Aqua Metals, Inc. (NASDAQ:AQMS) Q1 2022 Earnings Conference Call April 28, 2022 4:30 PM ET Company Representatives Steve Cotton - President, Chief Executive Officer Judd Merrill - Chief Financial Officer Ben Taecker - Chief Engineering and Operating Officer Glen Akselrod - Investor Relations Conference Call Participants Shawn Severson - Water Tower Research Colin Rusch - Oppenheimer Amit Dayal - H.C. Wainwright Operator Greetings! Welcome to Aqua Metals Q1 Investor Call. At this time all participants are in ...

Aqua Metals, Inc. (NASDAQ:AQMS) Q4 2021 Earnings Conference Call February 24, 2022 4:30 PM ET Company Participants Glen Akselrod - IR Steve Cotton - President & CEO Judd Merrill - CFO Ben Taecker - Chief Engineering and Operating Officer Conference Call Participants Colin Rusch - Oppenheimer Sameer Joshi - H.C. Wainwright Shawn Severson - Water Tower Research Operator Greetings! Welcome to Aqua Metals Full Year 2021 Results Conference Call. At this time, all participants are in a listen-only mode. A questio ...

Financial Data and Key Metrics Changes - As of September 30, 2021, the company reported cash of $11.7 million and working capital of $10.3 million, maintaining cash balances over $10 million for the last three quarters [23][24] - The net loss for the quarter was $1.386 million, with a basic and diluted net loss per share of $0.02 [27] - Cost of product sales increased approximately 2% and 23% for the three and nine months ended September 30, 2021, respectively [25] Business Line Data and Key Metrics Changes - The company completed its third generation Aqualyzer, which triples the throughput compared to the first generation, now capable of processing 1296 kilograms per day [11] - Research and development costs included expenditures related to improvements on AquaRefining technology for lead recycling and initial development of lithium-ion battery recycling [25] Market Data and Key Metrics Changes - The global lead battery market is valued at around $65 billion, with the fastest growth occurring in the Asia Pacific region due to increased industrialization and vehicle usage [18] - The company is preparing to ship AquaRefining technology to ACME Metals in Taiwan, marking a significant milestone in the Asia Pacific market [16] Company Strategy and Development Direction - The company aims to provide sustainable metal recycling for lead and lithium batteries, focusing on reducing reliance on mining and supporting clean energy initiatives [6][7] - Aqua Metals is transitioning to a capital-light model by providing equipment and licensing, which is expected to enhance operational efficiency [10] Management's Comments on Operating Environment and Future Outlook - Management emphasized the importance of recycling technologies in achieving net-zero emissions and addressing global climate change [8] - The company is optimistic about its partnership with LiNiCo and the potential for significant advancements in lithium-ion battery recycling technology [20][39] Other Important Information - The company received a final insurance payment of $5.25 million, exceeding initial guidance, and has advanced discussions with potential licensees [18][27] - Aqua Metals has established a strong patent portfolio with 71 patents issued and allowed, and 44 additional applications pending [22] Q&A Session Summary Question: Will ACME receive the latest Aqualyzer technology? - Yes, ACME Taiwan will receive the latest incarnation of the technology [32] Question: What are the expected revenues from the shipment to ACME? - The materials will ship by the end of the fourth quarter, with modest payments expected for the equipment and material produced [34] Question: Are there any near-term milestones for the LiNiCo partnership? - The company is sourcing black mass material for processing, with pilot sales expected to begin soon [39] Question: How does the company plan to fund operations through the end of 2022? - The company has $11.7 million in cash and expects additional funds from the building sale and revenue from operations [43] Question: What is the pace of lithium recycling process development? - The pace is rapid, with significant focus on innovation and capital-light models to enhance technology [46] Question: How does AquaRefining technology compare to other recycling methods? - AquaRefining offers a cleaner, more efficient process that can complement existing methods and reduce carbon output [55]

Aqua Metals, Inc. (NASDAQ:AQMS) Q2 2021 Earnings Conference Call July 29, 2021 4:30 PM ET Company Participants Glen Akselrod - Investor Relations Steve Cotton - President and CEO Judd Merrill - Chief Financial Officer Conference Call Participants Colin Rusch - Oppenheimer Sameer Joshi - H.C. Wainwright Shawn Severson - Water Tower Research Operator Good day and thank you for standing by. And welcome to Aqua Metals Second Quarter Financial Results. At this time, all participants are in a listen-only mode. Af ...

PART I - FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents Aqua Metals, Inc.'s unaudited condensed consolidated financial statements, including balance sheets, statements of operations, stockholders' equity, and cash flows, along with detailed notes explaining significant accounting policies, financial line items, and key events such as the strategic shift to a capital-light licensing model and recent investment activities [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The company's financial position as of June 30, 2021, shows a notable increase in cash and total current assets, alongside a substantial decrease in net property and equipment, reflecting the reclassification of assets held for sale and the recognition of a lease receivable Key Balance Sheet Data (in thousands) | Metric | June 30, 2021 | December 31, 2020 | Change ($) | Change (%) | | :-------------------------------- | :------------ | :---------------- | :--------- | :--------- | | Cash and cash equivalents | $10,704 | $6,533 | $4,171 | 63.8% | | Total current assets | $17,155 | $8,358 | $8,797 | 105.2% | | Property and equipment, net | $1,930 | $24,883 | $(22,953) | -92.2% | | Assets held for sale | $4,339 | — | $4,339 | N/A | | Lease receivable, non-current portion | $16,037 | — | $16,037 | N/A | | Total assets | $38,128 | $35,138 | $2,990 | 8.5% | | Total current liabilities | $6,415 | $3,454 | $2,961 | 85.7% | | Total liabilities | $6,432 | $3,999 | $2,433 | 60.8% | | Total stockholders' equity | $31,696 | $31,139 | $557 | 1.8% | - The significant decrease in **Property and equipment, net**, and the corresponding increase in **Assets held for sale** and **Lease receivable, non-current portion**, reflect the company's strategic shift and the lease-to-buy agreement for its TRIC facility[9](index=9&type=chunk) [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Aqua Metals reported a substantial net loss for both the three and six months ended June 30, 2021, primarily due to a significant loss on disposal of property and equipment and increased cost of product sales, with no product sales revenue in either period Key Operations Data (in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Product sales | $— | $— | $— | $18 | | Total operating expense | $4,443 | $3,768 | $8,642 | $7,849 | | Loss from operations | $(4,443) | $(3,768) | $(8,642) | $(7,831) | | Loss on disposal of property and equipment | $(4,254) | $— | $(4,254) | $— | | PPP loan forgiveness | $201 | $— | $332 | $— | | Net loss | $(8,016) | $(3,983) | $(12,102) | $(8,410) | | Basic and diluted net loss per share | $(0.12) | $(0.07) | $(0.18) | $(0.14) | - The significant increase in net loss for the three and six months ended June 30, 2021, was largely driven by a **$4.254 million loss on disposal of property and equipment**, which was not present in the prior year[12](index=12&type=chunk) - **Product sales remained at zero** for the reported periods in 2021, indicating the continued suspension of commercial production following the 2019 fire[12](index=12&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Stockholders' equity increased slightly from December 31, 2020, to June 30, 2021, primarily due to significant contributions to additional paid-in capital from stock-based compensation, RSU vesting, stock option exercises, and ATM share sales, which partially offset the period's net loss Key Stockholders' Equity Changes (in thousands) | Metric | December 31, 2020 | June 30, 2021 | Change ($) | Change (%) | | :-------------------------- | :---------------- | :------------ | :--------- | :--------- | | Common Stock Amount | $64 | $69 | $5 | 7.8% | | Additional Paid-in Capital | $196,728 | $209,382 | $12,654 | 6.4% | | Accumulated Deficit | $(165,653) | $(177,755) | $(12,102) | 7.3% | | Total Stockholders' Equity | $31,139 | $31,696 | $557 | 1.8% | - **Additional paid-in capital increased by $12,654 thousand**, largely driven by **$9,328 thousand from ATM share sales** and **$1,298 thousand from stock-based compensation** during the six months ended June 30, 2021[15](index=15&type=chunk) - The **accumulated deficit increased by $12,102 thousand**, directly reflecting the net loss incurred for the six months ended June 30, 2021[15](index=15&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Aqua Metals reported a net increase in cash and cash equivalents for the six months ended June 30, 2021, primarily driven by substantial cash provided by financing activities, largely from ATM share sales, which more than offset cash used in operating and investing activities Key Cash Flow Data (Six Months Ended June 30, in thousands) | Activity | 2021 | 2020 | Change ($) | Change (%) | | :---------------------------------------- | :-------- | :-------- | :--------- | :--------- | | Net cash used in operating activities | $(4,940) | $(8,323) | $3,383 | -40.6% | | Net cash (used in) provided by investing activities | $(1,131) | $5,350 | $(6,481) | -121.1% | | Net cash provided by financing activities | $10,242 | $174 | $10,068 | 5786.2% | | Net increase (decrease) in cash and cash equivalents | $4,171 | $(2,799) | $6,970 | -249.0% | | Cash and cash equivalents at end of period | $10,704 | $4,776 | $5,928 | 124.1% | - **Cash provided by financing activities surged to $10,242 thousand in H1 2021**, primarily from **$9,331 thousand in net proceeds from ATM share sales**, a significant increase from $174 thousand in H1 2020[17](index=17&type=chunk) - **Investing activities shifted from providing $5,350 thousand in H1 2020** (due to insurance proceeds) to **using $1,131 thousand in H1 2021**, mainly for property and equipment purchases and investment in LiNiCo[17](index=17&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed explanations of Aqua Metals' accounting policies, financial statement line items, and significant events, including the strategic shift to a capital-light licensing model after a 2019 fire, the lease-to-buy agreement for its facility, recent investments, and financing activities [1. Organization](index=8&type=section&id=1.%20Organization) Aqua Metals, Inc. was incorporated in 2014, initially focused on lead recycling using its proprietary AquaRefining™ process. Following a fire in November 2019, the company shifted to a capital-light strategy, focusing on equipment supply and technology licensing, and recently signed an LOI to deploy and license AquaRefining equipment in Taiwan - Aqua Metals transitioned from operating a capital-intensive lead recycling facility to a **capital-light strategy focused on equipment supply and technology licensing** for its AquaRefining™ process after a November 2019 fire[20](index=20&type=chunk)[22](index=22&type=chunk) - The **AquaRefining™ process is a novel, proprietary, and patented room-temperature, water-based method** for lead recycling that emits less pollution than traditional smelting[20](index=20&type=chunk)[21](index=21&type=chunk) - On July 1, 2021, the company signed a **Letter of Intent (LOI) with ACME Metal Enterprise Co., Ltd. (ACME) to deploy and license AquaRefining equipment** at its facility in Keelung, Taiwan[22](index=22&type=chunk) [2. Summary of Significant Accounting Policies](index=8&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) The company's unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP, with no material changes in significant accounting policies during the reported period. The company operates as one operating and geographic segment and has received $25.0 million in insurance payments related to the 2019 fire, with an additional $5.25 million agreed upon post-quarter end [Basis of presentation](index=8&type=section&id=Basis%20of%20presentation) The unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP and SEC rules, including all necessary adjustments, and should be read in conjunction with the 2020 annual report on Form 10-K - Financial statements are prepared in accordance with **U.S. GAAP and SEC rules**, including all necessary normal recurring adjustments[24](index=24&type=chunk) - The statements should be read in conjunction with the Company's audited consolidated financial statements for the period ended December 31, 2020, included on **Form 10-K**[25](index=25&type=chunk) [Principles of consolidation](index=10&type=section&id=Principles%20of%20consolidation) The condensed consolidated financial statements include the accounts of Aqua Metals, Inc. and its wholly-owned subsidiaries, with all significant inter-company accounts and transactions eliminated - The financial statements include the accounts of the Company and its **wholly-owned subsidiaries**[28](index=28&type=chunk) - **Significant inter-company accounts and transactions have been eliminated** in consolidation[28](index=28&type=chunk) [Use of estimates](index=10&type=section&id=Use%20of%20estimates) The preparation of financial statements requires management to make estimates and assumptions, particularly regarding long-lived assets, deferred tax assets, stock option expense, and fair value of stock warrants, with actual results potentially differing from these estimates - Management makes **estimates and assumptions** relating to the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities[29](index=29&type=chunk) - Significant items subject to estimates include the carrying amount and valuation of **long-lived assets, valuation allowances for deferred tax assets, stock option expense, and fair value of stock warrants**[29](index=29&type=chunk) [Net loss per share](index=10&type=section&id=Net%20loss%20per%20share) Basic net loss per share is computed by dividing net loss by weighted average common shares outstanding. Diluted net loss per share includes common stock equivalents (options, RSUs, warrants) only when dilutive, which were excluded in the reported periods due to net losses Excluded Potentially Dilutive Securities (as of June 30) | Security Type | 2021 | 2020 | | :------------ | :---------- | :---------- | | Options | 1,038,439 | 1,425,004 | | Unvested RSUs | 4,840,763 | 4,244,003 | | Warrants | 6,372 | 103,500 | | Total | 5,885,574 | 5,772,507 | - The listed potentially dilutive securities were excluded from the diluted net loss per share calculation because their effect was **anti-dilutive due to a net loss** in the periods presented[30](index=30&type=chunk)[31](index=31&type=chunk) [Segment and geographic information](index=10&type=section&id=Segment%20and%20geographic%20information) The company operates and manages its business as a single operating segment and in one geographic segment - The chief operating decision maker views its operations and manages its business in **one operating segment**[32](index=32&type=chunk) - The Company operates in only **one geographic segment**[32](index=32&type=chunk) [Concentration of credit risk](index=11&type=section&id=Concentration%20of%20credit%20risk) Aqua Metals generated no revenue in the six months ended June 30, 2021. In the prior year, 100% of nominal revenue came from one customer, Clarios, with no trade accounts receivable at either period end - **No revenue was generated** during the six months ended June 30, 2021[35](index=35&type=chunk) - Revenue from one customer, **Clarios, represented 100% of total revenue ($18,000)** for the six months ended June 30, 2020[35](index=35&type=chunk) - The Company did not have a **trade accounts receivable balance** as of June 30, 2021, or December 31, 2020[35](index=35&type=chunk) [Recent accounting pronouncements](index=11&type=section&id=Recent%20accounting%20pronouncements) There were no recent accounting pronouncements or changes in accounting pronouncements during the six months ended June 30, 2021, that were significant to the company - **No material changes in significant accounting policies** during the three and six months ended June 30, 2021[23](index=23&type=chunk) - There were **no recent accounting pronouncements or changes** in accounting pronouncements during the six months ended June 30, 2021, that are of significance or potential significance to the Company[36](index=36&type=chunk) [Insurance Proceeds](index=11&type=section&id=Insurance%20Proceeds) As of June 30, 2021, Aqua Metals had received $25.0 million in insurance payments for the November 2019 fire. Subsequent to quarter-end, an additional $5.25 million was agreed upon, bringing the total collected to approximately $30.25 million - **Total insurance payments received as of June 30, 2021, for the November 2019 fire: $25.0 million**[36](index=36&type=chunk) - Subsequent to quarter-end, an **additional $5.25 million payment was agreed upon** with insurance carriers[36](index=36&type=chunk) - The **total collected from insurance is expected to be approximately $30.25 million**[36](index=36&type=chunk) [3. Revenue Recognition](index=11&type=section&id=3.%20Revenue%20Recognition) Historically, Aqua Metals generated revenues by recycling lead-acid batteries and selling recovered lead and plastics. However, the company was not in commercial production during the three and six months ended June 30, 2021, or the comparable 2020 periods, with nominal 2020 revenue from inventory sales - The Company was **not in commercial production** during the three and six months ended June 30, 2021, or during the three and six months ended June 30, 2020[38](index=38&type=chunk) - **Nominal revenue generated during the six months ended June 30, 2020**, resulted from the sale of inventory[38](index=38&type=chunk) - Historically, **100% of the Company's revenue came from products transferred to customers at a single point in time**, including recycled lead (compounds, hard lead, AquaRefined lead) and plastics[37](index=37&type=chunk)[38](index=38&type=chunk) [4. Lease Receivable](index=11&type=section&id=4.%20Lease%20Receivable) Aqua Metals entered a sales-type lease agreement with LiNiCo Corporation for its TRIC facility, commencing April 1, 2021, with LiNiCo having an option to purchase the property for $14.25-$15.25 million. The company recognized a $17.0 million lease receivable and $20,000 in interest income for Q2 2021 - Aqua Metals leased its 136,750 square foot recycling facility at TRIC to **LiNiCo Corporation under an Industrial Lease Agreement**, commencing April 1, 2021, and expiring March 31, 2023[39](index=39&type=chunk) - LiNiCo has an **option to purchase the land and facilities for $14.25 million (by Oct 1, 2022) or $15.25 million (after Oct 1, 2022, by Mar 31, 2023)**, subject to nonrefundable deposits[39](index=39&type=chunk) - The agreement was accounted for as a **sales-type lease, recognizing an estimated fair market value of $17.0 million as a lease receivable**, and **$20,000 of interest income** was recorded for the three months ended June 30, 2021[41](index=41&type=chunk) [5. Inventory](index=12&type=section&id=5.%20Inventory) Total inventory decreased from $1,091 thousand at December 31, 2020, to $662 thousand at June 30, 2021, primarily due to a reduction in raw materials Inventory (in thousands) | Category | June 30, 2021 | December 31, 2020 | | :------------ | :------------ | :---------------- | | Finished goods | $2 | $2 | | Work in process | $245 | $247 | | Raw materials | $415 | $842 | | Total inventory | $662 | $1,091 | - **Total inventory decreased by $429 thousand (-39.3%)** from December 31, 2020, to June 30, 2021, mainly driven by a **$427 thousand reduction in raw materials**[42](index=42&type=chunk) [6. Assets Held for Sale](index=13&type=section&id=6.%20Assets%20Held%20for%20Sale) Aqua Metals classified $5.2 million of assets as held for sale during Q2 2021, believing them unnecessary for future operations, and sold assets with a book value of $0.8 million, including a battery breaker - For the three months ended June 30, 2021, the Company classified certain assets with a **net book value of $5.2 million as held for sale**, as management believes these assets are no longer necessary for future operating plans[44](index=44&type=chunk) - During the same quarter, the Company **sold assets held for sale with a book value of $0.8 million**, which included a battery breaker and related equipment[44](index=44&type=chunk) [7. Property and Equipment, net](index=13&type=section&id=7.%20Property%20and%20Equipment,%20net) Property and equipment, net, significantly decreased from $24,883 thousand at December 31, 2020, to $1,930 thousand at June 30, 2021, primarily due to the reclassification of land, building, and operational equipment, likely related to the lease-to-buy agreement and assets held for sale Property and Equipment, net (in thousands) | Asset Class | June 30, 2021 | December 31, 2020 | | :------------------------ | :------------ | :---------------- | | Operational equipment | $1,435 | $12,126 | | Land | $— | $1,047 | | Building | $— | $19,508 | | Equipment under construction | $1,715 | $3,597 | | Total property and equipment, net | $1,930 | $24,883 | - The **net book value of property and equipment decreased by $22,953 thousand (-92.2%)** from December 31, 2020, to June 30, 2021, largely due to the reclassification of land, building, and operational equipment[46](index=46&type=chunk) - **Depreciation expense for the six months ended June 30, 2021, was $0.5 million**, a decrease from $1.0 million in the comparable 2020 period[46](index=46&type=chunk) [8. Investments](index=14&type=section&id=8.%20Investments) Aqua Metals invested $1.5 million in LiNiCo Corporation, receiving 1,500 shares of Series A Preferred Stock (approx. 9% ownership) and a three-year warrant, accounted for at cost. The investment involved issuing 375,000 shares of Aqua Metals common stock and a $232,000 cash payment to LiNiCo - On February 15, 2021, Aqua Metals invested **$1.5 million in LiNiCo Corporation**, receiving **1,500 shares of Series A Preferred Stock** and a three-year warrant to purchase an additional 500 shares[49](index=49&type=chunk) - The investment represents approximately **9% of LiNiCo common stock** on a fully diluted basis and was accounted for at cost under ASC 321, Investments-Equity Securities[49](index=49&type=chunk)[50](index=50&type=chunk) - Consideration for the investment included the issuance of **375,000 shares of Aqua Metals common stock** and a **cash payment of $232,000 to LiNiCo**[49](index=49&type=chunk)[52](index=52&type=chunk) [9. Accrued Liabilities](index=14&type=section&id=9.%20Accrued%20Liabilities) Total accrued liabilities significantly increased from $1,253 thousand at December 31, 2020, to $4,634 thousand at June 30, 2021, primarily driven by a new accrued liability for building repair Accrued Liabilities (in thousands) | Category | June 30, 2021 | December 31, 2020 | | :----------------------- | :------------ | :---------------- | | Building repair | $2,547 | $— | | Property and equipment related | $1,321 | $715 | | Payroll related | $727 | $479 | | Use tax accrual | $10 | $1 | | Other | $29 | $58 | | Total accrued liabilities | $4,634 | $1,253 | - The **total accrued liabilities increased by $3,381 thousand (+269.8%)** from December 31, 2020, to June 30, 2021, largely due to the recognition of **$2,547 thousand for building repair**[55](index=55&type=chunk) [10. Leases](index=15&type=section&id=10.%20Leases) Aqua Metals maintains one immaterial finance lease and two operating leases for real estate, with remaining terms of 76 and 42 months. As of June 30, 2021, total right-of-use assets were $0.46 million and operating lease liabilities were $0.54 million, with sublease income recognized in both 2021 and 2020 Lease Information (in thousands) | Metric | June 30, 2021 | June 30, 2020 | | :-------------------------------- | :------------ | :------------ | | Total right-of-use assets | $460 | $960 | | Operating lease liabilities | $539 | $1,120 | | Sublease income (six months ended) | $255 | $216 | - As of June 30, 2021, the **weighted-average remaining lease term for operating leases was 0.7 years**, with a **weighted-average discount rate of 9.66%**[60](index=60&type=chunk) - **Operating lease liabilities due in the 12-month period ended June 30, 2022, totaled $561 thousand**, with an imputed interest of $(22) thousand, resulting in **current operating lease liabilities of $539 thousand**[61](index=61&type=chunk) [11. Notes Payable](index=16&type=section&id=11.%20Notes%20Payable) All notes payable, primarily from the Paycheck Protection Program (PPP) loans totaling $332,000, were forgiven during the six months ended June 30, 2021, resulting in no outstanding notes payable at period end Notes Payable (in thousands) | Category | June 30, 2021 | December 31, 2020 | | :----------------------- | :------------ | :---------------- | | Notes payable, current portion | $— | $29 | | Notes payable, non-current portion | $— | $303 | | Total notes payable | $— | $332 | - Both of the Company's two **PPP loans, totaling $332,000, were forgiven** during the six months ended June 30, 2021, eliminating all outstanding notes payable[63](index=63&type=chunk) [12. Stockholders' Equity](index=16&type=section&id=12.%20Stockholders'%20Equity) During the six months ended June 30, 2021, Aqua Metals issued a significant number of common shares through RSU vesting, cashless warrant exercises, an investment in LiNiCo, stock option exercises, and ATM share sales, contributing to an increase in additional paid-in capital. Stock-based compensation expense for the period was $1,298 thousand [Shares issued](index=16&type=section&id=Shares%20issued) Aqua Metals issued over 4 million common shares in the first half of 2021, primarily through ATM sales (2.47 million shares for $9.3 million net proceeds), RSU vesting (884,411 shares), and stock option exercises (347,901 shares), and 375,000 shares for the LiNiCo investment - **Issued 2,473,359 shares of common stock through At The Market (ATM) share sales**, generating **net proceeds of $9.3 million** during the six months ended June 30, 2021[65](index=65&type=chunk) - **Issued 884,411 shares of common stock upon vesting of Restricted Stock Units (RSUs)** granted to management, employees, and Board members[64](index=64&type=chunk)[65](index=65&type=chunk) - **Issued 375,000 shares of common stock related to the LiNiCo investment** and **347,901 shares upon stock option exercises**[65](index=65&type=chunk) [Stock-based compensation](index=16&type=section&id=Stock-based%20compensation) Stock-based compensation expense for the six months ended June 30, 2021, was $1,298 thousand, primarily allocated to general and administrative expenses, a decrease from $1,510 thousand in the prior year. No options were issued in either period Stock-based Compensation Expense (in thousands) | Allocation | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :----------------------------- | :----------------------------- | :----------------------------- | | Cost of product sales | $47 | $44 | | Research and development cost | $53 | $120 | | General and administrative expense | $1,198 | $1,346 | | Total | $1,298 | $1,510 | - **Total stock-based compensation expense decreased by $212 thousand (-14.0%)** for the six months ended June 30, 2021, compared to the prior year[68](index=68&type=chunk) - **No options were issued** during the three and six months ended June 30, 2021, or the comparable periods in 2020[68](index=68&type=chunk) [Restricted stock units](index=18&type=section&id=Restricted%20stock%20units) In February 2021, 25,000 RSUs were granted to a contractor, vesting upon licensing agreement, engineering package delivery, and project handover. In May 2021, 81,883 RSUs were granted to Board members, vesting in twelve equal installments over one year, with 13,648 shares vested during the six months ended June 30, 2021 - **25,000 RSUs with a grant fair value of $151,500 were granted to a contractor** in February 2021, vesting upon specific project milestones (licensing agreement, engineering package, project handover)[71](index=71&type=chunk) - **81,883 RSUs with a grant fair value of $235,000 were granted to Board members** in May 2021, vesting in twelve equal installments over a one-year period[71](index=71&type=chunk) - **13,648 shares from Board member RSU grants vested** during the six months ended June 30, 2021, while no shares from the contractor grant vested in this period[71](index=71&type=chunk) [13. Commitments and Contingencies](index=18&type=section&id=13.%20Commitments%20and%20Contingencies) The company refers to Item 1. Legal Proceedings for information on legal matters - For details regarding legal proceedings, refer to **Item 1. Legal Proceedings**[72](index=72&type=chunk) [14. Subsequent Events](index=19&type=section&id=14.%20Subsequent%20Events) Subsequent to June 30, 2021, Aqua Metals signed a definitive agreement with ACME Metal Enterprise Co., Ltd. to deploy and license AquaRefining equipment in Taiwan, following an LOI. Additionally, the company reached a final agreement with insurance carriers for an additional $5.25 million payment, bringing total fire-related insurance proceeds to approximately $30.25 million - On July 28, 2021, Aqua Metals signed a **definitive agreement with ACME Metal Enterprise Co., Ltd. to deploy and license AquaRefining equipment** at its facility in Keelung, Taiwan[74](index=74&type=chunk) - Subsequent to quarter-end, the Company and insurance carriers agreed on an **additional $5.25 million payment**, bringing the **total collected from insurance for the 2019 fire to approximately $30.25 million**[74](index=74&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section discusses Aqua Metals' financial condition and operational results, highlighting the strategic shift to a capital-light licensing model for its AquaRefining™ technology after the 2019 fire. It details the improved Aqualyzer technology, the lease-to-buy agreement for the TRIC facility, and the investment in LiNiCo for lithium-ion battery recycling, while acknowledging the absence of commercial revenue and the need for additional capital [Cautionary Statement](index=20&type=section&id=Cautionary%20Statement) This section contains forward-looking statements about the company's business and prospects, which involve risks and uncertainties, including those detailed in the 'Risk Factors' section. Investors are cautioned that actual results may differ, and the company does not undertake to update these statements - The report contains **forward-looking statements** regarding business and prospects, identified by phrases like 'will likely result,' 'are expected to,' 'believes,' 'expects,' etc[78](index=78&type=chunk) - Future results involve **risks and uncertainties**, including those detailed in Part II, Item 1A 'Risk Factors'[79](index=79&type=chunk) - **No assurance can be given that forward-looking statements will be achieved**, and the company does not undertake any obligation to update them[79](index=79&type=chunk) [General](index=20&type=section&id=General) Aqua Metals (NASDAQ: AQMS) specializes in lead recycling using its patented AquaRefining™ process, which is a room-temperature, water-based technology with reduced environmental emissions and high-purity lead output. Following a 2019 fire at its TRIC facility, the company shifted to a capital-light strategy focused on licensing and equipment supply, having successfully completed the V1.25L Aqualyzer program with 100% increased throughput and significant cost reductions - Aqua Metals is engaged in **equipment supply, technology licensing, and related services** for lead recycling through its proprietary AquaRefining™ process[80](index=80&type=chunk) - Following a November 2019 fire at its TRIC facility, the company adopted a **capital-light strategy focusing on licensing opportunities and equipment supply**[83](index=83&type=chunk)[86](index=86&type=chunk)[87](index=87&type=chunk) - The **V1.25L Aqualyzer program**, completed in Q4 2020, achieved **100% greater lead production throughput**, a **50% reduction in Aqualyzers needed**, a **50% decrease in capital expenditures**, and **over 60% reduction in operating expenses** compared to the V1.0 Aqualyzer[85](index=85&type=chunk) [Plan of Operations](index=21&type=section&id=Plan%20of%20Operations) Aqua Metals is pursuing a capital-light strategy focused on licensing its AquaRefining technology globally, aiming to maximize shareholder value by becoming an equipment and services supplier. This strategy includes expanding into lithium-ion battery recycling through a $1.5 million investment in LiNiCo Corporation, which also involves a lease-to-buy agreement for Aqua Metals' TRIC facility - The Company's plan of operations is centered on a **capital-light strategy, pursuing global licensing opportunities** for its AquaRefining technology to become an equipment and services supplier[89](index=89&type=chunk)[90](index=90&type=chunk) - This strategy includes an **expansion into lithium-ion battery recycling through a $1.5 million investment in LiNiCo Corporation**, which also involves a lease-to-buy agreement for Aqua Metals' TRIC facility[91](index=91&type=chunk) - Improvements from the V1.25L Aqualyzer program, including **100% increased lead production throughput and reduced costs**, are expected to demonstrate the value proposition to potential licensees[90](index=90&type=chunk) [Results of Operations](index=23&type=section&id=Results%20of%20Operations) Aqua Metals had no commercial revenue in Q2 2021 or Q2 2020 (except nominal inventory sales in Q1 2020) due to the 2019 fire. The company reported increased operating expenses, primarily due to higher cost of product sales from plant clean-up, and a significant net loss driven by a $4.3 million loss on disposal of property and equipment. Insurance proceeds and PPP loan forgiveness provided some offset Key Results of Operations (in thousands) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Product sales | $— | $— | $— | $18 | | Cost of product sales | $2,138 | $1,306 | $3,749 | $2,760 | | Research and development cost | $176 | $217 | $465 | $459 | | General and administrative expense | $2,129 | $2,245 | $4,428 | $4,630 | | Loss on disposal of property and equipment | $(4,254) | $— | $(4,254) | $— | | PPP loan forgiveness | $201 | $— | $332 | $— | | Interest expense | $(4) | $(164) | $(9) | $(347) | - **Cost of product sales increased by 63.7%** for the three months ended June 30, 2021, primarily due to plant clean-up costs in preparation for the facility's lease and eventual sale[95](index=95&type=chunk) - A **$4.254 million loss on disposal of property and equipment was recognized** during the three months ended June 30, 2021, including a **$3.5 million loss from the lease-to-purchase arrangement** for the McCarran facility[99](index=99&type=chunk) [Liquidity and Capital Resources](index=25&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2021, Aqua Metals had $10.7 million in cash and working capital. The company believes it will require additional capital for its capital-light licensing strategy over the next 12 months, intending to secure funds from remaining insurance proceeds, asset sales, and plant lease/sale, but may also seek equity or debt financing, which could be dilutive Liquidity and Capital Resources (in thousands) | Metric | June 30, 2021 | | :----------------------- | :------------ | | Total cash | $10,704 | | Working capital | $10,700 | - **Net cash provided by financing activities for the six months ended June 30, 2021, was $10,242 thousand**, primarily from **$9,331 thousand in net proceeds from ATM share sales**[105](index=105&type=chunk) - The company anticipates needing **additional capital over the next 12 months** to fund its capital-light licensing strategy and plans to acquire it through remaining insurance proceeds, asset sales, and funds from the plant lease/sale, with potential for **dilutive equity or debt financing**[106](index=106&type=chunk) [Off-Balance Sheet Arrangements](index=26&type=section&id=Off-Balance%20Sheet%20Arrangements) Aqua Metals does not have any off-balance sheet financing arrangements - The Company does not have any **off-balance sheet financing arrangements**[108](index=108&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=26&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This item is marked as 'Not applicable' in the report, indicating no quantitative or qualitative disclosures about market risk are provided - This section is marked as **'Not applicable'**[108](index=108&type=chunk) [Item 4. Controls and Procedures](index=26&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2021. There were no material changes in internal control over financial reporting during the six-month period [Evaluation of Disclosure Controls and Procedures](index=26&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Management, with CEO and CFO participation, evaluated and concluded that disclosure controls and procedures were effective as of June 30, 2021 - Management, with the participation of the chief executive officer and chief financial officer, concluded that **disclosure controls and procedures were effective as of June 30, 2021**[108](index=108&type=chunk) [Changes in Internal Control Over Financial Reporting](index=26&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) There were no changes in internal control over financial reporting during the six months ended June 30, 2021, that materially affected or are reasonably likely to materially affect it - There were **no changes in internal control over financial reporting** that occurred during the six month period ended June 30, 2021, that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting[109](index=109&type=chunk) PART II - OTHER INFORMATION [Item 1. Legal Proceedings](index=27&type=section&id=Item%201.%20Legal%20Proceedings) Aqua Metals is involved in two class action lawsuits: a securities litigation alleging false statements and a shareholder derivative action alleging breach of fiduciary duties. Both cases reached stipulations for settlement in July 2021, subject to court approval, involving a cash payment (partially insurance-funded) for the securities case and corporate governance reforms for the derivative case - A consolidated securities class action lawsuit, **'In Re: Aqua Metals, Inc. Securities Litigation,' alleges false and misleading statements** and deceptive site visits[111](index=111&type=chunk) - In July 2021, parties entered a **stipulation for settlement for the securities lawsuit**, involving a cash payment to plaintiffs funded by insurance carriers plus **$500,000 from Aqua Metals** (cash or common shares), subject to court approval[111](index=111&type=chunk) - A consolidated shareholder derivative action, **'In re Aqua Metals, Inc. Stockholder Derivative Litigation,' alleges breach of fiduciary duties** by officers and directors, with a stipulation for settlement in July 2021 based on **corporate governance reforms**, subject to court approval[112](index=112&type=chunk) [Item 1A. Risk Factors](index=28&type=section&id=Item%201A.%20Risk%20Factors) This section outlines significant risks to Aqua Metals' business, including the impact of the 2019 fire and the uncertainty of its revised capital-light licensing strategy, the unproven commercial scale of its novel AquaRefining technology, the need for additional financing, and potential adverse effects from global economic conditions, intellectual property challenges, and regulatory compliance, especially in international expansion [Risks Relating to Our Business](index=28&type=section&id=Risks%20Relating%20to%20Our%20Business) Key business risks include the uncertainty of the revised capital-light licensing strategy post-2019 fire, the unproven commercial scalability of AquaRefining technology, the need for additional financing, potential adverse effects from the coronavirus outbreak, and challenges in securing licensing agreements and strategic partnerships. The company also faces risks related to intellectual property protection, potential infringement claims, and compliance with environmental, health, and safety regulations, particularly with hazardous materials and international operations - The revised **capital-light business model**, focusing on licensing AquaRefining technology after the 2019 fire, is **not assured of success**, and the company may require additional capital that might not be available[116](index=116&type=chunk)[123](index=123&type=chunk) - The AquaRefining process is novel and has only been demonstrated on a modest scale; there is **no assurance it can be replicated commercially with adequate profit margins** by the company or its licensees[122](index=122&type=chunk)[126](index=126&type=chunk)[129](index=129&type=chunk) - The company faces risks in securing and integrating **licensing arrangements, joint ventures, or strategic alliances**, with no assurance of concluding definitive agreements or achieving expected benefits[117](index=117&type=chunk)[135](index=135&type=chunk) - **Intellectual property rights may not adequately protect the business**, with risks of challenges, invalidation, circumvention, and costly disputes over infringement claims[131](index=131&type=chunk)[132](index=132&type=chunk)[134](index=134&type=chunk) - Operations are subject to federal, state, and local **environmental, health, and safety laws**, with risks of significant penalties, liabilities from mishandling hazardous materials (e.g., lead, acids), and opposition to facility operations[140](index=140&type=chunk)[145](index=145&type=chunk) [Risks Related to Owning Our Common Stock](index=35&type=section&id=Risks%20Related%20to%20Owning%20Our%20Common%20Stock) The market price of Aqua Metals' common stock is highly volatile and subject to various factors, potentially leading to substantial investor losses. Future sales of common stock could negatively impact the market price, and the company has no plans to pay dividends. Charter documents and Delaware law may also inhibit favorable takeovers - The **market price of Aqua Metals' common stock is subject to wide fluctuations** due to factors like operational results, analyst recommendations, technological innovations, and general economic conditions, potentially leading to substantial investor losses[149](index=149&type=chunk) - Future issuances or sales of **substantial amounts of common stock**, or the perception of such sales, could negatively impact the market price and terms for future equity financing[153](index=153&type=chunk) - The company has **not paid and does not plan to pay dividends**, intending to reinvest all earnings to pursue its business plan and cover operating costs[154](index=154&type=chunk) - Provisions in the company's **charter documents and Delaware law may delay or discourage transactions involving a change in control**, potentially depriving stockholders of a premium for their shares[155](index=155&type=chunk)[156](index=156&type=chunk) [Item 6. Exhibits](index=37&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including the company's amended certificate of incorporation and bylaws, the third amendment to the equipment supply agreement with Clarios, and various certifications required by the Sarbanes-Oxley Act and Inline XBRL documents - Key exhibits include the **Third Amendment to Equipment Supply Agreement dated June 30, 2021**, between Aqua Metals and Clarios, LLC[159](index=159&type=chunk) - Corporate governance documents such as the **First Amended and Restated Certificate of Incorporation and Second Amended and Restated Bylaws** are filed[159](index=159&type=chunk) - **Certifications pursuant to Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002**, along with Inline XBRL documents, are included[160](index=160&type=chunk)[161](index=161&type=chunk)[162](index=162&type=chunk)[163](index=163&type=chunk) [SIGNATURES](index=38&type=section&id=SIGNATURES) The report is signed by Stephen Cotton, President, Chief Executive Officer and Director (Principal Executive Officer), and Judd Merrill, Chief Financial Officer (Principal Financial Officer), on July 29, 2021, certifying its submission in accordance with the Exchange Act - The report is signed by **Stephen Cotton, President, Chief Executive Officer and Director** (Principal Executive Officer)[165](index=165&type=chunk) - The report is also signed by **Judd Merrill, Chief Financial Officer** (Principal Financial Officer)[165](index=165&type=chunk) - The signing date for the report is **July 29, 2021**[165](index=165&type=chunk)

Aqua Metals, Inc. (NASDAQ:AQMS) Q1 2021 Earnings Conference Call April 29, 2021 4:30 PM ET Company Participants Glen Akselrod - Investor Relations Steve Cotton - President & Chief Executive Officer Judd Merrill - Chief Financial Officer Conference Call Participants Colin Rusch – Oppenheimer Amit Dayal - H.C. Wainwright Operator Thank you for standing by and welcome to Aqua Metals pre-record. I would now like to turn the call over to Glen Akselrod. You may begin. Glen Akselrod Thank you, operator, and welcom ...

PART I - FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The unaudited condensed consolidated financial statements for Q1 2021 detail the company's financial position, operations, equity, and cash flows [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section compares the company's financial position as of March 31, 2021, to December 31, 2020, highlighting increases in total assets, cash, and stockholders' equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | **Cash and cash equivalents** | $11,727 | $6,533 | | **Total current assets** | $13,459 | $8,358 | | **Investment in LiNiCo** | $1,500 | $0 | | **Total assets** | $41,564 | $35,138 | | **Total liabilities** | $4,321 | $3,999 | | **Total stockholders' equity** | $37,243 | $31,139 | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section details the company's financial performance for Q1 2021 versus Q1 2020, showing no product sales but an improved net loss Q1 2021 vs. Q1 2020 Operating Results (in thousands, except per share data) | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Product sales | $0 | $18 | | Loss from operations | $(4,198) | $(4,063) | | PPP loan forgiveness | $131 | $0 | | **Net loss** | **$(4,086)** | **$(4,427)** | | **Basic and diluted net loss per share** | **$(0.06)** | **$(0.07)** | [Condensed Consolidated Statements of Stockholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This section outlines changes in stockholders' equity during Q1 2021, primarily driven by common stock issuance from ATM sales and the LiNiCo investment - Raised **$7.5 million** in net proceeds from the issuance of 1,923,614 shares through its At-The-Market (ATM) sales agreement[15](index=15&type=chunk) - Issued 375,000 shares of common stock related to the LiNiCo investment, valued at **$1.27 million**[15](index=15&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section outlines cash movements for Q1 2021, showing significant cash generation from financing activities offsetting operational and investing uses Cash Flow Summary for Three Months Ended March 31 (in thousands) | Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(2,156) | $(4,262) | | Net cash (used in) provided by investing activities | $(859) | $3,149 | | Net cash provided by (used in) financing activities | $8,209 | $(76) | | **Net increase (decrease) in cash** | **$5,194** | **$(1,189)** | - Financing activities were primarily driven by **$7.5 million** in proceeds from the ATM offering and **$0.7 million** from stock option exercises[18](index=18&type=chunk)[99](index=99&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations of accounting policies, the strategic shift to a licensing model, and key investments and subsequent events - Following a fire on November 29, 2019, the company adopted a capital-light strategy focused on equipment supply and licensing opportunities rather than operating its own recycling facility[20](index=20&type=chunk)[22](index=22&type=chunk) - On February 15, 2021, the company invested in LINICO Corporation by issuing 375,000 shares and paying **$232,000** in cash in exchange for a **~9% equity stake**[42](index=42&type=chunk)[45](index=45&type=chunk) - During Q1 2021, one of the company's two PPP loans, amounting to **$131,000**, was forgiven[54](index=54&type=chunk) - Subsequent to the quarter, the company entered into an industrial lease with LiNiCo for its TRIC facility, effective April 1, 2021, which includes an option for LiNiCo to purchase the facility[72](index=72&type=chunk) - After the quarter ended, the company received an additional insurance payment of **$1.4 million** related to the 2019 fire[73](index=73&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the strategic pivot to a capital-light licensing model, operational progress, and financial results for Q1 2021, highlighting strengthened liquidity [General and Plan of Operations](index=18&type=section&id=General%20and%20Plan%20of%20Operations) The company is executing a capital-light strategy focused on global licensing of its AquaRefining™ technology and expanding into lithium-ion battery recycling - The company's business model is now focused on a capital-light strategy of global licensing and equipment supply for its AquaRefining technology[84](index=84&type=chunk)[85](index=85&type=chunk) - The V1.25L Aqualyzer program was completed, achieving a **100% greater lead production throughput** compared to the V1.0 model, expected to result in a **50% reduction in capital expenditures** and a **>60% reduction in operating expenses** for future licensees[83](index=83&type=chunk)[87](index=87&type=chunk) - Expanded into lithium-ion battery recycling through a strategic investment in LiNiCo, securing an approximate **9% ownership stake**[88](index=88&type=chunk) [Results of Operations](index=21&type=section&id=Results%20of%20Operations) This section details Q1 2021 operating results, showing no revenue, a slight increase in expenses, and an improved net loss due to PPP loan forgiveness Operating Expense Comparison (in thousands) | Expense Category | Q1 2021 | Q1 2020 | % Change | | :--- | :--- | :--- | :--- | | Cost of product sales | $1,610 | $1,454 | 10.7% | | Research and development | $289 | $242 | 19.4% | | General and administrative | $2,299 | $2,385 | (3.6)% | | **Total operating expense** | **$4,198** | **$4,081** | **2.9%** | - The increase in cost of product sales was due to plant clean-up costs in preparation for the lease and potential sale of the facility[92](index=92&type=chunk) - Total other income was **$114,000**, a significant favorable change from a total other expense of **$364,000** in Q1 2020, driven by **$131,000** in PPP loan forgiveness and a **97.3% decrease in interest expense**[94](index=94&type=chunk) [Liquidity and Capital Resources](index=22&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity significantly strengthened in Q1 2021 due to financing activities, though additional capital may be required for future operations Cash Position and Working Capital (in thousands) | Metric | March 31, 2021 | | :--- | :--- | | Total Cash | $11,727 | | Working Capital | $9,416 | - Net cash provided by financing activities was **$8.2 million** for Q1 2021, primarily from **$7.5 million** in net proceeds from the ATM and **$0.7 million** from stock option exercises[99](index=99&type=chunk) - Management believes additional capital may be required to fund operations over the next 12 months and is pursuing funds from insurance claims, asset sales, and potential financing[100](index=100&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=23&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company, as a smaller reporting entity, states that this section is not applicable - The company states that this item is not applicable[102](index=102&type=chunk) [Controls and Procedures](index=23&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2021, with no material changes to internal controls - Management concluded that disclosure controls and procedures were effective as of the end of the period[102](index=102&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[103](index=103&type=chunk) PART II - OTHER INFORMATION [Legal Proceedings](index=24&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in ongoing securities class action and shareholder derivative lawsuits, which it intends to vigorously defend - The company is defending a consolidated class action lawsuit alleging violations of the Securities Exchange Act related to false statements and deceptive site visits, with some claims dismissed but others proceeding[105](index=105&type=chunk) - A shareholder derivative action has been filed against certain current and former officers and directors for alleged breaches of fiduciary duties, and this case is currently stayed[106](index=106&type=chunk) [Risk Factors](index=25&type=section&id=Item%201A.%20Risk%20Factors) This section outlines significant business and stock ownership risks, including the unproven new business model, financing needs, and litigation [Risks Relating to Our Business](index=25&type=section&id=Risks%20Relating%20to%20Our%20Business) This subsection details operational and strategic risks, including the unproven capital-light licensing model, technology scale-up, and the need for additional financing - The company's revised business plan, focusing on licensing after the 2019 fire, is unproven and its success is not assured[109](index=109&type=chunk)[110](index=110&type=chunk) - The company may require additional capital to fund its business plan over the next 12 months, and there is no guarantee that financing will be available on acceptable terms[116](index=116&type=chunk) - The business model is new and has not been proven at a commercial scale, creating risk that licensees may not be able to operate profitably[119](index=119&type=chunk)[122](index=122&type=chunk) - There is no assurance that a definitive development program agreement can be negotiated with Clarios, which could impact the ability to license technology to others in key regions[128](index=128&type=chunk) [Risks Related to Owning Our Common Stock](index=32&type=section&id=Risks%20Related%20to%20Owning%20Our%20Common%20Stock) This subsection outlines risks for stockholders, including stock price volatility, pending litigation, potential dilution, and anti-takeover provisions - The market price of the company's common stock is subject to significant fluctuation and volatility[142](index=142&type=chunk) - Pending securities class action and shareholder derivative lawsuits could result in substantial costs and have a material adverse effect on the business[146](index=146&type=chunk) - The company has never paid dividends and has no plans to do so in the foreseeable future[149](index=149&type=chunk) - Anti-takeover provisions in the company's charter and Delaware law may inhibit a change in control that stockholders might consider favorable[150](index=150&type=chunk)[151](index=151&type=chunk) [Exhibits](index=34&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including corporate documents, material agreements, and required CEO and CFO certifications - Lists key agreements filed as exhibits, including the Industrial Lease Agreement, Series A Preferred Stock Purchase Agreement, Investor Rights Agreement, and Voting Agreement with LINICO Corporation, all dated February 15, 2021[153](index=153&type=chunk) - Includes certifications from the Principal Executive Officer and Principal Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[153](index=153&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk)