Welcome to the Q4 2022 NanoXplore Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Martin Gagné, Director of Investor Relations. Please go ahead. Merci, opérateur. Bonjour à tous et bienvenue à la conférence téléphonique du quatrième trimestre de NanoXplore. Good morning, everyone, and welcome to NanoXplore's fourth quarter conference call. Today, I'm here with Soroush Nazarpour, our President and CEO, and Pedro Azevedo, our CFO. We will start with our prepared remarks and then Q&A. Please note that our discussion will include estimates and other forward-looking information from which our actual results may differ in the future. We invite you to review the cautionary language in yesterday's earnings release and in our MD&A regarding the various factors, assumptions, and risks that could cause our actual results to differ. With that, let me turn it over to Soroush. Thank you, Martin Gagné, and good morning, everyone. Before discussing our results, I would like to start the call with our assets purchase acquisition of XG Sciences. We are very happy with this transaction as XG was a formidable competitor of ours, and we have the utmost respect for the team, the technology and patents that they have assembled. With this transaction, we acquired close to 40 patents covering graphene production and applications. With these patents, we are broadening our scope and accelerating our downstream market access. Moreover, this patent portfolio includes seven patents on silicon-graphene composite anodes, which protects our silicon-graphene composite anode technology. Silicon-based anodes play a crucial role in the current liquid electrolyte, but will play an even bigger role in the next-generation solid-state batteries, where silicon will act as active material of the anode. Graphene will act as a barrier to reduce the silicon from swelling, thus improving the cycle life of the batteries. Now that we have all IP protection that we needed, we intend to build a dedicated R&D facility for next generation of batteries and build a silicon graphene pilot manufacturing plant with starting capacity of 100-200 tons per year during 2023. Moving to management, we made some changes during the quarter. During his time at NanoXplore, Luke played a crucial role in building strong foundation that the company sits on today. Luke was a valuable team member and will be missed for his selflessness and keen business sense. He has stayed on until September first to enable a smooth transition and currently working full-time in VoltaXplore to help steer the ship to a very promising future. In addition, I would like to welcome Pedro to our team. As our CFO, Pedro was CFO of a large division of Tarkett S.A., the French global flooring company, for the past seven years. He brings a strong manufacturing operation and M&A experience and expertise. His great business understanding and strong interpersonal skills make him a real asset for NanoXplore. We are very happy to have him on the team. Switching gears to our results, we are very happy with our performance as we finished the year with a total revenue of CAD 94.3 million, beating our internal forecast of CAD 90 million. This enabled us to achieve a positive quarterly adjusted EBITDA to finish the year. Even though we expect to see further growth in our revenue during this fiscal year, we'll be increasing our expenditure on R&D, certifications, engineering and IT, and will invest in several growth initiatives, details of which will be covered in our five-year strategy presentation. Our focus is to grow graphene adoption while building a strong foundation to grow upon. We have a high conviction in our graphene potential, and this wonder material will no doubt power the two mega trends of the next few decades, which are the energy transition and sustainability. NanoXplore is playing in three key growth vectors that will enable these mega trends. These vectors are battery materials, composite lightweighting, and specialty compounds. Let us start with battery market, which is the first growth vector for our graphene. Lithium-ion batteries are central to the success of transportation OEM electrification strategies in terms of improving the driving range and price competitiveness. Car makers and battery manufacturers are aiming to improve battery quality and bring down prices to below $100 per kilowatt hour, the rate at which EVs can compete with traditional internal combustion engine vehicles. However, battery technology and prices are not the only factor at play. As EV demand rises, it is becoming especially critical for manufacturers to manage the procurement and production of batteries. There are serious questions over whether supply will keep up with demand across the battery supply chain. Some experts, such as Simon Moores, head of lithium-ion battery data firm Benchmark Mineral Intelligence, have referred to the push for regional battery production and supply chains as an arms race. Logistics and supply costs play a key role here, as batteries are heavy, costly, and complicated to move because of varying regulations around transportation of hazardous goods. Car makers are organizing supply chains around local lithium-ion battery manufacturing in all regions where it is feasible, in part to keep logistics costs to a minimum. Although batteries are generally cheaper to manufacture in low-wage regions in Asia and specifically China, supply and transport costs are likely to eliminate that cost advantage when shipping to North America, for instance. Hence, we believe the lithium-ion battery industry becomes regional, and consequently, cathode and anode material production facilities will become regional as well, all to ensure visibility and security of supply. The battery ecosystem is a large market, and for every GWh, we will need around 1,000 tons of anode active materials. Based on BMI projections, we could see 700 GWh of battery capacity in North America by 2031. Hence, we expect around 700,000 tons of demand for anode battery materials by 2031, while the current supply of anode material in North America is almost nonexistent. As will be shown in our upcoming five year strategy presentation, we're addressing this by planned capacity expansion for our graphene and anode material production, as well as by setting up a graphene silicon composite additives production facility. Using graphene not only as conductive additive in anodes and cathodes but also as an active material of anode is the main driver for us. Graphene is known to be a material that generally doesn't lithiate as graphite, and because of higher surface area, it will show a very short life cycle in batteries. We have addressed both these issues and developed a process where we can use graphene as active material of anode to replace graphite partially or entirely. This is obviously a big deal for us and for the industry. We will provide more color about this in our five-year strategy presentation. The second growth vector is graphene-enhanced composites. Light-weighting composites will play an important role in EVs as they're approximately 30% heavier than internal combustion engine vehicles. For instance, in Tesla Model 3, the battery weight represents 25%-30% of total vehicle weight. One of the key pain points for consumers when they buy an electric vehicle is the vehicle range. Thus, reducing the weight is paramount for OEMs as it will improve the battery performance. We have launched our graphene-enhanced sheet molding compound, SMC composite, with two of our large commercial OEM customers, and this validates our previous acquisitions. By adding graphene to SMC, we reduce the weight by up to 25% versus other SMC component parts, improving the surface finish as well as safety factor. We are seeing strong interest from other OEMs for our GrapheneBlack SMC solutions for exterior parts of the vehicle. Moreover, battery enclosures, excluding the cells, are heavy and could weigh between 150-200 kg. By using a graphene-enhanced SMC composite, we can lower the weight of the battery pack and benefit from the upcoming EV adoption. As we head towards the next generation of batteries, reducing the weight of the battery enclosure will be paramount, and we are well-positioned here as well. Therefore, light-weighting will be a key contributor in the energy transition, and our graphene-enhanced composite solution will help lower the weight of battery enclosure and thus improve the range of EVs. The third growth vector is our graphene specialty compounds and applications. We believe that we cannot have a sustainable world if the backbone of our products is not sustainable. Our flagship product, GrapheneBlack, is a green material produced through a water-based exfoliation process and emits seven times less CO2 than competing carbon material. We are seeing more and more companies approaching us for more sustainable products, and it shows in the expansion of our active funnel. A few segments have emerged where our product is functioning exceptionally well. One is cement, where a small loading of our graphene showed a tangible increase in the strength. As we continue validation with several cement manufacturers, we believe this will be a large segment of graphene market in the next five years. To accelerate this, we did set up a small cement lab within our R&D space in Montreal, which helped us to work on cement formulations in-house, along with development currently being done in our partners' laboratories. This accelerated the R&D process and technical results are quite interesting. Our cement partners are showing improvement in strength from 15%- 70%. Even though these numbers have been reported before in scientific articles by a few other graphene companies, we believe our large volume and low cost graphene production capabilities positions us particularly well to supply cement market. Currently, we are working to replicate these performances in industrial cement production facilities of our partners and continuing the validation process. Another one is thermoplastic compounds, which we have been successful in a few areas, such as graphene-enhanced nylon and polypropylene applications in transportation and graphene-enhanced polyethylene application in pipes, geomembranes, and rigid plastic packaging market. We'll continue developing these products with end users and partner up with intermediaries such as plastic compounders and formulators to scale our production capabilities. Another one is polyurethane foam insulation for the construction and transportation market. As we add graphene to the mix, we are seeing a tangible improvement in insulation efficiencies of these foams. We are developing these solutions for over three years and believe this can also be a large segment of our future sales. We're advancing with several large chemical companies and expect to see revenue from these products next year. Turning to our funnel. Our active funnel is still growing with more than 200 accounts. Our late stage funnel, which means we should see revenue in the next 24-36 months, has also grown and includes more than 50 accounts. Some accounts are reaching to commercial dispatches, and some are continuing with the pilot testing, but overall, our active funnel is steady and growing. As I said several times in the past couple of years, graphene is a new material, and we are competing with a product that is entrenched in people's minds. Consequently, patience is important. This is a large market with more than 1 million tons of total addressable market size and a slew of applications. We believe that we will gain market share over time as we can offer a more sustainable and a better performing solution. It's important to note that graphene sales cycle is long and complex. Several milestones have to be reached in order to see a widespread adoption of graphene in several markets. First is the availability of supply. It's important to demonstrate that the technology has reached a level of maturity that a consistent and reliable supply of graphene is available in an industrial setting at a cost that is acceptable. We have already proved that with our 4,000 metric ton per year graphene production facility in Montreal, which accounts for around 40% of global capacity and production of graphene. Second is graphene certification as a substance. Any new material requires to be certified in order to be produced and shipped across borders. Each jurisdiction has its own requirement. U.S. Environmental Protection Agency, Environment Canada, and REACH in Europe are examples of these entities which aim to provide a high level of protection of human health and the environment from the use of chemicals or substances. We have already achieved this certification in U.S., Canada, and Europe. Third is the production validation. These include technical performances, financial validation, sustainability, and life cycle analysis, processability, logistics, and more. Different players in the supply chain are involved in validating all these requirements. OEMs, molders, and formulators are all involved in these steps, making it a long process and highly unpredictable. We have been successful in a few applications and continue this with many more. This is our sales funnel that we talked about earlier. Fourth and last is product-level certification. Majority of products and applications are certified through ASTM or ISO or directly by OEM. For instance, for a new additive to be used in plastic pipes, corresponding ASTM and ISO certifications have to be modified. We're actively working on this now. For instance, we recently modified the Canadian pipe certification to include graphene as an additive beside carbon black and continuing to work with related associations to modify ASTM certification. It's a cumbersome process and requires many players in the supply chain of each market to agree with adding a new material. In some cases, our customers are driving these modifications in their respective market, which accelerate this process. Nevertheless, it has to be done and we'll continue to do so. To conclude, we are developing the graphene market and will continue collaborating with our customers and partners while acquiring key assets at reasonable cost as demonstrated before. We would like to see more products in the market with our graphene and accordingly expect seeing revenue growth. This coincides with investing on many initiatives in our business, such as streamlining manufacturing and operation by using robots and upgrading our global ERP system and also investing in R&D and engineering to increase the capacity of graphene and added material production and to accelerate sales. All in all, we will continue to expand the reach of our graphene while focusing on building a strong foundation to our company. Now I will pass it to Pedro to discuss our financial performance. Thank you, Soroush. I'm very happy to have joined the NanoXplore team. Having only been here for a few weeks, I can already see that it is an exciting company with strong competitive advantages and a strong and promising future. I will begin with our financial results and then discuss our balance sheet. First, some housekeeping. As the new CFO and looking at industry practice, I've determined best to remove foreign exchange variations from our adjusted EBITDA on a go-forward basis, as I deem it not to be an operational item. In the MD&A, we present the last four quarters calculated under this methodology. I'm pleased to report we finished the year on a strong note, and as Soroush mentioned, we were able to beat our CAD 90 million full-year total revenue guidance provided earlier in the year. For Q4, our total revenue was CAD 28.1 million, beating our implied Q4 revenue of CAD 24 million, which was up 35% year-on-year. The higher revenue versus our guidance was driven mainly by better pricing and a better product mix. Our Q4 gross margins, excluding depreciation and amortization, was CAD 4.7 million, an increase of CAD 2.6 million versus last year. Gross margins expanded by 640 basis points to 16.8%, which was driven again by better pricing, higher margin product mix, and better cost control. We generated 113,000 positive adjusted EBITDA in the fourth quarter versus -3.1 million last year. The strong improvement mainly attributable to higher gross margins and lower administrative expenses. On the balance sheet, we ended the year with CAD 51.2 million of cash and cash equivalents and CAD 7.4 million of available space on our credit line for a total liquidity of CAD 58.6 million. Our total debt stood at CAD 14.1 million and was comprised of CAD 9.5 million of long-term and CAD 4.6 million of short-term debt. As the pandemic unfolded, we took the decision to pay down our debt and have since repaid CAD 8.1 million over the last two years to be in a better position exiting COVID. Given the recent increase in the cost of borrowing, we are now in a stronger financial position. With that, I'll give this line back to Soroush for some final thoughts. Thank you, Pedro. I would like to end our prepared remarks with these comments on our upcoming five-year strategic plan that should be coming out in the next couple of months. We have been working hard for the past few months preparing for this comprehensive plan. For that reason, we'll give out our outlook for fiscal year 2023 after the release of the plan. We should be doing our Q1 call. With that, I will give the line back to Martin Gagné. Merci, Soroush. Operator, we can now open the line for questions. Certainly. As a reminder, to ask a question, you will need to press star one one on your telephone. Please stand by while we compile the Q&A roster. One moment. Our first question will come from Amr Ezzat of Echelon Wealth Partners. One moment. Line is open. Line is open. Hi, it's Amr from Echelon. Soroush, Pedro, Martin Gagné, thanks for taking my questions, and congrats on the quarter. Thank you. Thank you. My first one is on the Canuck acquisition. I'm actually pleasantly surprised with the performance. Correct me if I'm wrong, it seems like it's close to CAD 7.5 million in sales. Can you give us a bit of detail as to what is happening there? Are there, like, one-off contracts that are driving that, or do we sort of build growth out of that CAD 7.5 million? Sure. Canuck historically was not doing as much. The increase that we're seeing is related to the product mix. They have, you know, we have a group of products in transportation that generally tend to do higher gross margin versus more of a consumer product. Including graphene-enhanced products in them, we've been able to absorb business in transportation and we really think that this trend is going to continue in the next couple of quarters still. Okay. That's good to hear. I think the funnel numbers you gave, Soroush, in your prepared remarks, haven't changed from last quarter, and I certainly don't expect them to change every quarter. I'm wondering if you could sort of tell us how conversations with customers are evolving since last quarter. Do you still expect to be capacity constrained by the end of next year? Yeah. We are pretty reluctant these days to accept a new development partner in our R&D. I think we are at our max in terms of co-development with our potential future customers. We'll try to actually make the funnel even more you know stable and hopefully smaller as we go forward, so it's more focused in the areas of interest that we you know disclosed in the call. I would say that there is no change in our forecast. We still believe that new capacity is needed, and hopefully within our strategic plan, you would see the details of expansion of capacity of graphene and anode material. Yes, the answer is yes, we're still believing that there would be constraint in our production in the timeframe that you mentioned. Just on that last part of your answer, you said we'd see in the strategic plan the capacity expansion. I think last quarter you were speaking to a second graphene production module with a target production in early 2024. Are there any sort of changes to that timing or potentially to the size of the module? Can we see it maybe two modules that's like 8,000 instead of one at 4,000? You gotta wait for the plan to come out, but yes, there is a chance that we expand the output of the capacity to more than one module, but with the details of which will be in the strategic plan. Understood. Well, that's positive to hear. If you'll allow me one last one. On the silicon-graphene anodes materials facility you spoke to, the 100-200 tons per year, how much will that cost you then? You know, like, does that sort of cover all your needs for the two gigawatt-hour facility? Well, the majority of the cost of CapEx is already covered through the acquisition of XG. We are repurposing the mechanical assets that we acquired from XG and using them for production of graphene and silicon compound. There's still a little bit more CapEx will be added, but that would be pretty minimal. In terms of the need, we think that based on the customer list of VoltaXplore currently, the loading level of graphene-silicon would be lower than what we see in some of the consumer electronic applications. The fact is, we think a loading of 0.5%-1% of that graphene-silicon additive would be enough for the current needs of VoltaXplore. Inherent in that, you know, a total annual need of close to 100 tons per year, 100-200 tons per year. That's where the numbers are coming from. Having said that, we hope that we can continue the development with a bunch of solid-state guys that we work with, and they need lower amounts, but that facility will produce enough to continue that development as well. Great. Do you guys have an update on the financing for the battery plant or at least some visibility as to when we could expect you guys to announce something? Yeah. As you remember, we have discussed in the battery day that there are three criterias that have to be met for us to continue the VoltaXplore process. One is validating economics, second is financing, and third one is site selection. I mean, if you really can put them into one particular condition, and that was the variation that comes to our decision based on the U.S. Inflation Reduction Act, where you know, U.S. is providing special incentives to the battery makers to place the plant in the U.S. It was less of a discussion of financing of a project by itself. It was more the discussion around how this act will impact the battery cost and prices going forward, right? We are continuing the discussion with the Canadian government and as well the Quebec government to see how we can be sure that going forward our cost of production is competitive to plants in the U.S. It was less of a question of if we can finance it or not, right? We're now working a lot more on the OpEx side of the battery plant. A long answer to a question, but we expect to. We are hoping to see, you know, updates about the project within this calendar year. Okay. No, I appreciate all this color. Congrats again. I'll pass the line. Thank you. Thank you. One moment. Our next question will come from Rupert Merer of National Bank Financial. Your line is open. Good morning, everyone. Good morning. Good morning. I'd like to start with the silicon graphene anode technology from XG Sciences. If you look at the patents, can you give us a little more color on the importance of those patents and how they relate to the anode technology that you're working with? I mean, without disclosing exactly how we produce our silicon-graphene, I would say our process includes a mechanical step first and a more physical step second, okay? It's a two-step process, which we have some level of protection already in the second part of our production, but the first part was something that we were pretty worried in the future as we had much weaker intellectual property protection on there. The acquisition pretty much came to support the IP related to the mechanical side of the process to produce graphene and silicon. That's where you mix graphene with silicon pretty much, okay? The patents that XG got, it is a very general patent. It's borderline a material patent than a process patent. As a result, the scope that it covers is pretty wide. You know, we believe that many of the graphene silicon mix producers for anodes are going to infringe that patent. As a result, we took that patent over, and that gives us a protection going forward to have pretty much all the steps of production of graphene silicon protected by intellectual property. Given the potential importance of this patent, were you surprised that you were able to acquire it, at the price that you did acquire it for? Yeah. It's a much longer process and a much more complicated negotiation steps there. We can say the fact that we paid good price should not undervalue what we acquired. Great. With XG, you also mentioned that it could give you access to the downstream markets. Does that go beyond battery technology? In the remarks, I talked about polyurethane foam products. We had a pretty similar situation there where we see quite a lot of potential for the growth for our product, but there was a patent, an old patent of XG, which is pretty much the patent that covered the products they were selling to Ford. That patent was inhibiting us from really going after it more widespread. That's what we're doing now. We acquired XG. That patent also came, and that will help us in our polyurethane foam part of the business. This is the first time we're talking. It's pretty much because of that other IP acquisition that we did. With XG Sciences, were there any key employees that come along with that acquisition? Anything that it'll do to the cost line at NanoXplore? When we acquired XG, it was already ceased operations. There was no employee that joined the company. Having said that, we continue to discuss the key employees to be on short-term consulting contracts with us. We believe that there would not be an ongoing cost from that acquisition. Great. Oh, thanks for the color. I'll leave it there. Thanks. One moment. Our next question will come from Michael Glen of Raymond James. Your line's open. Hello? Hello. Hi. Hi, Michael. Oh, okay. Sorry, I missed my name. Can you just to go back on XG. Maybe just spell it out a little more in a little more detail. With the R&D facility you're planning to set up with the XG IP, how exactly does that differ from what you're currently doing at the pilot facility here in Montreal? Yeah. XG invested a lot more on earlier stage R&D activities. Our focus has been more on later stage or bit deep in the R&D, right? We are, you know, bringing those lab equipment that has been, you know, they're pretty expensive lab equipment. In general, you hardly see those lab equipment even in universities. Which kinda makes sense why the company has suffered. We brought those lab equipment, we're bringing those lab equipment to Montreal and we are looking at a little bit longer term R&D activity on battery now. We initially started our development in solid-state. We moved our technology to be more adaptable to liquid electrolytes, so it's closer to revenue. Now that we're getting enough, you know, resources, let's say through that acquisition, we are focusing a bit more on solid-state and hopefully, you know, on sodium-ion batteries. Now, these two, you know, they are very early stage. We're looking on, let's say, 10 years or plus horizon on seeing activities. We believe that the battery market is moving towards solid-state and afterwards on sodium-ion batteries. That's what we mentioned by putting that battery. It's a bit more longer term than what we're normally doing now. That development, the additional program you will co-locate that with your existing pilot here in Montreal, is that the plan? No, it's in a separate location. It's in a separate, okay. Obviously, we can all see that there was a fairly notable list of investors and customers on the XG side. To what degree do those legacy partners or customers play a role with NanoXplore going forward? Yeah. Good question. You know, you see some big names like Hanwha and Cabot and Samsung and Dow Chemical in the list. Of course, you know, the relationship and discussions, some were already known and some will continue. These were more of a strategic investors than customers. Of course, they bought products from XG, but the core for us is future development with these partners. The list is more than the names I mentioned. It is a component for us. Of course, it was not the main reason for us to acquire XG, but these partners will definitely help us going forward in some of those activities, especially on the battery side. Okay. Some of those partners do remain actively engaged and interested in what you're continuing to invest in? We certainly hope so. Okay. This is a question that I receive frequently, but when we look at your top line right now, and there's legacy acquisitions made in the past, and when you bought those companies, they were not using graphene. So when we look at your top line right now, how much of the sales mix or products sold now include graphene? I can tell you, I mean, market likes to separate the graphene and legacy. For us, it's very integrated. Almost all our SMC activities, for instance, include graphene. We have graphene, you know, accepted and now included in the resin transfer molding products. We have graphene in 100% of our Winnipeg facility products. We have graphene in the Canuck already. Listen, the reality is, we include our graphene, and we did this acquisition to pretty much seed the market. We have been very successful. I mean, you see the SMC activities and composite lightweighting is a result of all these acquisitions that we did, and that's a good growth avenue for us in the next five years, which you see in the plan. I would say separating it in a way of legacy business and graphene business and it is just irrelevant in this case. We acquired these companies. They were not using graphene. Majority of them are using graphene in the majority of the products. That's what I can say with certainty. The customers are liking what they're seeing, so that's why they're purchasing more and they're giving us more orders. As an integrated approach, graphene is in majority of those products already. Final one on my side. Are you able to indicate what the capacity utilization was on the 4,000 metric tons in the quarter? Yeah, we have avoided answering that question, and we're gonna continue doing that. Again, we go back to the questions that we answered. Still we see the capacity utilization and the limitation of availability of our product by the end of next year, early 2024. That translates to full utilization of the plant by that time, right? But we are not going to define it quarter by quarter. What we see is 4,000 tons, even though looks big for the graphene market, but comparing to what we're replacing, this carbon black market is just peanut, very small. We should start looking at much larger volume than a single module. Okay, thank you for taking the questions. One moment. Our next question will come from George Gianarikis of Canaccord Genuity. Your line is open, George. Hi, good morning, gentlemen. Thank you for taking my question. Maybe just start very broad. Good morning. Just very broadly, have you had time to study the Inflation Reduction Act? If you have, I'd be curious as to whether you could share some thoughts as to how that changes some of the investment decisions you have to make. Yeah, great question. Yes, we were looking at this act, I mean, for a couple of months before it even get approved, and we had ideas about this coming. What we know today is, you know, the act is advanced manufacturing credits, which is a part of that act, is covering pretty much all the supply chain of the EVs. We break it to three parts, the critical material supply, cell production and EV production. In these three parts, there are incentives for the supply chain. Two of them, which is critical materials and EVs, somehow Canada is also included with the U.S. and Mexico. In a sense, countries that they have within the USMCA are within that credit, though when it comes to cell production, it is really dedicated to the battery facilities in U.S. You know, yesterday we heard from Tesla moving potentially moving equipment from Germany to U.S. to start producing and benefiting from the act. It's very hefty in terms of payments. The government is covering $35 per kilowatt hour of battery produced for the first five years, and that continues through a tax incentive afterwards. You know, you can say that government of the U.S. is paying for CapEx of the battery facilities and also covering the borrowing costs for bridging the financing. It's a pretty strong program. Obviously, when it got approved, it absorbed a lot of activities and new facilities announcements in U.S. It also impacted on the price of equipment to build the batteries. This is like really driving the supply chain of United States on the battery production. You can imagine that this type of like impactful program, it impacts the capital expenditure first, but also impact the cost. For us, we were already in a position that we've received interest from the government, Quebec and federal, to build the plant in Canada. Now, what we are looking for is how the cost of production of battery will evolve in the next couple of years because of this incentive and, you know, continuing in Canada, which is exactly our desire, is going to be competitive with the United States counterparts or not. Great question. Supply chain is really evolving fast on the batteries. We think that these type of programs would really accelerate battery production. Having said that, even after all the announcements, we think that the total announcement of the Gigafactory is still quite lower than potential demand coming by 2030. We're still pretty bullish about supply limitation, but the equipments are getting more expensive and OpEx, the cost of production most likely coming down because of this. Soroush Nazarpour, you said that you saw an immediate change in the price of equipment right after the announcement. Is that? Did I hear that correctly? Yeah. Yeah. Yeah. Interesting. The equipment supplier quickly see a surge of demand for the equipment, and they pretty much jacked up the prices overnight. Many of the budgetary quotes we had in VoltaXplore are not valid as the cost of those equipments are going higher. Which is again because they have to put new capacity in place for a lot of just Panasonic announced 2 new facility with 50 gigawatt hour each. You can just imagine how much more battery production equipment is needed going forward. You know, the demand goes up, supply is limited, the price goes up pretty fast. Interesting. Thank you for that. May I ask a little bit about the acquisition of XG? I know you've already had several questions, but I'm curious, you know, about regulatory approval. Do you see any issue there given that the patents you're acquiring here are critical, and how that process should play out? You mean, antitrust regulatory approval or Correct. Correct. Yeah. No, I mean, the transaction is already done. So, you know, there are relationships, you know, when you look at the regulation, Canada is within the list of friendly countries, so it's less stringent on those types of, you know, technologies. Transaction is already done, and the assets are already being transferred. The ownership is already transferred. Got it. There is no risk on that side. Understood. You mentioned Ford as a customer for XG. Are there any cross-selling opportunities here? Are there ways to deepen the relationship over time? Well, in the case of Ford, you know, Ford look at two suppliers for the graphene, and that was us and also XG. It's already been, we've already been a supplier. I think you know, the couple of main customers of XG, we won't continue their product because either the volumes are too low or it's outside of our target market. Some of those ones, they can be continued really with our GrapheneBlack product. Of course, when you change the graphene from one to the other, there is certain period of validation needed. You know, in general, XG sales were shy of CAD 2 million, so it was pretty low anyway. Got it. Maybe you just focus specifically on the quarter. I think during the call, you mentioned that some of the positive impact you saw was mostly pricing and mix shift related. Can you kind of give us a little bit more detail on what exactly you saw during the quarter? What was the mix shift specifically that you experienced? Yeah. You know, in our generally, we have when we look at our composite activities, we have better productivity in our SMC product than RTM. We have a tendency to have a better gross margin there. As well, those products include graphene in them. They show better gross margin. That's one side of the story. Direct graphene sales, we put all those graphene and graphene-enhanced composite products within the products mix. When we talk about price increase, it certainly comes because we have partially transferred the raw material price increase to the customer. That brought the price increase as well that we mentioned there. A mixture of increasing the selling price because of raw material price increase and also the type of products that we're selling. You know, as more we sell graphene-enhanced product, as more of gross margin we see in the product. That. I mean, that's. I'm generalizing it, but that's normally what we see in our business. Thank you, gentlemen. One moment. Our next question will come from MacMurray Whale of Cormark Securities. Your line is open. Hi, good morning. I'm wondering, Soroush, if you could talk a bit about competition. Do you see in the graphene space, you know, as this takes time to get adoption, do you find that the competition is getting stiffer? Not really. I mean, when I mean, the acquisition of XG, the way the market translated that, the graphene focus, let's say the market, was the first signs of consolidation, right? When you enter that stage, you have all this popcorn of the startups that already going through a consolidation, so you see lower number of competitors. As a result of that, you're expecting to see larger sized competitors to us. Right now, this trend just started, so we don't yet see appearance of a large competitor for us. Actually, it was a very important competitor to us. They were, you know, doing business in North America, very close to us. We pretty much at this stage have a pretty good grasp on the whole North America when it comes to graphene. We don't yet see this happening in Europe. The events happening on the graphene in China, it's just nobody knows. Yeah. There's a pretty different part of the world in China that we know there's a ton of different companies. They're doing a lot of different things. The information is really limited, and the claims are very strange all the time. So we just put China aside. We don't see yet consolidation happening in Europe, but we expect this to happen. In North America, I think we already dominate the graphene market in North America. We will have majority of the North American market of graphene. Okay. When you look at some of the end markets that you've targeted, you talked, in your prepared remarks about certification and validation, that type of thing. In certain markets, that's been a barrier to adoption. In the EV space, do you face similar things? Is it really product certification which is all led by the customer anyway? Is that the bigger barrier than, say, standards? Yeah, you're absolutely right. For battery materials, especially new ones, to get into the battery market, certification of the product is important, and normally OEM does that. Pretty much the business case behind starting with VoltaXplore. We wanted to use VoltaXplore as the first customer of our battery material. It will be a validation customer for us as well. That helps. When your product has already been used somewhere in the world by a battery maker and the product is already successful in the market, you tend to get past the stage of product certification faster, right? That's Yeah. That's the concept of that. You're absolutely right. Certification comes either from OEM, like all the auto applications, OEMs are certifying your product. On generic markets like pipes and geomembranes and, you know, you name it, those are normally covered by ASTM and ISO. I mean, in United States it's more ASTM. Mm-hmm. Depending on the market, we have to either certify our product with the OEM or with the ASTM. You see, we have content in Ford, and our product has already been certified with Ford. That opens up the applications for us in different parts of that company, and we can bid for different programs. That's how it works with the OEMs. When you go to the ASTM, really market-specific. Do you find that the OEMs in general are in other areas, let's say not in batteries, but in their traditional business, it takes them a long time to adopt something new. Given the amount of investment in battery facilities, like, what's your view on adoption of silicon enhanced anodes and solid state? Like, is that really an opportunity even in this decade, in your view? Like, I'm curious about what you think the automakers' reception to bleeding edge technology is. Yeah. If you look at our battery material offering, it's going to be pretty much three products. One would be conductive additive, right? We can add that to the cathode side and also the anode side. This product, you know, this is normally replacing carbon black, conductive carbon black, and loading levels are 1%-2%. This is a much shorter and easier path to the market, right? For instance, the killer application for carbon nanotube is the conductive additive to the cathode. And we see the same type of performance, if not better, by adding our product to the cathode, for instance. You know, you have expansion of capacity in the LFP. These things are lower, let's say, approval process. It's like it's easier to get them approved and get them to the product. Now, looking at using graphene as active material of anode, of course, there is higher loading of graphene in the product as well. You're going to go through a longer validation process, though we have strategies to accelerate that by. You'll see it in the strategy presentation, but our graphene product offering for the active material is pretty similar to spherical graphite. So we can pretty much fit into the spec sheet of the spherical graphite but through a path of graphene. Now, when you will see that coming out, when you talk about graphene silicon loading, if it's low, it's easier to integrate. When you're talking about solid state, you know, you're not gonna see anything before 2032. That's our initial real commercial commercialization target for solid state is 2032. We think that, I mean, internally, we did analysis, by 2045, we see as liquid electrolyte as solid state. That's the time horizon for solid state. I see. It's pretty long. Yeah. The loading level now for liquid electrolyte is low, so it's still a business currently on that, but there is future potential on solid state. Okay. That's great. That's helpful. Obviously, it's helpful to be able to sort of not sneak it in, but in a way, you sneak it in in a way that gives great results from the beginning, and yet it's not sort of deemed as critical. You can kind of, once they get used to it, you then add the functionality. You start to put more in. It's interesting. Well, I look forward to, you know, reading that that strategic report. It sounds like it should be. I think it'll help investors grasp the pace of adoption. You bet. I'm showing no further questions. I would now like to hand the call back to management for closing remarks. Uh, Merci. I would like to thank everyone for attending this call, and we wish you a great day. You can now disconnect. Thank you. Thank you. Thank you. This concludes today's conference. You may now disconnect.