Please enjoy this interview with Dr. Gershon Borovsky, Chief Science Officer of NovoCarbon. This interview transcript contains forward-looking statements. Note, this is sponsored content and I, Peter Bell, help manage NovoCarbon social media accounts.

Peter Bell: Hello, my name is Peter Bell and I'm here with Dr. Gershon Borovsky. Hello, Gershon!

Gershon Borovsky: Hello Peter. Very nice to be talking to you.

Peter Bell: We have a mutual interest in NovoCarbon.

Gershon Borovsky: Yes, I hope I can be helpful answering your questions.

Peter Bell: Thank you very much. What is your role with the company?

Gershon Borovsky: I have been with the company for two years now -- a little bit more than that, really. I'm Chief Science Officer. My major responsibility, as in the title, is all scientific aspects that the company is involved with.

Peter Bell: Wonderful.

Gershon Borovsky: All aspects of scientific measurement and scientific data -- introducing new methods related to the physical and chemical properties of graphite and all materials that Novocarbon is involved in processing -- is my responsibility. I have introduced some new techniques, which allows us to get a better understanding of our materials to provide our customers with more specific information. We are somewhat unique in terms of our product knowledge today, relative to our competitors.

Peter Bell: Wonderful. So many questions about all of that, Gershon. Maybe one to start with -- the science, how much of it is it published or publishable versus kept private for commercial proprietary reasons?

Gershon Borovsky: The majority of information, of course, is commercially sensitive. We keep it private. However, several approaches that I'm using are based on my patents. I hold a US patent and European Union patents. I am developing techniques based on these patents. Other methods are well-known, but our methods and results are generally confidential.

Peter Bell: Okay. And the patents that you mentioned, please can you tell us anything more about those? How extensively are those being used or in the plan to be used?

Gershon Borovsky: Yes, we use them with this method. To go a bit deeper, the traditional methods of measuring porous structure are well-known. They are decades, if not a hundred years old. There is nothing new. However, the technique I am using provides us with excellent information. In particular, we are able to distinguish hydrophilic and hydrophobic properties for our graphite material. This information is extremely important. Especially when we're talking about application of energy storage, such as lithium-ion versus lithium-air versus zinc-air electrode. As well as a variety of fuel cells and supercapacitors. This distinction between hydrophilic-hydrophobic properties of our material is of enormous importance for the industry and for our customers.

Peter Bell: Not being an expert on the material science here, I've never heard of the hydrophobic distinction.

Gershon Borovsky: Yes. Different porous material, graphite or carbon material more generally, have different hydrophilic properties. Some are fully hydrophilic. Some are partially hydrophilic. It is extremely important to understand this property of the material in applications like batteries and energy storage to use it most efficiently in this or that particular application.

Peter Bell: Speaking of hydro- and water, it makes me wonder if there's similar properties with regards to other aqueous type solutions -- chemical compounds. The reactivity of carbon, generally, is a very important topic.

Gershon Borovsky: Yes, absolutely. In this case, when we are specifying hydrophilic-hydrophobic, basically, we're talking about whether the carbon material would accept water or water-based solutions. Some will, but others reject the water.

As a very simple example, we can talk about lithium-air or zinc-air batteries or any type of fuel cells. Any fuel cell where the main fuel is hydrogen or methanol on one hand and oxygen from air on the other side has some dependence on humidity. The humidity is very important because it affects how the water molecules go inside the electrode or not.

What happens at the border with the graphite is an extremely important point. It's not only important scientifically, which is significant, but the practical applications are significant. I can tell you that a difference of 20% percent in how much of the graphite is hydrophilic for an air electrode can result in 30-40% percent increase or decrease in battery efficiency.

These are not miniscule impacts, these are really serious impacts on battery performance from this hydrophilic-hydrophobic feature.

Peter Bell: That is serious, but it sounds like something subtle and some battery manufacturers might not initially appreciate or be able to diagnose that impact. Where's that 30% percent difference in performance coming from? If they're testing different materials, then I can imagine situations where battery manufacturers may not appreciate the subtle science there.

Gershon Borovsky: Yes, absolutely. This is, again, very important. Today, the main production is lithium-ion batteries. The electrolytes and separators they are using varies. Some are water-based and others are non-aqueous. This hydrophilic-hydrophobic information is extremely important and this is one of the directions we are moving towards. Practically speaking, for our company to provide this data puts us way in front of other suppliers. Our know-how with this will distinguish us.

Peter Bell: Great to hear that. I always wonder what's going on in NovoCarbon. I appreciate that clear description. How much is the information you're describing widely known among the industry or amongst the scientific community? I wonder about the role of the patents in that, too.

Gershon Borovsky: It is difficult to say. Inside scientific communities, everybody knows that this is important. Our advantage is that we have a direct method of measuring hydrophilic-hydrophobic properties. I would never say we are the only ones doing it because that's too much. As far as I know from following the literature, we are among a very few who can provide this data despite the fact that it is known to be important in scientific and industrial communities.

Gershon Borovsky: There are lot of problems with lithium-ion batteries. A few years ago, there was a fire on board of an airplane. It was very much connected with the hydrophilic or hydrophobic properties of material. With a lithium-ion, as soon as you have water anywhere close to it -- you have fire.

Peter Bell: Sorry -- to clarify, you're saying that an incident where a laptop battery or cell phone battery exploded in a plane while it was in flight was related to the concepts that you're describing with hydrophilic-hydrophobic properties?

Gershon Borovsky: No. This was not a laptop. This was the backup batteries on the plane. It was Boeing, by the way, flying from Japan.

Peter Bell: Oh! So, this wasn't consumer-grade electronics.

Gershon Borovsky: No, these were backup batteries that were part of the electronics of the plane. Consumer things like laptops and cell phones today are very safe. We have to admit it. Even though you see somebody burned by a phone on the internet from time to time, it is safe. Commercial is different. Especially when it is an airplane where you have much lower atmospheric pressure than on the ground. The humidity is different, too. There are thousands of reasons, but one of the key reasons is that the reaction between water vapor and lithium causes fire.

Peter Bell: That's a very important thing to understand there. I wonder about that incident -- there hasn't been much press. I wouldn't think that Boeing would want to talk too much about that.

Gershon Borovsky: One thing I do know is that, as soon as it happened, Boeing put an enormous amount of money into the development of different type of portable power sources. At least at their facilities in Seattle, possibly elsewhere. The rest is, of course, a very big commercial secret.

Peter Bell: It raises so many questions about what they may be able to do with the materials that they have on hand or the research expertise that they have. When you speak about the relatively small number of groups around the world who are publishing anything about this particular topic and doing any work on it, I wonder if there's any indication on the things you have patented would have been part of their investigation into what went wrong or possible solutions?

Gershon Borovsky: No. No, these are very different. The patent was for a very specific purposes with fuel cells, rather than batteries. The method, itself, was part of a patent. The patent was about fuel cells and electrodes of fuel cells. These are definitely not connected.

Peter Bell: If they had been able to measure this property of the carbon in that lithium-ion battery before they built it and put it in that plane, then would that have helped? Is it a material-quality issue? If they had been able to measure that hydrophilic-hydrophobic thing then would they have had some better ability to understand if that was likely to happen?

Gershon Borovsky: No, I can't answer that. That would be pure speculation. As I said, it is just one of many possibilities. As of today, there was no official releases of data or information on what happened. I mention it only because I have been working with this issue and carbon material for well over 20 years and I know how important the hydrophilic-hydrophobic properties are to quality control. There are important physics considerations for each and every application and I wouldn't go further.

Peter Bell: I understand. It's noteworthy that we haven't heard about this happening repeatedly, either.

Gershon Borovsky: No. I'm sure people are working on it. The last incident that was public was five to six years ago and I'm sure things have improved.

Gershon Borovsky: If you had a laptop from 2012-2013 and another from this year, then you can very easily see the difference. The latest laptop of Apple and others like HP are smaller than seven or eight years ago when they were selling special ventilators to put under the laptop to cool it down. Not anymore. They still generate heat above ambient temperature, but you're not burning your fingers.

Peter Bell: In this last winter, there was a lot of cold weather and electric vehicles were having performance issues. The specifics change from year to year with people getting burned by batteries in years gone by and then cars not running in cold weather another year, but all of these are safety issues. The more high-tech development, the more important is quality and research into material science.

Gershon Borovsky: Yes, I agree. I have worked on this for the last ten years. Around seven years ago, I was doing a project for the Department of Defense. Without going into details, of course, the title was "Cold Start of a Fuel Cell". How quickly can a fuel cell or battery start if it is -40C? I completed this project in 2012, which shows that this is a very important issue.

Gershon Borovsky: Again, we're coming back to where we started -- if material is highly hydrophilic, carbon material can keep some water molecules inside it. When you put this in a battery or fuel cell or energy storage device under -40C, things change. You understand what happens with water as it freezes -- it expands. Who knows what effects that will have? I've seen it and it's not very good.

Peter Bell: No, certainly.

Gershon Borovsky: It is another application where you are providing customers with valuable information. If you know this particular graphite can used be for this application, then that can help customers.

Gershon Borovsky: It's one thing if you are going to traditional lead-acid batteries, but it's completely different with possible electronic applications. They are completely different material. As a company, we're offering product variety oriented to meet the goals of the customer.

Peter Bell: Which is a great place to be because they can improve with access to materials that they may have never seen before. If you guys can provide them something new or even just provide them with new information that they might not have been aware of before, then they can use that in their testing and potentially have some new insight.

Gershon Borovsky: Yes, absolutely.

Peter Bell: Is there any innovation happening in the old lead-acid batteries?

Gershon Borovsky: Yes, absolutely. Quite a lot. If we compare the battery of 2000 and 2018, then it is at least twice the lifetime. Twice! Today's normal car battery is easily twice as good. I'm not talking about Alaska or equatorial Africa, but in reasonable temperatures the battery in the car would easily work for five years. That was absurd even ten years ago, not to mention twenty.

Gershon Borovsky: My first car after I came to a “normal” country was in 1989. I bought an old car, but I put a new battery in it. I was so happy that it worked for me for two-and-a-half years. It was the late eighties, not the 19th century! That was just 30 years ago. Today, if you are selling a five- or six-year-old car then you have no idea about the battery. You never touch it. I spent almost three years in Calgary and winters there are quite severe, sometimes. I never had problems with car batteries, even with old cars and old batteries. There are ways to improve these batteries further still.

Gershon Borovsky: By the way, graphite supply is one of the serious ways to make improvements. Battery manufacturers now know what they want. This is where our company is in very close contact with these companies. You can talk to Paul Ferguson for more, but I know that they are very specific on their graphite and we are making progress with them.

Peter Bell: It's such an interesting niche. There's not many other small public companies that I'm aware of that would be so foolhardy as to try to get into such a big, important, and mature market as the feed for these lead-acid car batteries. As you say, there have been gains. And the gains continue on the performance side, which means there's a lot at stake for the incumbents and entrenched parties in the industry. I guess that's where it comes back to having to do something different or better. I see potential for NovoCarbon with the science that you're doing to have some reception with those companies.

Gershon Borovsky: Yes, absolutely. We have our own facility and are planning to extend our battery facility. So far, I have concentrated on the structural measurements but my background is in electrochemistry. Of course, we are planning to extend our Company’s facility for electrochemical testing, which will enable us to have a full circle of research and development in our hands -- starting with raw material and ending with the resulting material. We would like to do this with not only structural data but electrochemical data as well. That will put us way out in front. As Chief Science Officer, this is my perspective and my goal. Paul Ferguson is supportive of this and we are working towards it.

Peter Bell: It's just a matter of budgets, isn't it always?

Gershon Borovsky: Always.

Peter Bell: I watch a lot of junior mining, minerals exploration companies who are drilling for gold or copper -- early-stage stuff in mining. People say that business is like research and development. To hear you talking about the research you have been doing with your background, and what you want to do with the company going forward is great. There is risk capital out there to fund this kind of stuff. In junior mining, the success story is to be bought out by some larger player. I wonder about that within the lead-acid battery market, which is surely pretty competitive. I would think that if you come in and start shaking things up a bit, then there may be all kinds of speculative scenarios that could play out. Again, that's a niche market I don't hear a lot about. What's the global landscape for that stuff look like? Is there stuff happening in India or China with new battery tech that is relevant competition to what you're doing or what you want to do?

Gershon Borovsky: It is a world trend. Today, I would say that world leaders are United States, South Korea, and India. South Korea is doing a lot to invest billions -- not millions -- into energy storage. India is doing a lot, too. China -- we don't know what they're doing.

Peter Bell: Often the way it seems to be.

Gershon Borovsky: They are behind a Great Wall of China.

Peter Bell: One of the things that comes up on this global scale, sometimes, is how the emerging middle class and new wealthy demographics of countries can leapfrog over the infrastructure and technologies of other countries that came before. The example of telecom and banking in Africa is always interesting -- how their banking industry looks different than the one in the US. I wonder how much the opportunities around lead-acid batteries are around existing products and uses of carbon, or new ones? Is it really just everything -- is there a need for everything?

Gershon Borovsky: There's a need for everything. It would be very wrong to say that there is nothing more to study in common, lead-acid batteries because they are known since the 19th century. This would be very wrong. As I said, the performance dramatically increased. Safety dramatically increased.

For another simple example, look to the 1970s and 1980s where every car owner had to check the level of electrolyte in the battery and check the density from time to time. It was normal! Everybody was doing it. Some people did it at home, others took it to the garage. Today, there is no such thing. The young generations today have no idea that there was a time when the lead-acid battery in the car was open and you had to add some water from time to time. Today, 100% of the batteries are sealed.

It's the same with other types of batteries. Of course, if we look at the broader history then we see that fuel cells were invented before batteries. It was only 10 years before, but it was still before. At the beginning, everybody was thinking batteries were dead -- dead immediately after birth -- and only fuel cells could thrive. Then, it changed and changed again. In 1965-1967, the United States had Apollo 9 flying around the earth. It circled the moon. Apollo 9 didn't have a single battery. They only used fuel cells. Only fuel cells!

Things changed again with lithium-ion batteries and a lot of people decided to forget fuel cells again. I don't know of many fuel cells used in Canada or the east coast of the USA, but in California there are more and more of them. In Europe, there are more and more of them. And this is only one application. One-and-a-half-years ago in Holland, they made a huge cargo ship running on fuel cells. It is now active in the Northern Sea. You could not get any of that without graphite, which is where we are positioned. It doesn't matter which niche you are looking at here, you need graphite.

Peter Bell: How much carbon would they use in a fuel cell powering a shipping container vessel?

Gershon Borovsky: It is a large amount. I am sure it is the future. Things go back and forth over time in the discussions around energy storage, but we are using carbon more and more. Even the Tesla Gigafactory that is making batteries has a backup power system using fuel cells. Tesla are proud of their batteries and don't allow anyone to even see how it looks inside as there are possibilities for different types of electrochemical power.

Peter Bell: That's funny! I hadn't heard they were using fuel cells at the Gigafactory. Is that the one in Nevada or the one in Shanghai?

Gershon Borovsky: It's the one in Nevada. They have a huge fuel cell backup because it is much more efficient.

Peter Bell: For storage.

Gershon Borovsky: Yes, of course. More efficient for storage.

Peter Bell: Well, they do think creatively about things. I'm not surprised. I'd expect them to have some plans for a whole new business line based on fuel cells. Again, I wonder how much graphite goes into the storage they have for backup there.

Gershon Borovsky: I'm pretty far from marketing, but I try to follow all the developments on all sides. The graphite market is one of the fastest growing areas. And don't forget, there is one more thing -- politics. In the United States, it is more or less officially announced that for any purposes connected with DoD they would not buy anything from China.

Peter Bell: Yes. They passed the McCain Act and it had language in there about sourcing of critical minerals. But there is an important caveat that's not discussed as much as it should be, which says basically this section of the bill doesn't apply if it's commercially prohibitive. They are trying to get away from Chinese dependence on critical minerals and all this, but they're also careful. All that DLA-DoD language says that if you can't find it anywhere else or can't afford to pay many times what you pay in China, then just go to China. We're not going to push this yet because the supply side isn't there, globally.

Gershon Borovsky: Exactly. And this influences how we grow this small company. If we can be a link in this chain of supply with non-Chinese supply, then it is my understanding this will be a big advantage for us.

Gershon Borovsky: I'm always trying to underline that, unfortunately for me, I'm a scientist. It may be because of my background in the country where I was born and grew up. It was different and the economy was literally translated into something else that you couldn't call an economy. It may be my disadvantage that I'm not as knowledgeable about the economics of these things, but I am who I am. I have so many things to do where I'm an expert. This is why you need a team, after all.

Peter Bell: Exactly right. And a team with some coherent vision. A shared sense of what the is the opportunity for the company -- where are the strengths and weaknesses? To be realistic about all that stuff is key. It occurs to me that carbon is carbon. Processing is important, but other people may be able to imitate you. They may not be able to do the same reliability or quality control, but it occurs to me that something else is happening here. It may be that NovoCarbon has better information about its products and its capabilities then the competitors. The edge for NovoCarbon may be really about the science and the information around your products, especially at this point in the early days.

Gershon Borovsky: Yes, I agree. I completely agree with you.

Peter Bell: A bigger company who is having revenue in this market needs the pulse of the market, but for NovoCarbon there may be something a little bit different driving success -- it's the business development stuff. Again, Paul Ferguson is out there working very hard on that. And to ask you about the news yesterday, the collaboration agreement was Versarien. Any thoughts on that?

Gershon Borovsky: This is a big, big step for us. I haven't had a chance to sit with Paul yet, but it is a really big step. I believe it can be very beneficial for both sides. It is definitely not a one-way road.

Peter Bell: The London connection is interesting to me. With them in London, and you and Paul based on the East Coast of the USA it's not your typical Vancouver story. There's something very different for the markets again.

Gershon Borovsky: Yes. This is really important. We will see where it leads us but, at the moment, it is a big step.

Peter Bell: Amazing to hear from you about everything from the hydrophobic properties through Apollo 9 with no batteries. I wonder if the batteries on Apollo 9 would have caught fire with less atmosphere? All this stuff again requires massive teams to figure out. To connect Versarien and NovoCarbon is great. I wonder how that will change things. So far, has it been just you doing a lot of this work? Has there been much of a team around you? How does that look going forward?

Gershon Borovsky: At the moment, I mainly on my own. We have some collaboration with a couple of companies, but I'm under very strict non-disclosure with them. For NovoCarbon at the moment, I'm on my own in this area. Whatever concerns science and R&D is me.

Peter Bell: And Ashland -- the crucibles they made for NovoCarbon. Were you involved in that?

Gershon Borovsky: No. Not at the moment. This is technology that Mike Coscia and Paul Ferguson are working on, although very soon I will step in to this area. Another part of my responsibilities, which was there from the beginning on paper although we are still not there yet, is quality control. As soon as we come to the point with Ashland that we need to establish very strict and very dependable quality control, I will jump in immediately because this is my area.

Peter Bell: Do you have experience doing something like this before?

Gershon Borovsky: Yes, absolutely. I was responsible for quality control in several companies where I was working before, including a company in Israel where I was among three people who established it some time ago. Then, I was completely responsible for quality control when I was working in Texas. There is more, too. Another company I was working with in Wyoming was noteworthy. Not only was I responsible for quality control, but I developed a special technique of quality control which allows much faster and more efficient control of fuel cells. I'm familiar with this subject.

Peter Bell: This is always a question. In junior mining, we say that we don't want a geologist with a checkbook. This is not a research project -- we're trying to run a business here and everything. It always occurs to me that you can get some good ideas when you get smart people working on practical things. I can't imagine the science and the research benefits that may come from having you doing quality control for NovoCarbon in a serious way.

Gershon Borovsky: Yes, absolutely. I'm working on it already on paper and am ready to jump in.

Peter Bell: With companies that are starting new production of something, there's always a chicken-and-egg problem. Do you have the financing first or the customers first? Do you have the project first or the financing first? There's all these different ways that it can layer on itself and become a Gordian Knot that is really hard to untie. Again, it's about business development -- the challenges there are very profound. Just assembling the right people so that you have a chance of competing to begin with is a very significant challenge. It is helpful to talk to you today and get some insight into some of the bench strength for NovoCarbon.

Gershon Borovsky: Glad that I can help you.

Peter Bell: I'd mentioned a recent Tesla conference call where they discussed battery packs. Apparently, Elon Musk is saying that the battery cells are the bottleneck. Their Superpacks or wallpacks or whatever -- I didn't understand if that was more about limitations on manufacturing the battery cells or the raw materials to go into the battery cells?

Gershon Borovsky: It is both. Tesla Automotive is only one branch of Elon Musk's' empire. They are trying very aggressively to enter the energy storage niche with residential energy storage and backup. In the automotive space, they didn't have serious competition until now. Now they do have it, but they didn't when they started. However, in residential backup energy storage they will have huge competition. There are a lot of players. Not only lithium-ion batteries -- there are several very strong US companies working on flow batteries, which are the best for residential storage in theory. If TESLA wants to enter this market, then they face much bigger much and stronger competition. Of course, the supply of the raw material would be restrictive as well. I would say it is at least a magnitudes of order increase in use of raw material if they jump into residential.

Peter Bell: It's amazing how I was just referring to the chicken-and-egg-problem that you have for NovoCarbon on the microeconomics scale, but it's the same concept on the macro scale. Which comes first, the demand or the supply?

Gershon Borovsky: Absolutely.

Peter Bell: It takes a lot of innovation, money, funding, work and time to break the cycle. It happens. You look at the progress over time. Thank you again, Gershon. I look forward to chatting with you another time.

Gershon Borovsky: Sure. Thank you very much for reaching out. It was my pleasure talking to you.

Peter Bell: Mr. Gershon Borovsky, NovoCarbon. Thank you very much.

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