Aqua Metals, Inc. (NASDAQ: AQMS), which is “reinventing” lead recycling with its AquaRefining™ technology, announced it has received an additional $2,500,000 insurance payment for a total of $12,500,000 paid to date. Of the total insurance proceeds distributed, $8,625,000 has been paid to Aqua Metals and the balance of $3,875,000 has been allocated to the retirement of the Veritex Bank loan.
Aqua Metals, Inc. also announced financial and operational results for its first quarter ended March 31, 2020.
Steve Cotton, President and Chief Executive Officer, commented “In response to a very difficult fourth quarter, I am pleased with the steps we’ve taken and the progress we have made in accelerating the transition of our business strategy to a capital light, licensing business model. We are convinced this is the right approach to build significant shareholder value. We have made positive strides in achieving our near term 2020 goals in a very short time period and in the face of logistical challenges resulting from COVID-19.
“We believe we are in a sound financial position to accomplish the objectives of our business model. We expect to fortify our current resources with the receipt of additional insurance payments and select asset disposals. In conjunction with our recent agreement with Veritex, we have established a plan to be debt free this year. We are on track to have the first V1.25L electrolyzer operational within six weeks after we are able to return to the facility, following present COVID-19 restrictions. These V1.25L electrolyzers will AquaRefine the large quantity of valuable lead concentrate we produced and incurred cost to create, prior to the plant fire which eliminates the need for costly battery feedstock acquisition and processing costs. In addition, we have had meaningful conversations with potential customers and partners to consider licensing our proprietary AquaRefining technology. I am optimistic and proud of our team for effecting the strength of the Aqua Metals cash position and runway we have established to fund our go forward plans, particularly in the face of the recent devastating fire and COVID-19 outbreak.”
First Quarter 2020 Financial Results
Revenue for the quarter ended March 31, 2020 was $18.0 thousand, a 96% decrease from revenue of $437.0 thousand for the quarter ended March 31, 2019. The decline in revenue was the result of the plant fire, which prohibited any recycled lead production subsequent to the fire in the fourth quarter of 2019 or in the first quarter of 2020.
Cost of product sales decreased by approximately 69% for the quarter to $1.5 million, compared to $4.7 million for the first quarter of 2019. Cost of product sales were lower in 2020 due to the suspension of production resulting from the fire.
General and administrative expenses for the first quarter of 2020 decreased approximately 41% to $2.4 million, from $4.0 million in the first quarter of 2019. The suspension of the Operations, Maintenance and Management section of the overall Veolia Agreement, reduced Company payroll and improvements in nearly all other expense categories drove the decrease. The Company recognized $0.6 million in non-cash expense as a result of the Veolia agreement during the first quarter of 2020. This compares to $1 million in non-cash expense related to the Veolia agreement that was recognized during the first quarter of 2019.
Interest expense for the first quarter of 2020 was $0.2 million, compared to $2.9 million for the first quarter of 2019. The decrease is attributed to the payoff of the Interstate Battery convertible note during the first quarter of 2019.
For the quarter ended March 31, 2020, the Company had an operating loss of $4.1 million compared to an operating loss of $8.9 million for the first quarter of 2019. The net loss for the first quarter of 2020 was $4.4 million, or $0.07 per basic and diluted share, compared to a net loss of $11.7 million, or $0.27 per basic and diluted share, in the first quarter of 2019.
The net loss for the first quarter of 2020 was impacted by non-cash items including $1.0 million in stock-based compensation and $0.6 million related to the Veolia agreement. By comparison, non-cash items that negatively impacted the first quarter of 2019 included a one-time $2.6 million amortization expense recorded in conjunction with the payoff of the Interstate Battery convertible note, $1.1 million in stock-based compensation and the $1.0 million related to the Veolia agreement.
Insurance proceeds receivable totaled $9.9 million as of March 31, 2020. This balance reflects a decrease of $7.5 million from December 31, 2019, as a result of insurance payments received. The original amount of insurance proceeds receivable recorded, during the fourth quarter of 2019, of $19.9 million was limited by GAAP accounting standards to the net book value of assets written off as a result of the fire. It is anticipated that actual total insurance collections, reflecting actual asset replacement cost, will be significantly more than the net book value of damaged assets.
As of March 31, 2020, the Company had $6.4 million in cash and cash equivalents.
Outlook for 2020
The Company is implementing a capital light business strategy designed to optimize shareholder value that focuses on licensing opportunities, which has always been a core part of Aqua Metals’ business plan. This path has the potential to maximize shareholder value as it could be far less capital intensive than rebuilding the plant and could potentially be funded primarily from a combination of cash on hand, insurance proceeds and asset dispositions. This strategy focuses on pursuing licensing opportunities within the lead battery recycling marketplace.
The Company’s cash burn rate has improved significantly as a result of Management’s swift cost reduction steps taken following the plant fire. It is anticipated that the rate of spend will continue to improve moving forward in 2020. The Company intends to dispose of certain assets that are not essential to the capital light licensing strategy. In addition, an agreement was reached with Veritex Bank, providing a plan to extinguish existing debt in 2020. In light of current COVID-19 events, applications also have been submitted for funding through the SBA’s Payroll Protection Program. The Company is hopeful to receive these benefits and will report the results of the applications soon. Further, our engineering team is working on demonstrating improved electrolyzers that would further decrease manufacturing costs and improve operating efficiency. The go forward capital light business strategy requires less space, less equipment, preserves cash and focuses on the needs of our future licensees.
About Aqua Metals
Unlike smelting, Aqua Metals patented technology AquaRefining is a room temperature, water-based process that emits less pollution. The modular systems are intended to allow the company to vastly reduce environmental impact and scale lead acid battery recycling production capacity by licensing the AquaRefining technology to partners. This could help to meet growing demand for lead to power new applications including stop/start automobile batteries which complement the vehicle’s main battery, lead acid batteries which are in electric vehicles, Internet data centers, alternative energy applications including solar, wind, and grid scale storage. Aqua Metals is based in McCarran, Nevada.