Q3 2021 Aqua Metals Inc Earnings Call
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Good day, everyone and thank you for standing by we apologies for the delay there is some technical issues coming on but today's conference is scheduled to begin shortly until that time. Your lines will again be placed on hold thank you for your patience.
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Good day, and thank you for standing by welcome to the Aqua metals analysis scheduled for third quarter financial results call.
French call at this time, all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone if you require any further assistance. Please press star zero I would now like to hand over the conference to you.
For today, Mr. Glenn actual Rod. Please go ahead Sir.
Good day, and thank you for standing by welcome to the Aqua metals analysis scheduled for third quarter financial results Conference call. At this time all participants lines are in a listen only mode. After the speaker's presentation, there will be a question and answer session.
To ask a question. During this session you will need to press star one on your telephone if you require any further assistance. Please press star zero I would now like to hand, the conference over to your speaker for today, Mr. Glad Axelrod you may begin.
Thank you operator, and welcome everybody to Aqua metals third quarter 2021 conference call earlier today Aqua metals released financial results for the quarter ended September 30th 2021. This release is available on the investors section of the company's website at Www Dot Aqua metals Dot Com John.
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 Form 10-Q filed today November four 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 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 to reflect new circumstances or unanticipated events as they occur.
Except as required by law as a reminder, after Steve's and judged formal remarks, we will take questions questions will be accepted over the telephone from analysts and all are there other investors can submit a question using the online webinar portal, providing it to Dave in last week's press release, we will take as many questions as we can in our available time.
And with that I'd like to turn the call over to Steve Cotton CEO of Aqua metals, Steve. Please go ahead.
Thank you Glen and welcome everybody to today's quarterly call.
Start off with slide number one which is our title slide which is the Aqua metals is truly leading a revolution in led and lithium battery recycling and.
And today, we're gonna be talking about our third quarter results. If you would like more indepth you of Aqua metals, you can refer to our Investor website and play back Register for and playback. The presentation that we made last week, which which has more in depth information today's call is focused on our quarterly result.
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Slide number two you will see the safe Harbor that Glenn just red So I won't read that to you unless theyre in writing for your reference.
Moving on to slide three our mission and our mission is to provide sustainable metal recycling for materials that are strategic for energy storage applications be it lead or lithium.
Our proven breakthrough technology, which we'll talk about today off refining returns raw materials to the manufacturing supply chain in a clean way in an economical way it will help vastly reduce the reliance on mining to meet the growing demand for both the lead asset in the lithium ion industries.
Moving on to slide four changes really imperative in the way that the industrial processes need to electrify and get away from fossil fuels and become the clean processes that support the clean initiatives as you see in the right. The U S Department of energy themselves have said that the vision is for global production of metals, using just air water and.
Clean energy as inputs, that's the only way, we're going to drive towards net zero emissions, which is quite the topic of these days as we talked about global climate change and the recent top 26 meetings.
So that change is imperative because today's smelting produces around 7% of global greenhouse gas emissions amongst other emissions.
This is going to go up significantly if we don't change and if we don't make way that we recycle and even build batteries powered through electrical processes that are powered from renewable energy.
So these recycling technologies need to really be incorporated in order to complete that transition. So it's not just in the transportation sector and the energy storage sector, but in that closed loop recycling.
Moving onto slide number five lets talk about Aqua metals milestones.
If you look at the left side, you'll see that the company was founded not too terribly long ago in August 2014, and that's when we made our first prototype of <unk>, which is our novel room temperature water based organic biodegradable methodology with low emissions to recycle led.
In July of 2016, we commenced operations after building about a 135000 square foot facility in the Tahoe Reno Industrial Center.
And after turning on that facility by October of 2018, we became a north American certified lead supplier in ingot form to one of the largest battery companies in the world.
And we produced about 35000 ingots of Aqua refined lead in 2008, and 2019 and during that period of time. We did reached 24 hours a day seven days a week commercial proving ground technology Derisking operations with the commercial production of that capability to deliver those 35000, Inc.
Yes.
By February of 2021, as a part of our transition from a capital heavy proving ground mode to a capital light mode of providing equipment and licensing, which we'll talk about we made an investment in <unk>, which is a lithium ion battery recycling company and we'll talk more about our relationship with when it go.
Today, and our recent press announcement today, but at the time in February of 2021, we made that investment and we also filed a provisional patent associated with taking the Aqua refining technologies and applying them towards the goal of recycling lithium ion batteries.
And also <unk> purchased the plant the Aqua refinery in a lease to buy scenario, which we'll talk about an update on that front.
And that has progressed since then.
So in July of 2021, we established our first commercial agreement Barack refining with Acme metals in Japan.
And that is a big milestone for the company because we are in the process of preparing to ship as a product that has the license more products to this client and partner to develop Aqua refining in the Asia Pacific region.
August of 2021 we did complete our third generation of Aqua wiser, which we were able to rapidly iterate focused on innovation through the past year of 2020, which now triples, the throughput over the first generation, where we've made those 35000 ingots up 296 kilograms per day Barack <unk> amongst many.
Other improvements that allow the product to be monitor bowl with our peer metric software suite as well as.
Additional electrical efficiencies and capabilities of that equipment.
Recently now want to today and moving forward basis, where you see the Green Arrow September 21, we completed the lab scale testing of our initial testing on the lithium ion recycling technology.
And by December of this year, we expect that we will be shipping the led equipment in form of Aqua wiser and other supporting equipment to our partner in Taiwan, So very important milestones coming up this quarter as we continue to commercialize the lead recycling aspects why we continue to develop the lithium recycling applications.
In August we did operation, we expect to do operational testing of our full sized lithium ion Aqua refining recycling units and circuit and by January of 2023, we have the potential to deploy the first full scale off refining process with lithium batteries.
Our ticker on NASDAQ as EQM S. We're headquartered in Tahoe, Reno, Nevada, and again, we were incorporated 2014, we have about $69 8 million shares outstanding and.
And our cash on hand, which we just reported an $11 7 million as of September 30th Judd will speak more about our financials inclusive of the fact that the company is very <unk>.
Strong balance sheet, and importantly is debt free.
Moving on to slide six arc refining is really a derisked technology at its core because we did produce those 35000 ingots and we expect to take the many principles from our off refining for led into the lithium ion.
Recycling aspects and apply what you see in the right important aspects, which is room temperature closed loop recycle the chemical that you're using to do the recycling with a fundamentally non polluted process as I was speaking about before which is critical in order to make this transition to electrification of not only transportation energy storage, but the <unk>.
Real processes that support the production of recycling of those materials.
Have a very strong patent portfolio, which we'll speak to and we are commercially derisked a lot of the aspects of the technology through the process that we've gone through to the state introduced our first product our solution is cleaner and more cost efficient in form of recovery.
As a recycling process.
We also produce a higher quality product and we will talk about how that applies to not only the ultra pure lead that we produce as you see in the background on this picture when we make the metal one item at a time through a continuous process, but also apply that 99 plus percent in the case of led 99 996 plus percent purity too.
Expanding to other metals and plating those metals in the lithium space, such as cobalt nickel and manganese and even other products.
Recent highlights from our quarter, which will focus on today is that we did establish our Aqua metals Innovation Center recently announced for the development of our lithium ion battery recycling solution and utilizing that Aqua refining technology that is just less than a mile away from the Aqua refinery, which is now the lingo.
Facility that is about to turn up as they migrate into next year with the lithium ion adaptation of the Aqua refining facility that we had.
Just down the street there in Tahoe Reno Industrial center. So we're very excited about that innovation center and the capability for us to rapidly innovate as we did with the <unk> program over the past year for led and get that lithium program, where it needs to be and we'll talk about how we're going to be doing that with the recent press release that we just issued this morning.
<unk> completed the third generation Aqua Liza as I mentioned before and we achieved production at over 300% of the original model.
We also finalized in the quarter, a definitive agreement to deploy Aqua refining technology in Taiwan to Acme metal, which we'll be shipping as I mentioned earlier later this quarter.
And partner with them to develop direct oxide process you can see that in our press release that we also issued about our direct to oxide capabilities, where we can take what comes off of our arc refining machines and bypass the whole <unk> process and take the Briquettes that we make that switch squished from the materials that come off of the <unk>.
<unk> and put those directly into the battery manufacturing process. So we're very excited about our partnership.
With Acme to take that technology and bring that to the largest battery manufacturers in Asia Pacific.
They already have as clients.
We have a signed collaboration agreement, we announced today with Linux for the clean lithium ion battery recycling technologies.
We will speak to that in a future slide so I.
I will just point that out for now we also received a $1 $25 million payment recently from Linacre was part of the lease to own and that is the nonrefundable deposit for the purchase of the Mccarran, Nevada facility.
And that is the facility that's in Tahoe Reno Industrial Center.
We also received a final insurance payment in settlement of $5 million to $5 million and we achieved a total of $32 $5 million collected exceeding the guidance that we originally provided on that process, we're glad to have that completed and done and behind us.
We also further advanced discussions with potential licensees and are very happy with our sales funnel as we continue to try to add additional aqua refining applications or customers throughout the world.
Moving on to more details about the Acme, Taiwan agreement on slide number eight.
You'll see that there our first partner and really located in the largest and fastest growing global led market market for land is mature and it's very large it's around $65 billion for lead acid batteries globally, but is growing fastest in the Asia Pacific market simply because theres more industrialization theres more cars are getting put on the road.
Many of those cars have to batteries that are lead acid battery them inclusive of Evs that also have a lead acid battery in them and we're seeing quite a bit of growth in that market. This deployment will showcase our aqua refining clean lead recycling in a market where these environmental drivers were not only building new facilities, but retrofitting existing.
Facilities or have been moving at a very rapid clip and we see a very strong bend towards the need to have environmentally clean.
Capabilities fueled this rapid growth in that marketplace, and capacitors nation et cetera.
This also unlocks and opportunity for future partnerships with these global battery manufacturers that are partners and clients of Acme metal to develop that direct to oxide methodology and really take aqua refining.
Towards a much tighter linked between battery recycling and battery manufacturing so stay tuned for more updates as we continue to make.
Make that deployment come alive in the coming months.
Moving on to slide nine we'll talk about the collaboration agreement that we just announced today.
With Linux.
And phase one and phase two are defined here really phase one the focus is immediately beginning to have Linda go process used lithium ion batteries into what's called Black mass.
And take that black mass into the Aqua metals innovation center and process process Black math into those high value metals that I was describing earlier and we will be doing that in our innovation mode with not large amounts of material, but meaningful amounts of material to derisk and prove the technology and support.
Phase two which is the goal for both parties were lenticle licenses Aqua refining equipment and technology.
<unk> has announced that they have a potential to process up to 100000 metric tons of feedstock annually of lithium ion batteries. So it would be one of the largest if not the largest battery recycling facility in the world and we're very pleased that we've established this collaboration agreement to get the lithium.
Our capabilities for Aqua refining.
Sure enough to deploy into that phase two as I mentioned earlier in the timeline in an earlier slide.
So moving on to slide 10 in order to support.
All of these activities, we have and continue to prosecute a very robust strategic intellectual property portfolio and we feel that we're well protected in our equipment supply and global licensing efforts throughout the globe, where you see blue.
You see where we have issued and allowed patents.
Pending and you'll see in the light blue and Blue.
We have additional pending patents, we have now achieved 71 total patents that have been issued and allowed with 44 additional applications that are pending inclusive of lithium ion adaptation of arc refining related IP that I mentioned earlier that we filed that key provisional patent for.
Just a couple of months ago.
So with that I'm going to turn it over to Judd Merrill our CFO to talk through the financial overview go ahead, Jeff.
Thank you, Steve I will share a few comments related to each of our financial statements.
First on slide 12 on the balance sheet.
As of September 32021, cash and working capital balances were $11 7 million and $10 3 million respectively.
Over the last three quarters, we have consistently maintained cash balances over $10 million.
This ability for us to maintain the stable cash balances, partly due to the sale of the building insurance proceeds and a reduced cash spend.
We have accounted for certain items.
Asset items with a net book value of $3.2 million and assets held for sale. These are noncore assets and are no longer necessary for future operating plans.
As mentioned in the prior quarter, we accounted for the lease to buy agreement with many co as a sales type lease.
As a component of the accounting for this agreement we recognized the estimated fair value of the land and plant of approximately $17 million as a lease receivable subsequent to the quarter end. When it comes there first required a positive $1 million to $5 million. The deposit is nonrefundable. However, it will be applied to the purchase price of that.
Building at the time the Mt.
Paid in full.
Lastly, accrued liabilities.
Includes approximately $2 3 million in remaining cost to repair the plant from the fire damage.
We're getting very close to completing the restoration implant.
From the damage.
And it's looking very good and we're pleased with the progress most of the building is ready for when it comes to start moving equipment in and we anticipate that by the end of the year the whole building will be available for their use.
Moving onto the next slide the income statement.
Okay experience has been fairly consistent over the last two years, averaging approximately $2.3 million per quarter.
Which this number does include both cash and non-cash items.
During the quarter, we recorded other income of insurance proceeds netted related expenses. This is related to the final insurance payment that we received a 5.25 million during the third quarter. We also recorded at 1.4 million dollar loss on the disposal of certain fixed assets and.
Net loss for the quarter with a negative 1.386 million and it's basic and diluted net loss per share with a negative two cents.
My final comments or on the cash flow.
Statement.
Statement.
Net cash used in operating activities for the nine months ended September 30th 2021 was 3.8 million that as compared to 9 million for the nine months in September 30th 2020.
Cashes in operation was positively impacted by cash inflow from insurance proceeds offset by cash G&A cash operating expenses and costs related to clean up our plants.
Yeah.
So acme in Taiwan to get the latest incarnation of the technology and will continue to work with them to even further improved technology over time.
Okay, and you should we expect acclimated to receive something from this shipment of deployment in the fourth quarter of getting one.
<unk> the materials are gonna be shipping uhm by the end of the fourth quarter and I need to get across the et cetera, and get there and get installed we're working towards what I've characterized before as a modest amount of payment ultimately put the equipment as well as.
Uhm, we will be once we get the equipment installed and commissioned be receiving payments for the the material that that there is produced but.
But again to guide on that is not gonna be a material amount of revenue for the company in the early phase. The key is to get the the material coming off of the equipment and the large battery manufacturers to work on that director oxide facility.
Understood.
And with respect to other potential customers do you have any updates in terms of any.
Lips or any other burgers.
You have made in terms of security new contracts with new customers for this.
Yeah. So we as I mentioned that the call have a good sales funnel and we are very pleased with the global nature of the sales funnel and uhm are intending to add one to two additional licensees end up coming here and Aqua medals is gonna be certain that we select and.
A licensee that selects us where it's a good match for both parties and that is what we're really solving for as we work through and would would ask everybody to stay tuned for updates on that.
Okay, and with respect to the medical purposes.
Are there any of them I'm stones that we should be looking for or.
And then maybe I dunno, Jason questions to that is.
What kind of resources do we never have to come in and it looks like you know, it's becoming a more serious so for compared to the announcement or a new mirror.
Uhm do we need to <unk> more resources as this fixed up.
<unk> do you think about you know the the topics of the enrichment requirements to.
Bring this do most of it.
The other we are going to be ahead of the the general curve of the industry. Because there was a building there's plant and equipment going in and we have our innovation center. We can begin moving materials practically upon commencement at the signing of our agreement.
So we're very excited about that and then as you look at our timeline in the website, you'll see uhm through the process of the your laugh further full size.
Pilot cells running towards the end of the year with the intent to begin deploying them as we round the bend into 2023 for production scale.
Understood.
Yeah, that's what I have I think one of the questions also and things too.
Thank you me.
Your next question comes from the line of counting Rush from Oppenheimer. Please go ahead.
Hey, guys. This is Brandon on at the time first one is coming with 11.7 million of cash on hand.
Just walk us through your plans to fund the business at the end of 22.
Yeah.
So we did receive we did have the 11.7.
Quarter, we did receive another 1.25 from the building so there's another deposit of 2 million.
Let's do next year. So there's an additional funds from the building. So that's coming in let it go doesn't have the option to pay that off sooner. So there's another 12, plus you know 30 million or so that that that we could receive uhm next year that you'd have the option to wait till till the first quarter of 2020.
Three so there's some additional funds coming in from that.
So what's the funds, we have on hand, and and some of the revenue that we expect towards the <unk> you know beta part of next year and the current spend right that were on terms of our needs for <unk> for the operating and are the cost that we have in front of us we probably we have enough buns, you know to take us through.
And into 2000 22022.
Great. Thanks, and then just as a follow up and I can touch on it a bit a second ago, but if you could provide just maybe a little bit more with mental color on the pace of the looking recycling process development in the Navy.
What kind of a target in terms of what we expect out of a proven commercial process on that song.
Inside the business, which is what our business model is really big.
Our capital light model.
Great. Thanks, so much.
Again in order to ask a question you May press Star one on your telephone. Your next question comes from the line of Shawn Severson from water Tower Research. Please go ahead.
Hi, Thanks, good afternoon, everyone.
Steve.
Are there any real technology hurdles left in the lithium ion recycling.
Occupied we're finding technology I mean, if we're looking at that kind of getting from where you are today to really you know implementation of commercial scale, what what what is left to be done from a technology standpoint.
Yes, Sean so really kind of what we've done before with Aqua refining for labs and extraction of led.
Through our arc refining technologies, where.
You have to Derisk the technology by operating a smaller unit and then going to a full size unit and then getting getting those that operating in a in a full scale facility.
One thing that we learned from our own development of Aqua metals.
As we spent $200 million building, a full sized plant and getting that scaled and having those distraction, we think that by removing some of that distraction in capital heavy focus we can continue to derisk. The technology as we go forward the process engineering and design is there and it's.
Confidence in our ability to extract the metals that we've named that we would be extracting we've done some very.
Very significant metal separation and extraction already and now its taking that and getting that pilot cells and getting those operating and getting everybody comfortable with the process flows and going towards the full size scale. So there's there's still derisking to do as the led technology has been derisked because.
Commercially produced 35000 ingots.
That's further along and that's really our workforce in our licensing deployments, but.
But we really do see a rapid path for us to.
Do our encore and do it much more quickly.
Through the things that we've learned in the past.
As a global effort to electrify our processes around the throughout the world.
We're not going to succeed in addressing global climate change at a fundamental level. That's why we're doing these that's why we're electrifying industrial processes, which is exactly what we're trying to do with.
With our methodologies and techniques. So it's really a difference where you see a industry that is looking at an upgrade in the led space and an industry. That's getting built really from the ground up in the lithium recycling space hopefully that answers your question.
Yes, It does and when you look at when you look at these customers in lithium ion space I mean, obviously, you don't do that.
Electric vehicles, and the sort of related products, but if you if you're looking at the carbon footprint and focus I would think it would be very high there.
My question is if you.
What would somebody to adopt.
Adopt this aqua refining technology for this what else would be other solutions or that there would be looking at or is this something where one adopts it everybody has to adopt it to kind of keep pace with keeping carbon reduction on track.
Yeah, so in order to.
Reduced carbon out with and Decarbonize, you can't burn things and so the.
The smelting methodologies will likely yield to the hydro metallurgical methodologies there are.
Very small amount because lead acid batteries for example, or.
Very much led centric in terms of the mineral that's in those batteries.
There are things like silver and.
Our business in a couple of other items that we don't plate and it's because we don't play in.
It will apply the same when we look at what we do plate in the lithium multi metal recoveries that we will play in a pure form the levels that we're going after and any metals that we're not going after will ultimately end up in a residue.
But that'll be a very small percentage when you look at the additive effect of the metals that we are going after.
Thank you.
A question here.
I guess in 2022, when do you first expect to start to receive licensing payments is it a quarterly annual basis.
So we expect to receive.
The first running royalties on the Taiwan installation relatively soon after we turn the equipment on again the volumes won't be large amount, but the the binary did aqua metals collect running royalties or not.
The answer.
The answer will be yes, and we will begin collecting those revenues in that form. So we definitely expect in the first half of 'twenty, two certainly will be receiving those payments and be able to report that we have received those payments.
Super. Thank you I have no further questions in the online Q, Steve So maybe some closing comments and then we'll end the call.
Yeah, I appreciate everybody's time here and I'll reemphasize.
Reemphasize that the Aqua metals business model was really to enable all the battery recyclers, whether it's led or lithium ion battery recyclers with key and core technologies and as we demonstrated with our led efforts thus far to date.
And our first licensee in Taiwan.
That gives us a good opportunity to enhance that further as we've evidenced today with our relationship with <unk>, which both parties intend to lead towards the licensing and enabler for <unk> to be successful and we wanted to be the suppliers of the best in class and best available technologies for all battery recycling and we feel that we are in a great.
Model, great cash position, great organizational capability to achieve these goals and really work with the industry to make the world a better place through the electrification.
<unk> de carbonization effort that we're all trying to do here. So I appreciate everybody's time and support and look forward to further updates in the near future.
This concludes today's conference call. Thank you all for joining you may now disconnect.
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