Aqua Metals, Inc. — Q1 2022 Form 10-Q
Business context and reporting period. Unaudited results cover the three months ended March 31, 2022, compared with the same period in 2021. Aqua Metals develops and licenses AquaRefining recycling technology and supplies related equipment and services. After a 2019 fire at its TRIC facility, it shifted away from operating a capital-intensive lead-recycling plant toward licensing and equipment supply, while developing lithium-ion battery recycling technology. The company reported no revenue in either period.
Key financial metrics
| Metric | Q1 2022 | Q1 2021 / prior date |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $4.310 million | $4.198 million |
| Operating loss | $4.310 million | $4.198 million |
| Net loss | $4.410 million | $4.086 million |
| Basic and diluted loss per share | $(0.06) | $(0.06) |
| Operating cash used | $3.589 million | $2.156 million |
| Investing cash provided (used) | $0.417 million | $(0.859) million |
| Financing cash provided | $4.075 million | $8.209 million |
| Cash at period end | $9.040 million | $11.727 million |
| Working capital | $7.9 million | Not stated for the comparable period |
| Total assets | $33.572 million | $33.269 million at December 31, 2021 |
| Total liabilities | $5.954 million | $5.736 million at December 31, 2021 |
Margins are not meaningful because the company had no revenue. It had no notes payable at March 31, 2022; lease liabilities were approximately $0.8 million in total, including finance and operating leases. Cash increased $0.903 million during the quarter, supported in part by $3.890 million of net proceeds from at-the-market share sales. The company issued about 3.398 million shares through the ATM and ended the quarter with 74.934 million shares outstanding.
Material changes versus Q1 2021
- Net loss widened by $0.324 million. Research and development expense rose $0.262 million to $0.551 million, and general and administrative expense increased $0.466 million to $2.765 million. Product-sales costs fell $0.616 million to $0.994 million, primarily because TRIC clean-up costs were lower.
- Operating cash use increased by $1.433 million. ATM proceeds fell to $3.890 million from $7.485 million, while cash at quarter-end was $2.687 million lower year over year.
- Other expense included a $0.150 million loss on disposal of assets held for sale; Q1 2021 included $0.131 million of PPP loan forgiveness. The company also recorded $0.052 million of interest and other income in Q1 2022, primarily related to the TRIC lease receivable.
- The company exercised its LINICO warrant for $0.500 million, bringing its investment to $2.0 million and its ownership to approximately 12% on a fully diluted basis.
Outlook, risks, and contingencies
- Management said additional capital may be needed to fund ongoing costs and its business plan over the next 12 months. It expects to pursue equipment and asset sales and collect amounts under the TRIC lease or potential facility sale; further equity or debt financing may be sought. Equity financing could dilute shareholders, and the filing warns that unavailable financing could prevent execution of the plan or threaten continued operations.
- Management reported recovery of copper and lithium hydroxide from lithium-ion battery black mass at its Innovation Center. It planned to demonstrate recovery of nickel, cobalt, and other compounds in 2022 and build a first full recovery pilot system later that year. These are plans, not assured commercial results.
- Aqua Metals has an agreement with ACME for phased deployment of AquaRefining equipment at ACME’s Taiwan facility, with potential licensing provisions. The filing cautions that successful commercial deployment and additional licensing or joint-venture arrangements are uncertain.
- LINICO leases the TRIC facility under a lease-to-buy agreement expiring March 31, 2023. Its purchase option is $14.25 million if completed by October 1, 2022, or $15.25 million if completed afterward and before lease expiry, subject to deposits and other terms. The company reported $16.263 million in current and non-current lease receivables at March 31, 2022.
- A securities class action settlement received court approval on March 2, 2022. Aqua Metals is to issue plaintiffs $500,000 of common shares; the amount was accrued at quarter-end. The company said insurance carriers funded the separate cash portion of the settlement and does not expect further insurance payments related to the 2019 fire.
- Principal risks include the absence of current operating revenue, need for additional capital, execution and scale-up of unproven technology, ability to obtain licensing customers and required permits, environmental and hazardous-material exposure, intellectual-property protection, and possible shareholder dilution. Management concluded disclosure controls were effective as of March 31, 2022.
Important facts for investors to verify
- Cash burn, expected funding needs, and whether asset sales or additional financing can support operations through the next 12 months.
- Milestones, costs, and commercial viability of the lithium-ion pilot program, including recovery of nickel and cobalt.
- ACME deployment progress and whether it produces binding licensing or revenue-generating arrangements.
- LINICO’s ability and intention to exercise the TRIC purchase option, the timing and amount of proceeds, and related lease collections.
- Share issuance and dilution, including the ATM program and the $500,000 settlement shares.