Q2 2020 Aqua Metals Inc Earnings Call
Thank you for standing by just the conference operator.
Welcome to metals, Inc. second quarter tiny tiny corporate update call.
As a reminder, all participants are in listen only mode and the cost that's been recorded.
After the presentation.
As an opportunity to ask questions.
Trying to question Q Human Press Star, then one and your telephone keypad.
You need assistance during the conference call you, Michigan on operator next question to start in general.
I'd now like to turn the conference over to Mr. Grant Axelrod, that's it into Brazil capital.
Please go ahead Sir.
Thank you operator, welcome to Aqua metals second quarter 2020 conference call early today, often metals when its financial results for the quarter ended June Thirtyth 2020. This release is available on the Investor section of the company's website at Www Dot Aqua metals Dot com.
Joining us for today's call fund management, it's because I didn't see out as well as Judd Merrill The company Chief Financial Officer.
During today's call management will be making forward looking statements. Please refer to the company's quarterly report on form 10-Q filed today August 4th for a summary of the forward looking statements in the risks uncertainties and other factors that could cause actual results could differ materially different dose forward looking statements.
Okay metal cautions investors not to place undue reliance on any forward looking statements that company does not undertake and specifically disclaims any obligation to update or revise such statements to reflect the circumstances or unanticipated events as they occur except as required by law with that I'd like to turn the call over to Steve <unk>.
You're welcome metal Steve. Please go ahead.
Thanks, Glenn good afternoon, and welcome everyone.
Since our last corporate update call I'm happy to report on behalf of our entire team key areas, where we've advanced than our mission to help to 65 billion dollar lead acid battery industry Capacitized compete innovate and thrive in an increasingly environmentally focused world by utilizing our proven OCC refining equipment and technologies.
First and foremost despite the challenges of covert 19, we're pleased to announce that we're ahead of schedule on or be one dot to five Electrolyzer program. We are seeing better than expected results inefficiencies in throughput, enabling us to offer lower cost equipment that runs more efficiently with lower operating costs to potential licensees, we can tell.
Due to engage with.
A key goal in the initial phase the Electrolyzers three phase program be one dot to five a with b in L. to follow was to automate the operation the electrolyzer through regular runs over a period of weeks. We've already reached the point with the Electrolyzer achieving consistent results once the on and off buttons are pushed in the control system in the electorate.
Wise are handling the rest this key improvement the positively impacts our value proposition would not have been achieved without all the operational experience in data that we gained from producing 35000 commercial acri finding gets in 2018, and 2019, which we sold for a significant price premium to Clarion is the world's large.
As battery maker.
Learnings from our heritage appears to have paid off in meeting this key automation goal.
I'm also pleased to announce that we are ahead of schedule on our second deterioration version, one dot to five be.
This adoration includes several additional improvements inclusive of a new tank designed with an integrated frame that reduces complexity fabrication cost and maintenance labor costs improved endurance performance of the Electrolyzer is also expected to take place during this iteration.
We've made substantial progress preparing for the version L. as well, which will be highlighted by new tightly integrated data logging capabilities in near real time to our secure web based portal our future licensees will utilize this portal, but just as important we plan to utilize this infrastructure as well to remotely support and improved the beep.
Not to five all units in future iterations.
So the V. one dot to fight program is ahead of schedule and we're pleased with the results thus far.
President and future planned advancements continued to be fuel not only by our teams knowledge skills and outright passion, but our cash on hand as a result of already received and planned ongoing insurance collections. In addition, we expect to receive additional cash infusion is from the expected sale of unnecessary assets as part of our go forward model.
We have now collected $15 million in insurance proceeds and we expect to continue collecting or insurance claims as we work through the layers of coverage, we've already disclosed while simultaneously selling the assets, we no longer need to supplement our cash position.
We have thoughtfully added organizational human capability in the quarter, including a commercial leader that we were happy to have read join our team Dave Regan hit the ground running in June and is keenly focused on our licensing and partner development efforts. In addition, we have added a strong chemical engineer and other technical resources to ensure that would be one dot to five program.
Moves through his development and ultimately into the support phase.
Our continuing conversations and engagements with potential licensees are improving value proposition from our view one dot to five program and interesting new partnership opportunities in the areas of market development and technology improvements continued to show promise.
Subject to the completion of our view went up to five L. development program and finalizing the costs in performance and benchmarks for improvements, which is expected by the end of the year. We believe that we will be in a position to finalize pricing configuration and the overall value proposition to negotiate and secure the first equipments.
Supply and licensing installation outside of our facility for our view went up to five l. product.
I'll now hand, it over to judge to review our Q2 financials go ahead.
Thank you Steve.
As of June Thirtyth, 2020, cash and working capital balances were 4.8 million at 6.1 million, respectively, which include the 4.9 million insurance proceeds receivable.
That's cool expected insurance collections are anticipated to be higher.
As of June Thirtyth 2020, the company had received a total of $15 million insurance payment as a result with the fire damage.
5 million was received in December 2019.
When Fivenine was received in Q1, an additional 5 million was received in Q2 2020.
We have recorded under insurance receivable at 4.9 million in line with GAAP accounting regulation.
Which limits the amount of insurance receivable, we can recognize on our books.
We are still very much involved with providing information to the insurance carriers, we expect to receive additional payment in the future as they review our claim which has over $30 million for property plant and equipment losses.
In addition, we may receive additional insurance payments for business interruption losses.
Assets on our balance sheet as of June Thirtyth 2020 that were not affected by the fire totaled approximately $38 million in book value.
During the battery breaker Multichannels killed enterprises, mixing and storage tanks water recovery storage system and the building infrastructure plus the land. These assets are still in good shape in some of them are branding and will either used in future licensing deals for sold.
As mentioned last quarter on March 20 said 2020, we entered into a memorandum of agreement with their tax regarding our alone.
We have agreed on the allocation of insurance proceeds with proceeds allocated to their tax to pay off the remaining balance of alone which is approximately 8.6 million as of the data. This report inclusive of approximately $500000 prepayment penalty netted against a $1 billion TD collateral.
As of June Thirtyth 2020.
Tax has received 4.875 million of insurance pretty proceeds from our insurance carriers, which has been set aside in escrow account to be used to pay off the note.
The 4.875 million is recognized as other assets on our balance sheet.
On receiving approximately 10 million additional insurance proceeds alone will be paid off.
Anticipate that this will be completed by the end of year.
Our lead recycling facility was not in production during the second quarter due to the fire and acceleration of our licensing strategy as a result, the company did not generate revenue during the quarter.
Plant will not be in production during 2020, except for the operation and testing of our improved electrolyzers as part of the.
The 1.25 program.
Roddick sell during the second quarter 2019 were 1.5 million and consisted of high purity lag from our talk refining process.
Well, it's led bargain, let compounds and plastics.
Cost of product sells includes raw material supplies.
I did cost salaries and benefit consulting and outside services costs, depreciation and amortization costs and insurance travel and overhead cost.
Cost of product sales decreased approximately 82% for three months ended June Thirtyth 2020, as compared to the three months ended June Thirtyth 2019.
Cost of products sales decreased during 2020 due to the suspension of production, resulting from the fire.
General and administrative expenses decreased approximately 48%.
Three months ended June Thirtyth 2020, compared to the three months ended June Thirtyth 2019.
The suspension of activities under our operations maintenance and management agreement with deal Yeah reduce company payroll and improvements in nearly all other expense categories drove the decrease.
We expect to further decreased general administrative expenses during the year as a result of our move to a capital light strategy.
The three months ended June Thirtyth 2020, the company had a net loss of 3.98 million or negative seven cents per diluted share.
Compared to a net loss at 10.5 million or a negative 21 cents per basic and diluted share. The three months ended June Thirtyth 2019.
Net cash used in operating activities for the three months ended.
32020 was approximately 4.1 million.
Included in cash outflows from operations for the quarter was approximately 1.2 million per outstanding payable.
And for general working capital purposes.
Our monthly cash burn rate during the quarter, which includes monthly plant expansions and corporate overhead was approximately 725000 per month as compared to approximately 830000 per month in Q1.
Approximately 2 million per month in the prior year.
This decrease was the result of significant action taken after the November 2019 fire that we may see a slight reduction in cash burn second half of the year, we anticipate after selling the plant and paying off note with their tax that we will experience other meaningful reduction in cash burn.
As of June Thirtyth 2020 were collected a total of $15 million insurance proceeds.
Our process with insurance carriers includes many details, including invoices quotes assessments drives and pitchers which represents a significant portion of our shirts claims for equipment and build the damage.
Recently, we have had several meetings with both virtually and in person insurance carriers.
We're currently preparing the additional investments such as a third party assessment of damaged equipment and ongoing expert analysis.
Do you work with our public adjuster, who represents the company in our claim and is very active.
Their team of experts.
As I mentioned, we expect to see additional payments in the coming months and we'll update you.
As proceeds everything.
In closing.
We continue to feel confident about our financial position and runway and supporting the companies go forwards goals over the coming months, we intend to seek fund primarily from insurance proceeds and the sale of assets.
He is not required for our accelerated capital light strategy.
With that I'll turn it back to Steve for closing comments.
Thanks, Chad.
As I've stated before we believe Aqua metals has demonstrated that our technology is proven and can produce the world's purist recycled led that will be sold at a premium by our future licensing partners and there's opportunity for battery manufacturers to make premium products. We are working very hard on achieving our first licensing deal I'm more confident everyday.
Hey that are solid team's execution is a harbinger of our future success and our morale and teamwork as an organization is at an all time high.
We will probably run into a hurdle or two but this team has proven it can clear hurdles.
We look forward to continue providing incremental in meaningful updates as we continue to make progress. Please watch the aqua metals, Twitter and you tube channels as we continue to provide supplemental information through those venues.
I'll now turn it back over to the operator to facilitate the Q and a portion of our call today.
Thank you.
We will now begin the question answer session.
Trying to question Q, you mean press Star then one on your telephone keypad, you'll hear a chilling acknowledging our request.
If you're using a speakerphone please pick up your hands up before passing any key.
I would draw your question. Please press Star then too.
Possible remotely that's college trying to.
The first question comes from Steve Emerson Emerson investment grade.
Go ahead.
Yeah right to excellent progress.
You refer to three for sure.
Oh so.
Does that mean, you're working on the third version now.
Sure. There are two more version is applicable.
Well you complete it took go in the second half of the here.
Yes, Steve. Thanks, So the first it duration V. When dot to five a has been running and that's what we've been reporting on a and it's been running and improved men's over even our expectations and schedule.
To be version, we anticipate to be remain ahead of schedule as well and that second electrolyzer well to be deploying soon and that has primarily as I was mentioning the tank for slashed frame improvements now while that unit is running a work finalizing the work on.
L and that'll be the L. version and that will include all the data logging in remote monitoring portal and some other improvements that we're making with added aeration. So we're kind of working on all of them at the same time, but really will be running one at a time serially. Once we start running be will run be and then once we start running L will run out.
Okay and are you.
[laughter] point ready to comment or.
With your new her latest for sure what your [laughter] C or any metric that the possible licensees.
Our looking for and one metric.
Perhaps that's your coal that [noise].
Really become.
Part of a metric you need to achieve for these customers total license fan.
Sure. So the metrics that we're going for our to reduce the capital cost as well as the operational costs to run the machines and improve the uptime. So the overall value proposition is a improved we do feel that the value proposition as it stands now is is.
Great and we're trying to make it even better and so in other words the metrics around where we are today, we believe a fit the model for licensing anyway, but for the program it too.
Allow us to improve that value proposition. Even further we've we find its very important to do that and and we need to finalize the actuals as we then begin the negotiation. So as I mentioned earlier, you know, we'll we'll finalize those metrics and that that is direct input into pricing.
And all the factors associated with the negotiation phase a with the various licensees. So it's kinda like you're working on a car and you don't have the final horsepower and MPG, yet and that's what we're finalizing now with these electrolyzers and with this program.
Hopefully that answers your question Steve.
Okay. Thank you very much excellent progress.
One finally.
After Youve now collected 15 million, you're expecting it to collect or you're applying to collect 30 million.
More.
As far as I understand that.
And how much of an asset sale. So you could give us a range.
Hey, Steve This is John I can probably answer that question.
You know we've collected the 50 million as we discussed we have over 30 million in claims that we've made on the property and equipment and clean up and so we expect to collapse more on that over the next few months.
And we also have a business interruption claim that that's above and beyond that amount and so that is in play until the study some additional dollars coming from that as well as our total okay wait to see was.
Okay. So the business interruption and as part of the 30 mill or would be in addition to the third email.
Replacement.
Oh, so the 30.
30 million is property plant equipment only so it would be in addition to that.
How big is that possible why are we haven't.
We haven't really disclose that that's there's a lot of negotiation kind of going on with insurance carriers right now it's a little last like you tie identified.
But it could be a few mailing to several millions of dollars Oh, I'm, sorry about that keeps us a ballpark.
Thank you again.
[noise] [laughter].
Thank you.
Once again, if you have a question. Please press Star then one I can talk on keypad now.
Your next question comes in Skied Cougar of course, I and bad debt.
Please go ahead.
Good afternoon, guys. Thanks for taking my question.
Are you far enough along in your discussions with any prospective licensees that are talking about a building greenfield.
Filling a new facility.
And if so can you give us any kind of.
Color on what that design or that would look like you know in general terms I know you and I've discussed the idea that.
And we're finding process.
Suited to only about 50% of it.
Lead compounds coming out of recycled batteries.
And I'm just wondering if.
Anybody's actually.
Working on a design it would include Uh huh.
Smaller less expensive less polluting smelter.
The process 50, 50% of OLED stream, and then echo finding modular.
Process the rest.
Yes, Steve <unk>. That's a good question. So in terms of designing OCC refining in from a a ground up you know Greenfield type of the build we are talking to a couple of players in fact in different continents, even about that that that kind of design in type of a function with a new facility.
So just as if you remodel your house you have some limitations in terms of how you what exactly are put in in addition in those types of things that benefited obviously when you're building a greenfield as you can kind of design and everything together so that keeps it interesting, but effectively it's the same outcome in terms of process flow. So you still at the battery.
Breaker and separation system, taking the metallic lead and sending it off into cleanly process through the furnaces and taking the paced and sending it through the OCC refining process, but with a greenfield build you do have an opportunity to think things in terms of the physical process flow and lay out at the plant to make it a little bit more efficient to do so.
So when you design it in which is great. So we find those opportunities, but just as interesting is the bolt on a an upgrade opportunities. Unfortunately as you look across the various markets in the world. There are a greenfield design opportunities there are plenty of bolt on opportunities. If we just as we've discussed in the.
Past and so that's it's you provides is different applications to apply the OCC refining technology.
I guess I'm I'm still little unclear on.
Whether or not there any prospective licensees that you're actually in discussions with.
Yeah, I haven't design that incorporates both smelting and refining.
We are in discussions with potential licensees, both for Greenfield and for bolt on.
And our eight down but it.
The Greenfield opportunities have a design that would include both smelting and refining.
The ones that we're talking to do yes.
Okay, Great. That's that's the answer thanks very much Steve.
Yeah, great. Thanks.
Thank you.
Once again have a question. Please press Star then one on your telephone keypad now.
This concludes the question answer session.
Now I'd like to turn the conference back over to Mr., Steve Cotton for any closing remarks.
Alright, Thank you operator, well thanks, everyone for your time today, and we really do appreciate the continued support from our shareholders as well as our partners as we continue our are from feed when dot to fight programming et cetera. As always we will continue to update everybody in the coming weeks and months as we make progress on the.
The one to five program and will continue to manage our cash position with the insurance collections and asset disposition. We'll report on continued commercial progress a with our existing partners as well as potential developing partners a in the future. So thanks again, everybody and hope everybody has a great unsafe day.
Thank you.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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