Notes
to Condensed Consolidated Financial Statements
(Unaudited)
1. Organization
Aqua
Metals, Inc. (the “Company”) was incorporated in Delaware and commenced operations on June 20, 2014 (inception). On
January 27, 2015, the Company formed two wholly-owned subsidiaries, Aqua Metals Reno, Inc. (“AMR”), and Aqua Metals
Operations, Inc. (collectively, the “Subsidiaries”), both incorporated in Delaware. The Company is reinventing lead
recycling with its patent-pending AquaRefining
TM
technology. Unlike smelting, AquaRefining is a room temperature, water-based
process that is fundamentally non-polluting. These modular systems allow the lead-acid battery industry to simultaneously improve
environmental impact and scale recycling production to meet demand. The Company intends to manufacture the equipment it has developed,
and will also operate lead acid battery recycling facilities.
2. Summary
of Significant Accounting Policies
The
significant accounting policies and estimates used in preparation of the condensed consolidated financial statements are described
in the Company’s audited consolidated financial statements as of and for the year ended December 31, 2016, and the notes
thereto, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, as filed with
the Securities and Exchange Commission, or the SEC, on March 2, 2017. There have been no material changes in the Company’s
significant accounting policies during the three and six months ended June 30, 2017 except for the addition of Revenue Recognition,
Accounts Receivables and Asset Retirement Obligations, as described below.
Basis
of Presentation
The
accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America (“U.S. GAAP”) as found in the Accounting Standards Codification
(“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”)
and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required
by such accounting principles for complete financial statements. In the opinion of management, all adjustments (which include
normal recurring adjustments) considered necessary to present fairly each of the condensed consolidated balance sheet as of June
30, 2017, the condensed consolidated statements of operations for the three and six months ended June 30, 2017 and June 30, 2016,
the condensed consolidated statement of stockholders’ equity for the six months ended June 30, 2017 and the condensed consolidated
statements of cash flows for the six months ended June 30, 2017 and June 30, 2016, as applicable have been made. The condensed
consolidated balance sheet as of December 31, 2016 has been derived from our audited financial statements as of such date, but
does not include all disclosures required by U.S. GAAP. The accompanying unaudited condensed consolidated financial statements
should be read in conjunction with our audited consolidated financial statements for the period ended December 31, 2016, which
are included on Form 10-K filed with the Securities and Exchange Commission on March 2, 2017.
The
results of operations for the three and six months ended June 30, 2017 are not necessarily indicative of results that may be expected
for the year ended December 31, 2017.
Principles
of consolidation
The
accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its Subsidiaries, both
of which are wholly-owned subsidiaries. Significant inter-company accounts and transactions have been eliminated in consolidation.
Use
of estimates
The
preparation of the condensed consolidated financial statements requires management of the Company to make a number of estimates
and assumptions relating to the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities
at the date of the condensed consolidated financial statements, and the reported amounts of expenses during the period. Significant
items subject to such estimates and assumptions include the carrying amount and valuation of long-lived assets, the valuation
of conversion features of convertible debt, valuation allowances for deferred tax assets, the determination of fair value of estimated
asset retirement obligations, the determination of stock option expense and the determination of the fair value of stock warrants
issued. Actual results could differ from those estimates.
AQUA
METALS, INC.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Accounts
receivable
The
Company sells its products to large well-established companies and extends credit without requiring collateral, based on an ongoing
evaluation of the customer’s business prospects and financial condition. In the event that payment of a customer’s
account receivable is doubtful, the Company would reserve the receivable under an allowance for doubtful accounts.
Asset
retirement obligations
The
Company records the fair value of estimated asset retirement obligations (ARO) associated with tangible long-lived assets in the
period incurred. Retirement obligations associated with long-lived assets are those for which there is an obligation for closures
and/or site remediation at the end of the assets’ useful lives. These obligations are initially estimated based on discounted
cash flow estimates and are accreted to full value over time through charges to operating expense. In addition, asset retirement
costs are capitalized as part of the related asset’s carrying value and are depreciated on a straight-line basis over the
assets’ respective useful lives.
Revenue
Recognition
The
Company records revenue recognition in accordance with ASC 606,
Revenue from Contracts with Customers
. ASC 606 provides
a single comprehensive model for the recognition of revenue arising from contracts with customers and supersedes most current
revenue recognition guidance, including industry-specific guidance. It requires an entity to recognize revenue when the entity
transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to
be entitled in exchange for those goods or services. ASC 606 creates a five-step model that requires entities to exercise judgment
when considering the terms of contract(s), which includes (1) identifying the contract(s) with the customer, (2) identifying the
separate performance obligations in the contract, (3) determining the transaction price, (4) allocating the transaction price
to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. ASC 606 requires
additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts,
including qualitative and quantitative information about contracts with customers, significant judgments and changes in judgments
and assets recognized from costs incurred to obtain or fulfill a contract.
Stock-based
compensation
The
Company recognizes compensation expense for stock-based compensation in accordance with ASC 718
Compensation – Stock
Compensation
. For employee stock-based awards, the Company calculates the fair value of the award on the date of grant using
the Black-Scholes-Merton method for stock options; the expense is recognized over the service period for awards to vest.
The
estimation of stock-based awards that will ultimately vest requires judgment and to the extent actual results or updated estimates
differ from the original estimates, such amounts are recorded as a cumulative adjustment in the period estimates are revised.
The Company considers many factors when estimating expected forfeitures, including types of awards, employee class and historical
experience.
Net
loss per share
Basic
net loss per share is computed by dividing net loss by the weighted average number of vested shares outstanding during the period.
Diluted net loss per share is computed by giving effect to all potential dilutive common securities, including convertible notes,
options and warrants. Potential dilutive common shares include the dilutive effect of the common stock underlying in-the-money
stock options as is calculated based on the average share price for each period using the treasury stock method. Under the treasury
stock method, the exercise price of an option and the average amount of compensation cost, if any, for future services that the
Company has not yet recognized when the option is exercised, are assumed to be used to repurchase shares in the current period.
For
all periods presented in this report, convertible notes, stock options, and warrants were not included in the computation of diluted
net loss per share because such inclusion would have had an antidilutive effect.
AQUA
METALS, INC.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
|
|
Six months ended
|
|
|
|
June
30,
|
|
Excluded potentially dilutive securities (1):
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Convertible note - principal
|
|
|
702,247
|
|
|
|
702,247
|
|
Consulting warrants to purchase common
stock
|
|
|
—
|
|
|
|
461,364
|
|
Options to purchase common stock
|
|
|
908,541
|
|
|
|
853,685
|
|
Financing warrants
to purchase common stock
|
|
|
2,340,828
|
|
|
|
3,295,258
|
|
Total potential
dilutive securities
|
|
|
3,951,616
|
|
|
|
5,312,554
|
|
(1)
|
The
number of shares is based on the maximum number of shares issuable on exercise or conversion
of the related securities as of the period end. Such amounts have not been adjusted for
the treasury stock method or weighted average outstanding calculations as required if
the securities were dilutive.
|
Segment
and geographic information
Operating
segments are defined as components of an enterprise engaging in business activities for which discrete financial information is
available and regularly reviewed by the chief operating decision maker in deciding how to allocate resources and in assessing
performance. The Company views its operations and manages its business in one operating segment, and the Company operates in only
one geographic segment.
Concentration
of credit risk
Substantially
all of our revenue and accounts receivable for the three and six-month period ended June 30, 2017 is attributable to Johnson Controls
Battery Group, Inc.
Recent
accounting pronouncements
In
February 2016, the FASB issued ASU 2016-02 - Leases (ASC 842), which sets out the principles for the recognition, measurement,
presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). The new standard requires
lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or
not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized
based on an effective interest method or on a straight-line basis over the term of the lease, respectively. A lessee is also required
to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their
classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases
today. ASC 842 supersedes the previous leases standard, ASC 840 Leases. The standard is effective on January 1, 2019,
with early adoption permitted. The Company is in the process of evaluating the impact of this new guidance.
There
were no other recent accounting pronouncements or changes in accounting pronouncements during the six months ended June 30, 2017
that are of significance or potential significance to the Company.
3.
Revenue recognition
Revenues
are recognized when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration
the Company expects to be entitled to in exchange for those goods or services. Generally, this occurs with the delivery of the
Company’s products, primarily hard lead, lead compounds and plastics, to customers. Sales, value add, and other taxes, if
any, that are collected concurrent with revenue-producing activities are excluded from revenue. Incidental items that are immaterial
in the context of the contract are recognized as expense. Freight and shipping costs related to the transfer of the Company’s
products to customers are included in revenue and product sales cost. Payment on invoices is generally due within 30 days of the
invoice.
The
Company generates revenues by recycling lead acid batteries (“LABs”) and selling the recovered lead to its customers.
Primary components of the recycling process include sales of recycled lead consisting of lead compounds, ingoted hard lead and
ingoted AquaRefined lead as well as plastics. The Company commenced the shipment of products for sale, consisting of lead compounds
and plastics in April 2017 and to the date of this report all revenue has been derived from the sale of lead compounds and plastics.
AQUA
METALS, INC.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Arrangements
with Multiple Performance Obligations
Contracts
with customers may include multiple performance obligations. A performance obligation is a promise in a contract to transfer a
distinct good or service to the customer, and is the unit of account in ASC 606. A contract’s transaction price is allocated
to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The Company
expects that many of our contracts will have a single performance obligation as the promise to transfer the individual goods or
services will not be separately identifiable from other promises in the contracts and therefore, not distinct. For contracts with
multiple performance obligations, revenue is allocated to each performance obligation based on the Company’s best estimate
of the standalone selling price of each distinct good or service in the contract. The primary method used to estimate standalone
selling prices is based on prices charged separately to customers or expected cost-plus margin.
Revenue
from products transferred to customers at a single point in time, as noted above with the delivery of the Company’s products
to customers, accounted for 100% of our revenue during the three and six months ended June 30, 2017.
Practical
Expedients and Exemptions
The
Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length
of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for
services performed.
4. Inventory
Inventory
consisted of the following (in thousands):
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Finished goods
|
|
$
|
42
|
|
|
$
|
—
|
|
Work in process
|
|
|
393
|
|
|
|
—
|
|
Raw materials
|
|
|
595
|
|
|
|
59
|
|
|
|
$
|
1,030
|
|
|
$
|
59
|
|
AQUA
METALS, INC.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
5. Property
and equipment, net
Property
and equipment, net, consisted of the following (in thousands):
|
|
Useful Life
|
|
|
June 30,
|
|
|
December 31,
|
|
Asset
Class
|
|
(Years)
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
Operational equipment
|
|
|
3-10
|
|
|
$
|
15,795
|
|
|
$
|
15,132
|
|
Lab equipment
|
|
|
5
|
|
|
|
648
|
|
|
|
547
|
|
Computer equipment
|
|
|
3
|
|
|
|
161
|
|
|
|
140
|
|
Office furniture and equipment
|
|
|
5
|
|
|
|
317
|
|
|
|
298
|
|
Leasehold improvements
|
|
|
5-7
|
|
|
|
1,408
|
|
|
|
1,408
|
|
Land
|
|
|
—
|
|
|
|
1,048
|
|
|
|
1,047
|
|
Building
|
|
|
39
|
|
|
|
24,641
|
|
|
|
21,962
|
|
Asset Retirement Cost
|
|
|
20
|
|
|
|
670
|
|
|
|
—
|
|
Equipment under
construction
|
|
|
|
|
|
|
1,889
|
|
|
|
1,635
|
|
|
|
|
|
|
|
|
46,577
|
|
|
|
42,169
|
|
Less: accumulated
depreciation
|
|
|
|
|
|
|
(2,152
|
)
|
|
|
(777
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
44,425
|
|
|
$
|
41,392
|
|
Depreciation
expense was $722,000 and $1,387,000 for the three and six months ended June 30, 2017, respectively and $120,000 and $198,000 for
the three and six months ended June 30, 2016, respectively. The building is a 136,750 square foot lead acid battery recycling
plant located in McCarran, Nevada. Equipment under construction is primarily AquaRefining modules manufactured by the Company
to be used in the McCarran, Nevada recycling plant.
Certain
costs necessary to make the recycling facility ready for its intended use have been capitalized, including interest expense on
notes payable. Capitalized interest totaled $152,000 and $303,000 for the three and six months ended June 30, 2016, respectively.
Capitalization of interest ceased upon completion of the building in early November 2016.
6.
Intellectual Property
On
April 13, 2017, when the closing market price of the Company’s stock was $17.36, the Company entered into an agreement to
purchase all of the capital shares of Ebonex IPR Limited, a company registered in England and Wales. Ebonex IPR Limited is a pre-revenue
IP-based company that has developed patented technology in the field of advanced materials and manufacturing methods for advanced
lead acid batteries. Total consideration was $2.5 million, consisting of cash, transaction costs and 123,776 shares of the Company’s
common stock. In accordance with ASC Topic 805-50, “Business Combinations – Related Issues”, the Company accounted
for the transaction as an asset acquisition and allocated the consideration to the relative fair value of the assets acquired.
The Company determined that the transaction was an asset acquisition rather than a business combination following the guidance
in the above-mentioned standard. In order to be treated as a business combination, the acquired assets and liabilities must constitute
a business. A business requires a set of inputs and processes applied to those inputs that have the ability to contribute to the
creation of outputs. Ebonex IPR Limited has no processes such as strategic management processes, operational processes, or employees.
Further, Ebonex IPR Limited provides no goods or services to customers, nor has it any investment or other revenues. Therefore,
the Company concluded that the acquired assets and liabilities do not constitute a business and are instead treated as an asset
acquisition. Assets acquired consisted of a patent portfolio. The fair value of the patent portfolio, of $112,000, was determined
by management with the assistance of an independent valuation specialist using an income approach. Included in the purchase were
certain fixed assets that have been determined by management to have no immediate value and were not considered in the valuation
of Ebonex IPR.
The
Company initially recorded the transaction as an increase of $2.5 million to intellectual property, net on the balance sheet.
Subsequently, due to the fair value of the patent portfolio being significantly less than total consideration, the early development
stage of the technology acquired and the uncertainties inherent in research and development, in connection with the preparation
of this Form 10-Q, the Company recorded a non-cash impairment charge of $2.4 million for the period ended June 30, 2017.
AQUA
METALS, INC.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
The
remaining $112,000 is being amortized straight-line over a 10-year period.
7.
Asset Retirement Obligation
ASC
Topic 410-20, “Asset Retirement and Environmental Obligations, Asset Retirement Obligations” requires the recording
of a liability in the period in which an asset retirement obligation (ARO) is incurred, in an amount equal to the discounted estimated
fair value of the obligation that is capitalized. In each subsequent fiscal quarter, this liability is accreted up to the final
retirement cost. The determination of the ARO is based on an estimate of the future cost to remove and decontaminate the McCarran
facility upon closure. The actual costs could be higher or lower than current estimates. The discounted estimated fair value of
the closure costs is $670,000 and the obligation was recorded as of March 31, 2017, when the obligation was deemed to have occurred.
Offsetting this ARO is, as noted in Note 4 above, an asset retirement cost of the same amount that has been capitalized. The estimated
fair value of the closure costs is based on vendor quotes to remove and decontaminate the McCarran facility in accordance with
the Company’s closure plan as filed with the State of Nevada in its “Application for the Recycling of Hazardous Waste,
by Written Determination” in 2016. Accretion of the ARO for the three and six months ended June 30, 2017 was $10,000.
The
Company has entered into a facility closure trust agreement for the benefit of the Nevada Division of Environmental Protection
(NDEP), an agency of the Nevada Division of Conservation and Natural Resources. Funds deposited in the trust are to be available,
when and if needed, for potential decontamination and hazardous material cleanup in connection with the closure and/or post-closure
care of the facility. The trustee will reimburse the Company or other persons as specified by the NDEP from the fund for closure
and post-closure expenditures in such amounts as the NDEP shall direct in writing. $100,000 was contributed to the trust fund
on October 31, 2016 and is included in other assets on the condensed consolidated balance sheet; $350,000 will be due and payable
on October 31, 2017, and $220,000 will be due on October 31, 2018.
8.
Convertible Notes
Convertible
note payable is comprised of the following (in thousands):
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Convertible note payable
|
|
$
|
5,000
|
|
|
$
|
5,000
|
|
Accrued interest
|
|
|
641
|
|
|
|
343
|
|
Deferred financing costs, net
|
|
|
(91
|
)
|
|
|
(115
|
)
|
Note discount
|
|
|
(4,814
|
)
|
|
|
(4,921
|
)
|
|
|
|
|
|
|
|
|
|
Convertible note
payable, non-current portion
|
|
$
|
736
|
|
|
$
|
307
|
|
9.
Notes Payable
AMR
entered into a $10,000,000 loan with Green Bank on November 3, 2015. The term of the loan is twenty-one years. During the first
twelve months, only interest was payable and thereafter monthly payments of interest and principal are due. The interest rate
will adjust on the first day of each calendar quarter to the greater of six percent (6%) or two percent (2%) per annum above the
minimum prime lending rate charged by large U.S. money center commercial banks as published in the Wall Street Journal. The terms
of the Loan Agreement contain various affirmative and negative covenants. Among them, AMR must maintain a minimum debt service
coverage ratio of 1.25 to 1.0 (beginning with the twelve-month period ending March 31, 2017), a maximum debt-to-net worth ratio
of 1.0 to 1.0 and a minimum current ratio of 1.5 to 1.0. AMR was in compliance with all but the minimum debt service coverage
ratio covenant as of and for the three and six months ended June 30, 2017. AMR has received a waiver for the minimum debt service
coverage ratio covenant for the periods ending March 31, 2017 and June 30, 2017.
The
net proceeds of the loan were used for the construction of the Company’s lead acid recycling operation McCarran, Nevada.
Collateral for this loan is AMR’s accounts receivable, goods, equipment, fixtures, inventory, accessions and a certificate
of deposit in the amount of $1,000,000.
AQUA
METALS, INC.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
The
loan is guaranteed by the United States Department of Agriculture Rural Development (“USDA”), in the amount of 90%
of the principal amount of the loan. The Company paid a guarantee fee to the USDA in the amount of $270,000 at the time of closing
and will be required to pay to the USDA an annual fee in the amount of 0.50% of the guaranteed portion of the outstanding principal
balance of the loan as of December 31 of each year.
Notes
payable is comprised of the following (in thousands):
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Notes payable, current portion
|
|
|
|
|
|
|
|
|
Thermo
Fisher Financial Service
|
|
$
|
146
|
|
|
$
|
137
|
|
Green
Bank, net of issuance costs
|
|
|
176
|
|
|
|
170
|
|
|
|
$
|
322
|
|
|
$
|
307
|
|
|
|
|
|
|
|
|
|
|
Notes payable, non-current portion
|
|
|
|
|
|
|
|
|
Thermo Fisher Financial
Service
|
|
$
|
61
|
|
|
$
|
138
|
|
Green
Bank, net of issuance costs
|
|
|
9,029
|
|
|
|
9,100
|
|
|
|
$
|
9,090
|
|
|
$
|
9,238
|
|
The
Thermo Fisher Financial Service obligations relate to capital leases. The costs associated with obtaining the Green Bank loan
were recorded as a reduction to the carrying amount of the note and are being amortized as interest expense within the condensed
consolidated statements of operations over the twenty-one year life of the loan.
10.
Stockholders’ Equity
Investment
Agreement
On
February 7, 2017, the Company entered into a Stock Purchase Agreement with Johnson Controls pursuant to which the
Company issued and sold to a wholly-owned subsidiary of Johnson Controls International plc, (“Johnson Controls”),
939,005 shares of its common stock at $11.33 per share for the gross proceeds of approximately $10.6 million. Costs incurred
in connection with the transaction, primarily legal fees, totaled approximately $167,000. The Stock Purchase Agreement
includes customary representations, warranties, and covenants by Johnson Controls and the Company, and an indemnity from the
Company in favor of Johnson Controls.
In
connection with the investment transactions, the Company also entered into an Investors Rights Agreement dated February 7, 2017
with Johnson Controls pursuant to which the Company granted Johnson Controls customary demand and piggyback registration rights,
limited board observation rights and limited preemptive rights allowing Johnson Controls the right to purchase its proportional
share of certain future equity issuances by the Company. The board observation and preemptive rights shall expire on the earlier
of (i) such time as Johnson Controls no longer owns 50% of the acquired shares or (ii) the termination of both the Tolling/Lead
Purchase Agreement and Equipment Supply Agreement.
There
were no sales commissions paid by the Company in connection with the sale of its common shares to Johnson Controls.
AQUA
METALS, INC.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Warrants
exercised
During
the six months ended June 30, 2017, 1,175,796 shares were issued pursuant to cash and cashless warrant exercises as detailed below.
Generally, the warrants specify using the preceding five-day average of closing prices for the Company’s common stock in
the calculation of common stock to be issued pursuant to a cashless exercise.
|
|
|
Average Closing
|
|
|
|
|
|
Warrant
|
|
|
Common
|
|
|
|
|
Market Price
|
|
|
Exercise Price
|
|
|
Shares
|
|
|
Shares
|
|
Date
|
|
|
Per
Share
|
|
|
Per
Share
|
|
|
Exercised
|
|
|
Issued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/10/2017
|
|
|
$
|
11.016
|
|
|
$
|
0.0034375
|
|
|
|
392,728
|
|
|
|
392,605
|
|
|
2/13/2017
|
|
|
$
|
13.062
|
|
|
$
|
3.00
|
|
|
|
25,119
|
|
|
|
19,349
|
|
|
2/13/2017
|
|
|
$
|
13.062
|
|
|
$
|
6.00
|
|
|
|
72,420
|
|
|
|
39,154
|
|
|
2/15/2017
|
|
|
$
|
16.768
|
|
|
$
|
6.00
|
|
|
|
65,177
|
|
|
|
41,856
|
|
|
2/16/2017
|
|
|
$
|
16.768
|
|
|
$
|
6.00
|
|
|
|
35,000
|
|
|
|
22,470
|
|
|
3/17/2017
|
|
|
$
|
20.262
|
|
|
$
|
6.00
|
|
|
|
2,500
|
|
|
|
2,500
|
|
|
3/20/2017
|
|
|
$
|
20.304
|
|
|
$
|
3.00
|
|
|
|
226,068
|
|
|
|
192,666
|
|
|
3/20/2017
|
|
|
$
|
20.304
|
|
|
$
|
6.00
|
|
|
|
586,596
|
|
|
|
413,253
|
|
|
4/3/2017
|
|
|
$
|
19.148
|
|
|
$
|
0.0034375
|
|
|
|
43,636
|
|
|
|
43,628
|
|
|
4/11/2017
|
|
|
$
|
17.920
|
|
|
$
|
6.00
|
|
|
|
12,500
|
|
|
|
8,315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,461,744
|
|
|
|
1,175,796
|
|
Warrants
outstanding
Warrants
to purchase shares of the Company’s common stock at a weighted average exercise price of $8.45 are as follows.
Exercise
Price
|
|
|
Expiration
|
|
|
Shares
Subject to purchase
|
|
per
Share
|
|
|
Date
|
|
|
at
June 30, 2017
|
|
|
|
|
|
|
|
|
|
$
|
7.12
|
|
|
|
5/18/2018
|
|
|
|
702,247
|
|
$
|
9.00
|
|
|
|
5/18/2019
|
|
|
|
1,605,131
|
|
$
|
10.00
|
|
|
|
11/21/2019
|
|
|
|
33,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,340,82
8
|
|
Stock
based compensation
The
stock-based compensation expense attributable to option grants granted was allocated as follows:
|
|
Three
months ended June 30,
|
|
|
Six
months ended June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Sales cost
|
|
$
|
24
|
|
|
$
|
—
|
|
|
$
|
24
|
|
|
$
|
—
|
|
Research and development cost
|
|
|
73
|
|
|
|
55
|
|
|
|
160
|
|
|
|
106
|
|
General and administrative
expense
|
|
|
209
|
|
|
|
475
|
|
|
|
283
|
|
|
|
632
|
|
Total
|
|
$
|
306
|
|
|
$
|
530
|
|
|
$
|
467
|
|
|
$
|
738
|
|
AQUA
METALS, INC.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
The
following assumptions were used in the Black-Scholes-Merton pricing model to estimate the fair value of the options.
|
|
Three
months ended June 30,
|
|
|
Six
months ended June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected
stock volatility
|
|
|
71.04%
- 72.65
|
%
|
|
|
72.36%
- 80
|
%
|
|
|
70.92%
- 72.65
|
%
|
|
|
72%-80
|
%
|
Risk free interest
rate
|
|
|
1.38%
- 1.66
|
%
|
|
|
0.94%
- 1.20
|
%
|
|
|
1.38%
- 1.79
|
%
|
|
|
0.94%-1.77
|
%
|
Expected years until
exercise
|
|
|
2.50-3.50
|
|
|
|
2.50-3.50
|
|
|
|
2.50-3.50
|
|
|
|
2.50-3.50
|
|
Dividend yield
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
The
Company issued 16,561 and 35,334 shares of common stock for the three and six months ended June 30, 2017, respectively, upon stock
option exercises.
11. Commitments
and Contingencies
Interstate
Battery Agreement commitment
Pursuant
to the Interstate Battery Investor Rights Agreement, the Company has agreed to compensate Interstate Battery should either Stephen
Clarke, the Company’s current chief executive officer, or Selwyn Mould, the Company’s current chief operating officer,
no longer hold such positions or no longer devote substantially all of their business time and attention to the Company, whether
as a result of resignation, death, disability or otherwise (such an event referred to as a “key-man event”). The Company
has agreed to pay Interstate Battery $2.0 million, per occurrence, if either officer is subject to a key-man event during the
two years following May 18, 2016. The Company also agreed to pay Interstate Battery $2.0 million if either or both officers are
subject to a key-man event during the third year following May18, 2016.
Johnson
Controls Agreement Commitment
Pursuant
to the Johnson Controls Investor Rights Agreement, the Company has agreed to compensate Johnson Controls should either Stephen
Clarke, the Company’s current chief executive officer, or Selwyn Mould, the Company’s current chief operating officer,
no longer hold such positions or no longer devote substantially all of their business time and attention to the Company, whether
as a result of resignation, death, disability or otherwise (such an event referred to as a “key-man event”). The Company
has agreed to pay Johnson Controls $1.0 million per occurrence, if either officer is subject to a key-man event during the 18
months following February 7, 2017. The Company also agreed to pay Johnson Controls $1.0 million if either or both key-man events
occur after 18 months and prior to 30 months following February 7, 2017.
12. Subsequent
Events
The
Company has evaluated subsequent events through the date which the condensed consolidated financial statements were available
to be issued.