# Aqua Metals, Inc.: Form 10-Q for the period ended Mar 31, 2024

- Company: [Aqua Metals, Inc.](/companies/aqms.md) (CIK 1621832)
- Form: 10-Q
- Filed: 2024-05-15
- Accepted by EDGAR: May 15, 2024, 20:23 ET
- Period: 2024-03-31
- Accession: 0001437749-24-017078
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1621832/000143774924017078/aqms20240110_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1621832/000143774924017078/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Cost of revenue | 3 months, 2024-01-01 to 2024-03-31 | $2.2m | us-gaap:CostOfGoodsAndServicesSold |
| Operating income | 3 months, 2024-01-01 to 2024-03-31 | −$5.8m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-01-01 to 2024-03-31 | $106.0k | us-gaap:InterestExpense |
| Net income | 3 months, 2024-01-01 to 2024-03-31 | −$5.8m | us-gaap:NetIncomeLoss |
| Basic EPS | 3 months, 2024-01-01 to 2024-03-31 | −$0.05 | us-gaap:EarningsPerShareBasic |
| Operating cash flow | 3 months, 2024-01-01 to 2024-03-31 | −$4.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2024-01-01 to 2024-03-31 | $2.7m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2024-03-31 | $8.3m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-03-31 | $10.1m | us-gaap:AssetsCurrent |
| Total assets | at 2024-03-31 | $31.4m | us-gaap:Assets |
| Current liabilities | at 2024-03-31 | $8.5m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-03-31 | $8.6m | us-gaap:Liabilities |
| Shareholders' equity | at 2024-03-31 | $22.9m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 20,251 characters.

### Cautionary Statement

The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes thereto contained elsewhere in this report. The information contained in this quarterly report on Form 10-Q is not a complete description of our business or the risks associated with an investment in our common stock. We urge you to carefully review and consider the various disclosures made by us in this report and in our other filings with the Securities and Exchange Commission, or SEC, including our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on March 9, 2023, or our Annual Report.

In this report we make, and from time to time we otherwise make written and oral statements regarding our business and prospects, such as projections of future performance, statements of management’s plans and objectives, forecasts of market trends, and other matters that are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Statements containing the words or phrases “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimates,” “projects,” “believes,” “expects,” “anticipates,” “intends,” “target,” “goal,” “plans,” “objective,” “should” or similar expressions identify forward-looking statements, which may appear in our documents, reports, filings with the SEC, and news releases, and in written or oral presentations made by officers or other representatives to analysts, stockholders, investors, news organizations and others, and in discussions with management and other of our representatives.

Our future results, including results related to forward-looking statements, involve a number of risks and uncertainties, including those risks included below in Part II, Item 1 “Risk Factors”. No assurance can be given that the results reflected in any forward-looking statements will be achieved. Any forward-looking statement speaks only as of the date on which such statement is made. Our forward-looking statements are based upon assumptions that are sometimes based upon estimates, data, communications and other information from suppliers, government agencies and other sources that may be subject to revision. Except as required by law, we do not undertake any obligation to update or keep current either (i) any forward-looking statement to reflect events or circumstances arising after the date of such statement or (ii) the important factors that could cause our future results to differ materially from historical results or trends, results anticipated or planned by us, or which are reflected from time to time in any forward-looking statement.

### General

Aqua Metals is engaged in the business of applying its commercialized clean, water-based, recycling technology principles to develop cost-efficient recycling solutions for both lead and lithium-ion (“Li”) batteries. Our recycling process is a patented hydro and electrometallurgical technology that is a novel, proprietary and patented process we developed and named AquaRefining. AquaRefining is a low-emissions, closed-loop recycling technology that has the potential to replace polluting furnaces and hazardous chemicals with electricity-powered electroplating to recover valuable metals and materials from spent batteries with higher purity, lower emissions, and with minimal waste. The modular “Aqualyzers” cleanly generate ultra-pure metal one atom at a time, closing the sustainability loop for the rapidly growing energy storage economy.

This breakthrough technology was initially applied in the lead acid battery (LAB) recycling industry, building the first integrated recycling system for breaking LAB and recovering pure metal. In 2019, we operated our demonstration AquaRefinery at commercial quantity production levels and produced over 35,000 ‘AquaRefined’ ingots operating twenty-four hours a day, seven days a week for sustained periods of time.

We are also applying our commercialized clean, water-based recycling technology principles with the goal of developing the cleanest and most cost-efficient recycling solution for lithium-ion batteries. We believe our process has the potential to produce higher quality products at a lower operating cost without the damaging effects of furnaces and greenhouse emissions. Aqua Metals estimates the total addressable market for lithium-ion battery recycling will be approximately $9 billion by 2025 and grow to exceed lead battery recycling by the end of the decade.

In February 2021, we announced our entry into the lithium-ion battery (LiB) recycling market through a key provisional patent we filed that applies the same innovative AquaRefining approach. In August 2021, we announced we had established our Innovation Center in TRIC focused on applying our proven technology to LiB recycling research and development and prototyping. Our strategic decision to apply our proven clean, closed-loop hydrometallurgical and electrochemical recycling experience to lithium-ion battery recycling is designed to meet the growing demand for critical metals driven by the global transition to electric vehicles; growth in internet data centers; and alternative energy applications including solar, wind, and grid-scale storage.

During the first half of 2022, we announced our ability to recover copper, lithium hydroxide, nickel, and cobalt from lithium-ion battery ‘black mass’ at bench scale at the Company’s Innovation Center. During 2022, we built our fully-integrated pilot system, located within the Company’s Innovation Center, which is designed to allow Aqua Metals to be the first company in North America to recycle battery minerals from black mass, sell them in the U.S. and position the Company as the first LiB recycler in North America to align with the U.S. government’s goal of retaining strategic battery minerals within the domestic supply chain.

During 2022, we conducted environmental comparisons based on Argonne National Lab’s modeling of lithium battery supply chains – called EverBatt. The initial results indicate that AquaRefining is a cleaner approach to LiB recycling, producing far less CO2 waste streams than smelting or chemical-driven hydrometallurgical processes currently on the market. In December 2022, we completed equipment installation and began to operate our first-of-a-kind LiB recycling facility, utilizing electricity as the catalyst to recycle instead of intensive chemical processes, fossil fuels, or high-temperature furnaces. In January of 2023, Aqua Metals recovered its first metals from recycling lithium batteries using the patent-pending Li AquaRefining process.

In February 2023, we acquired a five-acre recycling campus at the TRIC. When fully developed, the facility we envision is designed to process up to 10,000 tonnes of lithium-ion battery material each year using our proprietary Li AquaRefining technology. Subject to our receipt of the required additional capital, we expect to complete development of phase one, including all equipment installation, by mid-2024 and to commence the commissioning and operation at the new campus in the second half of 2024. The Company is planning for a phased development of the campus, beginning with the already commenced redevelopment of an existing building on-site into the first commercial-scale Li AquaRefinery, targeting 3,000 tons per annum (tpa) capacity in phase one. In January and February of 2024, we made significant progress on the construction of the planned first phase of the commercial Li AquaRefinery.

During the quarter ended March 31, 2024, we issued 4,155,611 shares of common stock pursuant to an at the market issuance sales agreement ("ATM") for net proceeds of $2.1 million. During the year ended December 31, 2023, we issued 3,244,302 shares of common stock pursuant to an at the market issuance sales agreement for net proceeds of $3.8 million. We raised a net of $18.3 million in the third quarter of 2023 from the public offering of our common shares and a net of $4.6 million from the sale of our common stock to Yulho.

Our current focus is building and operating our first-of-a-kind lithium battery recycling facility, utilizing electricity to recycle instead of intensive chemical processes, fossil fuels, or high-temperature furnaces. We are also pursuing potential partnership and/or joint ventures agreements and licensing agreements, particularly as our Li AquaRefining continues to develop and improve. We believe that Aqua Metals is in a position to become one of the few critical minerals recovery players for which our environmental and economic value proposition should generate both great commercial wins and potentially government grants to accelerate our credibility and progress.

### Plan of Operations

Our business strategy is based on the pursuit of building, operating and licensing Li AquaRefining recycling capacity to meet the growing demand for critical metals in lithium-ion batteries driven by innovations in automobile batteries, growth in internet data centers, and alternative energy applications, including solar, wind, and grid-scale storage.

We are in the process of demonstrating that Li AquaRefining, which is fundamentally non-polluting, can create the highest quality and highest yields of recovered minerals from lithium-ion batteries with lower waste streams and lower costs than existing alternatives. We have already demonstrated at our pilot facility our ability to recover key valuable minerals in lithium-ion batteries, such as lithium hydroxide, copper, nickel, cobalt, and other compounds. Our goal is to recycle commercial quantities of nickel, cobalt, and copper in a pure metal form that can be sold to the general metals and superalloy markets and can be made into battery precursor compound materials with known processes already used in the mining industry. We also intend to recycle commercial amounts of lithium that can be sold to lithium-ion battery manufacturers. We have installed, commissioned, and began to operate the first Li AquaRefining pilot plant at the end of 2022, scaling towards a commercial demonstration plant operation with capacity of processing approximately 3,000 tonnes of black mass per year. The location for the pilot demonstration is currently the Innovation Center with expansion to happen at our new 5-acre recycling campus starting with processing ~3,000 tonnes of black mass per year and growing to commercial quantities of ~10,000 tonnes per year or more of production starting in 2025 and 2026, which would be enough material to build ~100,000 average EVs or ~400,000 average home energy storage systems. At 2023 year average metals prices, ~10,000 tonnes per year capacity could also generate $200 million of revenues for the company.

### Results of Operations

We did not engage in commercial operations in 2024 and 2023. Our operations have been devoted to developing our Li AquaRefining battery recycling technology. During the three months ended March 31, 2024, Aqua Metals was focused on quickly advancing from the planning and validation phases to execution and operation of our pilot facility and the build out of our commercial facility. We did not earn any revenue during the three months ended March 31, 2024 and 2023. The following table summarizes our results of operations with respect to the items set forth below for the three months ended March 31, 2024 and 2023 together with the dollar and percentage changes in those items (in thousands).

|  | Three Months Ended March 31, 2024 | 2023 | Favorable% (Unfavorable) | Change |
| --- | ---: | ---: | ---: | ---: |
| Plant operations | $2,209 | $1,065 | $(1,144) | 107.4% |
| Research and development cost | 588 | 445 | (143) | 32.1% |
| Gain on disposal of property, plant and equipment | — | (20) | 20 | (100.0)% |
| General and administrative expense | 2,995 | 3,006 | 11 | (0.4)% |
| Total operating expense | $5,792 | $4,496 | $(1,296) | 28.8% |

Plant operations include materials, supplies related costs, salaries and benefits, consulting, outside services costs, inventory adjustments, depreciation, amortization, insurance, travel and overhead costs. Plant operations increased approximately $1,144,000 or 107.4% for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023. The increase in plant operations for the three months ended March 31, 2024 was primarily due to an increase in payroll and payroll related fees of approximately $556,000, as we hired additional staff to operate the pilot facility and process black mass, as well as $286,000 increase in professional fees, $151,000 in supplies and materials and $106,000 in depreciation expenses.

Research and development cost includes expenditures related to the improvement of the AquaRefining technology and the development of our lithium-ion battery recycling process. During the three months ended March 31, 2024, research and development costs increased $143,000, or approximately 32.1% compared to the three months ended March 31, 2023. The increase was driven by an increase in payroll and payroll related fees of approximately $48,000, as well as $34,000 increase in outside services, and $57,000 in supplies and materials.

We didn't recognize a gain on disposal of property, plant and equipment during the three months ended March 31, 2024 compared to a gain of $20,000 for the three months ended March 31, 2023. For the three months ended March 31, 2023, the gain on property, plant and equipment resulted from the sales of fixed assets.

General and administrative expense decreased $11,000, or approximately 0.4% for the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

The following table summarizes our other income and interest expense for the three months ended March 31, 2024 and 2023 together with the dollar and percentage changes in those items (in thousands).

|  | Three Months Ended March 31, 2024 | 2023 | Favorable% (Unfavorable) | Change |
| --- | ---: | ---: | ---: | ---: |
| Interest expense | $(106) | $(176) | $70 | (39.8)% |
| Interest and other income | 146 | 66 | 80 | 121.2% |
| Total other income (expense), net | $40 | $(110) | $150 | (136.4)% |

The decrease in interest expense for the three months ended March 31, 2024 is due to the reduction on the note payable outstanding balance.

We recognized approximately $146,000 in interest and other income during the three months ended March 31, 2024, an increase of $80,000 or 121.2% compared to the three months ended March 31, 2023. The increase in interest and other income is primarily due to the increase in interest received on our bank deposits.

### Liquidity and Capital Resources

As of March 31, 2024, the Company had total assets of $31.4 million and working capital of $1.6 million.

As of March 31, 2024, the Company had cash and cash equivalents of approximately $8.3 million, current liabilities of $8.5 million and an accumulated deficit of $229.0 million. The Company's current liabilities of $8.5 million include the note payable with Summit Investment Services, LLC in the amount of approximately $3 million due on February 1, 2025 as disclosed in Note 10. The Company has not generated revenues from commercial operations and expects to continue incurring losses for the foreseeable future. In order to satisfy our capital requirements, the Company anticipates that it will need to improve its liquidity position through equity or debt financings and/or reductions in operating costs, in order to satisfy its liquidity needs for the next twelve months. Management is devoting significant efforts to increasing liquidity, raising capital and developing its business.

Management believes that the Company does not have sufficient capital resources to sustain operations through at least the next twelve months from the date of this filing. Additionally, in view of the Company’s expectation to incur significant losses for the foreseeable future it will be required to raise additional capital resources in order to fund its operations, although the availability of, and the Company’s access to such resources, is not assured. Accordingly, management believes that there is substantial doubt regarding the Company’s ability to continue operating as a going concern through the next twelve months from the date of this filing.

The following table summarizes our cash provided by (used in) operating, investing and financing activities (in thousands):

|  | Three Months Ended March 31, 2024 | 2023 |
| --- | ---: | ---: |
| Net cash used in operating activities | $(4,251) | $(2,863) |
| Net cash used in investing activities | $(5,579) | $(5,222) |
| Net cash provided by financing activities | $1,602 | $4,358 |

### Net cash used in operating activities

Net cash used in operating activities for the three months ended March 31, 2024 was $4.3 million. Net cash used in operating activities includes approximately $67,000 of cash received related to our non-recurring engineering arrangement with 6K Energy offset by operating expenses. Net cash used in operating activities for the three months ended March 31, 2023 was $2.9 million which includes approximately $283,000 of cash received related to our lease receivable offset by operating expenses. Net cash used in operating activities during each of these periods consisted primarily of our net loss adjusted for non-cash items such as depreciation, amortization, stock-based compensation, and gain on the disposal of property, plant and equipment, as well as net changes in working capital.

### Net cash used in investing activities

Net cash used in investing activities for the three months ended March 31, 2024 was $5.6 million and consisted mainly of cash utilized towards equipment deposits and purchases of fixed assets related to the build out of our commercial facility offset by $150,000 of cash received related to our note receivable. Net cash used in investing activities for the three months ended March 31, 2023 was $5.2 million and consisted mainly of $4.3 million utilized towards the purchase of the building located at 2999 Waltham Way McCarran, NV 89434 and $0.9 million utilized towards purchases of fixed assets.

### Net cash provided by financing activities

Net cash provided by financing activities of $1.6 million for the three months ended March 31, 2024, consisting of $2.1 million in net proceeds from the sale of Aqua Metals shares pursuant to the at-the-market offering, or ATM, offset by $360,000 related to tax withholdings to cover RSU vesting and $164,000 related to debt issuance costs. Net cash provided by financing activities for the three months ended March 31, 2023 was approximately $2.0 million in net proceeds from the sale of Aqua Metals shares pursuant to the at-the-market offering, or ATM, and $2.9 million in net proceeds from the loan agreement secured with the Summit Investment Services, LLC partially offset by the $0.6 million related to tax withholdings to cover RSU vesting.

As of March 31, 2024, we had total cash of $8.3 million and working capital of $1.6 million. As of the date of this report, we believe that we will require additional capital in order to fund our current level of ongoing costs over the next twelve months and move forward with our current business strategy. There can be no assurance that we will be able to acquire the necessary funding on commercially reasonable terms or at all. We intend to seek funds through the sale of equity or debt financing. Funding that includes the sale of our equity may be dilutive. If such financing is not available on satisfactory terms, we may be unable to further pursue our business plan and we may be unable to continue operations.

Due to our lack of revenue from commercial operations, significant losses and need for additional capital, there is substantial doubt about our ability to continue as a going concern within one year after the date that the financial statements are issued.

### Critical Accounting Estimates

No material changes from what was reported in the 2023 Form 10-K.

## Controls and procedures

As filed, 826 characters.

### Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15 of the Securities Exchange Act of 1934. Based on that evaluation, management, including our chief executive officer and chief financial officer, concluded that our disclosure controls and procedures were effective as of March 31, 2024.

### Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the three month period ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 257 characters.

Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023 includes certain risk factors that could materially affect our business, financial condition or future results. There have been no material changes to those risk factors.

Filed May 15, 2024.
Source: SEC EDGAR, the filing index for accession 0001437749-24-017078. Last ingested by Listed: Oct 24, 2026, 15:14 ET. No prices; not investment advice.