Good afternoon and welcome to Eguana Second Quarter 2021 Earnings Call. Thank you for joining us.

My name is Brent Harris, Executive Vice President of Eguana, Eguana Founder. On the call today are Justin Holland, Eguana's CEO and Sonja Kuehnle, Eguana's CFO.

Please note that today's call is being recorded and participants will be in a listen-only mode. If you have any questions during the presentation, please type them into the Q&A box at the bottom of your Zoom's screen and we will address them after the formal presentation.

I would now like to turn the call over to Justin.

Thanks, Brent, and thank you everyone for joining us on the call today to go over our second quarter results. The team achieved a number of key milestones through the quarter, which we will discuss in greater detail later in the call.

However, our product sales revenue is substantially impacted from continued congestion in both shipping and receiving ports. Critical delays were experienced on both battery module and transformer deliveries.

Battery module orders which were placed in November did not actually land until the last week of March, eliminating the opportunity for revenue recognition within the quarter and dropping our quarterly revenue just under 350,000. Both key materials are now well positioned in our inventory, and we expect to see an immediate return to record setting orders and fulfillment of customer orders that has been pushed into the third quarter.

Demand remains very strong free Eguana product solutions; however, given the continuing logistics disruptions, along with the recent global shortage on semiconductor chips, supply chain management will continue to be a key focus area. As such, we will discuss in greater detail how our raw material positioning strategy will help mitigate further risk in both short and medium term perspectives.

Additional business objectives including the development team objective with respect to the battery management system in the 24M based battery module timelines, battery module security for future scale, dealer model and partnership growth, software development aggregation will be discussed, as well as some broader scale company overview plans. At this point, I'll turn the mic over to Sonja to discuss forward-looking statements and walk through the financial results from the second quarter.

Sonja, over to you.

Thank you, Justin. Before we begin, please note that certain remarks will make on this conference call constitute forward-looking statements.

Although, we believe these statements reflect our best judgment based on factors currently known to us, actual results may differ materially and adversely. Please refer to the Company's filings on SEDAR for a more inclusive discussion of risks and other factors that may cause our actual results to differ from projections made in any forward-looking statements.

Please also note that these statements are made as of today and will disclaim any obligation to update or revise them. All financial data disclosed as represented in Canadian dollars unless otherwise noted.

Now, we'll discuss the Eguana's financial position coming out of the second quarter building on our presentation from March 1st for Q1 2021 and the specific targets we had presented. Our main two focus points for Q2 were; one, the closing this special warrant transaction; and two, debt elimination and balance sheet optimization.

We were able to close the Special Warrant transaction at the end of February, at which point we immediately use a portion thereof to begin building raw material inventory supply for Eguana, propelling us into a flow manufacturing model and hedging risks associated with COVID-19 material and logistic delays that have disrupted the Company in the first half of 2021. Justin will discuss this in more detail later in the presentation; however, it goes hand in hand with Q2 reduced revenue results that you can see on the presentation in front of you.

While Eguana luckily was able to avoid major COVID-19 implications in 2020 issues through Asian and North American courts caused critical delays in receiving inventory. The process of inventory positioning that we commenced post financing as well as both purchasing allow us to hedge these risks on a go forward to the best of our ability.

While revenues and gross margins declined from the first quarter of 2021, I would point to product specific margin, which have increased in comparison to all quarters of 2020. This is due to cost reduction initiatives as well as the continued rollout of LFP product.

However, the reduction from Q1 2021 can be attributed to logistical and expediting costs associated with the aforementioned port problems. We expect margins to rise throughout the remainder of the calendar year as we continue to build our inventory positions.

Operating expenses increased from previous quarters primarily associated with general administrative expenses or G&A. Sitting within G&A is a non-cash expense associated with share based payments, which have significantly increased from the prior year.

This is primarily associated with 4.5 million in consulting options granted in Q1 and 1.5 million granted in Q2, which also averaged a faster vesting period versus our employee option plan. This is a metric that while it is non-cash in nature has a significant impact on our bottom-line.

We have shown this as a separate line item for the chart within the presentation. As mentioned in our previous earnings calls, we are on a trajectory of focusing on KPIs and non-GAAP metrics such as EBITDA by the end of the calendar year, which will incorporate the non-cash categories such as share-based payments as these will become very important our quarterly financial disclosures.

Remaining material increases within G&A can be associated with professional fees for the Company prepare for our AIF short form and special warrant transaction as well as Eguana incorporating quarterly auditor reviews into 2021 business objectives. While not required as a venture Company, we want to ensure we have the best information available for all stakeholders and can be positioned to move the Company to larger exchange in the future.

Turning to the next slide, this shows our Q2 focus on debt elimination and balance sheet optimization. Eguana is now seeing in a positive working capital position with a fully prime supply chain to deliver future quarter sales with additional deposits associated with future supply and inventory purchases.

This is this not only in an optimal balance sheet, but also in hedging the COVID-19 inventory disruptions. This was a key financial target to achieve in the quarter.

Historically speaking, the last time the Company was in a positive working capital position was December of 2016. In regards to total debt, we are able to force the conversion of the portion of the outstanding debentures as the stock price weighted average was over $0.30 for 30 continual days and continues to be.

This along with a handful of electric conversions produced our book value of our debentures by 2.7 million from the previous quarter. In April, shortly after quarter end, ITOCHU elected to convert the remaining 5 million or 4.7 million in book value of their converts, bringing our total outstanding debentures balance to zero.

During the quarter, we also took the opportunity to pay-off further contingent liabilities in full, one of which had over four years remaining, continuing our debt elimination goal. Additionally, we currently only have $388,000 remaining with our senior lender, with the first draw having been fully repaid.

So as you can see, our focus for the second quarter is very much balance sheet oriented, which is in line with the goals presented at the beginning of this fiscal year. And now, I'll turn the call back over to Justin.

Thanks, Sonia. As noted, our balance sheet and working capital position have been significantly improved.

This also takes into account a fully primed supply chain, which is now built for rapid growth. The supply chain and development teams continue to find solutions to these global issues in short order.

And from a supply chain perspective, I've never seen this level of disruption. I'm proud of the entire team and their execution, which has now positioned us for a record second half.

Risks associated with our plan are currently centered around the global semiconductor chip shortage including the chip set that Eguana uses within products. The development team has been successful in laying out a software modification to allow the use of a secondary chip, which has a reduced global demand profile relative to our current chip.

The interim fix is expected to be ready in July and curious through until our regular chip becomes available later this year. Operationally, we recently opened additional assembly and testing capacity in Carson, California with our long-standing magnetics partner Noratel.

Customer experience is key to our success. This facility allows the Company to further reduce lead times for our California and U.S.

based customers. The new facility, along with additional raw material overflow space, will also provide cost reduction opportunity with respect to inbound logistics costs and volume material pricing, delivering further margin improvements to our product solutions.

The sales team has successfully increased our dealer network, which now stands at more than 270 partners between the United States and the Australian markets. With the addition of the Q CELLS network, we're now approaching 1300 Eguana partnerships.

Our dealer model partner training program, Eguana certified, also continues to increase with over 600 installers trained by Eguana personnel. The Company has also begun planning the Eguana training center, which will bring additional training capacity for our partners, simplifying installation and system commissioning on a go-forward basis.

To ensure continued growth, we are in the process of expanding both the sales and technical sales teams. Our goal is excellent customer service.

And as part of our installer feedback process, we have identified the need for additional support, particularly with respect to the California market and its projected growth. We expect new hires to be completed this quarter, with training done over the next two months.

Field trials with the Moixa AI based Evolve continue with Sunnova for the ITOCHU Sunnova virtual power plant opportunity. Moixa is currently completing California Rule 21 certification within its AI software.

Once complete, the Company expects to move to the initial product release phase. California Rule 21 is the interconnection tariffs put in place by the California Public Utility Commission, defining the performance and function parameters required to connect the gallop to the California power grid.

It is widely considered to be the most advanced connection standard for solar and energy storage across the United States. In Europe, the development team has completed Q CELLS feature in additions to the Enduro product line including remote tunneling and multi-unit control.

Remote tunneling allows our development team to directly access the advanced power control software in installed systems by tunneling through the energy management system. Having this control further enhances our ability to remotely monitor, analyze, and recover installed systems.

Multi-unit control or the MUC as the team calls it, provides the opportunity for Q CELLS to daisy chain systems together with the use of only one energy management software system controlling the entire subset. The MUC also simplify system configuration on multi-unit installations, while optimizing solar usage at single locations with larger installs.

With these key features added to the Enduro product, we expect to see increase unit shipments to Q CELLS beginning in June and maintaining steady growth on a go forward basis. The Australian team remains focused on expanding VPP participation and opportunities that are now developing beyond South Australia.

Currently, the Evolve product is performing very well in the South Australia Simply Energy VPP and we expect to roll additional units out as we continue to build VPPs throughout the country. The Australian team has also expanded its dealer network, which now covers all mainland states and territories.

As part of the inventory positioning objectives, the supply team has product available in a steady state. As a result, we will see new growth from the Australian market in the coming quarters.

On this slide, we just pulled up a picture to show the investors where we stand on our raw material investment and what you can see here is the positioning of the raw material. We plan this raw material to cover a minimum of 600 Evolve in 300 and euro units with 50% additional coverage for battery modules or specific to battery modules.

The reason we added the additional coverage on battery modules is related to the fact that you cannot expedite a battery module outside of regular ocean in brown transportation in other words you cannot fly battery modules. All of those materials are expected to be received no later than June 30th.

This positioning will bring predictability to our customer shipments and more importantly for investor based predictability to revenue projections on a go forward basis. We will start managing the COVID-19 pandemic risks in the raw material side while maintaining product availability for our customers.

The development team remains extremely busy with new projects including an industry standard and battery agnostic battery management system, as well as the development of a new battery module based on semi-solid state lithium technology. This technology has been developed by MIT based 24M.

FREYR the Norwegian based battery cell manufacturer has completed a license agreement with 24M to manufacture the cells. FREYR is planning to have 43 gigawatt hours of capacity, complete by 2025, which will position them as one of the leading cell manufacturers.

Eguana has completed a memorandum of understanding with FREYR to design, develop and produce the battery modules utilizing their cells, combine these two projects represent tremendous opportunity for Eguana in line with our vertically integrated battery supply chain objectives. The Company will continue working with both LG Chem and Pylontech, our current NMC and LFP module partners, effectively opening up multiple supply lines from both a module and the cell perspective as well as a battery chemistry perspective, offering consumers the most choice relative to energy storage systems.

Management view remains that battery availability will be the critical success metric for stationary storage companies in the mid to long term as the EV markets continue to grow. Completion of the BMS and battery module will also open up new sales verticals for the Company including industrial and commercial storage opportunities as well as entry into the electric vehicle market.

Japanese partner ITOCHU also ties directly into these development objectives as they're the lead investor in 24M and recently led a 56 million financing round for them. ITOCHU's overriding objective is to build the 24M family of companies centered around leading edge technology.

We expect to see additional opportunities for module development, and BMS deployment, as 24M continues to increase its licensing partners. As our business and deployed fleet continues to grow, Eguana will begin taking direct control of its cloud database and cloud integrations which are required to deliver the best customer experience.

Currently, our EMS partners managed cloud services on behalf of the Company. Fleet aggregation capabilities required for virtual power plant participation will also be included in this development objective.

Through this approach, Eguana will be able to develop and publish your own user and installer interface out including monitoring and backup reserved control for the homeowner and additional commissioning training tools for the installers, both critical to long-term success, and importantly critical to brand value. We will also be able to define APIs and other requirements as needed without requiring development work from our EMS partners to open up participation opportunities for homeowners and market specific VPPs.

The 10 kilowatt, 28 kilowatt hour product remains on schedule and be sent for final certification this month. Early indication from the market as that system sizes in the U.S.

will continue to increase in size, the 10 kilowatt product will simply full home backup without the need, will simplify full home backup without the need for multiple times. To the best of our knowledge, this will be the first and the only fully integrated full home product in the market when we released later this summer.

To meet these development objectives, we will increase the development and lab teams over the next two quarters. Additionally, we are wrapping up the planning phase of the new Eguana development lab which will expand our capacity by roughly five times.

A portion of the proceeds from our last financing have been directed at increasing lab capacity to support our development and growth objectives. This will require a move to a new larger facility and I'm happy to report that the lease has been executed and moving dates have been determined.

Procurement of the required testing and lab equipment has commenced and we fully expect to be in the new operating lab later this calendar year. Broad objectives for the team going forward include further cost reduction to drive profitability, establishing Eguana products into virtual power plants in each key market we participate in, executing the vertical integration of our battery supply chain, and continuing to grow our dealer network building additional installation capacity for Eguana products.

Of course, I'd be remiss if I did not provide a quick update on our long-awaited website. Our development partner has recovered from their COVID capacity constraints and will be delivering the website to Eguana tomorrow.

We will then work with the website for about one week doing internal QA and QC and we anticipate releasing to the general or broader market next week. From an overall perspective, we're very pleased with our position going forward.

We've laid out the mid and long-term objectives for success and find our supply chain for immediate revenue increase. We will continue towards a debt free balance sheet with positive working capital as we move the Company towards profitability.

With that, we will open up the line for some questions.

As previously discussed, please enter your questions into the Q&A section on the bottom of your screen.

One of the questions that we've received and certainly critical to everything is our inventory positioning strategy, I am happy to say that the inventory has made it through the global constraints. We are very well positioned to deliver records across the second half and beyond.

We did plan as I noted that further battery inventory position so that we can continue the product availability for our customers. We've also positioned both NMC and LFP battery modules in Australia, the United States and the European market.

So, we're quite comfortable at this point for our inventory position. That will be the key driver to the revenue jumps that we expect to see across the coming quarters.

Based on these projections, we do expect to be profitable later this year. Given that we are seeing still a favorable product mix relative to the LFP and NMC battery chemistries.

Virtual power plants are going to be a big part of the stationary storage market and the energy services companies going forward. It's important to note that VPPs are started with a small handful of systems and they were built upon those systems in aggregate meaning that the products are aggregated together to operate as one.

We're seeing VPPs starting in each market that we participate in. One of the benefits that we have given our software driven platform is we can integrate EMF software from partners and potential partners who want to take part in virtual power plants.

There are not many platforms that can perform this task out there, which is one of the reasons why we feel we will be a key player in VPPs, particularly in the U.S. and the Australian markets.

We expect to see much more virtual power plant activity in the second half of the years as utilities are becoming more and more comfortable utilizing the assets from residential energy storage. 24M, we have a question on 24M.

24M is an MIT based company that is an investing company from ITOCHU. ITOCHU's game plan is to continue to lead the market in lithium-based battery technology.

Semi-solid state is the next generation which is where what they are developing now. The framework that ITOCHU has rolled out is to license that technology to battery cell manufacturers and provide those batteries all licensees the opportunity to have battery module with industry standard BMS.

That's where we want to comes in. We will be the developer of the industry standard BMS and the battery module.

So 24M is the start of the next generation technology. Their technology goes to battery cell manufacturers.

Eguana will take the battery cells and develop modules and fully integrate those modules with the industry standard battery management system. This will also provide just an enormous opportunity for the Company to utilize a cheaper, safer, more reliable battery in the Eguana products.

But again, the overall goal here is to make sure the Company has access to battery modules mid-to long-term. It's fully expected that the market demand is going to outstrip the total supply capability of the major manufacturers operating in key demand regions, which Eguana is one.

What we've done and will continue to do is to integrate our battery supply chain from a module perspective and they sell perspective with both chemistries and new chemistries as they come out, de-risking our revenue model ensuring we have batteries to move as the marketplace really starts to grow. From a gross margin perspective, we do anticipate seeing the margins continue to grow.

Product margins we're on the growth path again in the second quarter. However, due to increased logistics costs, they were brought back down.

We've fundamentally changed our procurement strategy and that's one of the key opportunities for near-term gross margin increases. We've gone from a batch manufacturing environment where we were procuring in almost prototype level quantity, which is normally the highest price you will ever pay for material.

We were demonstrating slightly positive margins in that environment. Given the raw material procurement strategy that we have now and to give you an idea of the level of increase we currently have in hand and on order raw material value equal to nearly the last two years of material purchases we have made.

There's been significant jumps in the order sizes which has reduced the cost profile of the entire system. We've also focused larger purchasing on the larger materials relative cost of the entire energy storage system, i.e., the batteries, the transformers and the enclosures.

By getting better cost profiles of those large key critical components we will see additional margin increases and we don't believe the past supply chain disruptions will continue to impact going forward. Because of the position that we chose at 600 and 300, 600 in Evolve 300 in euros, we've built in additional transit time against our standard lead times to manage that disruption and avoid expedited costs, which have negative impacts to your gross margin.

So, we do expect to see margin increases relative to the increased supply chain activity and the change of the manufacturing model to flow and the change to the procurement strategy. We have multiple questions coming in on the order book.

The order book remains relatively flat, and the good news for Eguana is that, orders have not been canceled. They have been pushed.

We still anticipate very high demand going forward. We have started shipping against the Q2 orders, already this current quarter, and we do expect the backlog, which is sitting just over 20 million to be eliminated this calendar year.

From a projection standpoint, when we start looking at revenue and predictability, we do have some analyst coverage out there. We're comfortable with the numbers that the analysts have put out.

Obviously, the longer tail numbers, we expect them to be significantly higher and than what has been projected based on additional VPP opportunities, additional integration, EMS integration opportunities with our platform, utility involvement which seems to be growing particularly in the United States market, and of course the ITOCHU starting to roll out their VPP which could significantly increase our revenue opportunities. So, from an analyst projection perspective, we're comfortable with the numbers although we do think we will beat the long-term number based on those points, I just mentioned.

Question on Q CELLS Again, we've just finished a number of Q CELLS feature improvements, and we do see new orders coming in that go out now to the end of our fiscal. We are seeing a lot of Q CELLS activity branching out into France.

And so, we do expect to see shipments increase month-over-month with Q CELLS. We've maintained the exclusive relationship with Q CELLS for Enduro, which is their AC-coupled solution in their Q home package.

We're happy with the relationship and we do expect to see Q CELLS begin to ramp up shipments in the near-term and to continue to grow in the European market. Just on the 24M.

Just to clarify, we are not expecting batteries from Kyocera. That was the first licensee year 24M.

FREYR is the second licensee who we've started working with now. There will be a number of licensee companies coming to the table.

However, we do not expect to have a battery relationship with Kyocera at this point in time. Question on pricing and pricing, product pricing, it's been a topic of debate for a number of years.

I think most of the listeners know, Tesla came out years ago, a very aggressive pricing for the Powerwall, that has now been increased a couple of times to match the Eguana pricing. I don't expect to see a lot of pricing pressure in the near-term given where demand will come in, relative to supply.

However, the market and I'll talk first about the United States market, there seems to be two groups from a product pricing perspective. The Eguana products, the Powerwall products in the Generac products are in a very tight circle as the price leaders.

The Enphase storage product and the Shell Storage product come in roughly half, again higher than price leaders. We believe the pricing is set correctly now amongst the price leaders, and we do not expect to see much change in the near-term relative to those prices.

Question on up listing to larger exchanges, one of the things the Company is doing, which is being led by Sonja is to put in quarterly reviews. We had switched to KPMG from our former audit partner BDO.

We will start looking at reporting against larger exchange timeframe. So, we're putting the pieces in play to open up opportunities for transition to a larger exchange when the time is right.

Revenue streams from the FREYR MoU, again I was on an interview late last week. It's too early to understand the revenue opportunities related to selling the modules back to FREYR.

We do know the target markets that they are looking at, that unfortunately is confidential they will release that in due course. It's they are significant opportunities however far too early to place, number against that.

Federal incentives in Canada that were recently released we are reviewing those. We do see some opportunities.

Certainly, we would like to see the Canadian market grow. It is the home market.

However, with the U.S. administration and in the view they are taking relative to climate change and funding Green Energy, we definitely like to call that home markets and we'll continue that the majority of our focus in the U.S.

particularly in California. The new office, question on the new office, I can't confirm and I did go into a little detail earlier.

It is in Calgary. It is about double the size.

I know many of our investor base have been to our current location, it's about double the size. And the reason that we've gone that way is to prepare additional production capability capacity and specifically to the lab and development requirements in space we need to deliver on the integration of the batteries and the development of the battery management system.

From a shipping perspective and a production perspective, I'm happy to say that Carson, California is shipping out systems daily. We do expect to see growth week-over-week from that facility.

In order to continue to deliver against the prior backlog, we will supplement the Carson shipments with additional shipment throughout the month of June from the Calgary facility as we tried to bring the customer service back in line. From a capacity standpoint, again, one of the benefits of how our platform has been developed as we do have key subassemblies, which allows us to easily manage capacity, we do not see any capacity constraints.

Currently, the transformer is the constraining sub assembly. And under standard lead time, the capacity of the magnetics is roughly 12,000 units per month.

And we utilize one transformer per system sold. So from a capacity standpoint right now without branching out to additional relationships for transformers, we would not be kept until we hit add plus 12,000 units per month.

Specific date for the website again, we're anticipating no issues. The developer has been working on this as many of our launch shareholders know for a long time.

We'll see what we received tomorrow and start running through the QA and QC process, but I would anticipate later next week to release that to the general public. So we'll wrap up there for today.

I would like to say that both Sonja and I will be joining the deep dive tomorrow with Steve Hyland just to cover off any questions I know the press release the MD&A and the financials all went out today. I'm sure there's going to be a lot of questions out of that material.

So, we've set out to go on with Steve and answer any further questions in that form. So, I'd like to thank everybody for joining today for the results meeting, and hopefully we'll hear more questions on the deep dive interview tomorrow.

Thank you.