Hello, and welcome to the HydroGraph Corporate Update video webcast. As a reminder, today, all webcast participants are in a listen-only mode, and the webcast is being recorded. During today's presentation, you can submit questions at any time by typing in the Ask a Question box below the video window of your webcast screen and clicking the Submit button. A Q&A session will follow the conclusion of the prepared remarks today. I would now like to turn the conference over to Matt Kreps, Senior Vice President, Capital Markets and Investor Relations at HydroGraph. Please go ahead.
Good morning, and welcome to the HydroGraph Corporate Update call. Today's call will include prepared remarks from Kjirstin, followed by a question-and-answer session. Questions may be submitted through the webcast interface during this call. We will consolidate the questions and ask them during the Q&A session. As always, some topics may not be areas we can address at this time. Additionally, please note that during this call, management will make forward-looking statements, including projections, statements regarding our expectations for production plans and costs, and other forward-looking statements regarding our future performance. Such forward-looking statements are not guaranteed future performance and involve numerous risks and uncertainties, including those noted in the forward-looking statements disclaimers on our press releases and securities filings.
Our actual results may differ materially from those projected in the forward-looking statements, and w e can give no assurance that such expectations or any of our forward-looking statements will prove to be correct. We encourage you to review our filings for additional information on factors that could cause actual results to differ from those in our current expectations. Forward-looking statements that we make on this call are based on assumptions only as of the date discussed. Investors should not assume that these statements will remain operative at a later time, and HydroGraph specifically disclaims any intent or obligation to update these forward-looking statements except as required by law. With that, I will hand the call over to Kjirstin for her prepared remarks.
Thank you for joining, everyone. We are excited to be here following our land lease and supply agreement with Western International, who is the largest acetylene supplier in the U.S. What I want to walk through today is our cash strong balance sheet, what the Western deal actually unlocks for us, our continuing sales development, an update on the U.S. redomicile, as well as growing U.S. federal interest in onshore supply chains for critical materials, including graphene. And really, what I want people to take away is that this is the strongest that I've felt about this business since we started this journey. We now hold approvals to sell in all major territories. We're about to break ground on our first large-scale production facility with a pipeline behind it. And w e have enough cash on hand to weather a macro downturn if one hits the market.
For the first time in this company's history, we have every card that we need to make this an overwhelming success. Add in our industry-leading performance, a rapidly growing team now consolidated in Austin, and surging international demand for graphene as a strategic material, and the advantage is clear. Let's walk through why. On our balance sheet and cash position, we have over $40 million in cash, zero bank debt. We have stayed lean on purpose, even while gearing up for expanded production and commercial sales. We are currently burning only $800,000 per month, and that already includes the planned redomicile. The takeaway from this is we are funded for years at this rate before a single dollar of new sales hits. And now, on the Western International agreement.
On Tuesday, we announced a land lease and supply agreement with Western International, the largest acetylene supplier in North America. What this does for us is secure stable, long-term feedstock on excellent terms and kicks off our first large-scale manufacturing facility. We've actually known Western a long time. They were our original gas supplier for the Hyperion units in Manhattan, Kansas, and they're well-regarded for quality and safety. We believe that our planned facility will be cost-efficient. It's a basic industrial building, a short pipeline connection next door, and then our first pod of Hyperion reactors. The all-in cost is about $8 million for the building, including the six first reactors, which we call a pod. This is a key part of what sets us apart from the rest. We don't have to buy a mountain of equipment upfront and then have it sit idle.
We're able to build reactors in a few months, so we can scale as demand grows, funded by the sales on the equipment that we already have. Let's think about what this means for capacity. Austin is capable of producing 30 tons a year, so we could start at roughly 90 tons a year, including the Bellville facility. Almost 400 tons a year once Phase 1 of the new plant is fully utilized. Almost 800 tons a year once we initiate the expansion. We also have an updated, more space-efficient production plan. 40,000 sq ft of the initial building at Western supports up to 360 tons per year, and that's including the post-processing inventory and offices. This site is designed to support future expansion as market demand grows, with a total capacity expected to exceed 750 tons per year over time within approximately 80,000 sq ft of covered space.
Plus, if the company uses the six initial reactors fully enough to need more capacity, it means that we're selling graphene commercially, and w e believe the proceeds from those sales would be sufficient to fund the cost of additional reactors. We've also lined up third-party support to build reactors faster and cheaper. We believe our reactor model and capital efficiency are a real edge. Competitors are paying more for facilities and unable to replicate our detonation synthesis graphene. So, filling the capacity. The obvious next question is: how do we fill that capacity? We are actively converting our first development programs into sales. It has been a long road, but we feel we've done it right. We've led with results, and we're aiming to exceed customer specs at scale, not just meet them. The timeline is not always in our control. Scaling up commercially depends on factors on both sides.
So, where we stand is with 80+ customers actively using our graphene in various stages of testing. Our team has also seen a massive amount of inbound for paste alone, a strong response since launch, plus a wave of inbound from various industry conferences that we've attended. We are seeing this progress every week, and I'm confident that the first takeoff orders are ahead of us. When it comes to our products, FGA-1, FGA-2, and our reactive graphene consistently test as the highest performing graphenes available, test after test. In a lot of these tests, we're not just beating the competition, we are actually resetting what people think is possible, and t he reasons are we are nanoscale, not micron scale. So, we are more than 1,000 times smaller, meaning we're more atomically precise.
We are few-layer, just three to six layers for FGA-1, and we're turbostratic, so those layers are loosely coupled. We have an ultra-pure graphene because we start from high purity feedstocks instead of impure mined material. And our batches are consistent. Every single run hits spec, so customers can commercialize confidently. Graphene has had two real barriers to adoption for 20 years: g etting lab performance to hold up in production and getting batch consistency at large scale manufacturing. We are confident that we've solved both. Our new graphene paste is a game changer. It's a drop-in additive for existing production lines with far less engineering or integration work. Once a manufacturer knows our graphene works and dials in their loading, all they do is add the paste into what they're already running. And the numbers back it up. We have four times the graphene concentration that competing products have.
A D50 of 35 nm and a two-year shelf life, that is actually a new bar for the industry. We're excited to see the market opportunities that this product could generate. Regarding the U.S. government, the federal government is increasingly focused on domestic resources, de-risking China and offshore supply chains. Washington is now laser focused on domestic resources and cutting reliance on China and other offshore supply chains. We've already seen this play out. China delayed graphite export restrictions to year end, and that's a pause, not a fix. That matters for graphene broadly because almost every other producer starts from graphite. There are a few exceptions, but none are matching our quality at scale. The government's now waking up to the fact that securing these supply chains means onshoring them, and we've seen how their policies reflect this stance.
With our move to Austin and our redomicile effort moving forward, we're not just aiming to relocate. We're positioning to be the top U.S. graphene supplier with a fully domestic supply chain. With our newly created defense division, we're building a team to best pursue these opportunities. On the redomicile, which is what I'd like to close on, r edomiciles are inherently complex, often involving significant tax and other considerations. We have found a path with a focus on mitigating tax consequences for stockholders and are pursuing an investor-friendly approach. More details will be shared in the circular when we call the shareholder meeting on this matter. We're limited in how much detail we can share at this stage, but we will provide updates as the program advances. We firmly feel, however, that this effort is strongly in the best interest of the company.
To bring this all together, this is the strongest balance sheet and cash position we've ever had with a multi-year runway. Our commercial pipeline is shifting towards orders, g overnment engagement on critical materials is growing, and we've got a full U.S. headquarters with 30 tons of graphene capacity. We're cleared to break ground on our first large scale facility, a real step towards being a meaningful supplier of the world's highest performing graphene. At 400 tons from Phase 1 alone, and with far more efficient loadings than conventional graphenes require, we have a real path to a leading position with top global names. Our team is strong, it's growing, and it's focused on delivering on those initiatives.
Dr. Sorensen continues to innovate and is thrilled to have his lab in Austin all set up, and Dr. Suhao Li, our new CTO, has successfully scaled up our capabilities at the GEIC, allowing us to better interact with customers and governments alike. Thank you for joining today. We look forward to continued updates as we advance.
All right. At this point, thank you, Kjirstin. We appreciate the prepared remarks. We'll begin to move into Q&A. There are a lot of questions that have been submitted, so I apologize. I have been trying to synthesize and consolidate some of these to ask. We'll do our best to get through as many as possible in the time ahead. These will be perhaps in a bit of a as they come order. Let's start with at full capacity in the Bellville production facility, how many Hyperions will be allowed under the current facility building plans? And how expandable is that facility beyond those initial plans?
That's a good question. To start with, we can expand effectively unlimited. There is a huge amount of land there. Should we really grow to a scale that we'd need to secure additional locations, we would work with Western on securing those locations. They do have a massive footprint internationally as well. On the Hyperion reactors, there is a bit of nuance here. Everyone is aware that the pods that we have are six reactors. Each reactor produces 10 metric tons. We don't want to add risk at this stage by pursuing larger reactors, but as soon as that first pod is in, we will do so. Should we have the time and the bandwidth within the HydroGraph team, we will absolutely look at larger reactors.
I think it's a little bit difficult to model, and we should model it conservatively right now, expecting that we would stay with the 10 ton reactors.
Excellent. We've had several questions around Western's capacity for feedstock supply. Primarily asking if they would need to grow its plant as HydroGraph grows, or how much capacity would really be available there to meet our needs as we continue to expand production capacity?
Another good question. So, they produce a massive amount of acetylene. We are not concerned that even if we would grow to a very large scale, that they would not be able to deliver, but t hey have reassured us that they would add additional generators, they would put them online to satisfy our demand. So, we are very confident with this relationship.
Then, another question about Western, a little bit of an interesting one. The announcement from Tuesday about the agreements in place provide benefits to both sides of the engagement letters. But the investor was asking if we could expand on the specific benefits that Western gets from the land lease and supply agreements for their business.
It's pretty standard. They are helping us build a pipeline. We are leasing land from them. And of course, I think it's preferential on both sides. Fo r us, w e have a massive economic benefit from moving from the micro bulk packs to the pipeline. That is a strong benefit for HydroGraph. And for Western, a lot of acetylene is really packaged and transported. So, we are a growing company, and acetylene is not necessarily a growing industry. So, I think that for Western to be a first mover here and really choose to work with us and assist us in that growth, I think it's strongly benefiting both companies.
Then, we had an interesting question around, as the Hyperions produce graphene, they also produce syngas as a byproduct. The question was around the disposition plans for the syngas produced at scale in the new Western based Bellville facility.
Another good question. We've talked a lot about pumping that syngas into a generator and then powering our facility. That is still plan A. With that said, our technical team is exploring all possibilities. And, you know, syngas or synthesis gas, it is a pretty basic gas, so w e could convert syngas into a number of other materials, which we are discussing internally. We will provide an update on this shortly.
Excellent. Let's shift gears a little bit and move to some questions in another topic area. Let's talk about the recently announced paste product. One of the questions, just starting off, is how that product is being priced in the marketplace as HydroGraph begins to engage with its initial customers exploring that product.
We are pricing this competitively. We haven't released full information here, but what we're confident in is this is really the vehicle that customers would like graphene to be delivered in. We feel, really de-risked the integration of graphene, and this has been a huge catalyst for a lot of markets that we previously weren't focused on. This is massive for a lot of polymer chemistry, concrete, and more. Just with the inbound interest, our margins are still very healthy, and luckily, the customer is often at cost break even or just a slight increase if it's more highly engineered. But the performance benefits that we're delivering with this product make it well worth it.
Then, the initial paste product announced was an aqueous dispersion approach. We have several questions inquiring about whether we'll also be adding solvent based dispersions to the paste family.
Yes, absolutely.
Excellent. Then on the paste, you just referenced a few of the end markets, but we did have several people asking from the appeal from the end market, what would be kind of the first example applications where the paste would be compelling as opposed to the powder based form of our graphene products?
At high level, I would say anything where integration has been a big bottleneck. The best example for that is concrete. Graphene companies have been talking about concrete for a long time, and in the field, it hasn't been working, and that's because powder is very difficult to process. This really enables these massive markets to effectively use graphene. I think that specifically is very exciting because we have our preferred compounder program. We feel we have already, to a large degree, de-risked a lot of plastics, but again, the paste makes it even easier. So, we can now rapidly spread our reach.
Outstanding. Then an interesting question that maybe we haven't really been approached about is shipping. The question was asking about, originally whether it would be shipped in branded transport trucks, but m aybe more broadly for the powder product and for the paste product, what's involved in shipping that from production to the end users?
It's I think more straightforward than what people expect. Currently, we're not producing the paste in-house. We're shipping our powder out and having a third party produce that paste. But with our graphene, it's shelf stable. It doesn't expire quickly. As long as it's packaged correctly, it can really sit on the shelf. It can sit within trucks, so it's very easy to ship. It's of course very light, and that's really going back to our centralized production model and why we feel so strongly about it.
Then, you mentioned being on the shelf with the product for storage purposes. We did have a couple of questions that we get occasionally about shelf life of the powder, and the paste announcement included a two-year estimated shelf life on that product. Could you speak to those topics a little bit?
Sure. So, if anyone reads more about these graphene dispersions, two years is an exceptionally long time. If you go to conferences and you talk to other graphene companies, most companies are really proud to have a shelf stable dispersion for three months or even six months. For us to achieve two years at this high of a loading is really a game changer. Again, I know if anyone on this call hasn't really read about these products, it might not sound so impressive, but this is a really big deal in the industry. For our graphene, we have old samples back from Dr. Sorensen's lab at Kansas State that we've tested that are probably a decade old, and they still function basically exactly like what we're producing in the reactor, and n ot all of these have been stored correctly.
So, I think it just shows the strength of our material. We're not getting a lot of air degradation, so this is, I think, a very positive fact. Obviously, now we have all of that completely ironed out, and we have a very streamlined packaging process, so we're confident that our graphene will be shelf stable for years.
Outstanding. Let's transition over to another category of questions where we have quite a few, and it's around customers and the customer pathway from the initial, let's say, exploration stage to a commercial order. Maybe, the first thing is the question notes that over the past year, we've expanded our commercialization infrastructure with the Compounding Partners Program, we've announced four to date. What are the functions of those compounding partners in our commercial ecosystem, and how do they interact with us and with customers?
That's a good question. These compounders, they have their own sales pipeline, which is great for us to be able to tap into. But the most important thing is, again, going back to processing. Processing graphene is challenging, and we have gone through, it's likely a six-month process in total to really qualify these compounders, and w e have this extensive matrix internally where we determine the quality of their work. We have them test different polymers, and we confirm that with what we've produced in the GEIC lab. We really put them through kind of a course on their capabilities, making sure it matches with our capabilities because we don't want, the last thing that we want is for a customer to use our graphene and it doesn't work. And normally, when it doesn't work, it's because it wasn't processed correctly.
We want to avoid that at all costs, and that's really what created this compounder program. Now, we can confidently direct customers at scale because the GEIC, it is an R&D facility. We can only produce sizes so large there for some of these polymer systems. And so, when we have a customer that comes and they say they want to produce 1 ton of nylon fiber, we really need to use these compounders, and we wanted to make sure that the compounders are effective and that this process has been de-risked.
Excellent. Then, probably a good follow-on to that is the question about the customer qualification journey of using our graphene specifically. The question is what that typical customer qualification journey looks like from the first sample experience through testing to get to a commercial offtake order, and if that timeline has changed since we secured our EPA designation earlier this year.
That's a good question as well. Of course, we go through the validation of our business development team, making sure that this aligns with our interests, that the company does have a path towards commercializing this product, especially at scale. We're in a very lucky position that we have so much interest. We are having to focus on the largest opportunities. So, we are really shifting away from some of the startups and some of the smaller companies. And what else did you ask on this?
I think the other part was around kind of that final qualification process post- EPA, if it's improved the timeline.
Yes. The timeline. When we started this, it's always a multi-year process with materials. I would say 18 months being really the shortest qualification, and when you're going for automotive aerospace defense, I mean, it's four- or five- plus years. So, I would say that the pace is actually reducing this. Our knowledge of integrating graphene is reducing this because there's been so much early days trial and error working with customers, figuring out the best way to do things, the best way to not do things, that we have this kind of graphene manual, so to speak, and that time is getting shorter and shorter. Getting shorter, to again clarify, for industrial applications. Whenever we're looking for some of these high-value application areas that would be closer to defense, the market needs to understand that is a longer path.
We think it's well worth it because the opportunity is massive, and those contracts are very stable. We are balancing both right now. We're balancing the near-term industrial opportunities that we think are really on the horizon, and a lot of these now are at the contract negotiation stage. Our shareholders should stay tuned because I think this next year is going to be very exciting commercially.
Outstanding. Then, we did have a couple questions on the consolidation of our facilities from Manhattan to Austin and the move. The questions were around the status of that, if the Hyperion reactors from Manhattan are now installed or ready in Austin, and what the timeline looks like there.
Yes. Manhattan has now fully closed. All of the equipment is in Austin. We have three Hyperion reactors currently in Austin. They are being assembled as we speak, so they should be assembled, I think, roughly in a week or two, and we are about to have our permits in hand. As soon as we have the permits, we will be able to start testing these, and I think what we are going to bring up at some point, and maybe we're going to have a question on that, is we will have some investor and analyst days, and we would be happy to host select people at our Austin location and really show off our technology.
We do have several questions on that.
Okay.
Would say stay tuned for our press release announcing details on that and how to request to join.
Yes.
As we get closer to those dates. So, a couple other questions here as we're kind of starting to come up on time for this call. But looking ahead in the next three to five years, what would be your thoughts on HydroGraph continuing to be primarily a graphene supplier or moving into other formulated products, pastes, masterbatches, or other verticalization of our business in the longer term?
That's a very good question. I think for the time being, I think we really need to focus really on our core competencies. But as we grow and as we expand the team and increase our capabilities, I would really love to bring a lot of that in-house.
Excellent. And then, just scrolling down, because we've been working through a lot of these, o ne of the things notes that we do have several customers we've spoken to in the past that could have very large capacity in hundreds or thousands of tons per year potential. The questions that we've had are around the ability to expand, not just at the current Bellville facility, but thoughts on expanding into other locations in the U.S. or around the globe.
Yes. We would be able to produce thousands and thousands of tons out of Bellville, just to be very clear about that. Western, owned by Matheson, has a massive international footprint, and we're extremely excited about this partnership. We believe that they would assist us internationally in any region that we would really need to set up production. We would be interested in looking at locations in Europe and certainly in Asia because i f we have, for example, an Asian customer and they require thousands of tons annually, we would need to make sure that that is a little bit closer than shipping from Texas, certainly.
Excellent. Within the bounds of what we can disclose, and of course the uncertainty of the timing and awards and so forth, has the company applied for or is expecting to apply for or receive any U.S. government grants as a part of the domestic interest in graphene?
Yes. We are confident there.
Excellent. All right. Let's see. I'm just scrolling through, looking for any kind of last ones here. We're right up on time. I think we've covered a pretty large section of them. I think at this point we can go ahead and wrap up the call, and we will, of course, be available through the Investor Relations contacts that are listed on every press release and on the website for additional questions or inquiries as people continue to do their diligence and learn about the business. Kjirstin, any final comments or closing remarks before we conclude the call today?
No. Thank you everyone for tuning in. As I mentioned earlier, this is the most excited I've been about the company. We really have everything we need to be the largest in the industry, not just by market cap, but by revenue.
Outstanding. Thank you, everyone, for joining us. I'll turn it back to the operator to conclude the call.
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