HPQ’s Electric Propulsion LOI Opens A North American Drone Supply Chain Opportunity

Speaker A: Foreign to the GOTACOM podcast where investors discover great small cap companies. Thank you for taking a GOTACOM with you and make sure to follow our podcast.

Speaker B: We're coming to you live from the Euro Satori Conference, the world's largest defense and security exhibition with over 2600 exhibitors representing 68 different countries and 75, 000 professional visitors from 150 nations. Alongside with 350 official international delegations from 100 countries where HBQ Silicon just announced an LOI to evaluate development of a Canadian based electric propulsion platform for North American markets. Here's Bernard, straight from Paris. Bernard, good to see you my friend.

Speaker C: Good to see you. Good to see you in, in balmy weather, Paris, I think I was gonna

Speaker B: ask you, I was gonna ask you quickly about uh, the loi but first I'm gonna ask you just generally, then we'll get back. How's the show going, how's the conference going so far?

Speaker C: It's been very well, very busy. We had a lot of very high uh, powered delegation that came and visit the booth, um, mostly from, you know, LM attracts them in because of their drone engine and then they show the entire cluster and then we get the opportunity to present our battery technology. You know, which people have to remember that from the start HPQ Silicon has always been fascinating about developing a silicone anode material that can basically improve battery performance. And with Navasium we've reached that and now we're, we're at the stage where we're demonstrating the commercial potential of these technologies to making uh, basically, you know, batteries for drones, which is, which is where we're moving forward. So I think it's a key point.

Speaker B: Yeah, we're getting, we're uh, getting into the details of the press release but it's not gonna be a long interview today because you're on the car, you're on the floor. But what does it say, quickly Bernard, about the fact that this is an LOI and some shareholders might not, you know, looking for something more concrete saying ah, it's an loi but you're in the ln, in all booth right now along with the partners right now. So what does that say about the strength of your relationship? It's more than just an loi.

Speaker C: Well, what you have to understand is that you know, and uh, Novacion are working together. Okay. And let me know if basically they're, they're manufacturer of drone engines. And right now they have, they are producing 5,000 drone engines per month. That translates into 1,250, uh, 1250 batteries packs needed for drones. All right, so they, their end client, which are the drone manufacturers, need batteries and we're in the position where we can offer those type of drone batteries to um, to, to drone manufacturers and presented to this. So this is an incredible synergy that's already operational. Okay. Novacium is already operational. It's already involved into this, it's already doing this and it's a, you know, this is through this situation that we're going to end up getting our first battery, our revenues from battery cells. So this is what the aluminum does. And since you know we have a long term relationship with uh, they're basically having some of the best drone engines in the world because they're based on uh, Ukrainian design and Ukrainian technology. Um so you know we're gonna, it's gonna be very good for us to expand the process but we're gonna stay focused uh, on what it is which is our silicone addled materials in 21700 batteries, how we can deploy them commercially from where we are right now. So we haven't changed our business plan. We're not getting into the drone business. What happens is that drone engine, uh, drone need batteries and for their drones to work better they need batteries, battery cells that have silicone into it. That's really what we're doing.

Speaker B: So for the Canadian market, North American markets. But let me ask you quickly before we hop in to the question about the loi, um, is it safe to say or is it too early to say that Novacium batteries are going to be powering um, LN and OF's propulsion system? It's going to be part of the propulsion system already. Or is that still hasn't been finalized in any kind of commercial terms.

Speaker C: It's, it's, it's finalized in the sense that what happened is knows almost every drone manufacturer because they sell to the engines and they present our batteries as a complete solution. And from that then on, um, we basically customize our batteries for the uh, the clients to develop them and get them going. Just to give you an example. Give me a second, I'll switch over, switch direction.

Speaker A: Okay,

Speaker C: this is a uh, this is a battery that we've done for a client of LMNov. Okay. It's basically a 666-S3P. So this is specific batteries done for drone, this is for like interceptor drone. It's going to be tested, it's going to be operational. So we've done this. It's based on our 21700 but specifically designed other thing we've done is for the uh, the French military. We've developed this uh, this portable radio for them. So the, these are all types of contracts that that Novacium um is getting okay. Has and it's ready to move forward.

Speaker B: That's incredibly promising because what does that say? Now let's talk about what are you looking to accomplish with this LOI in terms of the Canadian and North American uh markets. What's the commercialization opportunities there?

Speaker C: Well no we're gonna get it. We're gonna be in the position where we can offer just it's going to be a good way for us to enter the drone industry because we'll have a which is working with somebody that has manufacturing has been a lot of demand for for drones in Europe and it's ready to expand into into the US into the North American market. So for us it's just helping uh working with with element as we as we were to develop this. The entire goal is this okay. Alemina will, will be the one that will be selling their drone engines in North America. But the goal is for them the drone clients to use our batteries which are going to be the HP2 Endura branded batteries. So it's nothing else in an expansion and replication of what it is. But we then have a basically a market of qualities because our engines have been proven tested in Ukraine. Uh we're basically those are Ukrainian design engines have been improved here in France by Adam enough and we're ready to sell them.

Speaker B: So essentially HBQ would be the manufacturer supply chain side and Ellen and of would bring in the sales and marketing and the potential clients. Is that how it would generally basically

Speaker C: when sells drone engines okay. They they present the entire group solution to the buyer and then we would continue to do what we're doing. Okay. Which is basically uh, manufacturing and selling silicone anode material incorporated into cell and then build up into batteries for the drone manufacturer. And the reason for that is with silicone with our silicone based anode material. Um, although we probably want to be more focused on making the silicone animal material at this level we can generate significant revenues with the capacity we have of the silicone animal material we're doing because we can make about 600,000 20 uh 1, 700 cells. What we're doing right now and we're now part of the entire dynamic which is to try to create an infrastructure that is non Asian for the battery material. So this is not a change of our strategy or looking for us to get into a more uh, in demand thing. It's just that we're basically ah, we're taking an opportunity to present our batteries to more and more people.

Speaker B: Why 190 days, Bernard? It sounds like, it sounds like Elena, um, Novasio, HBQ are already really far down. This isn't. You just met George Colm Propulsion yesterday. So why 190 days? Why not 180?

Speaker C: Because we had to put a number. We just put that number. It's really irrelevant. Like we're ready, we're ready to hit the ground running now.

Speaker B: You know, you do you expect this. Would you have to build a facility in Canada first? Ultimately, if everything goes well with the loi, would you have to build a facility in North America first or would you start supplying from you know, your current supply with uh, the HBQ branding and then work towards a facility?

Speaker C: I think that's the best. It's, there's no need for us to rush into building something but you know, unless somebody comes up and said, you know, we have an order for 25, you know, if it's for Canada, I don't think there's any problem sending French, bad French drone engines to, to the place. If it's for the US we might have to rebuild the facilities but that's, you know we're going to get there but we'll have to have a certain level of sale level. So fundamentally this is the key point is like uh, this is an expansion. This is the start of the commercialization of our batteries. Our batteries are now being tested uh, by commercial people uh, from the, from the, from NATO country militaries to other areas. And there's more and more expansion what we're doing. So we're now getting ready. We're not, we've now started the commercialization and you know there's a back and forth because there's still some R and D part with regards to not uh, not our part of it, how our batteries are integrated into, into the drone design and eventually once everything is finalized then we'll get some big contracts. But I don't expect that to be long because the testing cycle isn't very long.

Speaker B: Yeah, that's great. This doesn't sound like a typical LOI that you see at a small cap company sometimes where George Calm and HBQ decide to put on loi, but they have no idea where they're going. Seems like the relationship has already really, really gone down the path, uh, pretty far.

Speaker C: Fundamentally the themes that Novacium and the people at LMNOV have been working together off and on, on different projects for the last 10 years. So there's a lot of relationship, a lot of trust. You know, there's a reason why LNA have brought us into it because they know that we can deliver the batteries. Uh, one of the mandates, not exactly the same thing, but we were giving a question mark about doing a batteries, which nobody said that can be done and we were able to do it. So you know, we're there. It's like it's now the next step is just finalizing and signing a contract. And I'm very optimistic. We're there. But the opposite, the beauty of it is, is LM enough brings to us an incredible um, and the entry door on all those, those areas. Every drone engines they sell, every four drone engines they sell need a battery. And you know, their supplier of choice for batteries is us. And then we, we work with them. So maybe we won't get 100 of the sales, but even if we just got a good chunk of the 5000 cell, the 5000, you know, batteries needed per month and we'll be in a good position, it'll be a good starting position.

Speaker B: What does this do for your third party validation with all the other companies that you're talking to that are evaluating you, that maybe don't want to be the first one to take the plunge. Do you reach back out to all them, make sure they know about this kind of relationship and this kind of application?

Speaker C: Well, it gets to be known. Uh, we actually put out a link. I actually put out today, I'm linking a video that explains a bit what the, the consortium in French. I mean what we're looking to reproduce here. Uh, so we're, we're ready to rock and roll. It's going to work in validation. You remember at one point, George, we talked once to one of your clients that was a drone guy. And at that time, you know, we weren't ready to deliver high powered drone engine. He wanted to be specific. Now we've gone completely digital. The defendant we're ready to develop, we found all the supply chains to do it. Uh, within the next few months, thanks to the Canadian government, uh, we'll be starting to build their own. The first non Asian, one of the few non Asian. Basically silicone anode manufacturing capacity. It's going to be in Lyon here, uh, it's going to be anonymous. It's going to be there and from then on we'll finish the project to move up to the 50 ton plan. So we're advancing, we're progressing, we're following on the plan. Commercialization of the battery seems to be working much forward and pretty soon we'll be able to talk about the other project we're working on. Hydrogen and you know, fume, silica. But fundamentally the key point, the important thing about Eurocentary is that we were here, we were seeing. I have a lot of, um, I, we've met a lot of area high level dignitary. I think yesterday at the booth, it was the French defense minister.

Speaker B: So yeah, that's the last question I want to ask you. Aside from this amazing loi and partnership here that looks like it's, it's progressing with Ellen and of what else, you know, how's that show going for you? Uh, because the size of the show means you're gonna re, you're gonna meet some very big people. Tell us two things. A, French military, how that's going. Because you did show us a bit of a battery there.

Speaker C: And B, I just wanted to give people an idea.

Speaker B: Oh yeah, this looks great.

Speaker C: And the first person here on the white shirt is Jed Pram, the CEO of Novacium. And uh, and then a few of our commercial people. Those are people from Ellen. So, uh, I just wanted to show that overall for everybody to see. I, uh, like. Oh wait, I should show you more. Sorry, sorry guys, I'm not a good cameraman.

Speaker B: Well, don't worry about it. It's great so far.

Speaker C: Press that button. Yeah, I got five fingers. So this is just where we are and this is one of the slow time in the booth. Uh, and you know, everywhere you got, you got those type of things. This is a massive, like you could walk here for, for days and not being able to go everywhere. So it's, it's always busy, always people coming in. So the fact is that we're now a visual player. What we, what we found that's interesting is there was no really other battery manufacturers that came here. So when every drone manufacturer were looking for batteries, you know, they, they came and talked to us and had discussion with them. So it's really interesting.

Speaker B: French, um, military. Uh, any update there? Because you did show us that battery pack for the French military that also had the, the French flag colors. That was interesting.

Speaker C: Well, that was, that was for the show here. Um, in that regard, we have to be more cautious there. Basically there's things going okay. It's actually, you know, probably revenues being generated, but we can't really discuss the nature of the contracts that we're working on, but, you know, it's there, it's approved. They're, they're excited by our results. You know, there was an objective that they wanted us to reach at the end of the contract and by the first set of batteries we send them. So we're fundamentally based on using gen 3 size battery. Uh, we already, we already match and exceeded the goal. So it's, it's very positive moving forward.

Speaker B: Bernard, thanks for joining us from Paris, my friend. I know you're busy on the floor and you've talked about some meetings that you have, so I'm going to let you get back to them. But, uh, this has been great to show everybody you know from the, from the conference what's going on over there and really great to hear how advanced this LOI is with Ellen and of course, and uh, wish you can continue success over there, my friend.

Speaker C: Thank you.

Speaker B: Bye everybody at home. Thanks for joining us. Have a great day. See you next time.

Speaker C: See you next time.

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