slide that shows a photograph of the battery breaking equipment as it is now configured. What you’re looking at is a photograph of the breakup which is a box at the top of the equipment in the photograph. And first thing I’d like to point out is that unlike pretty much any other battery breaking equipment in the world, we've chosen to put our inside a soundproof and environment contained box essentially that reduces the noise levels in a facility, but more importantly it provides an atmospheric control around the breaking equipment to control dust. And so you noticed that how clean the equipment is in our photograph, that's normal for us, but quite unusual in many parts of the battery breaking industry. And what you can see also in our photograph is various feed strings leading into super sac which are collecting plastic separators and some of the lead components. So the key point here is that as I mentioned in the last earnings call, we determine there was a need for us to operate our breaker at a higher level of separation that is common in the battery recycling industry. And the reason for that is in the conventional breaking operation all of the output goes into a smelter and we are a smelter free operation. We don't have the ability to take materials that we can't find at home for and put them in the smelter. So we have to operate our smelter at much higher standard. And what we did to get there was we leverage not only the battery recycling industry, we looked at the best that we could find, we looked at best-in-class. And then we went outside the battery breaking industry and we brought technologies and know-how and in some cases personnel from advanced materials handling and mining industries. And I'm pleased to say that right now we're operating what we believe to be the best-in-class in battery breaking and separation. And in fact, I didn't expect this to be at this position in having our own IP around battery breaking and separation and this is important to us in the sense that if we are building our own standalone AquaRefining facilities, than we need the ability to break and separate batteries at a far higher standard than its currently commercially available elsewhere and we will achieve that, that's important. Those improvements will continue and our expectation is that over the next two or three years will be continuing to make improvements in battery breaking and separation and that will add additional intellectual property and services that we can provide to our customers. The next part of the commissioning process was to bring the electrolyte virtual we call aqua preparation which is where we take the active material the oxide to sulfates and convert them into the electrolyte that we used to feed to our AquaRefining systems. And similarly we looked outside of our own skill set and we looked to the leading players in the chemical industry to bring techniques and best practices from the specialty chemical industry to bare on that process and not only it is commission and running but we’ve actually achieved a fourfold reduction in the electrolyte volume that means we’ve reduced the volume of electrolyte that we need to operate by a factor of four which is pretty considerable and I believe it is a remarkable testament to the hard work and effort of the technical and operations team in achieving that. Then moving on last but certainly not least, we now have AquaRefineries or four AquaRefining modules in operation. And I think actually a better title for this slide would be AquaRefining works in capital letters with a lot of exclamation marks. We are now AquaRefining lead. It’s a first for our facility and it’s a first for the world. And we’ve made some pretty significant advances in the commissioning of the equipment and whilst we were waiting for some of the other processes to go online. So I’ll just talk about a few of those we've have simplified the design of the modules and reduce some of the components. We've made it fairly significant reduction in plate and voltage and the energy required with significant I’m talking in the 20%. We’ve also been able to improve the range of operating parameters that AquaRefining modules can operate under which gives us a high degree of flexibility in operation. We've also made them more robust. And we’re now taking some of those licenses and working to develop a simplified installation of modules, a simplified configuration so that – we're looking at significant cost reductions and performance improvements going forward. Going back to that point I made earlier, AquaRefining works. We've got four modules operating now. We expect to have 16 operating by the end of 2017. And before I go on, I want to just talk about that point that we are now AquaRefining lead. And this is where we start to change the game. This is where we start to make our highest quality product. It’s also where we expect our highest margins. So if you look at the improvements we made - and we talked about in the previous slides, with all those improvements and upgrades, we now have five-nine battery processing capacity that we can utilize with the 16 AquaRefining modules that we plan for installation. And we have the option of producing and selling lead components from AquaRefining feedstock, and we’ve done this. And as Tom will say shortly, that's where much of our revenue for the second quarter came from. However, as you'll see in our numbers, the lead compounds have a low value in the less established market than lead alloys. And moving forward, our focus is really about the AquaRefined products and the licensing of AquaRefining equipment. So it's all about AquaRefining but optimal product mix and profitability. We’re focused on running all of our AquaRefining modules to the maximum benefit. And that means that we may choose to operate the overall facility with an output of less than 120 tons a day, but with maximized AquaRefining. And we’re looking to change our product mix to a higher level of AquaRefining product. So just finishing off this slide, the key point is, with AquaRefining this is first of kind capability. Our focus is to maximize our experience in AquaRefining to drive both our own product build-out and our licensing activities. So that kind of concludes where we are now, and I’m going to move into where do we go next. And to provide some context of that, I’m just going to take a step sideways. I am going to really provide some important context. And what I’m showing on this slide is a cover page of the current edition of Batteries International. If you really want to know what’s going on in the battery industry, you’re not going to get it from Wired magazine, Forbes, or Routers. You’re going to get it from hard-bitten industrial journalist who have worked in the battery, lead acid, and other industries for decades and one of those periodical is Batteries International. Another one is Battery and Energy Storage. And this month, Battery International have put out an edition that is entirely focused on what I believe is a massive - revolution that's underway in the lead industries. It’s in early stages, but its coming. And it’s driven by the fact that the automotive industry is steadily but surely switching to a new standard. What the automotive industry needs is a 48 volt high cycle life battery that can operate at partial state of charge. And they need this not for electric vehicles but to bring the latest advances in conventionally powered vehicles. So what they're looking for is a high voltage electrical bus within the vehicle and energy storage devices that can support features such as hybrid turbochargers, regenerative braking, and - semiautonomous and autonomous operation. So there is a new 48 volt automotive standard and given the vast majority of lead acid batteries and to the automotive sector, that is the giant 800 pound gorilla in the lead acid battery market, a new standard is potentially revolutionizing and game-changing step. So what happened is a response to that is that the lead acid battery industry is starting to respond with the development of 48 volt what is known as bipolar batteries. That is a completely different architecture to a conventional battery which is always a monopolar battery in which an electrode is either a positive or negative. In a bipolar battery, one side of an electrode is positive and the other side is negative, I’m not going into a science project today but what is happening is, the lead industry starting to move rapidly into the development of 48 volt bipolar products with extended cycle life. So given that the automotive industry pretty much drives the direction of the lead industry. If we're looking at a future in which there is a 48 volt extended cycle life product that operates a partial state of charge, that wouldn’t only be a game-changer for the lead industry and the automotive industry, it could be a game-changer for a lot of other markets and applications the batteries. And so why is that important? Well if you consider wide scale adoption of that 48 volt bipolar lead acid battery and that could make lead acid advantages in applications that are generally considered the realm of lithium-ion batteries. What it also means that the materials of construction and the methods of manufacturer quite likely to change. The 12 volt battery was developed in the era of essentially in chemistry and microscopes. More modern supposedly advanced batteries are developed in the era of quantum mechanics factor, crystal mechanics and tunneling electromicroscope, going to have a new phase of development of lead acid batteries is quite likely that the modern tools and techniques would be brought to bear and we can see a dramatic change in how lead acid batteries are made and the quality of the materials that they are made from. So how would this potentially affect Aqua Metals and how could Aqua Metals benefit? What we're seeing is a potential high demand the four-nines lead and a new market for five-nines lead. Cycle wise of active material is really a function of the purity of the lead in that active material. So four-nines give you high cycle life, five-nines gives you even better cycle life that's the theory. And in our AquaRefining product it's just that we are making already, we're achieving four-nines and are well on the way to achieving five-nines. We are expecting but also to lead to the need for advanced materials such as the nano structured ultralow density lead that I have mentioned previously and I talked about in our last earnings call. It's also likely to mean a need for corrosion resistant substrates or as [indiscernible] lead grids. That's what we see coming along, it’s with early stages yet but the automotive industry seems absolutely committed to moving towards that. So what does this mean for Aqua Metals in the detail? Now as I said we’ve been watching these and trying to build this into our expansion strategy. So in terms building our own additional facilities, it doesn’t really impact as we’re still proceeding as planned. We are looking to add four to five facilities of nominally 160 tons a day each. We still expect to fund those with project finance and/or debt finance. It does mean that we're going to be rebalancing out product to produce more AquaRefining lead unless great alloy partly because there is a - we’re seeing a higher demand four-nines, five-nines lead and we think we’ll be in a very interesting and advantageous situation and been able to provide that and because we believe that’s our lead product is our core defining product. What we are also seeing in a separate dimension is that, a very strong interest from brand sensitive large well-known brand sensitive uses of lead acid batteries to supply that use lead acid batteries to it specifically because they don't want their batteries to enter into the conventional smelter based recycling stream, they want to be sure that their batteries are recycled in the U.S. in using technology that doesn't involve smelting. It’s not my words, that’s there. We also believe that there is continuing potential to add strategic relationships that would accelerate our build-out fabulous strategic relationships on the supply and offtake side, and we think we can add to that with strategic relationships which would help us build out facilities faster than a lower risk. In terms of licensing what we've learned so far is that the retrofit of AquaRefining to an existing smelter looks really attractive. There is no secret, we’ve had some delays, I have talked about them before we’re overcoming them. All of that is really being driven by a need for us to build a standalone AquaRefinery that doesn't have a smelter. Our licensees are not particularly looking to stop with a turnkey AquaRefinery, they're looking to sequentially move away from smelting towards AquaRefining or to use AquaRefining to increase the production where the current production is limited by availability of mix. So what we're looking at with our first licensed products is to supply AquaRefining modules, electrolyte production equipment and related equipment to somebody who already has a smelter, and what experience I have had so far with bringing our own modules and developing our own electrolyte and operating our own electrolyte systems is that we think we're in really good shape now to stop that licensing program. We've done a lot of internal planning for the first licensee which is JCI and we are now planning regular joint meetings around the retrofit would look like and where it would be. I’m not going to say too much more about where it will be, I’m going to defer to JCI system to talk about that when they're comfortable to talk about that. The other thing is that we’re also continuing to generate strong interest in the slide is really massive interest from all the potential licensees who either want to move from third-party recycling of their products, or want to improve their own internal recycling. And then in the longer term going back to the scene around 48 volt and what's happening in the lead industry, what we seeing is potential markets for advanced materials and unknowable battery production equipment. [Indiscernible] and in our first bullet point, I talked about the IP strategy focused on materials and methods. You are going to hear that phrase a lot from me and you’re going to hear that phrase a lot from this company moving forward. We are a materials and methods company. We are not a lead company, we're starting out as a lead company, but we are a materials and methods company. What I mean by that, well the core of our business is to deliver advanced materials to the lead acid battery industry to proprietary methods of production and to do that primarily there is a supply of licensed equipment and we are starting with AquaRefining. We don't expect to stop at just providing AquaRefining equipment. We expect to explore and develop other equipment as proprietary that we can provide to the lead acid industry to keep them at the top of the game or help them stay at the top of the game. So to do that we have built IP strategy and our IP portfolio to support that. We started off in developing AquaRefining and commercializing it and in a sense what we've done is proven of a lot of people wrong and the lead acid battery industry collectively wrote-off the electrochemical methods or hydro metallurgy methods of battery cycling about 10 or 15 years ago. Many people have tried, many people have failed and the general received wisdom was that this was not possible, there was too many problems that it couldn’t happen. We've proved that wrong, and in a sense that’s great. In another sense, we've actually opened the door again for other people to become interested in electrochemical recycling of lead acid batteries and we prepared for that with 20 patents applied for in 20 countries, that is a massive IP undertaking. We chose to escape and where possible very some of those patent filings, and confidential filings and proxies and whatever we could, because we know people want to know what our IP is and they want to get site of it and they want to know what we're working on so they can be working on it too. So part of the defense of an IP strategy is not be too or front about exactly what it is with developing them patent in this very clearly, it needs to be - as we can make it until those patents are issued. And talking of patents issued, the first two have been granted. The first one was in Korea followed rapidly by one in Australia. And we actually choose the Korean Intellectual Property Officer or KIPO that is known as the lead examining authority on a belief and a hard strong belief that KIPO is pretty - and what I can tell you is our first patent led through the ringer with KIPO every aspect of our first patent was questioned, queried, second guest are we prevailed and we prevailed with all key claims upheld and that's important because he sets a really powerful precedent for all of our other continuing patent applications. And on the IP front, we also as we mentioned early made our first acquisition. We acquired Ebonex IPR for shares and the purpose of that would actually to give us additional complementary IP and the two broad streams of IP that we acquired were the rights to Ebonex which is chemically Ti4O7 often referred to as Magnéli phase conducting sub-oxide of titanium that’s a bit of a mouthful so we will go with Ebonex. It is a highly corrosion resistant electrode material. It has excellent adhesion to lead and lead compounds and that basically means it has the potential to be a very attractive alternative to lead as a group material in a lead acid battery or as a substrate for bipolar lead acid battery but I got to stress the word potential. This is an R&D level project. We brought the company after 20 years of development and some failure and we bought it on a hunch that we might be able to make this work and we’ve got a team doing some R&D on that, it's looking good - to go. But that material itself is potentially a powerful addition to that theme of materials and methods. What we also acquired was decades of designs, manufacturing processes, know-how and IP around bipolar lead acid batteries. And that again I will stress is R&D phase because a lot of work to be done but we acquired some really legally useful IP around how to make bipolar lead acid battery. So that again has another strange to that theme of materials and methods but I want to say don’t give anybody an impression that we're about to jumping to building bipolar batteries, we're not. We are about providing materials and methods to the lead acid battery industry to allow it to be the best it can be. So moving on, let's talk about the CFO succession and on July 31 we announced the hiring of Mark Weinswig as our new CFO and that's effective as of tomorrow. That means that Tom Murphy, Co-Founder, friend, life time associate of ours is retiring and going into a transition period and will remain a consultant to help with existing projects and the - knowledge of years in the history of this business. I'm thrilled to welcome Mark to Aqua Metals. He brings significant experience of working with technology and manufacturing companies with a background essentially in materials of method companies but are publicly traded. And we know that obviously a key contributor going forward but I really want to say a massive heartfelt thanks for Tom for his contribution and wish him best in his retirement but he is not too soon because he is not retired just yet and I am about to handover to him who will take us through the financials.

Thank you, Steve. As Steve mentioned, we are pleased to announce that Aqua Metal's is now generating revenues from our TRIC facility. In the second quarter we recognized differed revenues of $603,000. The sales consisted of plastic and lead compounds. For the three months and six months ended June 30, 2017 we had an operating loss of $8.5 million and $13.1 million respectively. The loss was primarily driven by ramp-up of production at TRIC and in the ramp up only sales of low value lead compounds and plastics and the $2.4 million from the impairment of the Ebonex IPR purchase. Net loss was $8.4 million for the second quarter and $13.3 million for the year-to-date. That's $0.42 and $0.69 loss per share respectively. The company initially recorded the Ebonex IPR transaction as an increase of $2.5 million to intellectual property, net on the balance sheet. Subsequently due to the fair value of the patent portfolio being significantly less than total consideration, the early development stage of the technology acquired and the uncertainties inherent in research and development, the company recorded a non-cash impairment charge of $2.4 million or $0.12 per share for the period ended June 30, 2017. We had $22.1 million in cash and cash equivalents as of June 30, 2017 compared to $26.6 million as of December 31, 2016. As Steve mentioned on July 31, we announced my retirement and the hiring of Mark Weinswig as my replacement effective tomorrow August 10. My decision to retire was based on multiple inputs as our most life-changing moments. I turned 65 this past April and have a health issue although not affecting my quality-of-life now, it will in the future. The company is at a point of going from start up stage to commercial operation and significant growth. Now is the time to bring in another executive for the experience and energy to take Aqua Metals into its next phase. I believe that Mark is that person. I will continue to stay on for some time as a consultant assisting Mark during transition period. We have accomplished some amazing things in the past four years during my tenure. In 2013 [five] of those formed in the proverbial shed what became Aqua Metals. The first time we're funding module product - further type was successfully run in late 2013. In June of 2014, Aqua Metals Corporation was formed. In August 2014 John Wirtz, CEO of Wirtz Manufacturing made the first outside investment in Aqua Metals. In 2014 we closed the private placement for $5.5 million. In December of that year we completed the build of the first full-size AquaRefinery unit, it produce lead the first time we turned it on. In March 2015, we purchased the land in TRIC to build our first plant and in August 2015 we had the official groundbreaking for our Reno plant, that's just less than two years ago we had the groundbreaking. Just 12 months later we officially opened the plant. On July 31, 2015 we had our IPO, went public on NASDAQ as AQMS and raised $36.2 million. November 2015 we received a $10 million loan from Green Bank giving us the funding to increase TRIC capacity. In May 2016 we entered a strategic relationship with interstate batteries, the largest battery wholesaler in the U.S. As part of that relationship, interstate battery invested $5 million in equity and $5 million in a convertible note. At the same time, we raised an additional $5 million from primarily previous investors. In October 2016, we produced lead from our first AquaRefining module installed in TRIC. In November 2016, we completed the secondary raise of $23 million which help to provide the capital to further our facility build out and provide working capital to begin operations. In February 2017, we established a strategic relationship with Johnson Controls, the largest lead acid battery company in the world. JCI invested $10 million into Aqua Metals' equity. The relationship includes a commercial lead contract and rights to license our equipment and know-how. And in the second quarter of 2017, we recognized our first revenues from production at our TRIC plant. This has been an incredible journey with a great team of people that I'm very proud of to have been a small part. And I look forward to my new role as Consultant to Mark in the company. The majority of my net worth is invested in Aqua Metals' and I intend that to be the case for a long time. I’m confident we have the right team in place to make Aqua Metals' even more successful. And with that, for the last time, I'll turn the call back over to Steve.

Thank you, Tom. In no way was Tom’s part a small part. Any of you who’ve met Tom will recognize there’s a slight joke in that as well. He's always a tallest guy in the room. Okay, so just going to round up now with some key takeaways some of which Tom has alluded to already and we’ve mentioned before. We recognized our first revenue in quarter 2, 2017. Our primary focus is to have 16 AquaRefining modules running by year-end, and to be prepared for the licensing activities which will become the main focus of this business. The experience that we’ve gained supports licensing roll out with our current partners and we’ve got strong interest from other potential licensees. We’ve achieved important I.P. precedents with our first two patents. We’ve got opportunities for additional strategic relationships to accelerate business development. And we can see on the horizon, the move to 48 volt and a new standard of lead acid battery could bring outside opportunities to AquaRefining lead and for our development stage materials and methods. So basically we've worked hard to, and I think we have positioned the company to leverage existing and future strategic partners. And with that point, I’m going to hand back to Kathy to handle questions. Thank you.

[Operator Instructions] We’ll go first to Colin Rusch of Oppenheimer and Company.

Kind of a housekeeping question. In terms of the cash consumption, can you just break out what was the operating loss, and then what was actual incremental CapEx in the business.

For the year-to-date through the first six months of the year, the net cash used in operating activities has been $9 million. And purchase of property and equipment for that six-month period is $5.6 million, little over $5.5 million.

And then it sounds like you’ve got a lot of customers, potential new customers looking at the process. Can you talk a little bit about how many folks are actually testing material at this point and are fairly far down the road in terms of discussions? And where we might think about in terms of incremental customer win over the balance the year?

I’ll take that. In terms of providing material for people to test, that’s a little bit low priority for us at the moment. And in the context of the arrangement we have with JCI, the primary focus is to supply the gains of level of interest that we have there. The additional licensees coming from battery companies and lead companies, we see it as - the level of interest on multiple site visits and observing processes in operation and thinking around how they would integrate into their existing facilities where they have their own in-house recycling, or whether they are - if they are lead company or how would they go about building a facility if they are currently outsourcing to a third-party for battery recycling, and discussions around do they want to start off with a standalone AquaRefining facility or do they we want to go a hybrid route. And so I really can't get into the specifics around it. Our process, our focus is to begin the rollout with JCI. We are obligated and happy to be obligated to JCI to agree a rollout schedule with them before we start formalizing any additional licensing arrangements. And so the priority for us is to begin the rollout within JCI, and then move on to working with the licensees in addition.

We’ll go next to the Bhakti Pavani of Euro Pacific Capital.

Just quickly on the operation side, like you mentioned in your prepared remarks, the battery baking equipment and system, everything is running as you guys want to. Just kind of curious to know how many shift are you currently running.

We’re currently running two shifts of 10 hours each.

For four days.

For four days a week. And that’s deliberately. We reorganized our original shift patent. What we want to do is have all operations working at a time when we have got technical expertise on site both to help with the recent issue, but more importantly, to learn from the operations. We've mentioned in our last earnings call that we're moving the basis of continuous improvement from Alameda to Reno, and that’s now happened. Many of our technical staff are on site three or four days a week now in Reno taking the opportunity to work with the full-scale equipment, working to look at where we would go next for our own facilities and for licensees.

Just one quick one on the housekeeping side. What is the expected CapEx spend for the remaining two quarters of this year?

It’s approximately in the $5 million to $6 million range.

We'll go next to Ilya Grozovsky of National Securities.

First of Tom, congratulations and best of luck in whatever it is you do in the future.

Thanks there. I appreciate that Ilya.

And then I just wanted to understand a little bit more about the sort of time table of the other 5 through 16 modules coming online. I think, Steve, you had said that you expect them to be in by October. Did I hear that correctly?

Yes. And this is the plan, I mean, guidance. But we expect to have the balance of the 16 modules on-site during October, and then to have all of them in operation by the end of the year.

And is that 5 through 16, are you going to install them in fours, or you’re going to kind of one at a time? I just want to get a little bit of the sense of kind of how this scales up from I think now with December.

I think we’re likely to be running the one at the time as we install them. We install them and commission them. We've not actually formalized that plan yet. So I can’t give you clear guidance on whether we’ll commission them in batches or commission individually. But what I can tell you is that module 5 is half built and module 6, 7, 8 are on site 6 and 7 that are quarter built and the balance of the equipment is in Alameda being assembled.

And then from what you've seen in one through four, you said you're running at two shifts 10 hours per shift and four days a week. In one of those shifts what kind of volume are you able to do coming out?

At the moment we are running - the modules are designed to operate at about 2.4 tons a day each. We are spending the next month running a series of trials in which we are running them at higher outputs, lower outputs different concentrations of lead in the electrolyte different voltage and current regimes, different temperatures. Essentially we’re taking the next month to fully map the performance of the modules. We’ve done a huge amount of work here in Alameda to map the technology but there's always some level of shift in parameters as you go from large pilot scale to full scale and even when you install the modules in different locations. Ambient temperature has an impact, validation has an impact, weather has some measurable impact it’s not huge but it’s there. So the first thing you need to do with a large-scale hydro metal facility which essentially that is what it is, it’s fully mapped the process. And so the next one we’ll be doing that I’m really not going to give guidance to how many tons we’ll get join the balance of quarter three or even quarter four for that matter. The really important part was is that we gain as much experience as we can from operating AquaRefining modules under a broad range of operating conditions and other things to prepare for the supply of equipment to licensees and to prepare for the build-out of our own facilities. I know it’s not very precise answer but it’s the truth.

And then lastly just given that we’re halfway through the September quarter what can you tell us about sort of the revenues that you've had in the month of July and thus far in August in terms of - have you grown it from the June numbers?

Look our expectation - and this is an important point there is some kind of misconception in the market that ramping up the first of the kind facility is a linear process, it really isn’t it’s an exponential process. You've got equipment that is rate base, you’ve got hours in which you can run the equipment and you got percentage of time. So you’ve got to factor times, factor times, and factor. Our expectation is quite modest for quarter three that will be largely flat in revenue but we’re expecting to see a big growth in revenues until the backend of quarter four as we ramp of the final modules and we really start cranking on them.

We’ll go next to [indiscernible].

Just sharing congratulations and thanks Tom it's special to be part of a disruptive technology company and your role has been critical from the beginning, so thank you.

Thanks. I feel disruptive enough so I am ready….

As you guys know I and my family members and our family company is in a scrap metal processing and recycling business back in Michigan. And we view what you're doing as among the most exciting things that happened to the industry in generations. And at the same time we have this is more of a tactical stock related question. There is a very emboldened short interest short upwards of 4 million shares and the short guys are smart guys and I wonder if you could articulate really Steve why are these guys wrong?

Well, if all of the guys - the guys behind the Seeking Alpha article, is a bit like asking me that famous [indiscernible] when did I stop beating my wife, there is no logically possible answer to it. I’ll try to unpick the strands of that ridiculous article and for that short thesis to be correct, I'm a scurrilous, fraudster but nothing works, you chose to raise, a $100 million to build a theatrical set in the Nevada desert, so that I could run off with the proceeds. And we can see the strength of that unwind, I mean knowing some commentary about the acquisition of Ebonex being a third-party issue because quite rightly I did actually found the precursor to that company but was not a shareholder of the company we bought and had no dealings with it for 20 years. Though as the strand that we bought of giant distraction when we should have been focusing what we were doing and I would argue it really wasn't distraction at all because with almost no effort into it and I don’t mean that in a pejorative sense I just mean that we’re focusing entirely on doing what we’re doing. We are starting to explain as you saw today a little bit about where we see the industry going, and why an acquisition like that might payoff in the future. One of the other strands was that AquaRefining just doesn't work. Well we had - it was about 90 people through the facility watching it work now at some point, some of those 90 people will start communicating to the guys who are holding a short positions and explaining actually it does work. We've shown videos of it working and I don't know, maybe the shorts are so upside down and buried in their own bubble of misbelieve they just can't get out now, I don't know. It makes no sense to me at all. I would point out that there are probably one or two entities in this world who would be very upset if smelting was to go away and be replaced by something else.

Adding on to that Ben is, and just summarizing what Steve words said, the reason the search will eventually go away and it may not be overnight unfortunately as this works. And why I am comfort level and we never leave because this works.

And as Tom said earlier it worked the first time we turn it on. I mean you got to recognize that we actually - we put our second mortgages 401(k) and kids education for instance found in this business if this is a get rich quick scheme, please show me where I got rich. I haven’t monetized anything from this, I have not sold a single share. And the reason we were happy to look our spouses in the eye and say, I am going to write another $100,000 check tomorrow darling because when we turned AquaRefining modules on they worked and they still do.

Well thanks for that. I just appreciate the color and I just wanted to hear your thoughts and kind of an open forum because they’re certainly open with the way they do business and I always appreciate a CEO or a management team’s opportunity to respond.

Thank you.

Okay, I think with that we’ll bring the earnings call to an end. Thank you all for joining in and thank you for listening and thank you for being part of this incredible journey.

That does conclude our conference for today. We thank you for your participation. You may now disconnect.