Aqua Metals, Inc. Price & Performance (AQMS)

And then we'll begin transitioning from his role to Eric later this month and will continue as a consultant through August. We'll speak more on that shortly. So let's begin with our operational updates. Starting with what we have accomplished to build an adaptive platform for critical minerals recovery. In q one, we achieved three key technical and operational milestones that position us at the forefront of battery recycling innovation. First, our product line expansion. We produced initial samples of nickel carbonate and mixed precipitate, or MHP, which align with our developing downstream partners' need These are not just technical wins. They unlock new revenue opportunities and enhance our developing customer and partner value proposition. Second, our LFP recycling breakthrough. We completed a successful engineering analysis and then the lab and bench scale demonstration. For lithium recovery from LFP batteries. As many of you know, LFP [indiscernible] lithium iron phosphate is poised to dominate both EV and stationary storage markets. Importantly, our process can handle a blend of 50% NMC or nickel manganese cobalt and 50% LFP input effectively doubling our lithium carbonate output and improving project economics. Third, our purity and performance advancements. We have continued to improve our battery grade lithium carbonate assays to meet specific and stringent potential customer specifications which further strengthens our position as a trusted domestic supplier.

So in short, as market needs evolve, so does Aqua Metals. We are continuously advancing our technology and adjusting our overall business and commercialization strategy to meet the challenges and seize the opportunities that we see ahead. So now turning to our site strategy. We have entered into an agreement to sell the Sierra R property. This strategic move allows us to retire all of our debt generate meaningful cash reserves, and reduce our holding costs by approximately a hundred thousand dollars per month. This decision is about resilience and flexibility. We are aligning our capital deployment with today's market environment. Characterized by lower lithium prices, uncertainty in our industry, and the tighter capital markets. By lightening our footprint now, we gain the freedom to evaluate more cost efficient locations ideally near the feedstock and offtake sources for which we are developing which could both lower CapEx and introduce meaningful OpEx efficiencies as we advance towards commercial deployment. Remain fully committed to building our first commercial arc and we're actively engaged with our potential supply, offtake, and funding partners to determine the best path forward. Switching now to the leadership front. As I mentioned earlier, Judd Merrill will transition from CFO on May 16.

After several years of dedicated service. Judd, we really sincerely thank you for all of your commitment and leadership through the transformative times and we all wish you the best on your next venture. And directly related to judge departure, we are pleased to welcome Eric West as our incoming CFO effective May 19. As many of you listening already know, Eric has six years of experience with Aqua Metals, through his prior role, including VP of finance. And we are also grateful that he has agreed to return to the company in the CFO role and have every confidence in his ability to help lead us into this next phase. Judd will also ask Eric to introduce himself. In a moment. So to summarize my comments, as we look ahead, Aqua Metals is [indiscernible] expanding and adapting its product portfolio in commercial plant economic model to match market conditions where the critical minerals market is heading. Second, managing capital prudently and adapting our strategy to strengthen our already well proven resilience. As a company. And third, aligning the right leadership to deliver on our goals, including the previously announced recent additions to our Board of Directors adding key commercial and financial market expertise.

We are operating with a clear eye on long term value creation. Making the right moves at the right times build a flexible, high performance business and maintain that resilience as we have to date.

So with that, I'll turn it over to Judd to walk through the financials. After that, we'll open the call for q and a. Thanks, Steve. First, this being my last call as a of the company, I want to take a moment to thank the shareholders, stakeholders, my colleagues, the board, and Steve for the trust and support in my role here over the last six and a half years. Sometimes, though, opportunity knocks. And I have taken a new role a competitive company. To be announced soon. While I leave the role, of CFO here, very capable guardianship of Eric West. Eric and I have known each other for and worked together for many years including here at Aqua Metals. And I am providing consultancy to the company and to Eric through August. For a seamless transition I thought I'd ask Eric to introduce himself briefly on this call. Eric, go ahead.

Thanks, Jud and Steve, and to the board for giving me the opportunity to smoothly take the helm from Jed and help drive forward our future. Returning to Aqua Metals to take this role, because I believe in the company's value proposition, the strength of the team, and in my abilities to make a positive impact on the company's future. I will leave it at that for now and look forward to engaging with shareholders and stakeholders directly in the near future. I'll turn it back over to Jed now to cover the Q1 financials and Q and A. Thanks, Eric. Let me start my comments with our balance sheet. We ended the quarter with total cash of approximately $1,600,000 As we have reported, we have listed the Sierra Arc asset. For cell. The cell would result in the retirement of all debt and produce cash proceeds while also reducing holding costs by approximately 100,000 per month. This decision adds cash runway allowing the company evaluate more cost of [indiscernible] cost efficient locations for future development. The Sierra Arc facility includes the billing structure the underlying land, and various permanent improvements that were previously classified as construction in progress within the plant property, and equipment on the company's consolidated balance sheet.

The total carrying value of the asset group was approximately 9,300,000.0 net of depreciation. An impairment charge of approximately 5,200,000.0 was recorded during the three months ended 03/31/2025. The company anticipates the sale will be completed during the February. I will move now to the income statement. Plant operations decreased approximately 1,500,000.0 or 67.2% for the three months ended 03/31/2025. As compared to the three months ended 03/31/2024. The decrease was primarily driven by a reduction in payroll and related costs of approximately $786,000. Resulting from workforce reductions implemented in August 2024 and continued reductions during the February. Additionally, professional fees decreased approximately 390,000 and supplies, materials, inventory, adjustments, and other overhead related expenses decreased by 309,000. General and administrative expense decreased 619,000 or approximately 27 2020.7% for the three months ended 03/31/2025. Compared to the three months ended 03/31/2004. The decrease was primarily due to the re a reduction in payroll and related costs of approximately 737,000 and a 49,000 decrease in director's fees. These decreases were partially offset by an increase of 41,000 per professional fees and a hundred and 26,000 supplies, materials, and other overhead expenses. For the three months ended 03/31/2025, the company recognized a noncash impairment of approximately 5,200,000.0 related to construction in progress for the facility The impairment was the result of a strategic shift in revised capital allocation priorities, which led management to discontinue development of the facility.

For its originally intended use As a result, the carrying amount of the facility was reduced to reflect its estimated recoverable value Our net loss for the three months ended 03/31/2025 was approximately 8,300,000.0 or a negative dollar 3¢ basic and diluted share compared to a net loss [indiscernible] 5,500,000.0 or a negative dollar and 5¢ per basic and diluted share for three months ended 03/31/2024. Now moving to the cash flow statement. Net cash used in operating activities during this period consisted primarily of our net loss adjusted for noncash items such as depreciation. Amortization, and stock based compensation. [indiscernible] as well as net changes in working capital. Net changes in investing op [indiscernible] [indiscernible] previously committed fixed asset acquisitions. Net cash provided by financing activities was 638,000 for the three months ended 03/31/2025. Consisting of 1,200,000.0 net proceeds from the sale of Aqua Metals shares pursuant to the at the market offering or ATM offset by 66,000 related to tax withholdings to cover RSU vesting. And 500,000 principal payment made on notes payable. We are actively engaging with potential and strategic financial partners aligned with our long term strategy. That concludes my remarks. On the company financials. I will now turn it back over to the moderator for Q and A. Thank you.

Ladies and gentlemen, the floor is now open for questions. If you do have a question, please press 1 on your telephone keypad at this time. Again, that's 1 if you do have a question or comment. Please hold as we poll for questions. And we'll take our first question from Mickey Legg from Benchmark. Please go ahead, Mickey.

Hey, guys. For taking my questions, and congrats on making it through another quarter. Judd, congrats on your new role too. You know, I I wish you the best, and Eric, it's it's nice to meet you over the phone, and and congrats on the new role as well. So I guess just to start, you know, have to ask on the the Sierra Rx sale, you know, Kudos to, you know, find use yourself some breathing room there. Could you just walk me through, you know, that process, you know, your thought process with that? And exactly, you know, how much runway does this give you and it seems like if I can read into this a little bit, there's more of a focus on colocating now. Could you just, you know, correct me there if that's right and and walk me through that? Thanks.

Hey, Mickey. Yeah. This Steve. Thanks for the question. And I'll I'll start with the CER arc and, kind of my view and the the industry, as a whole. And as as everyone's looking at the the critical minerals industry is seen, I would say there are companies that have had to effectively see operations due to large initial outlays and building what we would characterize as really large plants. We've always been market aware and willing to pivot and willing to adapt the current conditions early enough And that gives us kind of that pragmatic and survivor instinct that we've demonstrated in in the past for those of you that have known us for a long time. Along with our own belief, most analysts and players in this industry do believe that it's gonna thrive. For those that survive. Selling the CEREC now gives us that hundred thousand dollar a month savings and carrying costs and gets us that meaningful cash runway to continue to develop our commercial relationships with that pragmatic and I would say is resilient shift in focus to build it when they come compared to, what the industry has been doing, which has been build it and then they will come.

We're fully committed to building the first ARC once we finalize the offtake and supply financing for the entire project. And our commercial discussions have led us to alternate locations. And that could improve the CapEx and OpEx and other efficiencies especially needed in the current market conditions to produce EBITDA that is bankable, And that's really what we believe is the best approach given the current difficult market conditions and public policy, shift etcetera, is to is to do what we've done and to partner and go where the materials are versus bring the materials to us. And not carry the load in the meantime. I'll turn it over to Jud just to give another quick summary in terms of what it means for us economically on, you know, how it saves money so we can be very clear on that.

Yeah. Hi, Mickey, and thanks for your, comments and and your questions.

So the CR we owe about $3,000,000 on that. That's the only debt the company has left And so anything that we sell above and beyond that price, will add to our cash balance. And so you know, in the past and we're still kind of in the same area. Of about 500,000 a month burn. And that's just our base kind of, like, holding cost and and being a publicly traded and and employees and all that.

And and even some of the cost related to the work that's still ongoing at our innovation center, which we still are operating and and running, you know, on ongoing basis. So, you know, we anticipate that you know, we'll be over that. Debt price quite a bit, and and that will just add to our cash balance. And help with the runway.

Got it. Okay. Okay.

That's clear.

Alright.

And, yeah, that kind of segues into my next question, you know, which is related to the macro and how things have been so dynamic, I guess, you could put it. Has there been an uptick in customer inbounds given all, you know, the tariff announcements and discussions there, you know, It it seems like OEMs don't really have a choice but to go domestic now. For their lithium, but you know, there's clearly not a lot of domestic products. So I'm just curious, you know, what what sort of conversations you're having there.

Yeah. It's, an interesting time in the industry for sure. Everybody is trying to figure out what the public policy moving forward is going to be and how that translates to government support from a policy perspective, from a loan guarantee perspective, and from grant perspective, even grants that were previously issued or in question. And so that coupled with the drop in lithium prices that are really frankly below, any project financeable, number for a mine, to consider opening up a new lithium mine. That is, got most analysts, and we agree with those analysts, believing that this is a temporary bump in the road, so to speak. And that we will see those lithium prices, come up because it has to in order for the industry to really work. Think of it like what the minimum price of a barrel per oil has to be. It's the same type of a scenario. So we see the industry in the meantime looking not only at their own capabilities, but, looking at each other. And this is very common when an industry, is new and maturing and hits a bump in the road that you see a phase of consolidation and a phase of more open armed partnerships.

And that's what we've been experiencing is the activity level of engaging with not only the large players, but the medium and the small players has really gone through the roof, which is a really positive thing because now everybody's talking and trying to collectively figure out how to build this industry from the ground up in The US. So we're really encouraged by that. And like I said in my earlier comments, it's it is the game of survivor. And in order to thrive, you've got to survive. And so we're very situationally aware in making sure that we continue to survive and be there for when this industry really starts to thrive.

Got it.

Got it. Okay. Understood. I thought the product line expansion and the LS recycling was an interesting development. And, you know, it's another example of how you guys are able to be nimble in this rapidly evolving industry and it seems like that being driven by some of these customer discussions you're having and some of the the off paid product that they're looking for to meet some of their specifications. Could you just talk about the opportunity there? And, you know, where what the thought process is with that?

Yeah. Great, Nikki. That's a great question. And I'd love to talk talk about that. So I would say our our advancements that we've announced this quarter are really two pronged. And that is that firstly, we're oriented to market and partner responsiveness by our nature. Think of that as, like, have it your way. And that means making materials that fit as best as possible as the input for our downstream partners' processes. And that greatly enhances and improves our off take opportunities, engagements, with those customers because we're we're we're gonna give it to them their way. Secondly, we're really driving hard for optimization And that is really to improve the plant economics iteratively, So our process does continue to be the one, if not the only one, that could actually produce positive EBITDA, particularly with the suppressed metals prices and current, marketplace conditions that we're seeing. So with that focus on that optimization, we believe strongly that our operating cost at commercial scale could be much lower than the other process And that's because they eliminate the need for massive amounts of one time use chemical costs, transport costs, processing costs, and, costly and harmful waste streams that come about when you're doing it with that methodology.

And that, we believe, does two things. That optimization improves our margin profile at scale and that provides what we believe is still a bankable plant building future that can be debt or project financed. And then the second thing that does is that this key work allows us to further advance the discussions we've been having with other adjacent players the critical mineral space for Aqua Metals to also be an enabler in the form of licensing or joint venture or other win win arrangements. Because we have the IP, we have the two plus years of demonstrating lithium AquaRefining that have produced battery grade materials. And we have the proof of the economic and environmental and worker safety advantages And that's what we believe is at the largest scale of battery grade materials production from recycling by us thus far in The US.

Great.

Great. And then lastly, I just have to throw in one about government discussions and the White House. I know I asked last call, and, you know, you said it might take a couple months for those to progress and to get a bit better line of sight into how those may go. Is there anything more you could tell us? You know, are those at I see, you know, your mission creating, you know, domestically produced product that's very aligned with this administration's desire to create this supply chain locally here in The US. Thanks.

Yeah. So, the the government side, is kinda we discussed in the last conference call. We've we've been engaging the various stakeholder agencies, and that includes things like the DOD, the DOE, etcetera, etcetera. And we're taking full advantage of the opportunity, but we don't have specific feedback yet. And we've been advised by our well respected DC based government relations partner, that it will likely take a few more months to gain a little bit more clarity on what the go forward policy and then following with that policy, the funding support will or won't be for the industry. That said, we are aligned with the administration's interest securing the domestic supply chain and keeping all these critical and valuable materials in The US where they can then be reintroduced into The US manufacturing operations, creating manufacturing jobs, rather than really the current conditions where effectively The US is a net exporter of critical materials in the form of black mass that goes to Asia. And an importer of the battery cells and systems that come back as a net importer. And everyone agrees on that being a major problem and a major priority to to address. And so we're really hopeful and in trying to affect the outcome to see government support really kick in in this space again later this year.

Got it.

Okay. That's all for me. Guys.

Thanks, Nikki.

Once again, that's star one if you do have a question or comment. And I'll turn the floor over to Bob Myers for additional questions.

Yes. Thank we thank you. We have received a few questions. First question is, are potential partners testing the quality of your more recent material that your [indiscernible] Yeah. That's a good question. So, yes, the the primary focus of our pilot demonstration plan operation to continue to today and beyond in our innovation center here in Tahoe Reno Industrial Center continues to be producing and assaying ourselves product samples and sending those samples and testing varying, feedstock sources to create those samples and getting those materials in the hands of all these potential off takers that we've been talking to like I was mentioning earlier. We've continued doing this in q one through now, and those commercial relationships, of course, really underpin the financing of moving forward with that commercial scale facility.

Great. Thank you. The next question is similar. With the appropriate financing for [indiscernible] How quickly can these new initiatives translate into revenues?

Yeah. So even with the Sierra Arc, we would need to build an additional building. So we believe that we could potentially improve time to market by taking a suitable building or buildings that already exist such as a brown field sitting somewhere else in the country closer to supply and offtake partners that we're talking to. And that could be better suited to our new plant layout process flows, with these improvements that we made by adding the LNP, mix it in with the NMC, and producing these other products to be able to produce EBITDA at the maximum level. And, as I already pointed out, we're in several these adjacent players in the industry that already have facilities and we can be an enabler for them.

And that means making their EBITDA producing value proposition and time to market greater and faster. And that might allow for, improvements for them in those types of scenarios. One company in in this industry cannot do it all. So we believe that in addition to helping our ourselves, we're positioned uniquely to be able to help all the other companies do it better.

Got it. Thank you. Pivoting a little to the financials and Judd in particular, can Judd tell us a little bit more about his departure? Yes. Sure, Bob.

This decision was based kind of on a a long term opportunity that advances my career, and it in a noncompetitive opportunity. And it's not related to Aqua Metals, know, it's really been a pleasure I'm I'm seriously being here at Aqua Metals and being the CFO, and I wish the best for the team. And that's why, I'm available during a transition period. We've worked out a ninety day plus consulting period where I can help smoothly transition my role to Eric. The incoming CFO. You know, and I've I've worked with Eric for quite a bit of time, not only at Aqua Metals, but in a prior role, and and I have full confidence. In him and and a go forward plan with that.

Great. Thank you. And we have I think, one more question for you. Can you expand a little bit on your early remarks? Around near term and long term financing opportunities?

Yeah. So start we'll start with the near term. Know, that's been driven by our desire to you know, retire some existing debt. By the end of this this quarter that we're in now, and that's gonna revert reduce burn So we'll be making interest payments and other holding cost and that helps with our cash run rate. Also, term financing has included the judicious use of the ATM. And potential asset disposition of, like, fungible equipment as we announced today, real estate that won't be we don't need to be bearing the cost you know, for at this time. And then on the long term, know, a lot of this has remained the same, just trying to find the right partner. For project financing, and they're still in debt based finance, capital. And we're still having discussions in in, you know, advancing that, and there's some opportunities there. That we're continuing to have. We're also having directly related discussions about feedstock and offtake partnerships. That make the financing the first, ARC bankable. And then also how we can work together with these partners to fund the go forward strategy.

Excellent. Thank you. And that's all the time we have for questions. I'll now turn the floor back to Steve Cotton for closing remarks.

Great. Well, thank you, operator. And I'll just close by saying, this is consolidation time for players in Critical Minerals for sure. And consolidation also means partnerships. We've seen, for example, in one Lighten acquired many of NorthFull's assets and many other of consolidation and partnering. And this is really common with the development of any industry that hits the proverbial bump in the road. Definitely paying attention engaging with all the opportunities, with all the parties, that are out there. And where it makes sense, we'll explore a better way forward. On that front. But in the meantime, we've really added to the resilience and the runway of the company with the, the courageous decisions that we've made as a management team to date. And I feel very confident in our ability to continue to survive to make the day that we shall thrive. And I thank everybody for your support and continued confidence in Aqua Metals. And we will see you soon.

Thank you. Ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time, and have a great day.