Aqua Metals, Inc. — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022. Unaudited consolidated financial statements; amounts below are in millions unless otherwise noted.
Business context
Aqua Metals develops and supplies equipment, licenses technology, and provides services for metal recyclers. It is not in commercial production: since the 2019 fire at its TRIC facility, operations have focused on technology development and recovery of the facility through a lease and potential sale. Its strategy emphasizes licensing and equipment supply for lead-acid battery recycling, alongside research into lithium-ion battery recycling.
Key financial metrics
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Product sales | $0.004 | $0 | $0.004 | $0 |
| Operating costs and expenses | $3.959 | $4.443 | $8.269 | $8.642 |
| Operating loss | $(3.955) | $(4.443) | $(8.265) | $(8.642) |
| Net loss | $(3.166) | $(8.016) | $(7.576) | $(12.102) |
| Net loss per share | $(0.04) | $(0.12) | $(0.10) | $(0.18) |
Revenue was nominal and the company reported no commercial operations. Product-sales costs were $1.048 million in Q2 and $2.043 million for the first half; conventional operating margins are therefore not meaningful. Lower product-sales costs primarily reflected reduced plant clean-up costs. R&D increased to $0.521 million for Q2 and $1.072 million for the first half, while G&A rose to $2.390 million and $5.154 million, respectively.
- Cash flow, first half: Operating cash use was $6.349 million, investing cash use $0.361 million, and financing cash inflow $4.998 million. Cash declined $1.712 million to $6.425 million.
- Liquidity, June 30: Working capital was $20.6 million; current assets were $24.134 million and current liabilities $3.517 million. Current assets included a $16.037 million current lease receivable related to LINICO.
- Debt and obligations: No notes payable remained. Total liabilities were $5.201 million, including lease liabilities and a $1.250 million building purchase deposit. Lease liabilities were approximately $0.722 million in total.
- Equity: Stockholders’ equity was $25.684 million. The company issued 4.217 million shares through its at-the-market program in the first half, raising $4.588 million net. Shares outstanding were 75.773 million at June 30 and 76.950 million on July 15.
Changes versus prior period and unusual items
First-half net loss improved by $4.526 million versus 2021, largely because 2021 included a $4.254 million loss on disposal of property and equipment; 2022 recorded a $0.590 million gain for the six months, including a $0.739 million Q2 gain. Management attributed the gain to writing off accrued plant commitments. The 2021 periods also included insurance proceeds and PPP loan forgiveness, neither of which recurred in 2022. Operating cash use increased by $1.409 million year over year, and ATM proceeds fell from $9.331 million to $4.588 million.
The company reported completing clean-up and repair of the fire-damaged area by the end of June 2022. It had received $30.25 million in total fire insurance payments and expected no further payments.
Outlook, risks and contingencies
- Management budgeted $3 million for 2022 R&D and reported spending $1.1 million in the first half. It planned to build an initial lithium-ion battery recycling pilot later in 2022, after reporting lab recovery of copper, lithium hydroxide, nickel, and cobalt from black mass.
- The company said it may need additional capital over the next 12 months to fund ongoing costs and its business plan. It expects to seek funds from equipment and asset sales and lease or potential sale proceeds from TRIC; equity or debt financing, including ATM sales, may also be needed. Management cautioned that funding may not be available on acceptable terms and equity financing could dilute shareholders; without financing, it may be unable to pursue its plan or continue operations.
- Aqua Metals reported a phased equipment deployment agreement with ACME in Taiwan, but emphasized that its licensing model and lithium-ion recycling remain unproven commercially. It could not estimate when meaningful commercial or licensing revenue would begin.
- Key risks include scaling and commercializing AquaRefining, securing customers and partners, obtaining required permits, protecting intellectual property, environmental and hazardous-material liabilities, and access to capital. The filing describes ordinary-course litigation exposure; accrued liabilities included a $0.5 million class-action settlement amount.
- Management concluded disclosure controls were effective as of June 30, 2022, with no material quarterly change in internal control over financial reporting.
Investor facts to verify
- Progress, milestones, costs, and commercial-scale results for the planned lithium-ion pilot and the ACME deployment.
- Whether TRIC asset sales or the LINICO lease/purchase option produce the expected cash, including the timing and terms of any facility sale.
- Cash runway and financing needs, including potential ATM issuance, dilution, and the availability of funding on acceptable terms.
- The composition and collectability of the $16.037 million current lease receivable, and LINICO’s ability to meet purchase-option deposit and payment obligations.
- Status of the $0.5 million accrued settlement amount and any material developments in litigation, permitting, or environmental matters.