Thank you for standing by. This is the conference operator. Welcome to the Aqua Metals Fourth Quarter 2018 Corporate Update Call. As a reminder all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask question. [Operator Instructions] I would now like to hand the conference over to Alison Ziegler, Managing Director of Darrow Associates. Please go ahead.

Thank you, operator. Welcome to the Aqua Metals year-end 2018 conference call. Earlier this afternoon, Aqua Metals released financial results for the year ended December 31, 2018. This release is available on the Investors section of the company's website at www.aquametals.com. Joining us for today's call from management is Steve Cotton, President and CEO; as well as Judd Merrill, the company’s Chief Financial Officer. During today's call, management will be making forward-looking statements. Please refer to the company's annual report on Form 10-Q filed today for a summary of the forward-looking statements and the risks, uncertainties and other factors that could cause actual results to differ materially from those forward-looking statements. Aqua Metals cautions investors not to place undue reliance on any forward-looking statements. The company does not undertake and specifically disclaims any obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur except as required by law. And with that, I’d like to turn the call over to Steve Cotton, CEO of Aqua Metals. Steve, go ahead.

Thanks, Alison. Good afternoon and welcome. As you read in today’s press release we’ve made significant progress readying the company to scale our AquaRefining operation in our McCarran, Nevada facility, and with the help of our new strategic partners, we are positioning Aqua Metals to expand on a global basis. Let me first update everyone on today’s announcement of our new strategic partnership with Veolia North America Regeneration Services. Veolia is a multi-billion dollar global leader in operations management known for their commitment for sustainability and the circular economic business model. Today’s announcement comes after months of mutual due-diligence from including engineering process review, mass balance of the plant which identifies all material flows detailed in the financial modelling. Under the terms of the initial two year agreement Veolia will provide operational and technological expertise and organizational capability in a clear state process in chemistry, and will also take on responsibilities for operations, supply chain, off take and management of the plant. The agreement has been structured to ensure that both company’s interests are aligned in reaching our goals scaling plant operations as the 16 module of AquaRefining capacity by the end of 2019, and future rate increases in 2020. Veolia team mates will officially begin working onsite beginning on March 4. Longer term, we believe that having Veolia manager operations at the McCarran plant will also enable them to provide go-to-market support as we seek to deploy our technology on a global basis, facilitating our transition to the next phase of our business strategy to become a capital like technology licensing organization. Veolia’s size and technical regeneration capabilities are expected to provide valuable and additive expertise as we execute on our business plan. We chose a partner with Veolia for its well-deserved reputation as a global leader in operations…

Thank you, Steve. For the year ended December 31, 2018 we recognized revenue of 4.4 million, more than double the reported revenue 2.1 million in 2017. Increased sales of aqua refined led and our product mix as well as having a full year of operation in 2018 versus approximately 8 months during 2017, led to the increased revenues for the year. For the fourth quarter of 2018, revenue was 1.1 million comparable to 1.2 million reported in the third quarter of 2018. As we stated previously, in order to conserve capital we have limited our aqua refining operation to one or two modules at a time, while we complete phase 1 process improvement. Aqua refined led comprised 50% of total revenue during the fourth quarter of 2018, with the remainder from the sales of metallic lead compound and plastic from lead acid batteries. In 2018, cost of product sales above target levels and can be attributed to a number of items including but not limited to a greater loss of electrolyte in the aqua refining process. Business being addressed with phase 1 and 2 process improvements that are being blocked online during 2019. General and administrative expenses more than doubled in 2018 to 14.2 million due to various non-operational items that totaled approximately 6.5 million and should not be repeated in 2019. These include a 2.5 million accrual of key man penalties, 0.9 million in legal, proxy and solicitation fees related to the shareholder proxy contest settled in April 2018. 1.8 million of severance accrual, a net 0.4 million non-cash charge associated with modifying a warrant in connection with our settlement agreement with Interstate Battery and a 0.8 million non-cash write-off of leasehold improvement at our California location. We also spent 0.6 million on legal fees associated with shareholder losses…

Thanks Judd. This is indeed a very exciting time for Aqua Metals. Page 1 of our capital program is nearly complete and we remain on track to conserve 75% of our target for electrolyte recovery, which will boost contribution margins significantly to allow rational scaling and production starting at the end of Q1 and continuing in to the second quarter and beyond. The company has already run a successful pilot program for the phase 2 solution of the capital improvement program which along with conserving additional 25% of electrolyte and generate higher yield for the auto refining process, further improving contribution margin. With final designs related to phase 2 complete, a full size dryer equipment has been ordered whose benefits are likely being realized in the third quarter of 2019, given a long lead time to deliver. After our first 4 months it was up and running in Q2, our plan is to bring additional auto refining production online four modules at a time over the remainder of 2019. Our partnership with Veolia can provide significant report as we look to scale production. Our relationship is structured so that Aqua Metals and Veolia are aligned to reach our target of 16 modules in production by 2019 year end and additional modules in 2020. And with our recent fund raising, we have the capital in place to allow us to direct our focus on operations and achieve our 2019 goals. Regarding Johnson Control power systems division, with the pending acquisition by (inaudible) Capital, we have strengthened this relationship by instituting project management for transparency and making progress on key milestones. Having received formal vendor approval, we are now regularly shifting AquaRefined lead at (inaudible) and continuing to work closely with our teams we prepared to visit the nominated first site and enter negotiations for a joint development agreement in April 2019 with a date to enter to the development program no later than June 30, 2019. We also see opportunities for additional partnerships given the growing demand for high purity lead to improve product performance life cycle, and we are working with the prospective lead buyers in and beyond the battery industry who are seeking ultra-pure lead for which we could receive a higher premium. Finally, before I open up the calls to questions, I want to publicly thank all of our employees. While there will always be challenges in scaling a first of kind facility, we could not be more proud of the hard work and dedication of our employees to get us to where we are today producing high quality AquaRefined lead. Our team is confident that 2019 will continue to a transformational year for Aqua Metal. We thank you for your continued interest in Aqua Metal and we are now ready to take questions.

[Operator Instructions] Your next question comes from the line of Colin Rusch with Oppenheimer & Company. Please go ahead.

We’d love to understand some of the financial arrangement with Veolia at this point. What are the puts and take here, you mentioned that you want to align all the parties. So can you give us a sense of what the financial agreement is and how the alignment is actually in place?

The Veolia front, the nature of the relationship is to start off with the cashless model where we work with them in the form of equity and details of that can be found in the 10-K, but the arrangement part of it is really about – overtime with Veolia getting more involved with the business and taking a stake in the business through that methodology, we feel that we’re well aligned as we continue to work together to get AquaRefine where it needs to be in charge.

Okay, I’ll take it offline. And then with JCI obviously, with the transition affecting the battery business there’s a lot of questions around the strength of the relationship and how active it’s been with a new owner. Can you just speak the interactions that you’ve had with them, kind of the consistency of those and how closer is at this point as you start to enter in those negotiations?

The JCI relationship is strong. We have plenty of interaction with them especially as described in the call how we got through the certification with them on AquaRefine lead. So that was quite a bit of work that we had to do together to get to the quality audit and the environmental audit and everything associated with that. So the name just on going forward with Johnson Controls as this point is rushing towards that joint development agreement and April is when we will commence the discussions for the joint development agreement as already planned and we’ll be getting that by visiting the dominated site. We can’t say where the site is, but we’ll be working together between April and June and as per the agreement we’ll come out in the month of June with our joint development move forward agreement. So, plenty of engagement, plenty of conversation on many front both in the lead uptake from the plant as well as the joint development agreement. So we feel really good about that relationship and we think that also with the addition of Brookfield coming in acquiring Johnson Control Power Systems division. There’s going to be even more opportunity as we progress and they become basically their own entity and move forward in 2019 and beyond. We are really tight and bullish about that relationship.

The next question comes from Ilya Grozovsky with National Securities. Please go ahead.

So just on housekeeping side, what was the share count at the end of the quarter?

At the end of the year it would be at 38.9 million shares outstanding.

(inaudible) about 44 million.

And then if you back out, were there any one-time items in the fourth quarter expenses because those were a bit, the explanation was for the year out of 14 you identified about 6 something. But what was the – were there any one-time items in Q4?

Yeah, one of one-times items were in Q4, the 2.5 million (inaudible) accrual that we talked about was in Q4. There is a $0.8 million severance accrual right off of our channel improvement or about 0.8 million was in the fourth quarter. I think that makes up most of the fourth quarter item.

And then just trying to get a better understanding of this agreement with Veolia, so are you paying there, are they paying you, how is this working? Or it sounded like based on the previous question, you’ve given them some equity, you’ve given them some shares or just kind of – because I don’t have any 10-Q in front of me, the 10-K rather. So given that it will take time to get out there, kind of wanted to get a better understanding between now and then?

Ilya, this is Steve. So its operation, maintenance and management agreement, and the way that we’re remunerate them in a cashless form and that will progress towards that alignment that you’re talking about. So the details are in the 10-K but I guess all of the details, you can take a look there.

[Operator Instructions] Our next question comes from Bhakti Pavani with Alliance Global Partners. Please go ahead.

Just a quick one on the improvement in contribution margin, you did mention that at the end of the phase 1 you would expect the contribution margin to improve to 75%. Just kind of getting my thought process here, do you plan to or do you intend to touch this core module for some time to see if you are actually generating 75% of contribution margin before you implement phase 2 and bring along additional modules, what’s kind of the thought process here?

In terms of the contribution margin driving the position of scale, I assume that’s what you’re asking?

Yes.

So we measure contributions margins throughout the month, as we’re getting in to Q1 and we’re getting more and more confident and the positive direction of that contribution margin is getting very close to our target, which is why we are planning the scaling that we announced as we get to the end of the quarter and in to Q2. So the addition that you’ll see in the press release with earnings announcement, you’ll see some pictures of the facility and the improvement that have been made there, all of which contributes to the contribution margin. One of the big ones is that filter perhaps if you will see a picture of which required a lot of concrete steel and everything associated with it. That’s the rest of the phase 1, all the electrolyte recovery and that will get us to the 75% as well and get us enough concentrate production to feed multiple modules than we can be (inaudible) the scale the facility just from a volume perspective. So we’re pretty much there in terms of our confidence and scaling the plant with a reasonable target contribution margin commencing late this quarter.

The other was a housekeeping question, you did mention that there were about one time 6.5 million non-recurring expenses in the G&A and then so get to your understanding those expenses will not be repeated in 2019, so I guess the G&A is going to be round about 8 million on an average, is that correct, from the modelling point?

If you look at last years’ 14.2 million of G&A and you dig out those one-time expenses that does go in that $7 million to $8 million range and that’s consistent kind of with the last year or two and it’s probably consistent with where we’re going for 2019.

The next question comes from David Green with Special Situation Fund. Please go ahead.

You guys said the details of all the transaction are in the K, when will the K file?

The K has been filed in [Dow Jones] and the SEC’s website.

Actually I (inaudible) now and it’s not there, at least I don’t see it.

I’ve got my notice that it’s been file and accepted. So, let me just point out we’re holding it out.

Can you guys describe the nuts and bolts of the deal with Veolia?

The nuts and bolt portion of it is better read from the K because there’s too much detail and too many numbers to look around here. But it’s not a single digit percentage of equity earned over time that you’ll see when you read it with some performance initiatives that are well aligned with my performance initiatives with my share options, David. So it’s paid over time. And the nice thing about the relationship from the starting point is that it does not consume cash. So if the company is doing everything it can to preserve and extend the cash runway, till we get the additional resources from Veolia without expend the cash to reap the benefit of their expertise over those two year period. So for the two years it won’t face direct cash impact on the company at all. So we’re pretty pleased with that because again in our view and then their view is aligning the companies towards the objectives of getting the plant to scale and then progressing to propagate AquaRefining globally and we were very happy with the way that we made those arrangements together and we were really pleased that they were putting some [skin] in the game that way.

The next question comes from David Brown, a private investor. Please go ahead.

In your press release on the phase 1 equipment that includes a filter press and a centrifuge system, are these standard off the shelf equipment and i.e. not a special design for you?

David yes, it’s pretty pedestrian equipment that’s off-the-shelf. They do have longer lead time, and as you’ll see in the pictures, you’ll see a picture of the filter press in the press release itself in the earnings press release. It’s quite a bit of customization around that standard piece of equipment in terms of your own electrical or your own plumbing or you own human machine interface, and the likes, including the concrete platform and the steel platform etcetera. But the actual technology itself is well known and well used throughout the world. So even --?

(inaudible) just standard specification with respect to performance, so what’s (inaudible).

So what you’re getting at, we are not really inventing anything now, we are intro-venting. The execution in response to the technology (inaudible).

Okay, that’s what I was getting to. And one other question on when you’ll be cash flow positive?

We’re not projecting exactly when we’re going to reach cash flow positive at a plant level or the company level. At this point in time but I’ll allow Judd to contemplate that.

As we haven’t given any guidance on cash flow, but last year we had a cash firm rate of about 7 million a quarter. As we enter 2019 and with a positive improvement the news that we’re moving in to we’ll see that come down and as we get closer to the 16 modules it will be quite a big improvement, but we haven’t given any guidance kind of on how that’s going to play out each quarter.

You got enough money for the next four quarters to keep going?

With the 21 million dividend a year even after – and we raised the net of 9.1 in January after we paid off the Interstate battery note, it puts us in a strong cash position to do what we need to (inaudible).

I’ve been with other companies where the technology was good but the money ran out. Not a good thing, so okay.

[Operator Instructions] We have follow-up from Ilya Grozovsky. Please go ahead.

Just one quick one, given that we have the opportunity for a new CFO here, what is the thought process right now on when the 16 modules are up and running, what do you think the plant can generate on a quarterly basis when its fully operational from a revenue perspective?

I don’t think we’ve given any guidance on that as well. We’ve put together some models internally and so it’s - 16 is a good place to be in terms of generating revenue and along with that comes all the improvement that we’re putting this year including electrolyte improvements and equipment improvements. And so once we reach that we’ll have a better idea of kind of where we’re at, but we have some expectations and they are all very, very positive and where we want to be.

I’m not asking in terms of guidance or timing, I’m just asking in terms of the math and the throughput. What does the math say it can generate given the current price of lead, if it was today for example, just from a revenue perspective?

That varies based on the cost of batteries, cost of lead, (inaudible) things like that. And so all I can say right now it’s a positive outlook and that we’re very excited to get to the 16.

This concludes the question-and-answer session. I would like to turn the conference back over to Steve Cotton for any closing remarks.

Well thank you all for your time today and we appreciate everybody’s support as we get ready to scale up our operations. And a reminder for everyone that this is a $20 billion plus market and the partners we have in place including the partnership we announced today with Veolia and our long standing partnership with Johnson Controls, we really have the bandwidth now to target this large market. And as a reminder if you haven’t seen the pictures of the recent plant upgrade that we’ve been working on for (inaudible), I encourage you to go to our website in the press release section and you will see the pictures with a description of what it is that you’re looking at, because they were quite significant projects that we’re very proud of having those mostly behind us. Thanks again everybody for your continued confidence in Aqua Metals and we definitely look forward to updating you as we make further progress.

This concludes today’s conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.