Aqua Metals, Inc. — FY 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual filing, not a standalone fourth-quarter report. Dollar amounts below are in U.S. dollars.
Business context and reporting period
Aqua Metals is an early-stage metals recycling technology company developing its electricity-powered, closed-loop AquaRefining process. Its strategy combines licensing and equipment opportunities in lead-acid battery recycling with development of lithium-ion battery recycling operations. The company was not in commercial production in 2022; reported sales came from remaining inventory generated before the 2019 fire at its TRIC facility.
During 2022, Aqua Metals built and began operating a lithium-ion recycling pilot system. It reported recovering several battery minerals at its Innovation Center; the first metals from lithium battery recycling were recovered in January 2023. In Taiwan, two lead-processing units deployed with ACME were operating at demonstration levels.
Financial performance and liquidity
| Metric | FY 2022 | FY 2021 |
|---|---|---|
| Product sales | $4,000 | $173,000 |
| Operating expenses | $15.587 million | $17.638 million |
| Loss from operations | $15.583 million | $17.465 million |
| Net loss | $15.431 million | $18.193 million |
| Basic and diluted loss per share | $0.20 | $0.26 |
| Net cash used in operating activities | $10.148 million | $7.062 million |
| Net cash used in investing activities | $3.420 million | $2.228 million |
| Net cash provided by financing activities | $12.513 million | $10.894 million |
- At year-end, cash was $7.082 million, working capital was $10.9 million, total assets were $33.502 million, and total liabilities were $12.586 million.
- Year-end debt included a $5.899 million net carrying value for a $6 million secured loan bearing 8.5% interest, with principal due September 29, 2024. The loan is secured by the TRIC land and recycling facility; the filing says obligations become payable upon completion of the planned LINICO sale.
- The $15.527 million current lease receivable relates to LINICO’s purchase agreement for the TRIC facility. The agreed purchase price is $15.25 million, with $3.25 million in deposits already paid and credited against the price. Management expected collection by March 31, 2023; the auditor identified valuation of this receivable as a critical audit matter.
- Gross margin is not meaningfully reported: sales were nominal and the filing does not provide a clear gross-margin figure.
Material changes versus FY 2021
- Sales fell 98%, from $173,000 to $4,000, reflecting the absence of commercial production.
- Net loss narrowed by approximately $2.8 million, while operating expenses decreased 12%. Plant operations and cleanup costs fell 44% as fire-damage cleanup and repairs were completed; research and development costs rose 94% to $1.813 million.
- Operating cash use increased from $7.062 million to $10.148 million, and year-end cash declined by $1.055 million to $7.082 million.
- Comparisons of other income were affected by unusual items: FY 2021 included $4.794 million of net insurance proceeds and $332,000 of PPP loan forgiveness, while FY 2022 included a $596,000 gain on disposal of property and equipment. FY 2021 also included a $5.665 million disposal loss.
- The company raised $6.519 million net through its at-the-market stock program in 2022, issuing 6.742 million shares. Shares outstanding increased from 70.417 million at year-end 2021 to 79.482 million at year-end 2022; 81.341 million were outstanding on February 17, 2023.
Outlook, risks and unusual items
- Management said additional capital would be required to fund operations and execute its plan over the next 12 months. Potential sources include asset sales, lease or licensing revenue, collection of the TRIC building sale proceeds, and additional debt or equity financing; availability and terms are uncertain. Equity financing could dilute shareholders.
- In February 2023, the company acquired a five-acre TRIC campus and an existing building for $4.275 million, funded in part by a $3 million loan at 9.5%. Interest-only payments are due for 24 months, with principal and unpaid interest due March 1, 2025; the loan is secured by the property. The initial system is planned for approximately 3,000 tonnes of annual processing, with ultimate campus capacity described as up to 10,000 tonnes.
- Management expected phase-one development and equipment installation by the end of 2023 and operations at the new campus in the first quarter of 2024, contingent on obtaining development financing. These are plans, not assured outcomes.
- Key risks include scaling an unproven process to commercial output, securing feedstock, customers, permits and financing, obtaining commercial licensing or partnership agreements, metal-price volatility, competition, and environmental, health and safety liabilities. The company cautions that it cannot estimate when meaningful commercial revenue will begin.
- The 2019 fire-related cleanup and repairs were completed in 2022. The company had received $30.25 million of insurance payments and expected no further payments. Management reported no legal proceedings expected to have a material adverse effect.
- The independent auditor issued an unqualified opinion on the financial statements. Management concluded disclosure controls and internal control over financial reporting were effective; the auditor did not provide an internal-control attestation.
Important facts for investors to verify
- Whether LINICO completed the $15.25 million TRIC facility purchase by the expected March 2023 date, and how the proceeds were applied to the secured loan and liquidity.
- Available cash, operating cash burn, and committed versus uncommitted financing for the new campus and the next 12 months.
- Whether the lithium-ion pilot achieves repeatable commercial-scale yields, product specifications, customer qualification and positive unit economics.
- Actual construction, permitting and commissioning progress against the stated 2023 development and first-quarter 2024 operating targets, and whether capacity plans remain unchanged.
- Further share issuance, dilution and debt terms, including repayment or refinancing of the secured loans.
- Progress under the ACME arrangement and any signed commercial licenses, joint ventures, feedstock agreements or product offtake contracts.