Q1 2021 Aqua Metals Inc Earnings Call
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Thank you for standing by and welcome to Aqua metals pre and acquired I would now like to turn the call over to Glenn Axelrod you may begin.
Alright, Thank you operator, and welcome everybody to Aqua metals first quarter, 2020 One conference call earlier today Aqua metals released financial results for the quarter ended March 31, 2021 news release is available on the investors section of the company's website at Www Dot Aqua metals Dot com joined.
And us for today's call from management, and Steve Cotton, President and CEO as well as Judd Merrill and the company's Chief Financial Officer. During today's call management will be making forward looking statements. Please refer to the company's report and the form 10-Q filed today April 29 per a summary of the forward looking statements and the risks uncertainties and other factors that could cause.
Actual results could differ materially from those forward looking statements Aqua metals cautions investors not to place undue reliance on any forward looking statements. The company does not undertake and specifically disclaims any obligation to update or revise such statements.
Reflect new circumstances or unanticipated events as they occur except as required by law as a reminder, after Steve's and judge formal remarks, we will be taking questions questions will be accepting of the telephone from analysts and all of the other investors can submit a question using the online whether the portal, providing and two days and last week's press release.
We will take as many questions as we can and the available time spot and with that I'd like to turn the call over to Steve Cotton CEO of Aqua metals, Steve go ahead.
Great. Thanks, Glen and welcome everybody to our quarterly call.
I'll move from our title slide the slide number two which is our safe Harbor, which Glenn and basically reviewed so that's for your reference and.
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 the Aqua metals mission statement is to provide sustainable metal recycling from materials strategic to energy storage applications inclusive of led and lithium.
Our proven breakthrough technology Aqua refining does deliver raw materials back into the manufacturing supply chain and the clean and economical way that reduces the overreliance on mining to meet demand.
And with that I'll move to slide four and summarize the aqua metals at a glance.
We've already developed our technology, our core technology called the Aqua refining, which is now commercially ready and it's a sustainable battery recycling technology, what's unique about Aqua refining is and it uses water inorganic assets to create and 99 996 plus percent ultra pure lead and we created one item at a time.
For the 20 billion and growing lead recycling industry. We're also seeking to extend the person recent announcements our aqua refining technologies to apply to the metals recovery associated with the lithium ion batteries and we've evidenced our commitment to continuing to develop aqua refining for this area through additional IP filings.
And through strategic investment and research and development that will talk about a little further throughout the day to day.
Aqua refining is also a transformative technology the benefits the industry and the Earth itself Aqua refining benefits the environment with reduced emissions and vastly reduced worker safety exposures and while they are performing the act of out of recycling. It also improves battery performance and life through the.
The ilkka pure metals, resulting in better performance and better life span of batteries and the economics of Aqua refining are becoming more and more favorable when the operators, particularly and look at all of the aspects of the cost that they spend on worker safety and environmental mitigation, coupled with the conversion cost of the capital cost.
Deploy aqua refining compared to the incumbent methodologies to begin with the.
And the ticker on NASDAQ as AQR, and that's and we're headquartered in Tahoe Reno in Nevada the cut.
And he was incorporated in 2014, and we have about 68 million shares outstanding and cash on hand and our.
The report of late is $11 7 million and we had zero debt and a very strong balance sheet.
Moving onto slide number five I'm going to talk about nine recent highlights of our quite active quarter. Since we last spoke to you.
The first is that we continue to advance discussions with several potential licensing partners as Ive stated before were currently working through multiple active engagements that are all continuing to progress very well the.
And as engagements include opportunities for Aqua refining upgrades to existing battery recycling centers Greenfield builds of new hybrid Aqua refining facilities with small efficient furnace and greenfield builds of Standalone Aqua refining facilities.
Some of these engagements also include a focus on our streamlined aqua refining direct to oxide the application, which we announced recently as well and geographically. These active engagements currently cover North America, Europe, the Middle East, India and Southeast Asia.
With the progress we've made in the past quarter. We are still confident that the company will have more to say about this by the end of June as previously guided.
Second we received first the business interruption insurance payments of $1 4 million with the total collection to date of $25 million and we expect future insurance payments, but we've made some great progress in the past quarter by breaking into the business interruption element. In addition to the property and casualty.
Appointed two additional board members with key industry experience and I'll talk about those board members when we get further on and the deck and we're very pleased to welcome Molly and that each of the team.
We also filed a provisional patent for the Aqua refining application to lithium ion recycling. There's a lot of companies that are talking about with them like the lithium ion and recycling and trade secrets Aqua metals of course has trade secrets, but aqua metals is pursuing the IP because in order to be and equipment supplier and license of our technology.
It's very important to secure the intellectual property of the technology and the processes. We've also evidenced our per.
<unk> and the lithium ion and by investing in a clean tech lithium ion and recycling innovator linacre politico stands for lithium and nickel and cobalt three of the metals.
And the multi metals lithium ion and recycling environment and <unk> purchased.
The at least the purchase of our Aqua refinery and we expect that we will be working with them towards helping standard let it go up very quickly.
Commenced.
And our at least the buy agreement for the non core facility with Lin of go and that was an important step for US also from a financial perspective.
Cause it released the burden of the capital heavy environment that Aqua metals wanted to transition to a capital light environment and allows us to have a better financial runway, which Joe will be talking about it and a little bit here.
We also filed another provisional patent, which is the patent around creating lead oxide directly from Aqua refining and that therefore streamlines. The overall link between battery recycling of battery production by eliminating the need to melt and cast and refined metal and instead take the briquettes to.
Come off of the Aqua refining process and put them directly towards the battery manufacturing process.
We've also established a global partnership with B, ASF, which is one of the world's largest chemical companies and the world to help secure the supply of one of our key chemicals and work with us the market our solution on the global stage we.
We also raised additional net proceeds of the half a million dollars through some opportunistic ATM sales.
So I'm going to go on to slide six now and point out debt the company from an IP perspective, and execution perspective, and developing the technology is quite mature we have over $200 million invested and that sets up the equipment supply and global licensing the opportunities that we are currently engaged and.
And the robust IP portfolio.
That's the only company with IP for clean led and lithium battery recycling with 61 patents now of total issued and allowed and 53 additional patents pending.
This is a very important area and again to be of technology and licensing and equipment supply company that you have to get your IP coverage and the markets that you're operating and as I was mentioning from our sales funnel earlier today and if you look at the back of it maps together quite well.
So slide seven and talks about our experienced management team and our engaged board, which is truly focused on execution, we've really derisked a lot of the technology, particularly in the led space and we are focused now on execution as the management team and with a great independent directors.
Our board and on the management team side of myself I come from a background of battery monitoring and lead acid battery supply.
And I understand the battery manufacturing and battery cycling industries quite well and have been with Aqua metals since of the very early days in January of 2015, Judd Merrill our CFO.
From a mining and metals background, so jud understands very.
Very similar processes.
In terms of metals and metals production and has brought a great deal to the table in terms of not only our financial management, but our strategic initiatives.
And Packer and our vice President of Engineering and operations comes from one of our investors and Aqua metals, <unk>, which happens to be the world's largest battery manufacturing company.
And then had joined the Aqua metals years back and has really risen to the task of being a very productive vice president of engineering and operations for the company with that and domain experience and background.
On the independent director side shark use of size are.
The non executive chairman as an independent chairman and more like the European model and the held various positions at Chevron.
Including President of global marketing and has been on many boards and brings a steady hand of the chairman of the board for Aqua metals that has been a wonderful addition to our board for years now they need the Vito has been with the since the beginning and as just and.
Fantastic Chair of our audit Committee.
All of these thing and Eddie Smith of our two recent editions and Molly is somebody that has quite a bit of licensing global licensing experience and background and executing and licensing deals through Dow Chemical company and Eddie Smith, Who's joined Us as President and CEO of S. M.
T C of manufacturing contract manufacturing Corporation.
And has over 25 years of extensive experience in manufacturing and <unk>.
Remember, we are going to be and equipment supplier here and electronic components distribution industries. So.
So we're very pleased with the team that we have that's focused on that execution because it is an execution play as we move forward and that team is really what you have to believe and to make sure that the execution.
So with that I'm going to turn over the presentation to Judd Merrill our CFO to take everybody through the financial overview Jud.
Thanks, Steve Alright.
Alright, and we're going to move now to slide nine the balance sheet or financial statement and 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 total of approximately $27 4 million of net book value.
These assets, making up the balance is largely the plant building and infrastructure, which we announced this quarter. It was part of the lease itself and when it comes.
And the remaining fixed asset, including the battery breaker and.
Melting kettles and filter presses and such are.
Being evaluated to be either sold or used and are used in our first licensing deal.
Non current assets now include $1 5 million.
The dollar investment into the clinical Corporation.
We also have an option to exercise the warrants and that's another 500000.
We are pleased to point out also that our liabilities are now at the lowest level and recent company history. Since we have retired debt from last year.
The lease liabilities related to the facility located about a mile from our existing plant located in the Tahoe Reno Industrial Center.
Plan to use this facility to continue R&D work as well as to assemble the electric language for our future licensees.
I'm going to move to slide.
Slide 10.
And the income statement or lack of recycling facility with non of production during 2020 or the first quarter of 2021 as we focus on of our licensing strategy.
Cost of product sales includes raw materials supplies and related costs salaries and benefits and consulting and outside services costs.
<unk> and amortization of insurance travel and overhead cost cost.
Cost of product sales did increase of approximately 11% for the three months ended March 31 2021.
As compared to the three months ended March 31st 2020, the increase in cost of product sales was the result.
And finally cleanup cost and preparation for the lease and the eventual sounds and facility.
For the three months ended March 31, 2021, and the company had a net loss of $4 2 million or a negative six cents per basic and diluted share.
<unk> two of net loss of $4 1 million or and negative seven cents per basic and diluted share from the three months ended March 31 2020.
And 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 two point.
The $1 million and $4 3 million respectively. The.
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 and amortization and.
And working.
Dock based compensation charges as well of net changes in working capital.
The net cash used in investing activities for the three months ended March 31 of $2021 9 million and consisted mainly of <unk> five.
And $5 million for the purchase of property plant and equipment and <unk> 2 million used towards the investment and when it comes.
Net cash provided by investing activities for the three months ended March 31, 2020 was $3 1 million and that consisted primarily of $4 7 million of insurance proceeds.
Partially offset by $1 6 million for purchases of property plant and equipment during that quarter.
Net cash provided by financing activities was $8 1 million for the three months ended March 31, 2021 and consisted of $7 5 million of the net proceeds from the sale of Aqua metals shares pursuant to the ATM and <unk> 7 million from stock options exercised.
The offset by the $1 1 million forgiveness of the PPP loan.
Net cash used and financing financing activities for the three months ended March 31 2020.
Consisted of <unk> $1 million for payments on debt.
And I want to point out also that we have only used approximately.
<unk> 5 million of the ATM since we last reported this usage was partially related to our investment in <unk>.
And future usage of the ATM is contingent upon strategic investment opportunities.
And we guided on our last earnings call we anticipate.
Starting this month in April 2021 arm and that our monthly cash needs are estimated to be around 650000 per month.
And lease payments began in April and since we still have access to the build the lab and some office space. We expense. The company will also realized and savings by not having to move quickly kind of the building.
And then finally on the last slide.
Just a couple of updates first on the insurance.
As of the data and this report.
And as of today, we received approximately $25 million of insurance proceeds from our insurance carriers and that includes an initial payment of $1 4 million towards our business interruption insurance claim.
This completes the first three layers of insurance, we're now working with the fourth and final wave of insurance, which totaled up to $25 million and kind of range.
We do expect another $2 million on the business interruption claim to be made shortly by the forest land and we're getting very close to being done with the insurance collection process.
We believe that additional payments will be made both on the equipment and business interruption and we intend to vigorously pursue the receipt of the remaining insurance proceeds to satisfy.
Our total claim.
In closing I will reiterate that our cash balance remains strong our current cash needs are very manageable, which puts us in solid place and move forward on our strategic business plan and allow us to execute on our goals as we move forward.
With that I will now turn it back over to the operator for questions.
Yes.
Yeah.
Operator, do we have any questions.
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No we cannot come in and Oh, Yes go ahead now.
Okay Calia and Ross. Your line is now open you may ask your question.
Thanks, so much guys.
Could you just give us an update on where and gets them to sell the insurance element of my life.
And my cap out that you guys have done a great job of click and retail and so far and just wondering you know kind of expectations around the additional capital and you could come in and alpha over the next several quarters.
Yeah, I mean, we're we're very close to being done with the.
The last little bit of insurance, but we don't want to comment exactly where that might end up I think.
And there's still some negotiations and and some discussions that we'll have as we kind of wrap things up and that's kind of the normal process.
And when we kind of get to the end of the the pain on everything that we've presented to date.
We believe there is some more room on the on the business interruption.
But we don't want to comment too much on that as we're kind of getting to the final.
The discussions and negotiations.
But you know if you look at where we're at the $25 million.
And and we've identified a couple of more million on the B I like kind of set the floor range and then it could go up from there.
Okay. That's helpful and then and now it's early days with Lenox Hill, you know, but.
You guys are demonstrates the work with them can you talk a little bit about you know what the initial efforts are around the scoping out the opportunity to work together and.
Clinical benchmarks for holiday and the approach.
Yeah, Hey, Collyn I'll take that so yeah, we're really excited of what the the growing relationship with Lin of go they've gotten into the building and theres quite of a.
Our crew doing lay out and planning for the the the adopted lay out 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 in to the area, but where.
We're working together with them to look at what the Aqua refining.
Activity will be as it fits in with the overall facility and we'll be operating some cells of going after individual metals within the lithium suite and hopefully.
Hopefully, bringing those to the <unk> facility to to deploy and and workout.
And that looks from an equipment supply and licensing perspective and.
We've also evidenced a like I mentioned in the earlier in the call our interest and the space with Provisional IP and that's really important filing around the area of lithium I and of recycling as it relates to the capabilities that aqua refining can offer to that space.
And we feel very confident that we will be able to say some things and the not so distant future about some further progress in that space that will further evidence and addition to the partnership with let it go and the sale of the facility and the IP that we prosecuted and the research and development that we've already announced so we're really excited about but we're not going to let that the.
Attract us from the deal making that we are in the midst of on getting our first the licensing deal for Aqua refining and the led space, but we recognize that lithium is going to be about as big as the lead recycling market and dollar value by about the end of the decade, if not sooner. So it's a really important space for us to consider.
Perfect and thanks for quick and that sort of growth hormone. So yeah.
And Alex it's obviously.
So a little difficult to say too much about where you're at with with the the leg and license and supply agreement.
And I guess, if you could kind of a sense of kind of the per.
Progress that we're making and.
Competence level has it changed over the last couple of months since you last reported sure. Yes, so as I mentioned and the call you know the the the the geographical and broadness of the of prospects and and folks that we're talking to and a very detailed level has grown.
The applications have grown from things like Aqua fit which is bolting on aqua refining to an existing battery recycling facility with smelting to Greenfield net new builds that of government sponsored and.
And supported to the applications of Aqua refining for our recently announced I other provisional patent filing for the direct to oxide. When you take those for cats and you can then put them directly into a battery manufacturing mode bypass and the whole need to refine and kettle and ingot and cast and and then just turn it back back into what it would have been.
Looks like anyway.
So we feel very good about the the the breadth and depth of the of 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.
Excellent. Thanks, so much cash.
Thanks, again and light attack.
And Ken again, and now you can ask the question you really depressed side and the number one and the telephone keypad next question comes from the line of Amit Dayal of from H C. Wainwright. Your line is now open you may ask your question.
I appreciate you taking my questions guys and share with respect of the licensing agreement and Steve.
Should we assume this.
Any progress on this will only materialize after June 2021.
So the with.
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 a something positive to say about where we are with the deal making between now and the end of June.
Okay understood.
And if that materializes and the machine you should get something going in.
The income through policy.
How should we think about the impact on your burn rate.
Yeah.
So what's important is the the first the deployment.
Of Aqua refining will will likely not be a very large deployment of 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 had mentioned earlier on some of these calls I anticipate that we will be seeing phased deployments of aqua refining of so.
People get comfortable with and their facility of of the deployment and and that's particularly when you do the bolt on type of arrangement and.
And then greenfield announcements could be very exciting, but had a little bit of of longer timeline, because you have debt yet to build the building and building the entire facility and integrate aqua refining within those facilities. So it's dependent upon the type of deal how quickly we'll see the revenue and unfortunately, we have a good mix and the sales funnel. So we will see a different types of of Kt.
And with the revenue associated with the services and equipment and ultimately the running royalty.
Okay understood. Thank you for the just one last one.
Well there of any or has there been any additional improvements to the the one two claims.
The solution.
So we've indicated the and even of our tweeting photos of our where now of operating to Aqua <unk> and we are continuing to make further adjustments and improvements to our two two the the the technology and the capability. So the research and development curve continues and that that focuses on things like <unk>.
Throughput a cost reduction and.
And further tightened the automation and controls the electrical efficiency, which helps with the the value proposition. Even further so so we will continue that our product development for the foreseeable future, but that's improvements on what we believe is already a very capable version one dot two five of the can.
And you put in the hands of clients and in a in a very near term scenario.
Okay.
That's all I ask do you think of so much great. Thank you.
Thank you again and I hate to ask the question, you've only of depressed side and the number one and the telephone keypad.
Stephen It's Glenn here, we've got a number of questions and the queue of the came in through the portal and they all has to do with the the licensing deals for the most part so I think you've answered most of that already but has the point of clarification as it relates to the clarity of our exclusive can you comment on whether or not that exclusive.
So exists outside of North America and debt. If that's also subject to the June deadline.
So the Ah.
June deadline for <unk> is applicable to North America, China, and Europe that is correct so that.
That is and 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 mentioned before our negotiations and sales funnel and has gone down the path with and that is inclusive of glorious, obviously and so we're continuing to work out how it will how it will look.
Okay Super. Thank you I think the covers most of the questions and thank you.
Great.
I guess, if theres no. Other further questions moderator, we will conclude the call.
Thank you. So much. This concludes today's conference call. Thank you all for participating you may now disconnect.