Aqua Metals, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. The unaudited results are for a pre-commercial-stage battery-recycling company; Aqua Metals reported no revenue in either Q1 2023 or Q1 2022.
Financial results and liquidity
| Metric | Q1 2023 | Q1 2022 / prior date |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $4.516 million | $4.310 million |
| Operating loss | $4.516 million | $4.310 million |
| Net loss | $4.606 million | $4.410 million |
| Basic and diluted loss per share | $0.06 | $0.06 |
| Cash used in operating activities | $2.863 million | $3.404 million |
| Cash used in investing activities | $5.222 million | Cash provided: $0.417 million |
| Cash provided by financing activities | $4.358 million | $3.890 million |
At March 31, 2023, cash was $3.355 million, working capital was $7.4 million, total assets were $33.960 million, and total liabilities were $14.884 million. Current assets included a $15.244 million lease receivable. Notes payable totaled $8.847 million at quarter-end, alongside lease liabilities. The filing reports no revenue, so sales margins are not meaningful.
Changes versus Q1 2022 and balance-sheet developments
- Operating expenses rose 4.8%: plant operations and cleanup increased 7.1% to $1.065 million as the company began operating its pilot and processing black mass; R&D declined 19.2% to $0.445 million; and general and administrative expense rose 8.7% to $3.006 million.
- Net loss increased by $0.196 million. Q1 2023 included $0.176 million of interest expense on notes payable, while Q1 2022 reported a $0.150 million loss on disposal of property, plant and equipment.
- Property, plant and equipment, net, increased to $11.894 million from $7.343 million, reflecting property acquisition and construction activity. Q1 investing cash use included the new building purchase and equipment spending.
- Cash declined $3.727 million during the quarter. Financing included $2.0 million of net ATM proceeds and $2.9 million of net loan proceeds; equity issuance increased shares outstanding.
Business, outlook, and risks
Aqua Metals is developing AquaRefining, a water-based, electrochemical recycling process for lead-acid and lithium-ion batteries. It said it had recovered metals from lithium-ion battery material at its pilot facility and was scaling operations. The company has not engaged in commercial operations since 2019 and has not established meaningful commercial revenue from its current strategy.
In February 2023, the company acquired a five-acre recycling campus and an existing building. Its stated plans include a first phase designed for about 3,000 tonnes of lithium-ion battery black mass annually, with an ultimate campus capacity of up to 10,000 tonnes per year. Management said that capacity could generate more than $200 million in revenue at then-current metal prices; this is an illustrative potential, not a revenue forecast or assurance of results.
The filing contains inconsistent timing for the new campus: the business discussion refers to operations beginning in Q1 2024, while the risk-factor discussion says Q2 2024, subject to financing and development. The company expects to need additional capital over the next 12 months for operations and Phase One. Potential funding sources include loans, government-backed debt, grants, and ATM equity sales; availability is not assured, and equity financing could dilute shareholders. The filing warns that inability to obtain satisfactory financing could prevent execution of its plans and threaten continued operations.
On April 26, 2023, after quarter-end, Aqua Metals sold its former facility at 2500 Peru Drive to Comstock Inc. for the agreed transaction terms; after repaying the related note, it received approximately $5.7 million in net proceeds. The related loan obligations were terminated. This subsequent transaction is not included in March 31 cash or debt balances.
Key risks include technology and scale-up uncertainty, lack of established commercial operations or meaningful revenue, reliance on additional financing, execution and permitting delays, metal-price and market volatility, competition, and environmental, health, and safety obligations. Management reported that disclosure controls were effective as of March 31, 2023, and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Reconcile the stated Q1 versus Q2 2024 target for starting operations at the new campus, and assess the status and cost of construction and commissioning.
- Confirm availability, terms, and timing of financing required for Phase One and ongoing operations; evaluate liquidity after the April property sale and note repayment.
- Track pilot performance and independent evidence of commercial-scale yields, product quality, operating costs, and customer qualification.
- Verify the final accounting and cash impact of the April 26 property sale, including repayment of the secured loan and net proceeds received.
- Monitor dilution from ATM sales and other share issuances, as well as execution, permitting, environmental, and safety risks.