Aqua Metals, Inc. (NASDAQ:AQMS) Q1 2020 Earnings Conference Call April 30, 2020 4:30 PM ET Company Participants Glen Akselrod - Investor Relations Steve Cotton - President, Chief Executive Officer, Director Judd Merrill - Chief Financial Officer Conference Call Participants Colin Rusch - Oppenheimer Operator Good day and welcome to the Aqua Metals First Quarter 2020 Results Conference Call. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Gle ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission file number: 001-37515 Aqua Metals, Inc. (Exact name of registrant as specified in its charter) Delaware 47-1169572 (State or other jurisdiction of incor ...

Aqua Metals, Inc. (NASDAQ:AQMS) Q4 2019 Earnings Conference Call March 11, 2020 4:30 PM ET Company Participants Glen Akselrod - President, Bristol Limited Capital Steve Cotton - President and Chief Executive Officer Judd Merrill - Chief Financial Officer Ben Taecker - Vice President, Engineering and Operations Operator Greetings and welcome to the Aqua Metals 2019 Year End Results and Business Update Conference Call. [Operator Instructions] It is now my pleasure to introduce our host, Glen Akselrod, Spokesp ...

Part I [Business](index=5&type=section&id=Item%201.%20Business) Aqua Metals, Inc. pivots to a capital-light licensing model for its AquaRefining™ technology following a 2019 fire that suspended operations - A fire on November 29, 2019, caused significant damage to the AquaRefining area of the TRIC facility, leading to the suspension of all commercial operations[10](index=10&type=chunk) - The company has shifted its strategy to a capital-light model focused on licensing its AquaRefining technology, funded by insurance proceeds, cash on hand, and potential asset sales[14](index=14&type=chunk)[35](index=35&type=chunk) - AquaRefining is a proprietary, room-temperature, water-based electrochemical process that produces lead with a purity of **99.996+%**, which is cleaner and more modular than traditional smelting[18](index=18&type=chunk)[30](index=30&type=chunk) - The company has strategic agreements with Clarios for equipment supply and lead purchase, and with Veolia for plant operations, with negotiations underway to revise them post-fire[38](index=38&type=chunk)[56](index=56&type=chunk) Intellectual Property Portfolio | Type | Status | Jurisdictions | | :--- | :--- | :--- | | Patents | 3 US patents, 24 international patents, 2 allowances | US, EU, Eurasia, Honduras, India, Indonesia, South Korea, Japan, China, Australia, Canada, Africa, Mexico, South Africa, Vietnam, Ukraine | | Patent Applications | 86 pending | US and 20 additional jurisdictions | [Risk Factors](index=18&type=section&id=Item%201A.%20Risk%20Factors) Significant risks include fire-related insurance uncertainty, operational suspension, unproven licensing model, debt covenants, and Nasdaq delisting - A fire on November 29, 2019, destroyed or impaired substantially all AquaRefining equipment, valued at approximately **$37 million**, with no assurance of full collection of the **$50 million** insurance coverage[72](index=72&type=chunk) - The company has shifted to a capital-light licensing business model, which is less capital-intensive but unproven and its success is not guaranteed[76](index=76&type=chunk) - The company is indebted to Green Bank for approximately **$9.2 million**, secured by all assets, including insurance proceeds, and has required waivers for non-compliance with restrictive covenants[83](index=83&type=chunk)[84](index=84&type=chunk) - Agreements with key partners Clarios and Veolia are at risk due to unmet performance conditions and a declared force majeure, jeopardizing partnerships[82](index=82&type=chunk)[100](index=100&type=chunk) - The company is facing a putative class action and shareholder derivative lawsuit, which could result in substantial costs and divert management resources[114](index=114&type=chunk) - On January 15, 2020, the company received a delisting notice from Nasdaq for its stock price falling below the **$1.00** minimum bid requirement, with a deadline of July 13, 2020, to regain compliance[117](index=117&type=chunk) [Unresolved Staff Comments](index=28&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments - None[128](index=128&type=chunk) [Properties](index=28&type=section&id=Item%202.%20Properties) Aqua Metals owns a 136,750 sq. ft. recycling facility in Nevada and leases executive office space, while subletting its former California office - The company owns a **136,750 sq. ft.** LAB recycling facility on **11.73 acres** in TRIC, McCarran, Nevada[131](index=131&type=chunk) - Executive offices are leased in a **14,016 sq. ft.** space in McCarran, Nevada, with the lease expiring in December 2021[129](index=129&type=chunk) - The former executive office in Alameda, California (**21,697 sq. ft.**) has been sublet, with the sublease expiring in May 2022[130](index=130&type=chunk) [Legal Proceedings](index=31&type=section&id=Item%203.%20Legal%20Proceedings) Aqua Metals is defending against a consolidated class action lawsuit, a shareholder derivative action, and a wrongful termination claim - A consolidated class action lawsuit alleges false and misleading statements between May 19, 2016, and November 9, 2017, with a Second Amended Complaint filed after a partial motion to dismiss[133](index=133&type=chunk) - A consolidated shareholder derivative action alleges breach of fiduciary duties by current and former officers and directors, currently stayed pending a decision in the class action lawsuit[134](index=134&type=chunk) - A former employee has filed a wrongful termination claim with Nevada OSHA, which is currently under investigation[135](index=135&type=chunk) [Mine Safety Disclosures](index=31&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Inapplicable[137](index=137&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=32&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on NASDAQ, has experienced significant volatility, and has never paid cash dividends - The company's common stock (AQMS) has traded on the NASDAQ Capital Market since July 31, 2015, and has experienced significant price volatility[139](index=139&type=chunk) Common Stock Price Range per Share (2018-2019) | Quarter | 2019 High | 2019 Low | 2018 High | 2018 Low | | :--- | :--- | :--- | :--- | :--- | | First | $4.18 | $1.80 | $3.00 | $1.59 | | Second | $3.10 | $1.51 | $4.14 | $2.26 | | Third | $2.06 | $1.54 | $3.11 | $2.24 | | Fourth | $1.91 | $0.42 | $2.92 | $1.55 | - The company has never declared or paid cash dividends and plans to retain any earnings to finance its business operations[142](index=142&type=chunk) - The company has two equity compensation plans: the 2014 Stock Incentive Plan (**2,113,637 shares reserved**) and the 2019 Stock Incentive Plan (**4,500,000 shares authorized**)[143](index=143&type=chunk)[144](index=144&type=chunk) [Selected Financial Data](index=34&type=section&id=Item%206.%20Selected%20Financial%20Data) This item is not applicable to the company - Inapplicable[146](index=146&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The 2019 fire halted operations, prompting a strategic shift; revenues rose 10% to $4.9 million, net loss widened to $44.8 million, liquidity depends on insurance - The November 29, 2019 fire caused an estimated **$37 million** in equipment and plant damage, leading to a suspension of operations and a strategic pivot to a capital-light licensing model[151](index=151&type=chunk)[152](index=152&type=chunk)[155](index=155&type=chunk) Results of Operations (in thousands) | Metric | 2019 | 2018 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Product sales | $4,874 | $4,449 | $425 | 10% | | Cost of product sales | $24,799 | $22,761 | $(2,038) | (9)% | | Research and development | $1,555 | $4,502 | $2,947 | 65% | | General and administrative | $19,314 | $14,214 | $(5,100) | (36)% | | Loss from operations | $(40,794) | $(37,028) | - | - | | Net loss | $(44,795) | $(40,254) | - | - | - General and administrative expenses increased by **36%** in 2019, primarily due to **$9.0 million** in non-cash expense related to the Veolia agreement and a **$2.8 million** increase in stock-based compensation[164](index=164&type=chunk) Cash Flow Summary (in thousands) | Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net cash used in operating activities | $(25,177) | $(26,318) | | Net cash used in investing activities | $(10,574) | $(3,929) | | Net cash provided by financing activities | $22,434 | $28,346 | - As of December 31, 2019, the company had **$7.6 million** in cash and **$17.7 million** in working capital, which includes a **$17.4 million** insurance proceeds receivable, and management believes additional capital will be required[167](index=167&type=chunk)[172](index=172&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=43&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks relate to interest rate fluctuations on its variable-rate debt and the price volatility of lead - The company is exposed to interest rate risk from its debt with Green Bank, which has a variable rate tied to the prime lending rate[195](index=195&type=chunk) - The company faces market risk from the volatility of lead commodity prices, which affects the cost of raw materials and the sales price of finished products[195](index=195&type=chunk) [Financial Statements and Supplementary Data](index=44&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents audited financial statements for 2019 and 2018, reflecting a $44.8 million net loss and the impact of the 2019 fire - The independent auditor, Armanino LLP, issued an unqualified opinion on the consolidated financial statements for the years ended December 31, 2019 and 2018[200](index=200&type=chunk) Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | Cash and cash equivalents | $7,575 | $20,892 | | Insurance proceeds receivable | $17,446 | $0 | | Total current assets | $27,503 | $22,752 | | Property and equipment, net | $37,643 | $45,548 | | Total assets | $69,454 | $71,371 | | Total current liabilities | $9,810 | $11,799 | | Total liabilities | $19,865 | $21,281 | | Total stockholders' equity | $49,589 | $50,090 | - The November 29, 2019 fire resulted in a write-off of approximately **$22.4 million** in fixed assets, with a net write-off of **$19.9 million** after accounting for accumulated depreciation[257](index=257&type=chunk) - The company repaid its **$5.0 million** convertible note to Interstate Battery in January 2019 for a total of **$6.7 million**, including principal and interest[270](index=270&type=chunk) - The company has a **$10 million** loan with Green Bank, with a balance of **$9.3 million** as of December 31, 2019, and has received waivers for non-compliance with the minimum debt service coverage ratio covenant[274](index=274&type=chunk)[278](index=278&type=chunk) Unaudited Quarterly Revenue 2019 (in thousands) | Quarter | Product Sales | | :--- | :--- | | Q1 2019 | $437 | | Q2 2019 | $1,483 | | Q3 2019 | $2,361 | | Q4 2019 | $593 | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=93&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reported no changes in or disagreements with its accountants on accounting and financial disclosure - None[374](index=374&type=chunk) [Controls and Procedures](index=93&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2019 - Management concluded that disclosure controls and procedures were effective as of December 31, 2019[376](index=376&type=chunk) - Management concluded that internal control over financial reporting was effective as of December 31, 2019, based on the COSO framework[378](index=378&type=chunk) [Other Information](index=93&type=section&id=Item%209B.%20Other%20Information) The company reported no other information - None[379](index=379&type=chunk) Part III [Directors, Executive Officers, Corporate Governance, Executive Compensation, Security Ownership, and Principal Accountant Fees](index=94&type=section&id=Item%2010-14) Information for these items is incorporated by reference from the company's definitive proxy statement for its 2020 Annual Meeting of Stockholders - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the registrant's 2020 definitive proxy statement[381](index=381&type=chunk)[382](index=382&type=chunk)[383](index=383&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=95&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists financial statements and an index of exhibits, including key agreements and Sarbanes-Oxley Act certifications - The financial statements are referenced under Item 8, and no separate financial statement schedules are filed[386](index=386&type=chunk) - The exhibit list includes key agreements such as the Underwriting Agreements, the Amended and Restated Certificate of Incorporation, the Tolling/Lead Purchase and Equipment Supply Agreements with Clarios (formerly Johnson Controls), and the Operations, Maintenance and Management Agreement with Veolia[385](index=385&type=chunk)[390](index=390&type=chunk)[395](index=395&type=chunk) - Certifications from the CEO and CFO under Sections 302 and 906 of the Sarbanes-Oxley Act are filed as exhibits[397](index=397&type=chunk)[398](index=398&type=chunk)

Financial Data and Key Metrics Changes - For Q3 2019, the company recognized revenue of approximately $2.4 million, a 102% increase compared to $1.2 million in Q3 2018, and a 59% increase from Q2 2019 [10] - Cost of products sold was $8.2 million, up 28% from $6.5 million in the previous year, but cost as a percentage of revenue decreased by 37%, indicating improved efficiency [10] - General and administrative expenses (G&A) for Q3 2019 were $5.1 million, compared to $2.2 million in Q3 2018, with approximately two-thirds of G&A being non-cash expenses [11] - The company reported an operating loss of $11.3 million for Q3 2019, compared to a loss of $8.4 million in Q3 2018, and a net loss of $11.3 million or negative $0.20 per diluted share [12] Business Line Data and Key Metrics Changes - The company is on track to operate all 16 modules simultaneously by the end of 2019, which is expected to significantly increase production capacity [6] - The AquaRefinery is projected to reach a production rate of 40 tonnes of AquaRefined lead per day, plus an additional 40 tonnes of other lead products by mid-2020 [6] Market Data and Key Metrics Changes - The company has received commercial volume shipments orders from its battery manufacturing partner, Clarios, indicating strong market interest in AquaRefined lead [9] - There is ongoing interest from large operators globally in the AquaRefining technology, suggesting a positive market outlook for licensing opportunities [9] Company Strategy and Development Direction - The company aims to maximize shareholder value through various financing options, including debt, equipment leasing, and preselling AquaRefined lead [15] - The strategy includes scaling the plant to full capacity and expanding beyond the current 16 modules, with a focus on operational efficiency and cost management [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to transform lead recycling through innovative technology, positioning Aqua Metals as a leader in the industry [8] - The company is focused on completing capital projects and scaling operations, with expectations of achieving full utilization of the plant by mid-2020 [19] Other Important Information - The company used $6.8 million in cash for operations and $5 million for capital expenditures in Q3 2019, indicating a need for additional capital to support growth [14] - Management confirmed that the drying system will not be completed by year-end but will not affect the operation of the 16 modules [51] Q&A Session Summary Question: Can you discuss the ramp-up cadence after all equipment is installed? - Management indicated that all 16 modules will be running simultaneously by year-end, with scaling expected to begin in early 2020 and reach full utilization by mid-year [19] Question: What are the revenue expectations for Q4? - Management stated that Q4 revenues will focus on completing capital projects, with expectations that revenues will resemble Q1 or better, but not a primary focus [22] Question: How many customers are currently testing lead products? - Currently, Clarios is the primary customer taking lead shipments, with ongoing discussions with other potential partners [24] Question: Is there a buyout clause with Clarios? - Management confirmed there is no buyout option in the agreement with Clarios [33] Question: What is the status of the power supply and its impact on operations? - Management assured that power outages would not significantly impact operations, as the facility can restart quickly after outages [56]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 AQMS FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 30, 2019 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission file number: 001-37515 Aqua Metals, Inc. (Exact name of registrant as specified in its charter) Delaware 47-1169572 (State or other jurisdic ...

Financial Data and Key Metrics Changes - For Q2 2019, the company recognized revenue of approximately $1.5 million, a significant increase from $483,000 in Q2 2018, reflecting the initiation of 24x7 operations [12] - Cost of product sales increased to $7.2 million from $4.6 million year-over-year, but costs related to revenue generation decreased by 52% [12][13] - The net loss for Q2 2019 was $10.5 million, or a negative $0.21 per diluted share, compared to a net loss of $9.9 million, or a negative $0.33 per diluted share in Q2 2018 [14] Business Line Data and Key Metrics Changes - AquaRefined lead production saw a 458% increase over Q1, while lead bullion metal production increased by 352%, leading to a 438% overall production increase from Q1 to Q2 [7][12] - The company moved to 24x7 operations with its initial four modules, up from 24x4 operations, achieving a record production level [9][12] Market Data and Key Metrics Changes - The partnership with Clarios is progressing, with specific performance metrics agreed upon for the existing AquaRefinery, which are conditions precedent to shipping equipment [10] - The company is preparing for the delivery of equipment for Phase 2 of its capital program, expected to further boost electrolyte recovery and increase yield later in 2019 [9][10] Company Strategy and Development Direction - The company aims to scale production by optimizing Phase 1 equipment and expects to continue increasing module utilization [17] - Phase 2 of the capital projects plan is critical for enhancing contribution margin and scaling the plant to 16 modules [17] - The company is focused on achieving higher-margin licensing revenue beginning as early as 2020 through its partnership with Clarios [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving production targets and highlighted the importance of strategic partnerships and operational improvements [18] - The company anticipates a decrease in cash burn as production ramps up, with cash needs expected to decline as operations scale [16][33] Other Important Information - The company had $27.3 million in cash and cash equivalents as of June 30, 2019, including approximately $20.3 million net received from a public offering [14] - General and administrative expenses for Q2 2019 were the lowest in the last six quarters, excluding non-cash items [13] Q&A Session Summary Question: What is the cadence towards cash break-even? - Management indicated that cash break-even is expected to be reached once the company scales to 16 modules, with cash burn decreasing throughout the year [21] Question: Can you provide an update on the Clarios relationship? - Discussions with Clarios are ongoing regarding performance metrics and the overall joint development agreement, with expectations to have more information early next year [23] Question: What was the July output in terms of tonnage? - July output was similar to June due to maintenance issues unrelated to AquaRefining, but the overall trend remains positive [25] Question: How many modules are needed for positive gross margin contribution? - The company stated that 16 modules are required to reach breakeven, with positive margins expected beyond that [31] Question: What is the impact of Phase 2 on lead recovery? - Phase 2 is expected to significantly improve electrolyte recovery and contribute to higher margins, with a goal of reaching up to 100% recovery by 2020 [35][49] Question: How is the relationship with Interstate? - The relationship with Interstate remains strong, with them being a significant investor and feedstock supplier [59]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 AQMS FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended June 30, 2019 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission file number: 001-37515 Aqua Metals, Inc. (Exact name of registrant as specified in its charter) Delaware 47-1169572 (State or other jurisdiction ...