Aqua Metals, Inc. (AQMS) on Q1 2021 Results - Earnings Call Transcript
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 welcome everybody to Aqua Metals First Quarter 2021 Conference Call. Earlier today, Aqua Metals released financial results for the quarter ended March 31, 2021. This release is available on the investors section of the company's website at www.aquametals.com. Joining us for today's call from management is Steve Cotton, President and CEO; as well as Judd Merrill, the company's chief financial officer. During today's call, management will be making forward-looking statements. Please refer to the company's report on the Form 10-Q filed today, April 29, for a summary of the forward-looking statements and the risks, uncertainties and other factors that could cause actual results to differ materially from those forward-looking statements.
Steve Cotton: Great. Thanks, Glen. And welcome everybody to our quarterly call. I'll move from our title slide to slide number two, which is our Safe Harbor, which Glen basically reviewed. So that's for your reference. And now I'm going to move on to slide number three. And that's our mission statement. And I just want to remind everybody that Aqua Metals' mission statement is to provide sustainable metal recycling for material strategic to energy storage applications, inclusive of lead and lithium. Our proven breakthrough technology AquaRefining does deliver raw materials back into the manufacturing supply chain in a clean and economical way that reduces the overreliance on mining to meet demand. And with that I'll move to slide four and summarize Aqua Metals at a glance. We've already developed our technology, our core technology called AquaRefining, which is now commercially ready and it's a sustainable battery-recycling technology. What's unique about AquaRefining is that it uses water and organic acids to create 99.996-plus percent ultra-pure lead and we created one atom at a time for the $20 billion-and-growing lead recycling industry. We're also seeking to extend, per some recent announcements, our AquaRefining technologies to apply to the metals recovery associated with the lithium-ion batteries. And we've evidenced our commitment to continuing to develop AquaRefining for this area through additional IP filing, through strategic investment and research and development that we'll talk about a little further throughout the day today. AquaRefining is also a transformative technology that benefits the industry and the earth itself. AquaRefining benefits the environment with reduced emissions, vastly reduced worker safety exposures while they're performing the act of battery recycling.
Judd Merrill: Thanks, Steve. All right. We're going to move now to slide 9, the balance sheet first financial statement that we'll talk about. So as of March 31, 2021, the cash and the working capital balances were $11.7 million and $9.4 million respectively. The fixed assets on our books as of March 31, 2021, totaled approximately $27.4 million in net book value. These assets making up this balance is largely the plant building and infrastructure, which we announced this quarter was part of the lease to sell to LiNiCo; and the remaining fixed assets, including the battery breaker, the melting kettles, the kiln, filter presses and such are being evaluated to be either sold or used in our first licensing yield. Non-current assets now include $1.5 million investment into LiNiCo Corporation. And we also have an option to exercise warrants to invest another $500,000. We are pleased to point out also that our liabilities are now at the lowest level in recent company history, since we have retired debt from last year. The lease liability is related to the facility located about a mile from our existing plant located in the Tahoe Reno industrial center. We plan to use this facility to continue R&D work, as well as to assemble the electrolyzers for our future licensees. I'm going to move to slide 10. On the income statement, our lead-recycling facility was not in production during 2020 or the first quarter of 2021 as we focused on our licensing strategy. Cost of product sales, includes raw materials supplies and related costs, salaries and benefits in consulting and outside services costs, depreciation and amortization insurance, travel and overhead costs. Cost of product sales did increase approximately 11% over the three months ended March 31, 2021 as compared to the three months ended March 31, 2020. The increase in cost of product sales was a result of plant cleanup costs in preparation for the lease and eventual sales facility. For the three months ended March 31, 2021, the company had a net loss of $4.2 million, or a negative $0.06 per basic and diluted share, compared to a net loss of $4.1 million, or a negative $0.07 per basic and diluted share for the three months ended March 31, 2020. Now, I'm going to move to slide 11, and have a little discussion on the cash flows. The net cash used in operations for the three months ended March 31, 2021, and March 31 2020, was $2.0 million and $4.3 million respectively. The net cash used in operating activities during each of these periods consisted, primarily of our net loss adjusted for noncash items such as depreciation, amortization and working stock-based compensation charges as well as net changes in working capital.
Glen Akselrod: Operator, do we have any questions? No, we can't hear you. Yes, go ahead.
Operator: Okay. Colin Rusch, your line is now open. You may ask your question.
Colin Rusch : Thanks so much, guys. Could you just give us an update on where you think the insurance element might tap out? You guys have done a great job of collecting what you can so far. I'm just wondering kind of expectations around additional capital that you could bring in over the next several quarters?
Judd Merrill: Yeah. I mean we're very close I think to being done with the last little bit of insurance. But we don't want to comment exactly where that might end up. I think there's still some negotiations and some discussions that we'll have as we kind of wrap things up and that's kind of the normal process. When we kind of get to the end they've paid on everything that we presented to date. We believe there's some more room on the business interruption. But we don't want to comment too much on that as we're kind of getting to those final discussions and negotiations. But if you look at where we're at the $25 million and we've identified a couple more million on the PI that kind of set the floor range and then it could go up from there.
Colin Rusch: Okay. That's helpful. And then I know it's early days with LiNiCo, but obviously you guys are getting straight to work with them. Can you talk a little bit about what the initial efforts are around scoping out the opportunity to work together in critical benchmarks or validating the approach?
Steve Cotton: Yeah, hey, Colin I'll take that. So yeah, we're really excited with the growing relationship with LiNiCo. They've gotten into the building and there's quite a crew doing layout and planning for the adopted layout of the facility. They can take advantage of a lot of the layout that we created for the facility with the inbound materials breaking and separation and the cells that will go into the area. But we're working together with them to look at what the AquaRefining activity will be as it fits in with the overall facility. And we'll be operating some sells going after individual metals within the lithium suite and hopefully bring those to the LiNiCo facility to deploy and work out how that looks from an equipment supply and licensing perspective. We've also evidenced like I mentioned earlier in the call our interest in the space with provisional IP. And that's really important filing around the area of lithium-ion recycling as it relates to the capabilities that AquaRefining can offer to that space. And we feel very confident that we'll be able to say some things in the not-so-distant future about some further progress in that space that will further evidence in addition to the partnership with LiNiCo and the sale of the facility and the IP that we prosecuted in the research and development that we've already announced. So we're really excited about it. But we're not going to let that distract us from the deal-making that we're in the midst of on getting our first licensing deal for AquaRefining in the lead space. But we recognize that lithium is going to be about as big as the lead-recycling market in dollar value by about the end of the decade if not sooner. So it's a really important space for us to consider.
Colin Rusch: Perfect. And thanks for sort of breaking that segue for me. So I know it's obviously a little bit difficult to say too much about where you're at with the lead license and supply agreement. But I guess, if you could give us a sense of kind of the progress that you're making and confidence level as it's changed over the last couple of months, since you last reported?
Steve Cotton: Sure. Yeah. So as I mentioned in the call, we -- the geographical broadness of the prospects and folks that we're talking to at a very detailed level has grown. The applications have grown from things like AquaFit which is bolting on AquaRefining to an existing battery-recycling facility with smelting to greenfield net new builds that are government-sponsored and supported to applications of AquaRefining for our recently announced other provisional patent filing for direct to oxide where you take those briquettes. And you can then put them directly into a battery-manufacturing mode bypassing the whole need to refine and kettle it and getting cast and then just turn it right back into what it would have looked like anyway. So we feel very good about the breadth and depth of the funnel and the progress that we've made through each stage of the sales fall with the various candidates that we have. So that's why we continue to reiterate our confidence that we'll have something to say soon. We're excited about that.
Colin Rusch: Excellent. Thanks so much guys.
Steve Cotton: Thanks, Colin.
Operator: Thank you. Next question comes from the line of Amit Dayal from H.C. Wainwright. Your line is now open. You may ask a question.
Amit Dayal: Thank you. I appreciate you taking my questions guys.
Steve Cotton: Sure.
Amit Dayal: With respect to the licensing agreement, Steve, should we assume this -- any progress on this will only materialize after June 2021?
Steve Cotton: So with the funnel and the stages that we are in the funnel and the guidance that we've already provided, the company is seeking to get a -- something positive to say about where we are with the deal-making between now and the end of June.
Amit Dayal: Okay. Understood. And if that materializes, right I mean, if you get something going and a deal comes through, how should we think about the impact on your burn rate?
Steve Cotton: So what's important is that the first deployment of AquaRefining will likely not be a very large deployment initially; it will be a phased approach. So there could be initial revenue associated with some equipment and some services and things along those lines. But as I've mentioned earlier on some of these calls I anticipate that we'll be seeing phased deployments of AquaRefining. So people get comfortable within their facility of the deployment. And that's particularly when you do the bolt-on type arrangement. And then greenfield announcements could be very exciting but have a little bit of a longer time line because you have to build a building and build an entire facility and integrate AquaRefining within those facilities. So it's dependent upon the type of deal how quickly we'll see the revenue. Unfortunately, we have a good mix in the sales funnel. So we'll see different types of cadence with the revenue associated with the services and equipment and ultimately the running royalty.
Amit Dayal: Okay. Understood. Thank you for that. Just one last one. Were there any or has there been any additional improvements to the V1.25 solution?
Steve Cotton: So we've indicated that -- and even are tweeting photos of a -- we're now operating two aqualizers and we are continuing to make further adjustments and improvements to the technology and the capability. So the research and development curve continues and that focuses on things like throughput, cost reduction and further tightened automation controls, electrical efficiency which helps with the value proposition even further. So we will continue that product development for the foreseeable future. But that's improvements on what we believe is already a very capable Version 1.25 that can be put in the hands of clients in a very near-term scenario.
Amit Dayal: Okay. Yes, that's all I have Steve. Thank you so much.
Steve Cotton: Great. Thank you.
Operator: Thank you.
Glen Akselrod: Steve, it's Glen here. We've got a number of questions in the queue that came in through the portal and they all have to do with the licensing deals for the most part. So I think you've answered most of that already. But as a point of clarification as it relates to the Clarios exclusive, can you comment on whether or not that exclusive also exists outside of North America? And that is if that's also subject to the June deadline?
Steve Cotton: So the June deadline for Clarios is applicable to North America, China and Europe. That is correct. So that is in those three areas. We have opportunities that are within those areas, but we also have plenty of opportunities outside of those areas. And as I've mentioned before our negotiations in sales funnel has gone down the path and that is inclusive of Clarios, obviously. So we're continuing to work out how it'll look.
Glen Akselrod: Okay. Super. Thank you. I think that covers most of the questions in our queue.
Steve Cotton: Great.
Glen Akselrod: I guess, if there's no other further questions moderator, we will conclude the call.
Operator: Thank you so much. This concludes today’s conference call. Thank you all for participating. You may now disconnect.
