Aqua Metals(AQMS) - 2022 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements This section presents Aqua Metals, Inc.'s condensed consolidated financial statements, including balance sheets, statements of operations, stockholders' equity, cash flows, and accompanying notes, providing a comprehensive overview of its financial position and performance for the periods ended September 30, 2022, and December 31, 2021 - The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP and SEC rules, and do not include all information and footnotes required for complete financial statements[28] - There have been no material changes in the Company's significant accounting policies during the three and nine months ended September 30, 2022[27] - The results of operations for the three and nine months ended September 30, 2022, are not necessarily indicative of results that may be expected for the full year ending December 31, 2022[29] Condensed Consolidated Balance Sheets Presents the company's financial position, detailing assets, liabilities, and equity as of September 30, 2022, and December 31, 2021 | Metric | September 30, 2022 ($ thousand) | December 31, 2021 ($ thousand) | | :-------------------------- | :---------------------- | :--------------------- | | Total Assets | 34,961 | 33,269 | | Total Liabilities | 11,518 | 5,736 | | Total Stockholders' Equity | 23,443 | 27,533 | - Current lease receivable significantly increased to $15,811 thousand as of September 30, 2022, from $920 thousand at December 31, 2021[10] - Notes payable, current portion, appeared as $5,886 thousand as of September 30, 2022, with no balance at December 31, 2021[10] Condensed Consolidated Statements of Operations Details the company's revenues, expenses, and net loss for the three and nine months ended September 30, 2022 and 2021 | Metric | Three Months Ended Sept 30, 2022 ($ thousand) | Three Months Ended Sept 30, 2021 ($ thousand) | Nine Months Ended Sept 30, 2022 ($ thousand) | Nine Months Ended Sept 30, 2021 ($ thousand) | | :----------------------------------- | :------------------------------------ | :------------------------------------ | :----------------------------------- | :----------------------------------- | | Product sales | — | — | 4 | — | | Total operating expense | 3,934 | 4,624 | 12,202 | 13,264 | | Loss from operations | (3,934) | (4,624) | (12,198) | (13,264) | | Total other income (expense), net | 49 | 3,238 | 739 | (222) | | Net loss | (3,885) | (1,386) | (11,461) | (13,488) | | Basic and diluted net loss per share | (0.05) | (0.02) | (0.15) | (0.20) | - Net loss increased significantly for the three months ended September 30, 2022, to $(3,885) thousand from $(1,386) thousand in the prior year, while decreasing for the nine months ended September 30, 2022, to $(11,461) thousand from $(13,488) thousand[12] - Research and development costs increased by 79.5% for the three months and 111.5% for the nine months ended September 30, 2022, compared to the prior year, reflecting increased efforts in AquaRefining technology and Li battery recycling[12][95] Condensed Consolidated Statements of Stockholders' Equity Outlines changes in stockholders' equity, including common shares, additional paid-in capital, and accumulated deficit | Metric | September 30, 2022 ($ thousand) | December 31, 2021 ($ thousand) | | :-------------------------- | :---------------------- | :--------------------- | | Common Shares Outstanding | 78,065,455 | 70,416,552 | | Common Stock Amount | 78 | 70 | | Additional Paid-in Capital | 218,672 | 211,309 | | Accumulated Deficit | (195,307) | (183,846) | | Total Stockholders' Equity | 23,443 | 27,533 | - Total stockholders' equity decreased from $27,533 thousand at December 31, 2021, to $23,443 thousand at September 30, 2022, primarily due to the accumulated deficit[16] - Additional paid-in capital increased by $7,363 thousand, reflecting stock-based compensation and common stock issued for ATM share sales[16] Condensed Consolidated Statements of Cash Flows Summarizes cash flows from operating, investing, and financing activities for the nine months ended September 30, 2022 and 2021 | Cash Flow Activity | Nine Months Ended Sept 30, 2022 ($ thousand) | Nine Months Ended Sept 30, 2021 ($ thousand) | | :---------------------------------- | :----------------------------------- | :----------------------------------- | | Net cash used in operating activities | (9,308) | (3,753) | | Net cash used in investing activities | (1,680) | (1,506) | | Net cash provided by financing activities | 12,144 | 10,426 | | Net increase (decrease) in cash | 1,156 | 5,167 | | Cash and cash equivalents at end of period | 9,293 | 11,700 | - Net cash used in operating activities increased to $9.3 million for the nine months ended September 30, 2022, from $3.8 million in the prior year, primarily due to net loss and changes in working capital[103] - Net cash provided by financing activities increased to $12.1 million, driven by $5.6 million from ATM share sales and $5.9 million from a new loan[105] Notes to Condensed Consolidated Financial Statements Provides detailed explanations and additional information supporting the condensed consolidated financial statements - Aqua Metals is engaged in applying its AquaRefining technology for clean, water-based recycling solutions for both lead and lithium-ion batteries, offering technology licensing for lead and expecting to provide recycling services for Li batteries[22][83] - The company made a strategic investment in LINICO Corporation in February 2021, acquiring approximately 12% ownership, to explore applying AquaRefining intellectual property to lithium-ion battery recycling[25][53] - An Innovation Center was established in August 2021, demonstrating the ability to recover copper, lithium hydroxide, nickel, and cobalt from lithium-ion battery black mass in the first half of 2022, with a pilot plant expected to be fully operational in Q4 2022[26][87] - The TRIC facility is leased to LINICO Corporation, with an option for LINICO to purchase the land and facilities for $15.25 million by March 31, 2023. LINICO has made nonrefundable deposits totaling $3.25 million[42][76] - On September 30, 2022, Aqua Metals Reno, Inc. secured a $6 million loan with an 8.50% annual interest rate, collateralized by the TRIC facility, with principal due September 29, 2024[66] - During the nine months ended September 30, 2022, the company issued 5,406,914 shares of common stock through an At The Market (ATM) offering, generating net proceeds of $5.6 million[68][105] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section discusses Aqua Metals' financial condition and results of operations, emphasizing its strategic shift towards technology licensing and lithium-ion battery recycling. It provides an analysis of key financial performance indicators, liquidity, and capital resources, alongside forward-looking statements and associated risks - Aqua Metals' business strategy focuses on licensing its lead-acid battery recycling technologies globally and developing Li AquaRefining methodologies to meet the growing demand for critical metals from lithium-ion batteries[88][90] - The company is demonstrating that Li AquaRefining can produce high-quality, high-yield recovered minerals (lithium hydroxide, copper, nickel, cobalt) with lower waste and costs, aiming for a pilot plant to be fully operational by year-end 2022 and scaling to 80 tonnes per month by year-end 2023[89] Operating Expenses (Nine Months Ended September 30) | Metric | 2022 ($ thousand) | 2021 ($ thousand) | Change ($ thousand) | % Change | | :--------------------------- | :-------- | :-------- | :---------- | :------- | | Cost of product sales | 3,026 | 5,417 | (2,391) | (44.1)% | | Research and development cost| 1,561 | 738 | 823 | 111.5% | | General and administrative | 7,615 | 7,109 | 506 | 7.1% | | Total operating expense | 12,202 | 13,264 | 1,062 | (8.0)% | Other Income and Expense (Nine Months Ended September 30) | Metric | 2022 ($ thousand) | 2021 ($ thousand) | Change ($ thousand) | % Change | | :------------------------------------ | :-------- | :-------- | :---------- | :------- | | Insurance proceeds net of related expenses | — | 4,792 | (4,792) | (100.0)% | | PPP loan forgiveness | — | 332 | (332) | (100.0)% | | Gain (loss) on disposal of P&E | 595 | (5,665) | 6,260 | (110.5)% | | Interest expense | (22) | (15) | (7) | 46.7% | | Interest and other income | 166 | 334 | (168) | (50.3)% | | Total other income (expense), net | 739 | (222) | 961 | (432.9)% | - As of September 30, 2022, the company had $9.3 million in cash and $15.5 million in working capital, but anticipates needing additional capital within the next 12 months, potentially through asset sales, equity, or debt financing[101][106] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section states that there are no material quantitative or qualitative disclosures about market risk applicable to the company - This item is not applicable[108] Item 4. Controls and Procedures This section reports on the effectiveness of the company's disclosure controls and procedures and any changes in internal control over financial reporting - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of September 30, 2022[108] - There were no material changes in internal control over financial reporting during the three months ended September 30, 2022[109] PART II - OTHER INFORMATION Item 1. Legal Proceedings This section indicates that there are no legal proceedings to report for the company - None[111] Item 1A. Risk Factors This section outlines significant risks associated with investing in Aqua Metals, covering operational challenges, technological uncertainties, financial needs, market volatility, and regulatory compliance, emphasizing the high degree of risk due to the company's limited operating history and novel business model - A fire at the TRIC facility in November 2019 caused significant damage, leading to a revised business model focused on licensing AquaRefining technology and a lease-to-buy agreement for the facility, rather than a costly rebuild[113][114] - The company's efforts in lithium-ion battery recycling are in early R&D stages, with no assurance of successful commercialization or recovery of high-value metals on a commercial scale[115][126] - Aqua Metals' business strategy relies on licensing arrangements and strategic alliances, but as of the report date, few such agreements are in place, and their successful integration or benefits are not assured[116][117] - The company has a limited operating history and its AquaRefining process is novel and unproven at a large commercial scale for both lead and Li-ion batteries, making it difficult for investors to evaluate the business[119][121][124][127] - Additional financing may be required within the next 12 months to fund operations and the business plan, with no guarantee of availability on reasonable terms, potentially leading to dilution or cessation of operations[122] - The market price of common stock is volatile, and the company received a Nasdaq delisting notice for failing to meet the $1.00 minimum bid price requirement, with no assurance of regaining compliance[146][147][148] - Intellectual property rights may not adequately protect the business, and processes may infringe on others' rights, leading to costly disputes or disruptions[129][130][133] - Operations involve hazardous materials and are subject to stringent environmental, health, and safety laws, with potential for significant penalties, liabilities, and opposition from local groups if non-compliance or unsafe operations occur[137][142] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports that there were no unregistered sales of equity securities or use of proceeds to disclose during the reporting period - None[159] Item 3. Defaults Upon Senior Securities This section states that there were no defaults upon senior securities to report for the company - None[159] Item 4. Mine Safety Disclosures This section indicates that there are no mine safety disclosures applicable to the company - None[159] Item 5. Other Information This section states that there is no other information required to be disclosed that has not been previously reported - None[159] Item 6. Exhibits This section lists all exhibits filed as part of the Form 10-Q, including organizational documents, certifications, and XBRL-related files - Includes certifications pursuant to Section 302 and 906 of the Sarbanes-Oxley Act of 2002[160] - Includes Inline XBRL Instance Document and Taxonomy Extension Documents[160]