Aqua Metals, Inc. (AQMS) Q4 2017 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Aqua Metals' Fourth Quarter 2017 Corporate Update Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to Greg Falesnik, Managing Director for MZ North America, Aqua Metals' Investor Relations firm. Thank you. You may begin.

Thank you, operator. Welcome, everyone, to Aqua Metals Fourth Quarter 2017 Earnings Call. Earlier this afternoon, Aqua Metals released financial results for the full year and quarter ended December 31, 2017. The release is available on the Investors section of the company's website at www.aquametals.com. This earnings call will include forward-looking statements concerning Aqua Metals, Inc. forward-looking statements include, but are not limited to our plans, objectives, expectations, and intentions and other statements that contain words such as expects, contemplates, anticipates, plans, intends, believes and variations of such words or similar expressions that predict or indicate future events or trends or that do not relate to historical matters. The forward-looking statements in these earnings call include the strength and efficacy of Aqua Metals' portfolio of patent applications and issued patents, the lead acid battery recycling industry, 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 and efficiency of the company's proposed lead acid battery recycling operations. Those forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause actual results to differ materially. Among those factors are the risk that the company may not be able to produce and market AquaRefined lead on a commercial basis or if it achieves commercial operations that such operations will be profitable. The fact that the company only recently commenced production and has not generated any significant revenue to date, thus subjecting the company to all the risk inherent in a pre-revenue startup, the risk that no further patents will be issued on the company's patent applications or any other application that the company may file in the future and that any patents issued to date or in the future will be sufficiently broad to adequately protect the company's technology; the risk that the company's initial patents and any other patents that may be issued to the company may be challenged, invalidated or circumvented. Risks related to Aqua Metals' ability to raise sufficient capital, as and when needed, to develop and operate its recycling facilities and fund operating losses as we endeavor to achieve profitability; changes to 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 those risks disclosed in section Risk Factors and included in the company's annual report on Form 10-K filed today, March 15, 2018. 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, except as required by law. Aqua Metals CEO, Steve Clarke, is your host today, and he will introduce the rest of the team joining him on this call. With that, I'll turn the call over to you, Steve.

Thank you, Greg. So my first order of business today is to welcome Tom Murphy back to the team as Interim CFO. So welcome back to the team, Tom.

Thank you.

Now before moving to the agenda for today's call, I want to summarize the progress we've made since Tom, Selwyn and I, cofounded Aqua Metals. And you can see the bullet points on the image there, they largely speak for themselves. After a period of founder funder [indiscernible] development, we closed our first external funding in quarter 4, 2014. We went on to get our first full scale electrolyzer up and running by quarter 1, 2015, following that with an IPO and starting construction of our first facility. To the surprise of many in our industry, we secured our key permits in quarter 3 and quarter 4 of 2016, and our first facility was determined not to be subject to NESHAP, which was an important precedent. At the start of 2017, we secured an important strategic partnership with Johnson Controls, JCI, and secured key patents in the second half of 2017. As we reported, we hit a roadblock in the form of sticky lead, and I'm going to explain sticky lead in a few minutes. And we overcame that through science, engineering, hard work and long days. And as we have reported, we solved that issue and daytime operation of a single electrolyzer featured with what we call the sticky lead fix kit began in quarter 4, 2017. That's continued and daytime operation of 1 complete electrolyzer module -- sorry, one complete 6 electrolyzer module or 6 electrolyzers per module, each fitted with the same sticky lead fixed kit, began in this quarter, and we recently announced our first 24-hour run of that module. The rest of this presentation will continue this theme of progress and perseverance. For the agenda for the presentation today, I'm going to focus on operations update, starting off with sticky lead, what is it and how we fixed it. And I'm going to talk about the ramp-up of production at our Tahoe Reno Industrial complex base facility. I'm going to talk a little bit about intellectual property, I'm going to hand over to Tom, who will take us through the financials, and then I'll summarize. So that's the agenda for today. So sticky lead. What is it? There is a photograph on the right of the slide there, and that photograph means, it will be a video and it pretty much shows a phenomenon. Simply put, the lead that we produced with [ stop ] sliding of the electrolyzer's exit chute. That's basically a close-up shot of the exit chute of a single electrolyzer, of which there are 6 in a complete module. The important thing is this is a new phenomenon and we've never seen this before. And we started to notice it over the summer of last year. And essentially after a period of operation, the lead would simply stop sliding off the exit chute. And to put this in perspective many times earlier we have the opposite problem, well, not really a problem. So we've never seen lead not slide of the exit chute. So what caused it? What we discovered after quite a lot of investigation was that the electrolyte was stratifying in the plating tanks. So we have 6 electrolyzers in a module. Each electrolyzer has a plating tank, and each plating tank that has the anodes and cathodes in it, from which we plate a lead on to the cathode from the electrolyte that contains a lead. And stratification means that we have zones within the tank in which the electrolyte is too dilute, and zones within the tank in which the electrolyte is too concentrated. That's known technically a stratification. And it's a -- and so a phenomena is well known in the world of electrochemistry and metal plating. I think it normally occurs in seconds and minutes, not hours. And unfortunately, some of the very important benefits of our process may dilute cause of stratification quite difficult to trace. As an example of that, the electrolyte entering and exiting the system remained in specification as did the lead we produce. So that in a very simple way is sticky lead and what caused it. And the challenge there was that the process is designed to be continuous and semiautomatic or fully automatic. And it's got lead hanging up on the exit chute. To be able to run that way, we would have had to increase the amount of labor and intervention to get the lead off the chute in a periodic manner and we chose -- we decided that was not really what we wanted to do. So sticky lead is a fix. So how did we fix it? It really came down to better electrolyte mixing within the electrolyzers. And the way we did that was by increasing the headers or the manifolds that supply new electrolyte to the tanks from 1 to 2 and make some other design changes within those headers as well. We increased the electrolyte circulation rate. And together, that gave us far better control of the plating conditions. Now on top of that, we reengineered what we called the scraper table, it's something like the smelter. There's misnomer[indiscernible] in there. The table doesn't physically scrape the lead and it is, in fact, the exit chute. And one of the modifications we made is to add a programmable tool mechanism to that table, which is instantly Christian [indiscernible] the dump truck by the technical guys. And that allows us to get the lead off of on a regular basis. So together, these 2 features allowed us to produce lead using less energy, that's the key point. And so over this summer, when we discovered this problem, we were faced with a choice, do a workaround. We quickly figured out a couple of ways of getting the lead off the table. But the thing that I was concerned about was we didn't really know why we had a problem. And what I believed then and what we've proven is that, if you figure out the root cause to a technical problem, there is often an opportunity to improve that process. And essentially that's exactly what happened. So when we add the fixtures to the sticky lead problem, that's actually allowed us to produce lead now using less energy, and we made an announcement about that recently. And essentially, we now are producing lead at the target rate of production, 13% to 14% less energy usage. And we think that gives us longer-term potential to increase throughput. So that's sticky lead. What I'm going to talk about now is the -- how we go about retrofitting that and ramping our production of AquaRefined lead? So what we've developed is what we call a fix kit. It's a kit of parts that goes on to the existing AquaRefining modules. With that developed, validated in and in regular use. We're now totally focused on retrofitting all of our AquaRefining modules with this fixed kit. And the fixed kit itself consists of new electrolyte manifolds, basically pipe and modified exit chutes with the pneumatic tilt feature. All of the key parts for the 16 fix kits are now on site and retrofitting of all of those 16 modules has commenced. And one of the things that's important to note is that we planned the retrofit of the fixed kits. We planned that campaign, not as a campaign, not a rollout. This isn't Orange County choppers with people jumping on one thing at a time. It's actually planned as 16 modules that have been disassembled, ready to accept the kit of parts and then with teams of people who have been trained up to do a specific task in the retrofit. So we're now entering a very intensive phase over the next 3 weeks, as we take the modules that are being prepared to accept the fixed kits and we actually have them in. So the 16 modules are organized in what we call 2 trains of 8 modules. Each of the -- so the 8 modules in 2 lines or 16 modules in 2 lines of 8. We call those trains. Each train of modules has a group -- 2 groups of 4 modules. And moving forward, our goal is to have all of the fixed kit applied by the end of March and to have initial runs on the first group of 4 modules in play before the end of March, and then ramp up the rest of the AquaRefining facility and start producing quantities of AquaRefined lead during quarter 2. And that covers the retrofit of the components to the modules that we already had on site and then how we ramp up production in that site. And the real key here is to get the fixed kit applied by the end of this month, have 1 of the group of 4 modules operating by the end of this month, bring the rest of the modules online and then move progressively from daytime operation to longer periods of operation to 24-hour operation, as we move through the quarter 2. So now I'm going to talk a little bit more about the overall ramp-up of the operations in the facility. And just really want to pick up on some key themes here. And the first thing is that we made some more major changes during 2017. We changed the management. We changed supervisors. We brought a new plant management process engineering, environmental health and safety and maintenance. And we moved the technology -- the leadership of the technology and engineering group to trig [indiscernible] during 2017. And basically brought all of the engineering and science team from Alameda up to Reno and located all of our activities here. And we're now really seeing the benefits of that. There is a time delay in implementing changes and sweeping is the ones that we made, and we're now seeing the benefits of those multiple organizational staffing and equipment changes that we did -- we talked about during 2017, and we're now seeing the benefits of that. So in essence, where we're at now is we reported earlier last year challenges in our breaking and separation, well that's now working. The desulfurization and digestion processes, which is essentially electrolyte production, led there in operation and ramping up the throughput to meet the needs of AquaRefining. And one of the key themes here is that we're really running the facility to feed the AquaRefining modules. We've proven at the break, it works, we've proven that desulfurization works. We've got everything in place. So we're really ramping things up to feed the AquaRefining modules as we bring them online. And essentially, the overall thing here is that we're now starting to function as an operating facility. I'll talk a little bit about how we actually plan to ramp up our lead products is -- there's a number of different ways you can do that. And essentially, what we've got in place right now is 2 50-tonne lead kettles. We've got an additional 4 kettles in place, but not fully built out and that to be added as we need them. We've had operators of ours work with JCI, we've got a tremendous amount of help and commitment from JCI by providing assistance with both operator training at their facilities and then we follow up training of those guys in our own facilities. And that's been a tremendous help towards the -- helps de-risk ramp up and it has the potential to accelerate supplier approval, our approval as a supplier of high-purity lead. But it also gives JCI some insights and helping how we go about planning together the retrofit of JCI's facility. So that's the backdrop to what we're doing on preparing to ramp up their products. The important point to note is that the product progression. So basically, we're going to start by making lead bullion. Lead bullion is a commodity grade of lead. It's -- if you look at any metals or materials company, it's routine to start off by producing the high volume, lowest risk version of their product. And in the lead world, that's bullion. So we're starting with that and the AquaRefined lead that we've made, and we'll continue to make and the lead that we call direct to kettle, that's the lead that's harvested directly out of the batteries, it's soft lead and the grid lead, all of that is combined into a standardized lead product called bullion. And then we plan to progress directly to the high-purity grades of AquaRefined lead, and we need to build up the production of the AquaRefining modules to get the production rate sufficient that we can bring a dedicated lead kettle online that we will fill with high-purity lead and used to produce high-purity lead. And then, last, we're going to progress to specific alloys that meet JCI's specification. And in this sequence, there is a slight change. We had initially thought we would start with bullion, then we progressed to lead alloys, and then finally, moved to high-purity grade. We've actually brought forward the plan to progression to the high-purity grades of AquaRefined lead and we're pretty pleased that we were able to do that. So moving on. Let's talk a little bit about intellectual property. The important point here is that our first key patent has been allowed in the U.S. and 5 other countries. Our first patent is main devices and methods, the smelters recycling. It's absolutely key. It's been allowed in the U.S., Canada, Korea, Japan, Australia and South Africa. Many other countries are in play. We just got some encouraging notifications from China and several other countries. The important thing is that, that first patent was allowed with substantially all of our claims intact. I mean, to say so, pretty significant prior ops in the field of electrochemical plating of lead. And we believe that, that has generated -- first of all, it's a significant achievement and there is quite a significant amount of skepticism about whether we would be able to achieve that earlier last year and we have. And this achievement establishes a very important precedent on priority, [ prior our ], patentability. And we'd, obviously, not going to stop there. We've got 7 additional patent families filed and pending. And we are -- actually have been filing next-generation filings, and that started with some provisional and the one U.S. filings. And we're pretty pleased. There was a lot of hard work both from the technical and the legal teams in prevailing with our first patent. So it's established a phenomenal precedent and we're all pretty pleased, and I'm tremendously proud of the team for achieving that. So with that said, I'm now going to hand over to Tom Murphy, who will take us through the summary of the financials in this quarter and the year-end.

Thank you, Steve. In the fourth quarter of 2017, we recognized revenues of $900,000 compared to $600,000 of revenue in the third quarter of 2017. This was a third consecutive quarter the company generated revenue. The revenue consisted of plastics and lead compounds. For the 3 months ended December 31, 2017, we had an operating loss of $6.5 million compared to an operating loss of $4.6 million in the fourth quarter of 2016. The current quarter loss was primarily driven by low production in our trick facility, product mix and ramp up costs. In addition, we continue to invest in technology, developments and process improvements. Net loss for the fourth quarter of 2017 was $7 million or $0.32 per diluted share compared to a net loss of $4.9 million or $0.30 per diluted share in the fourth quarter of 2016. In the year ending December 31, 2017, we recognized revenue of $2.1 million compared to no revenue in 2016. For the year ended December 31, 2017, we had an operating loss of $24.9 million or $1.22 per basic and diluted share compared to a net operating loss of $13 million or $0.85 per basic and diluted share for the year ended December 31, 2016. Net loss for the year of 2017 was $26.6 million or $1.31 per diluted share. This compares to a net loss of $13.6 million in 2016 or $0.89 per diluted share. We had over $22.8 million in cash and cash equivalents as of December 31, 2017. In the fourth quarter, the company raised approximately $13.8 million from a capital raise. Capital expenditures were approximately $2.2 million. For the first quarter, we expect to see similar levels of cash outflows from operations. In addition, we expect our CapEx will be in the $2 million to $3 million range in the quarter. We also received approximately $2.2 million in January 2018 from the underwriters, exercising their over-allotment option from the December 2017 capital raise. As we have discussed before, as we expand our business, we will need additional capital. Total revenues in the first quarter of 2018 are expected to range between $1.3 million and $1.4 million compared to revenue of $900,000 in the fourth quarter of 2017. The revenues will consist of plastics and lead compound sales. As we increase production in 2018, we believe that our operating results will improve as we ramp up production of our AquaRefining modules. Now I will turn the call back to Steve.

Thank you, Tom. So before we move on to the Q&A portion of the call, I would like to leave you with some key points. The first one is that we fixed the sticky lead issue, and we're fully implementing the retrofit. And I just want to take a moment to say, what an incredible effort the technical and operations teams did to achieve that. It took some time to understand why we were seeing something for the very first time in 4 years, where there was a tremendous disappointment, and head scratching as to why the modules have been designed and will operate and as we had expected and had every reason to expect. So there is a tremendous amount of hard work, and I'm absolutely thrilled with the performance of the team in doing that. It speaks volumes to what we've done. Understanding and fixing the issue that's helped us achieve higher efficiency. There was tremendous pressure to apply 1 of 3, what I would call sticking plaster approach is to the fix, and I'm glad that we resisted that and stoke out to find out why exactly we had the problem and implemented it. Because, actually, as is always the case, understanding the fundamentals gives you insights to improve performance. And right now, it's giving us a lower energy usage through a higher efficiency plating. But it also gives us the potential for some pretty significant future advancements. The second point is this has been a theme recurring for the last 18 months to 2 years now. We use a novel combination of recycling chemical, electrochemical and metallurgical processes. We believe we're unique in the combination that we've got. And that combination of processes is a situation and a set of operating conditions, an environment that is very different, not quite different, very different from a conventional recycle. And it took us a while to figure that out. Once we figured that out, we adjusted the management, the team, the technical team, the science team, the level of resources, the equipment and the focus. And much of that work was done throughout 2017, to adjust to this reality. And those changes that we made are really now yielding benefits. The facility here looks and feels like an operational facility. And I'm tremendously proud of the team in achieving that. Another absolutely key point here is that, we've been able to, we are, and we continue to leverage our relationship with JCI. They have been tremendous help to us and with passing key tests as an operational facility. And the last point is the most important one. Our focus is 100% on ramping our production of AquaRefined lead at the Tahoe Reno Industrial Center. This truly is groundbreaking world's first production of commercial quantities of AquaRefined lead right here in Reno. And this is our catalyst for growth. So with those thoughts, I'll hand you back to the operator. Operator?

[Operator Instructions] And your first question comes from Colin Rusch with Oppenheimer & Co.

I just wanted to clarify one point. So you're expecting all 16 modules to be fully mechanically complete exiting the quarter here, with the fixture. Did I understand that correctly?

Yes. To be specific, we will have the fix kit applied to all 16, rather we plan to have the fix kit applied to all 16 modules by the end of the month. And I'm watching the progress. I'm talking to the team daily, and they are confident that they can achieve that. It will be a challenge. But these guys are and gals are working really hard to achieve that.

And then to be clear, once the retrofit kit has been installed and then there is a series process to get the modules ramped up into production. So it's not a matter of once the kits on, we throw a switch, but it is fairly we got a short cut[indiscernible] to get 16 modules.

And my understanding is that you've been testing these individual subsystems and well balanced entire line kind of as you go, and so there is going to be some starts and stops along the way as you move towards overall continuous production.

So that's correct.

Yes. And then just in terms of the mix for the guidance for this quarter. How much of that is the plastic and how much of it is the lead compound, just out of curiosity?

We've never broken down the different components, but the lead compounds is the vast majority of that. Plastic is a nice byproduct, but it's not a huge revenue producer.

Our next question comes from Sameer Joshi with H.C. Wainwright.

Few questions. One relates to the fix that you did. The second relates to your timing of ramp up. And then also the status of JCI. So coming to the first question. While you were fixing this problem, did you do a risk analysis or an analysis of what other unknown issues could rise up and how we would tackle them in the future?

The answer is yes, we continually do risk analysis and continually challenge ourselves of what could go wrong, what could we fix, what is our contingencies.

And so you feel confident that an issue like this probably will not arise in the future?

Pardon me for being a little gun shy. We didn't expect ever to have a situation, where the lead wouldn't slide of the exit chutes. What I can say is that we now have a proven track record of being able to solve unimaginable problems occur as a huge surprise. And I've got a high degree of confidence in the team that should anyone of the risk factors that we've identified or not identified crop up, we've got the capability of dealing with it.

Yes, no. I think the pace at which this was fixed, that is commendable. Congratulations on that. Continuing on the same theme. On the cost side, the fit -- the fix kits, these -- were they a part of your CapEx expense? Or do you consider it to be operational expense?

They will be part of the CapEx expense, and that's part of what we're projecting the $2 million to $3 million for -- they're included in the $2 million to $3 million for the first quarter.

It's not even close to being that. But it's included in the CapEx. And another point that's probably worth making is that it is a pretty much 0 cost change for future module production. So we're not really added a huge demand -- any significant amount of cost to the overall modules going forward.

Right. So now that you have fixed this issue and you have outlined your process of getting to higher purity AquaRefined lead production. How does that correlate with your ongoing relationship with JCI and deployments at their facilities? Like, is it that you have to get your AquaRefined -- a high-purity AquaRefined lead completely operational before JCI starts implementing that, how does this work?

It's -- we're not actually -- first of all, there's a JCI team here today in the room next to where we're sat and they were here yesterday, and they are not strangers to this facility. And they -- we are working very closely with them, both where they can help us in the conventional technology. So that's taking the AquaRefined lead through the kettling and casting process where they've clearly got decades of experience and they have proven a tremendous help to us in that. But also having their guys on site, working with us, we can jointly see what opportunities there are for retrofitting our technology into their existing facilities. And I'm not really going to say much more beyond that. I'm not going to speak for JCI as to -- their timing and what is essentially under their control and their business.

Okay. So just one clarification. Do you have an internal time line for yourself achieving high-purity AquaRefined lead production?

Not one that we put into the public domain.

Yes, we do have an internal time line.

Yes.

We will go next to Ilya Grozovsky with National Securities.

So I just wanted to understand the timing of what April looks like in terms of getting these modules up and running in the setting groups of 4? How much time does each group of 4 need? And just to understand, do all 16 get to run for shifts in the month of April? Or is that much more spread out over the quarter?

So in general, the plan is to bring on modules in groups of 4, bring them online in groups of 4, and to bring operating modules up from daytime operation to day and evening to 24-hour operation. We've given guidance that during quarter 2, we plan to have -- by the end of quarter 2, we plan to have all of the modules in full-time operation either at or approaching 24-hour operation. Beyond that, we're not providing guidance.

Okay. Understood. And then the -- and then do you plan on producing high-grade lead in the second quarter at any time? Or is that a third quarter event?

We're actually making high-quality lead now. The challenge for us is to get the production of the high-purity lead to a level at which it would justify -- no, justify is a wrong word, physically be capable of dedicating a single kettle and casting line to the high quality -- high-purity lead, where the kettle is 50 tonnes of capacity, we need what's called a heal of pure lead to start the process that heal is somewhere in the region of 20 tonnes. So you basically you need 20 tonnes of high-purity lead, is what's known as a heal, you that and you use that to form and fill with a kettle and then you decant from it and cast from it as you add more pure lead into it. So the timing of the pure lead is really a function of the capacity or -- so operational capacity, the throughput of AquaRefined lead. And we can't give guidance beyond that.

You mean, in terms of -- is that a Q2 event or a Q3 event? You are not sure yet or are you not giving -- why are you not giving guidance? And I just want to be clear?

We're not giving guidance on that.

We'll go next to Bhakti Pavani with Euro Pacific Capital.

Just wanted to understand, once you guys are in full operation, you did mention that there will be 2 products, lead bullion and AquaRefined lead. Wanted to understand what percentage of would be each of those products? And would you may be able to provide some color on the pricing of those products?

So continuing with the theme that we started in 2017, we don't give guidance on product mix and we don't give guidance on pricing. One of our challenges as a materials company in this space is we are the only publicly-owned lead company. We only have, maybe less than 10 products in total, including all of the various grades of alloy that we would aspire to. And it would be very dangerous for us to put into the public domain percentages of wage and pricing. It will be very easy then for our competitors to back calculate meaningful commercial data from that. So we had to take the decision that we're not going to provide guidance on pricing or product mix.

Actually, with regards to pricing, I wanted to understand was, I mean, historically you have mentioned that you can receive a premium to LME, is that still the case? Or would it be fair to assume that?

It would be fair to assume that some of the products will certainly attract a premium to LME.

Okay. The second question with regard to capital expenditure. You did mention that in Q1, you expect the CapEx of $2 million to $3 million. Could you maybe able to provide information on the CapEx for the rest of the year?

We haven't given that out at this time.

We'll go next to Ben Padnos with DONE! Ventures.

Just as a follow-up to the previous question. I do think it would be helpful for investors to understand a bit more about the business model. Could you talk a little bit about projected economics? You maybe not now are at scale of AquaRefined lead productivity. I mean, I guess, I'm saying you buy a battery of x dollars per pound, what's the cost to run the process and what's the projected price or margin when you sell the recycled lead?

Well, I respect to the question, Ben. And I -- we struggle with this one. We're not comfortable with the fact that, we're the only publicly traded lead company. And we've taken a decision that we're not going to provide that level of granularity that you and others have asked for at this time. I think as we progress as a business, it may come to a point where we can do that. But there is a massive tension between providing meaningful data to investors and stakeholders and providing a really dangerous window into our business operations for what is a fairly aggressive competitive market.

Fair enough, I understand the competitive sensitivity, so I do appreciate that. I think it's a goal to get there, right, to give visibility and transparency as we mature as a business.

Absolutely, yes.

Yes, certainly, as the company gets up to full scale and operates for a period of time, it will become obvious what those economics are. And so it's really just as we're in this ramp period, trying to protect ourselves from attack from competitors.

Yes.

And secondly, just, you've already mentioned JCI. It's now well known. It's out in the market that JCI is conducting a strategic review of their battery division. It sounds like essentially considering putting the whole business up on the block. Do you have any color or commentary, or anything you could share?

Yes, absolutely. I think we're one of the first people to know that, that had happened. And I'm not going to say more about that, other than we were assured proactively that it would have no impact on the relationship between the battery division and us. And Brian Wycklendt at JCI was with us yesterday, and we iterated that point. And I think the battery division, if it is sold, is likely to continue to be a battery division for some point in the future. It is right now the world's largest lead acid battery company. And I don't see that spinning it off would be -- is demise. I think spinning it off could actually accelerate its growth. And so we don't see that it really impacts what we're looking at, may actually create some additional opportunities.

Great. All right. So we're on a roll. I know you said too but let me chirp in a third question. And it's really on competition. What are you hearing in the marketplace that's any potential competitive threat? We were first, but it's been a little longer than we thought to get out there. Anybody or anything that we're hearing in the marketplace that's posing a competition to what we're doing?

So no, it's a great point because when we entered in this market in 2014, we entered it at a point in time when the collective wisdom of the lead industry and the lead acid battery industry and they are not the same thing, was that everybody in these dogged attempted to do electrochemical recycling of lead acid batteries and that collective R&D have proven that it was not possible and not economic and, et cetera, et cetera. We took the view that every one of those initiatives were part of a company or an entity of which electrochemical recycling was a small part of their future going forward. We're different. We only do electrochemical recycling of lead. And I think that gives us a level of focus that maybe wasn't there with prior competitors. It would be foolish of us to imagine for a second that us coming to market wouldn't spur some of those closed research programs to restart and to encourage others to come into the market, and both at the industrial and the academic scale. One of the features of our technology is that we're proven and are proving that a branch of electrochemistry that is normally the sole area of -- dedicated to laboratory scale, let me put it that way. It was never before thought of something that could be scaled up. We've proven that actually it can be the case. And so we've seen an uptick in academic research. And we believe that one of the abandoned prior attempts to commercialize an electrochemical recycling technology has restarted. For me, the take-on is that we're still substantially ahead of the competition. Obviously, we're talking to companies who are in the lead and the lead acid battery industry. We're talking to actual and potential licensees. They're not shying comparing those 2 alternatives. And from those conversations, we believe that we're ahead. I think we -- all it means for us is we have to run harder and harder and harder to stay ahead. Again, it would be foolish for us to assume that we wouldn't see competition. The thing where I draw a great comfort is that, as others have said before me, competition is one of the highest forms of flattery.

I think it's safe to say that -- and certainly to the best of our knowledge, we are the only one trying this at the -- and doing this at the plant level.

Yes, absolutely. Yes, that's a good point. And there is another feature that I kind of need to bring up and that is we got our patent, and we got -- the very first patent that we got is very all-encompassing is, something like 34 claims in it. Can somebody will count that and tell me that is not over. So don't hold me up for exactly 34 claims. But it's a very broadly encompassing patent. We knew going in that there's a -- that academic field and research field is very crowded and we had to do something quite spectacularly different to succeed in this venture. And we're doing something spectacularly different, we got patents on something that we believe is spectacularly different. So I think our patents has put us in a tremendous position with respect to competition. The competitors that we're aware of are using the same old technologies that didn't quite make it before and falling over some of the same problems we suspect, I don't know. They are going to face the same problems that they faced previously. We think we've carved out a completely virgin space in intellectual property and, as Tom just mentioned, a commercial scale operation.

And that concludes today's question-and-answer session. At this time, I would like to turn the call back over to Dr. Steven Clarke for any additional or closing remarks.

I just want to say, thank you. I think we've made a tremendous effort over the past -- it took a couple of quarters. As I said before, we hit a problem we didn't expect to hit. We solved it and we solved it in a pretty resounding fashion, not only solving a problem, but actually deriving benefit for the business and solving that problem going forward. So I just want to say thank you very much for participating in the call and thank you for your continued interest in following us. Thanks.

And that concludes the Aqua Metals' Fourth Quarter 2017 Corporate Update Call. Thank you for your participation. You may now disconnect.