Aqua Metals Inc (AQMS) 2017 Q2 法說會逐字稿

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 the Interstate Batteries, and 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 operations, 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 knowhow, 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 to not 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. Steven 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, I'm just going to give you an outline how I propose to go through the remaining of the call and I'll get on with it.

So we just finished quarter 2, and there's a 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. So we're now producing AquaRefining lead, again a world first. In this quarter, we've secured our first 2 international patents. The first of those being in Korea, and the second one following shortly afterwards in Australia. We made our first acquisition. We acquired UK-based Ebonex IPR Limited. We just appointed Mark Weinswig as the CFO effective tomorrow. We've hosted several analyst and investor visits to our first AquaRefinery. And we've received several accolades, including our second Platts Global Metals Award and then award by the San Francisco Business Times Technology, the Technology and Innovation Award, which is really pleasing to win. So those are the highlights. 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 have we learned? What have we done? Where are we? Where are we 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 the CFO succession. Tom Murphy, our current CFO, is going to go through the financials and then I will summarize. But you'll see there on the second line, the second bullet point is a comment about 48-volt vehicle batteries. We believe that there is a massively underreported revolution and the early stages are taking place in the lead industry.

And I'm going to talk a little bit about that after the operational update, is that what I believe is an important context for where we are as a company, where we're going as a company and the scale and 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've mentioned before in previous earnings calls that we had identified some issues around conventional breaking, and we were making some improvements in installing. And we've done that. They're installed, successful and I'm pleased to say that breaking and separation is operating reliably.

Following on from that, we were able to commission and scale up the Aqua preparation area. That's where we made the electrolyte for the AquaRefining. 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 assembly. Modules 1 to 4 are 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, we now are producing lead in sufficient quantities to warrant the commissioning and operation of the ingot line that's taking place this week. So I'm going to expand on some of those points now. Let's start off with the breaking and separation area.

I'll move to a 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 breaker, which is a box at the top of the equipment in the photograph. And the 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 ours inside a soundproof and environment-contained box. Essentially that reduces the noise levels in the facility, but more importantly, it provides an atmospheric control around the breaking equipment to control dust. So you'll notice that, that -- how clean the equipment is in a photograph. That's normal for us, but quite unusual in many parts of the battery-breaking industry. And what we can see also in that photograph is various feed streams leading into super sacks, 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 determined that there was a need for us to operate our breaker at a higher level of separation than 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 a home for and put them in to smelter. So we have to operate our smelter at a much higher standard. And what we did to get there was we leveraged 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 us to be at this position in having our own IP around battery breaking and separation. And this is important to us in the sense of, if we are building our own stand-alone AquaRefining facilities, then we need the ability to break and separate batteries at a far higher standard than those currently commercially available elsewhere. And we've achieved that. That's important. Those improvements will continue, and our expectation is that with -- over the next 2 or 3 years, we'll 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 bat -- the electrolyte, which is what we call "Aqua preparation," which is where we take the active material, the oxide, the sulphates and convert them into the electrolyte that we use to feed to our AquaRefining systems. And similarly, we looked outside of our own skill set and we looked to leading players in the chemical industry to bring techniques and best practices from the specialty chemical industry to bear on that process. And not only is it commissioned 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 4, which is pretty considerable. And I believe it's a remarkable testament to the hard work and effort of the technical and operations team in achieving that.

And moving on last, but certainly not least, we now have the AquaRefineries, 4 AquaRefinery 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 us. It's a first for our facility and it's the first for the world. We've made some pretty significant advances in the commissioning of the equipment and whilst we're waiting for some of the other processes to go online. So I'm just talk about a few of those. We simplified the design of the modules and reduced some of the components. We've made a fairly significant reduction in plating voltage and the energy required with significant -- I'm talking in the 20 percents. 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 lessons and working to develop a simplified installation of modules in a simplified configuration, so that we're looking at significant cost reductions and performance improvements going forward.

So going back to that point I made earlier, AquaRefining works. We've got 4 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. 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 on the previous slides, with all of those improvements and upgrades, we have now far more battery processing capacity that we can utilize with the 16 AquaRefining modules that we've planned for installation. And we have the option of producing and selling lead components from unused 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 lower value and a less established market than lead alloys. And moving forward, our focus is really about the AquaRefining 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 at less than 120 tonnes a day, but we've maximized AquaRefining, and we're looking to change our product mix to a higher level of AquaRefined product.

So just finishing off this slide, the key point is that we're AquaRefining. It's a 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 the "where we are now" and I'm going to move into "where we do go next." And to provide some context to that, I'm just going to take a step sideways. Why don't we really provide some important context. 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 Reuters. You're going to get it from hard-bitten industrial journalists, who've worked in the battery, lead acid, [lead] mine and other industries for decades. And one of those periodicals is Batteries International, and other one is Battery and Energy Storage. And this month, Batteries International have put out an edition that is entirely focused on what I believe is a massively under reported revolution that's underway in the lead industry. It's at early stages, but it's 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 states 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, advanced stop-start and semi-autonomous and autonomous operation. So there is a new 48-volt automotive standard. And given that the vast majority of lead acid batteries enter the automotive sector, that is the giant 800-pound gorilla in the lead acid battery market. A new standard is potentially a revolutionizing and game-changing step. So what's happened as a response to that is that the lead acid battery industry is starting to respond with the development of 48-volt, what are known as "bipolar batteries." Now it's 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, 1 side of an electrode is positive and the other side is negative. I'm not going to go into a science project today. But what is happening is, the lead industry's 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 at 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 lot of other markets and applications for batteries.

And so why is that important? Well, if you consider wide-scale adoption of that 48-volt, bipolar, lead acid battery, now that can make lead acid advantageous in applications that are generally considered the realm of lithium-ion batteries. It also means that materials of construction and the methods of manufacture are quite likely to change. The 12-volt battery was developed in the era of, essentially, book of chemistry, [prefix] and microscopes. More modern, supposedly advanced batteries were developed in the era of quantum mechanics, fractal crystal mechanics and tunneling electro microscopes. If we're going to have a new phase of development of lead acid batteries, it's quite likely that the modern tools and techniques will 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're made from.

So how would we potentially affect Aqua Metals and how could Aqua Metals benefit? What we are seeing is a potential high demand for Four Nines lead and a new market for Five Nines lead. Cycle life of active material is really a function of the purity of the lead in that active material. So Four Nines gives you high cycle life. Five Nines gives you even better cycle life or that's the theory. And in our AquaRefined product, the stuff that we're making already, we're achieving Four Nines and we're well on the way to achieving Five Nines. We're expecting that also to lead to the need for advanced materials, such as the nano structured ultra low-density lead, that I've mentioned previously and I talked about in our last earning call. And it's also likely to mean a need for corrosion-resistant substrates or as they're currently known, lead grids.

That's kind of what we see coming along. It's 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? As I said, we've been watching these and trying to build this into our expansion strategy. So in terms of building our own additional facilities, it doesn't really impact us. We're still proceeding as planned. We're looking to add 4 to 5 facilities of nominally 160 tonnes 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 our product to produce more AquaRefined lead and less grade alloy, partly because there's a -- we're seeing a higher demand for Four or Five Nines lead and we think we'll be in a very interesting and advantageous situation to being able to provide that. And because we believe that's our lead product, is our core defining product. What we're 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 the used lead acid batteries to us, 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. and using technology that doesn't involve smelting. That's not my words. That's theirs.

We also believe that there's continuing potential to add strategic relationships that would accelerate our build-out fabulous strategic relationships on the supply and uptake side, and we think we can add to that with strategic relationships which will help us build out facilities faster and at 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's no secret that we've had some delays. I've talked about them before, and we're overcoming them. All of that has really been driven by a need for us to build a standalone AquaRefinery that doesn't have a smelter. Our licensees are not particularly looking to start 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 their permits. 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 -- the experience we've had so far with running 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 start 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 what a 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 to talk about that, when they're comfortable to talk about that. The other thing is that we're also continuing to generate such strong interest in the slide. There's 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 this theme around 48-volt and what's happening in the lead industry. What we're seeing is potential markets through our advanced materials and novel battery production equipment. So that's all right. (inaudible) will probably be next.

And in our first bullet point, I talk about the IP strategy focused on materials and methods. You're going to hear that phrase a lot from me, and you're going to hear that phrase a lot from this company moving forwards. We are a materials and methods company. We're not a lead company. We're starting out as a lead company, but we are a materials and methods company. What do I mean by that? Well, the core of our business is to deliver advanced materials to the lead acid battery industry through proprietary methods of production. And to do that primarily through the supply of licensed equipment, and we're starting with AquaRefining. But we don't expect to stop by 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 our 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 prove an awful lot of people wrong. The lead acid battery industry collectively wrote off electrochemical methods or hydro methodology methods of battery recycling 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 and it couldn't happen. We proved that wrong. And in a sense that's great and in another sense, we've actually opened the door again for other people to become interested in the electrochemical recycling of lead acid batteries. And so we prepared for that with 20 patents applied for in 20 countries. That is a massive IP undertaking. We chose to obfuscate and, where possible, bury some of those patent filings in confidential filings and proxies and whatever we could, because we know people want to know what our IP is and they want to get sight of it, and they want to know what we're working on, so that they can be working on it too. So part of the defense of an IP strategy's not to be too up-front about exactly what it is we're developing and patenting it's very clearly, it needs to be as secretive as we can make it until those patents are issued. And talking of patents issued, the first 2 have been granted. The first one was in Korea, followed rapidly by 1 in Australia. And we actually chose the Korean Intellectual Property Office or "KIPO", as it's known, as the lead examining authority on the belief and a hard-fought belief that KIPO is pretty forward and what I can tell you is our first patent went through the wringer with KIPO

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every aspect of our first patent was questioned, queried, second-guessed, and we prevailed. And we prevailed with all key claims upheld. And that's important, because it sets a really powerful precedent through all of our other continuing patent applications. And on the IP front, we also -- as we mentioned earlier, we made our first acquisition. We acquired Ebonex IP Office shares and the purpose of that was actually to give us additional complimentary IP. And the 2 broad streams of IP that we acquired were the rights to Ebonex, which is chemically Ti407, often referred to as Magnéli phase conducting sub-oxide of titanium. That's a bit of a mouthful, but we'll 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 grid material in a lead acid battery or as a substrate for a bipolar lead acid battery. But I've got to stress the word "potential." This is an RD-labeled project. We bought 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, but we've got a long, long way 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, manufacture processes, knowhow and IP around bipolar lead acid batteries. And that again, I will stress, is R&D phase. There's a lot of work to be done. But we acquired some really, we believe, useful IP around how to make bipolar lead acid battery.

So that, again, adds another strain to that theme of materials and methods, but I don't want to say -- I don't want to give anybody any impression to we're about to jump into building bipolar batteries. We're not. We're about providing materials and methods to the lead acid battery industry to allow it to be the best it can be. So moving on, I'll 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, long-time associate of ours is retiring, and going into a transition period. And he will remain a consultant to help with existing projects and the fountain of knowledge that he is 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 and methods companies that are publicly traded. And we view him as a, obviously, a key contributor going forward. But I really want to say a massive, heartfelt thanks for Tom for his contributions. I wish him best on his retirement, but he's -- not too soon, because he's not retired just yet.

I'm about hand over to him to take us through the financials.

Thank you, Steve. And as Steve mentioned, we're pleased to announce that Aqua Metals is now generating revenues from our TRIC facility. In the second quarter, we've recognized our first revenues of $603,000. The sales consisted of Plastic and Lead Compounds. For the 3 months and 6 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 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 noncash 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 are most life changing moments. I turned 65 this past April and had a health issue.

Although not affecting my quality of life now, it will in future. The company is that the 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 4 years during my tenure. In 2013, 5 of us formed in the proverbial shed what became Aqua Metals. The first AquaRefining module prototype was successfully run in late 2013. In June of 2014, Aqua Metals, the 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 AquaRefiner unit. It produced 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 2 -- less than 2 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 (sic) [Batteries] 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 AquaRefinery module installed in TRIC. In November, 2016, we completed the secondary raise of $23 million, which helped 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 revenue 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, and any of you who have met Tom will recognize there's a slight joke in that, as well. Always the tallest guy in the room. Okay, so I'm just going to round up now with some key takeaways and, some of which, Tom has alluded to already and we mentioned before. We recognized our first revenue in quarter 2 '17. And 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 rollout with our current partners and we've got strong interest from other potential licensees.

We've achieved important IP precedents with our first 2 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 upside opportunities for AquaRefining lead and for our development stage materials and methods. So basically, we've work 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 Cathy to handle questions. Thank you.

(Operator Instructions) We will go first to Colin Rusch with Oppenheimer & Co.

Kind of start with a housekeeping question. In terms of the cash in question, 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 6 months of the year, the net cash used in operating activities has been $9 million, and purchase of property and equipment for that 6 months period is $5.6 million, a little over $5.5 million.

Okay, that's extremely helpful, thanks. 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 what we might think about in terms of incremental customer wins over the balance of the year?

Sure, I'll take that. In terms of providing material for people to test with us, that's kind of 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 -- against the level of interest that we have there. The additional licensees coming from battery companies and lead companies, we see it as -- it's 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're a 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 want to go 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 arrangement. And so the priority for us is to begin the rollout within JCI and then move on to working with other licensees in addition.

We will go next to Bhakti Pavani of Euro Pacific Capital.

Just quickly on the operations 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 shifts are you currently running?

We're currently running 2 shifts of 10 hours each, 4 days a week, and that's, that's deliberate. We reorganized a list-- our original shift pattern. What we want to do is have all operations working at the time when we have got technical expertise on site, both to help if there is an issue, but more importantly to learn from the operations. I've mentioned in our last earnings call and -- that we are moving the basis of continuous improvement from Alameda to Reno and that's now happened. We've -- some of -- many of our technical staff are on site 3 or 4 days a week now in Reno, taking the opportunity to work with the full-scale equipment, working to look out where we would go next for our own facilities and the licensees.

Okay, perfect. Just one quick one on the housekeeping side. What is the expected CapEx spend for the remaining 2 quarters of this year?

Approximately in the $5 million to $6 million range.

We will go next to Ilya Grozovsky of National Securities.

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

Thank you. I appreciate that, Ilya.

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

Yes. And this is the plan, earnings guidance. But no books. 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.

Okay. And is that 5 through 16? Do you run them -- are you going to install them in 4s or are you going to kind of 1 at a time? I just want to get a little bit of the sense of kind of this how this scales up from between now and December?

I think we're likely to be running them 1 at a time as we install them, install them and then commission them. We've not actually formalized that plan yet. So I can't give you a clear guidance on whether we'll commission them in batches or commission them individually. But what I can tell you is that module 5 is half built; and module 6, 7 and 8 are on site; 6 and 7 about 1/4 built; and the balance of the equipment is in Alameda being assembled.

Okay, got it. And then from what you've seen in 1 through 4, you said you're running it at 2 shifts, 10 hours per shift and 4 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 tonnes 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 in current regimes, different temperatures, essentially 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 modules in different locations. Ambient temperature has an impact. Elevation has an impact. Weather has some measurable impact. It's not huge, but it's there. So the first thing you need to with a large-scale hydromat facility, which essentially, that's what this is, is fully map the process. So the next month we'll be doing that, we're really not going to give guidance to how many tonnes we'll get during the balance of quarter 3 or even quarter 4 for that matter. The really important part for us 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 a very precise answer, but it's the truth.

Okay, that's fine. 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 the important point, there's some sort of a misconception in the market that ramping up the first-of-kind facility is a linear process. It really isn't. It's an exponential process. You've got equipment that is rate-based. You've got hours in which you can run the equipment and you got percentage of time. So you've got a factor x a factor x a factor. Our expectation is quite modest for Quarter 3, that we'll be largely flat in revenue. We're not expecting to see a big growth in revenues until the back-end of quarter 4, as we ramp up the final modules and we really start cranking on them.

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

Tom, it's special to be part of a disruptive technology company and your role has been critical from the beginning. Well, as you guys know, I and -- my family members and our family company is in the scrap metal processing and recycling business back in Michigan, and we view what you're doing as among the most exciting things to happen to the industry in generations.

Thank you.

Well, you're welcome. And at the same time, we have this -- this is more of a tactical, stock-related question. There's a -- 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 infamous Seeking Alpha article. It's a bit like asking me that famous nonsequitur, "When did I stop beating my wife?" There's no logically possible answer to it. I've tried to unpick the strands of that ridiculous article. And for that short feces to be correct, I'm a scurrilous fraudster, nothing works, who chose to raise upwards of $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 online. I mean, there was some commentary about the acquisition of Ebonex being a related 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 -- had no dealings with it for 20 years. Though as the strand there, we bought a giant distraction when we should have been focusing on what we were doing, and I would argue it really wasn't a distraction at all because we put almost no effort into it and I don't mean that in the prejudistic sense, I just mean that we're focused 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 pay off in the future. One of the other strands was that AquaRefining just doesn't work. Well, we've had upwards of 90 people through the facility watching it work now and at some point, some of those 90 people will start communicating to the guys who are holding the short positions and explaining how it 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 misbelief that 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 1 one or 2 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 shirts will eventually go away and it may not be overnight, unfortunately, is this works and we'll have comfort level and being able to leave, because this works.

And as Tom said earlier, it worked the first time we turned it on. I mean, you've got to recognize that we actually -- we put our second mortgages, 401Ks and kid's education funds into founding this businesses. If this is a get-rich-quick scheme, please show me where I got rich. I haven't monetized anything from it. I've not sold a single share. And the reason we were happy to look our spouses in the eye and say, "I'm going to write another $100,000 check tomorrow, Darling" was 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 in kind of an open forum, because they are 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 that, that will bring the earnings call to an end. Thank you all for joining in. 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.