Aqua Metals, Inc.: Form 10-Q for the period ended Sep 30, 2025

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, 2024 filed with the SEC on March 31, 2025, or our 2024 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.

Reverse Stock Split

Effective August 4, 2025, the Company effected a one-for-10 reverse stock split of its issued and outstanding common shares. Accordingly, all common share, stock option, per common share and warrant amounts for all periods presented in the condensed consolidated financial statements and notes thereto have been adjusted retroactively to reflect this reverse stock split.

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 lithium-ion (“Li”) batteries. Our recycling process is a hydro and electrometallurgical technology that is an innovative, 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 chemical regeneration and 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.

Since 2021, the Company has focused on 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 traditional hydro processes and greenhouse emissions.

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 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 parcel of land with an existing building to begin development of our Li AquaRefining recycling campus at TRIC. During the second quarter of 2025, we sold the Sierra ARC property. The action retired all debt, added cash to the balance sheet and reduced holding costs. The company will now evaluate more cost-efficient locations for future development. We are working closely with prospective strategic materials and financial partners to explore co-location opportunities near feedstock and offtake sources, which could lower capital expenditures and future operating expenses.

In February 2025, the Company announced its expanded vision to more than double the output of lithium carbonate by deferring the plating of nickel and cobalt to metal form until the next phase. This allows for several improvements to the early years of scaling – reduced capital expenditures by simplifying the product set to lithium carbonate and MHP (Mixed Hydroxide Precipitates), more volume of product due to the simplification, further de-risk with the simplified product set, more revenue and overall operating margins with a much improved payback on remaining capital to be financed. The Company continues to seek the funding to build it's first commercial plant.

During the third quarter of 2025, the Company expanded its feedstock diversification strategy by extending its proprietary AquaRefining™ technology to evaluate polymetallic deep-sea nodules as an additional potential source of critical minerals. In September 2025, the Company announced the signing of a Memorandum of Understanding (“MOU”) with Impossible Metals Inc. to collaborate on the development of a domestic, environmentally responsible supply chain for essential minerals— including nickel, cobalt, copper, manganese, and rare earth elements—recovered from deep-sea nodules and refined through the AquaRefining™ process.

In November 2025, the Company further broadened its collaboration framework by entering into an MOU with MOBY Robotics Inc. to explore the use of robotic harvesting and precision sorting of nodules and to conduct bench-scale testing of AquaRefining™ for these materials. These initiatives remain exploratory and are intended to assess the technical and economic feasibility of applying the Company’s clean, water-based recycling process to nodule-derived feedstocks.

During the nine months ended September 30, 2025, we issued 833,219 shares of common stock pursuant to an at the market, or ATM, sales agreement for net proceeds of $5,921,000, and 177,283 shares of common stock pursuant to the equity-line-of-credit purchase agreement, or ELOC for the net proceeds of $903,000. On October 16, 2025, we closed a registered direct offering of 205,213 shares of common stock at an offering price of $11.34 per share and 928,581 pre-funded warrants at an offering price of $11.339 per pre-funded warrant, In a concurrent private placement, we also sold 1,133,794 common stock purchase warrants at an offering price of $0.125 per warrant, with each warrant exercisable over a five year period for one share of common stock at an exercise price of $11.34 per share. After the deduction of the placement and legal fees payable by us, the aggregate net proceeds from the registered direct offering and warrant placement were approximately $12,000,000.

During the year ended December 31, 2024, we issued 119,503 shares of common stock pursuant to the ATM facility for net proceeds of $5,014,000. In May 2024, we completed a public offering of 100,625 shares of our common stock, at the public offering price of $78 per share. In connection with the sale of common stock, we issued warrants to purchase shares of common stock at the rate of one warrant for every share of purchased common stock, at the price of $2 per share. After the deduction of the underwriter’s discount and expenses payable by us, we received net proceeds of $7,306,000.

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.

Effective November 5, 2024, we effected a one-for-20 reverse stock split of our issued and outstanding common shares. Subsequently, on August 4, 2025, we effected a one-for-10 reverse stock split of our issued and outstanding common shares. All share and share price information set forth in this report has been adjusted retrospectively to reflect these reverse stock splits.

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 battery metals in lithium-ion batteries driven by innovations in automobile batteries, growth in internet data centers being rapidly accelerated by artificial intelligence (AI), 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. Throughout 2023 and 2024, we have demonstrated at our pilot facility our ability to recover key valuable minerals in lithium-ion batteries, such as lithium hydroxide or lithium carbonate, copper, nickel, cobalt, and other compounds. These demonstrations ran for 24 hours x 5 days a week for many weeks in 2024 and an extended 24 hours x 7 days a week endurance run in November-December of 2024 that produced the results the Company believes makes the process commercial scale ready. Our next goal for lithium AquaRefining is to process 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. The location for the pilot demonstration facility is in our Innovation Center in Tahoe-Reno Industrial Center. Our next phase is constructing our first commercial ARC and we are actively working with multiple potential supply, off-take, and funding partners to determine the optimal timing and location. The construction of the first commercial facility is subject to our receipt of additional financing.

Our focus for the critical battery minerals market includes operating our first-of-a-kind lithium battery recycling facility, utilizing electricity to recycle instead of traditional approaches involving intensive and dangerous and expensive one time use chemical processes, fossil fuels, or high-temperature furnaces which also produce very large gas (CO2) and solid (sodium sulfate) waste streams our process avoids. Because of the cost savings (labor, chemical, waste streams, footprint), the Company believes it is the low cost producer giving a material economic advantage to lithium AquaRefining compared to other processes. We are also exploring partnership and/or joint venture agreements, particularly as our Li AquaRefining matures. 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 and support to accelerate our expansion and progress.

Results of Operations

We did not engage in commercial operations in 2025 or 2024. Our operations have been devoted to developing our Li AquaRefining battery recycling technology. During the nine months ended September 30, 2025, we focused on the continued operation of the pilot facility and advancing the underlying processes that support our recycling capabilities. We did not earn any revenue during the three and nine months ended September 30, 2025 and 2024. The following table summarizes our results of operations with respect to the items set forth below for the three and nine months ended September 30, 2025 and 2024 together with the dollar and percentage changes in those items (in thousands).

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 decreased approximately $1,041,000, or 64.4%, and $4,122,000, or 66.5%, for the three and nine months ended September 30, 2025 as compared to the three and nine months ended September 30, 2024. The decrease in plant operations for the three months ended September 30, 2025 was primarily driven by a reduction in payroll and related costs of approximately $634,000, resulting from workforce reductions implemented in August 2024 and continued reductions during the first quarter of 2025. Additionally, professional fees decreased by approximately $153,000 and supplies, materials, inventory adjustments and other overhead expenses decreased by $254,000. The decrease in plant operations for the nine month ended September 30, 2025 was primarily due to a decrease in payroll and payroll related fees of approximately $2,570,000 resulting from workforce reductions, professional fees decreased by approximately $697,000 and a decrease of $855,000 in other overhead expenses, including supplies, materials and inventory adjustments. Management does not expect the reduction in force to materially impact its current pilot operations or continuing research and development. However, until additional funding is secured, employee-related and overhead expenses are expected to remain at the reduced levels throughout the remainder of 2025.

Research and development cost includes expenditures related to the continued enhancement of the AquaRefining technology and the development of our lithium-ion battery recycling process. During the three months ended September 30, 2025, research and development expenses decreased $70,000, or approximately 17.6%, compared to the three months ended September 30, 2024, and $389,000, or approximately 28.8%, for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. This decrease over the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 was primarily due to lower payroll and related costs of approximately $297,000, as well as a reduction in supplies, materials, and other overhead expenses of approximately $116,000 offset by an increase in professional fees of approximately $24,000.

For the three and nine months ended September 30, 2025, we recognized a non-cash impairment and loss on disposal of property, plant and equipment of $25,000 and $9,037,000, respectively, in connection with the sale of the facility located at TRIC and related equipment. During the three and nine months ended September 30, 2024, we recognized a loss on disposal of property, plant and equipment of $448,000.

General and administrative expense decreased $612,000, or approximately 22.3%, for the three months ended September 30, 2025 compared to the three months ended September 30, 2024 and $2,463,000, or approximately 26.9%, for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. The decrease for the three months ended September 30, 2025 was primarily due to a reduction in payroll and related costs of approximately $366,000 due to workforce reductions and restructuring and $277,000 decrease in professional fees offset by an increase of approximately $31,000 in other overhead expenses. The decrease for the nine month ended September 30, 2025, was primarily attributable to a reduction in payroll and related expenses of approximately $1,960,000 due to workforce reductions, a $47,000 decrease in director fees, a $459,000 decrease in professional fees offset by an increase of $3,000 in other overhead expenses.

The following table summarizes our other income and interest expense for the three and nine months ended September 30, 2025 and 2024 together with the dollar and percentage changes in those items (in thousands).

The decrease in interest expense for the three months ended September 30, 2025, is due to the decrease in the notes payable outstanding balance. The increase in interest expense for the nine months ended September 30, 2025, is due to the increase in the notes payable outstanding balance and an increase in the amortization of the related debt discount.

On May 5, 2025, the Company repaid its $1,500,000 bridge loan prior to the December 31, 2025 maturity. As part of the agreement, the Company was required to pay a guaranteed interest amount of $300,000 regardless of early repayment. For the nine months ended September 30, 2025, the Company recognized $435,000 in interest expense (including amortization of issuance costs), and recorded a $825,000 loss on extinguishment of debt related to the write-off of unamortized financing costs and the remaining unaccrued portion of the guaranteed interest.

We recognized approximately $28,000 and $805,000 in interest and other income during the three and nine months ended September 30, 2025, a decrease of $56,000 for the three months ended September 30, 2025 and an increase of $476,000 for the nine months ended September 30, 2025. The increase was primarily driven by the approval of a payroll tax employee retention credit during the first six months of the 2025.

For the three and nine months ended September 30, 2025, the Company recognized a change in fair value of warrant liability of $72,000 and $1,255,000, which was primarily due to the remeasurement of the warrants issued in December 2024.

Liquidity and Capital Resources

As of September 30, 2025, we had cash and cash equivalents of approximately $3,586,000, current liabilities of $3,459,000 and a working capital of approximately $508,000. However, on October 16, 2025, we closed a registered direct offering of 205,213 shares of common stock at an offering price of $11.34 per share and 928,581 pre-funded warrants at an offering price of $11.339 per pre-funded warrant, In a concurrent private placement, we also sold 1,133,794 common stock purchase warrants at an offering price of $0.125 per warrant, with each warrant exercisable over a five year period for one share of common stock at an exercise price of $11.34 per share. After the deduction of the placement and legal fees payable by us, the aggregate net proceeds from the registered direct offering and warrant placement were approximately $12,000,000. 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 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. Management is devoting significant efforts to increasing liquidity, raising capital and developing its business.

Even after giving effect to the October 2025 registered direct offering and concurrent warrant placement, management believes that the Company's capital resources remain insufficient 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, and its current working capital level, 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.

Looking ahead, Aqua Metals plans to continue pilot operations, advance site selection and permitting for its first commercial AquaRefining facility and pursue additional strategic partnerships and grant opportunities to accelerate commercialization. Management believes the Company’s validated technology, new capital resources, and expanding partner ecosystem position Aqua Metals to play a key role in building a resilient, low-carbon domestic supply chain for critical minerals.

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

Net cash used in operating activities

Net cash used in operating activities for the nine months ended September 30, 2025 and nine months ended September 30, 2024 was $7,648,000 and $11,637,000, respectively. 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, amortization of deferred financing costs, loss on extinguishment of debt, stock-based compensation, impairment and loss on disposal of property, plant and equipment, as well as net changes in working capital. During the nine months ended September 30, 2025, we recognized approximately $9,037,000 expense for impairment and loss on disposal of property, plant, and equipment related to the sale of the facility located at TRIC.

Net cash provided by (used in) investing activities

Net cash provided by investing activities for the nine months ended September 30, 2025 was $4,971,000 and consisted mainly of $4,382,000 cash received from the sale of the building and equipment, $1,141,000 from equipment deposits, the payment of our $100,000 related to our note receivable, offset by cash utilized towards equipment deposits of $231,000 and purchases of fixed assets of $421,000. Net cash used in investing activities for the nine months ended September 30, 2024 was $11,062,000 and consisted mainly of cash utilized towards equipment deposits of $3,975,000 and purchases of fixed assets related to the build out of our commercial facility of $7,452,000, offset by $350,000 of cash received related to our note receivable.

Net cash provided by financing activities

Net cash provided by financing activities was $2,184,000 for the nine months ended September 30, 2025, consisting of $5,921,000 in net proceeds from the sale of Aqua Metals shares pursuant to the at-the-market offering, or ATM, and $903,000 of net proceeds from the sale of Aqua Metals shares pursuant to the equity-line-of-credit purchase agreement, or ELOC, with Lincoln Park Capital Fund, LLC offset by $108,000 related to tax withholdings to cover RSU vesting and $4,500,000 principal payments on notes payable. Net cash provided by financing activities of $9,127,000 for the nine months ended September 30, 2024 consisted of $2,820,000 in net proceeds from the sale of Aqua Metals shares pursuant to the at-the-market offering, or ATM, and $7,306,000 in net proceeds from our May 2024 public offering, offset by $552,000 related to tax withholdings to cover RSU vesting and $424,000 related to debt issuance costs.

Critical Accounting Estimates

No material changes from what was reported in the 2024 Annual Report.

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 September 30, 2025.

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 September 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024 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, except as described below:

We will need additional financing to execute our business plan and fund operations, which additional financing may not be available on reasonable terms or at all. As of September 30, 2025, we had cash and cash equivalents of approximately $3,586,000, current liabilities of $3,459,000 and a working capital of $508,000. As of the date of this report and after giving effect to the October 2025 registered direct offering and concurrent warrant placement for the gross proceeds of approximately $13,000,000, we believe that we will require additional capital in order to fund our current level of ongoing costs and our proposed business plan over the next 12 months as we move forward with our business strategy. We intend to acquire the necessary capital though debt financing, sale of assets or through the sale of equity. Funding that includes the sale of our equity may be dilutive. If such funding is not available on satisfactory terms, we may be unable to further pursue our business plan and we may be unable to continue operations, in which case you may lose your entire investment.

The report of our independent registered public accounting firm for the year ended December 31, 2024 states that 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.

We are the subject of a claim that could have a material adverse effect on our financial condition. In October 2021, we filed an action against Johnson Controls Fire Protections, LP (“Defendant”) relating to its involvement in the November 2019 fire at our former TRIC facility (Aqua Metals, Inc., et. al v. Johnson Controls Fire Protections, LP, Second Judicial District of the State of Nevada CV21-01891). Our complaint alleged Defendant’s liability for a portion of the fire loss based on Defendant’s negligence, breach of contract and other causes of action in connection with Defendant’s failure to properly inspect, maintain and repair the fire suppression system in the TRIC facility. On March 25, 2025, the Court dismissed our complaint in response to a motion for summary judgment filed by Defendant. On May 12, 2025, Defendant filed a Memorandum for Costs seeking approximately $300,000 in litigation-related costs and on May 29, 2025, Defendant filed a motion to recover its attorney’s fees and costs in the aggregate approximate amount of $3.5 million, including approximately $300,000 of costs (the same costs identified in Defendant’s Memorandum of Costs) and approximately $3.2 million of legal fees. We believe that we have a strong defense to Defendant’s claim for recovery of fees and costs, especially with regard to Defendant’s claim for legal fees, and we intend to vigorously defend against Defendant’s motion. However, should Defendant be successful in obtaining an award for all or a substantial portion of the requested amount, we may be unable to satisfy any such award without raising additional capital either through the issuance of our equity or debt securities or and/or liquidation of some or all of our assets. There can be no assurance that Defendant’s motion for fees and costs will not have a material adverse effect on our financial condition.