Aqua Metals(AQMS) - 2025 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION This section details the company's financial statements, management's analysis, market risks, and internal controls Item 1. Financial Statements This section presents unaudited condensed consolidated financial statements, including balance sheets, operations, equity, and cash flows, with notes detailing significant financial changes Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position at specific dates, detailing assets, liabilities, and stockholders' equity | ASSETS (in thousands) | June 30, 2025 | December 31, 2024 | | :---------------------- | :------------ | :---------------- | | Cash and cash equivalents | $1,933 | $4,079 | | Total current assets | $2,369 | $4,644 | | Total non-current assets| $6,875 | $21,721 | | Total assets | $9,244 | $26,365 | | LIABILITIES AND STOCKHOLDERS' EQUITY (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------------------ | :------------ | :---------------- | | Total current liabilities | $3,633 | $8,182 | | Total liabilities | $4,126 | $10,121 | | Total stockholders' equity | $5,118 | $16,244 | | Total liabilities and stockholders' equity | $9,244 | $26,365 | Condensed Consolidated Statements of Operations This section outlines the company's financial performance over specific periods, detailing revenues, expenses, and net loss | (in thousands, except per share) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total operating expense | $7,031 | $6,162 | $15,715 | $11,954 | | Loss from operations | $(7,031) | $(6,162) | $(15,715) | $(11,954) | | Total other income, net | $263 | $15 | $632 | $55 | | Net loss | $(6,770) | $(6,150) | $(15,085) | $(11,902) | | Basic and diluted net loss per share | $(7.44) | $(9.94) | $(17.54) | $(20.36) | Condensed Consolidated Statements of Stockholders' Equity This section details changes in the company's equity accounts, including common stock, additional paid-in capital, and accumulated deficit | (in thousands, except share amounts) | Balances, December 31, 2024 | Balances, June 30, 2025 | | :----------------------------------- | :-------------------------- | :---------------------- | | Common Stock (Shares) | 773,084 | 1,027,701 | | Common Stock (Amount) | $1 | $1 | | Additional Paid-in Capital | $264,205 | $268,039 | | Accumulated Deficit | $(247,770) | $(262,855) | | Treasury Stock (Shares) | 2,942 | 2,648 | | Treasury Stock (Amount) | $(192) | $(67) | | Total Stockholders' Equity | $16,244 | $5,118 | Condensed Consolidated Statements of Cash Flows This section summarizes the cash inflows and outflows from operating, investing, and financing activities over specific periods | Cash Flows (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------ | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(5,299) | $(8,002) | | Net cash provided by (used in) investing activities | $4,936 | $(9,762) | | Net cash provided by (used in) financing activities | $(1,783) | $9,075 | | Net decrease in cash and cash equivalents | $(2,146) | $(8,689) | | Cash and cash equivalents at end of period | $1,933 | $7,833 | Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and additional information supporting the condensed consolidated financial statements 1. Organization This note describes the company's business, recent stock splits, and going concern considerations - Aqua Metals (NASDAQ: AQMS) specializes in clean, water-based recycling technology (AquaRefining) for lead and lithium-ion batteries, aiming for higher purity, lower emissions, and minimal waste[18] - The company effected two reverse stock splits: one-for-20 on November 5, 2024, and one-for-10 on August 4, 2025, with all share information adjusted retrospectively[21] - For the six months ended June 30, 2025, the company reported a net loss of $15.085 million and negative cash from operations of $5.299 million, leading management to believe there is substantial doubt about its ability to continue as a going concern[22][23] - To address liquidity, the company entered into an equity-line-of-credit purchase agreement with Lincoln Park Capital Fund, LLC, committing to purchase up to $10 million of common stock[23] 2. Summary of significant accounting policies This note outlines the key accounting principles and policies used in preparing the condensed consolidated financial statements - The unaudited condensed consolidated financial statements are prepared in accordance with interim reporting requirements of Form 10-Q, with no material changes in significant accounting policies during the three and six months ended June 30, 2025[25][26] - The company's chief operating decision maker views its operations and manages its business as one operating segment[40] - The company is evaluating the impact of recently issued accounting pronouncements, ASU 2024-03 (Expense Disaggregation Disclosures) and ASU No. 2023-09 (Improvements to Income Tax Disclosures), effective for annual periods beginning January 1, 2027, and after December 15, 2024, respectively[42][43] 3. Revenue recognition This note clarifies the company's revenue recognition policy, noting no commercial production or revenue during the reported periods - The Company was not in commercial production and did not generate revenue during the three and six months ended June 30, 2025 and 2024[44] 4. Note receivable This note details the collection of the outstanding note receivable from LINICO during the first quarter of 2025 - The $100 thousand balance of the note receivable from LINICO as of December 31, 2024, was fully collected during the first quarter of 2025[45] 5. Inventory This note provides a breakdown of the company's inventory, primarily consisting of raw materials | Inventory (in thousands) | June 30, 2025 | December 31, 2024 | | :----------------------- | :------------ | :---------------- | | Raw materials | $245 | $251 | | Total inventory | $245 | $251 | 6. Property and equipment, net This note details the company's property and equipment, including impairment charges related to asset sales | Asset Class (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------- | :------------ | :---------------- | | Operational equipment | $3,456 | $3,551 | | Lab equipment | $1,112 | $1,128 | | Computer equipment | $107 | $107 | | Office furniture and equipment | $87 | $87 | | Leasehold improvements | $80 | $80 | | Land | — | $1,141 | | Building | — | $3,131 | | Equipment under construction | $2,757 | $9,726 | | Less: accumulated depreciation | $(2,615) | $(2,478) | | Total property and equipment, net | $4,984 | $16,473 | - The Company recognized an impairment charge of $5.247 million in Q1 2025 to write down assets held for sale (TRIC facility) to their estimated fair value of $4.1 million[51] - An additional impairment and loss on disposal of $3.765 million was recognized for the three months ended June 30, 2025, in connection with the sale of the TRIC facility and other equipment[52] 7. Other assets This note provides a breakdown of other non-current assets, including equipment deposits and right-of-use assets | Other Assets (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Equipment deposits | $1,340 | $4,540 | | Nevada facilities Right of Use Assets | $421 | $542 | | Other assets | $20 | $20 | | Total other assets, non-current | $1,781 | $5,102 | 8. Accrued expenses This note details the company's accrued expenses, primarily related to payroll, professional services, and property and equipment | Accrued Expenses (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------ | :------------ | :---------------- | | Property and equipment related | $560 | $560 | | Payroll related | $1,006 | $1,576 | | Professional services | $806 | $884 | | Other | $90 | $110 | | Total accrued expenses | $2,462 | $3,130 | 9. Leases This note describes the company's finance and operating leases, including remeasurements due to extensions - The Company maintains one finance lease for equipment and two operating leases for real estate (headquarters and Innovation Center)[57] - Operating lease extensions in March and June 2024 for the headquarters and Innovation Center, respectively, resulted in remeasurement of Right-of-Use (ROU) assets and operating lease liabilities using incremental borrowing rates of 9.61% and 9.52%[58][59] | Future Maturities of Lease Liabilities (in thousands) | Operating Leases | Finance Leases | | :------------------------------------ | :--------------- | :------------- | | Due in 12-month period ended June 30, 2025 | $255 | $47 | | Due in 12-month period ended June 30, 2026 | $147 | $47 | | Due in 12-month period ended June 30, 2027 | $74 | $47 | | Due in 12-month period ended June 30, 2028 | — | $36 | | Less imputed interest | $(46) | $(14) | | Total lease liabilities | $430 | $163 | 10. Notes payable This note details the repayment of various notes payable and the recognition of a non-cash loss on debt extinguishment - The Company paid off the $3 million outstanding principal balance of the loan with Summit Investment Services, LLC, along with $49 thousand in guaranteed minimum interest, in June 2025[63] - The outstanding balance of $1 million on secured promissory notes from accredited investors, plus $300 thousand in guaranteed interest, was repaid in full on May 5, 2025[65] - A non-cash loss on extinguishment of debt of $825 thousand was recorded for the three months ended June 30, 2025, related to the write-off of unamortized financing costs and the remaining unaccrued portion of guaranteed interest[65] | Notes Payable, Current Portion (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------------------------------- | :------------ | :---------------- | | Summit Investment Services, LLC | $— | $3,000 | | Notes related-party | $— | $856 | | Notes | $— | $654 | | Less issuance costs | $— | $(974) | 11. Warrant liability This note explains the re-measurement of warrant liability using the Monte-Carlo option pricing model - The warrant liability, classified as Level 3 in the fair value hierarchy, is re-measured at each balance sheet date using the Monte-Carlo option pricing model[69] | Warrant Liability (in thousands) | Amount | | :------------------------------- | :----- | | Fair value as of December 31, 2024 | $1,493 | | Change in fair value of warrant liabilities | $(1,327) | | Fair value as of June 30, 2025 | $166 | 12. Stockholders' equity This note details changes in stockholders' equity, including equity line of credit agreements, share issuances, and stock-based compensation - On May 15, 2025, the Company entered into an Equity Line of Credit (ELOC) agreement with Lincoln Park Capital Fund, LLC, granting the right to sell up to $10 million of common stock over 24 months[72] - During the six months ended June 30, 2025, the Company issued 211,474 shares of common stock through at-the-market (ATM) sales for net proceeds of $2.735 million, and 12,000 shares via the ELOC for net proceeds of $69 thousand[74][75] | Stock-based Compensation Expense (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Plant operations | $5 | $99 | $13 | $185 | | Research and development cost | $30 | $16 | $69 | $36 | | General and administrative expense | $310 | $636 | $965 | $1,304 | | Total | $345 | $751 | $1,047 | $1,525 | - On July 22, 2025, an additional 260,000 shares of common stock were authorized and added to the 2019 Stock Incentive Plan, bringing the total authorized shares to 400,000[83] 13. Commitments and contingencies This note addresses legal proceedings, including a dismissed complaint and potential liability for attorney's fees and costs - The Company's complaint against Johnson Controls Fire Protections, LP, related to a 2019 fire at its former TRIC facility, was dismissed on March 25, 2025[93] - Defendant is seeking approximately $3.5 million in attorney's fees and costs; an adverse award could materially affect the Company's financial position, requiring additional capital or asset liquidation[93] 14. Segment reporting This note confirms that Aqua Metals operates as a single operating segment focused on sustainable metals recycling - Aqua Metals operates in one operating segment: sustainable metals recycling, with the CEO evaluating financial performance at a consolidated, entity-wide level[94] 15. Employee Retention Credit This note reports the recognition of government grant income related to the employee retention credit - The Company recognized government grant income of $420 thousand and $643 thousand for the three and six months ended June 30, 2025, respectively, related to the employee retention credit, along with associated interest income[96] 16. Subsequent events This note discloses a reverse stock split implemented after the reporting period - On August 4, 2025, the Company implemented a one-for-ten (1-for-10) reverse stock split of its common stock[97] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition and operations, highlighting Li AquaRefining, TRIC facility sale, and lithium carbonate optimization, noting increased net loss, reduced expenses, and critical liquidity needs General This section provides an overview of the company's core technology, strategic asset sales, and future operational vision - Aqua Metals utilizes its patented AquaRefining technology for clean, water-based recycling of both lead and lithium-ion batteries, aiming for higher purity and lower emissions[103] - The company sold its Sierra ARC property in Q2 2025, which retired all associated debt, added cash to the balance sheet, and reduced holding costs, prompting evaluation of more cost-efficient locations for future development[110] - An expanded vision for Li AquaRefining aims to more than double lithium carbonate output by deferring nickel and cobalt plating, reducing capital expenditures, simplifying the product set, and improving operating margins[111] - During the six months ended June 30, 2025, the company issued 211,474 shares of common stock through an at-the-market (ATM) sales agreement, generating net proceeds of $2.735 million[112] Plan of Operations This section outlines the company's strategy to build, operate, and license Li AquaRefining capacity, contingent on securing additional financing - The business strategy focuses on building, operating, and licensing Li AquaRefining recycling capacity to meet the growing demand for critical metals in lithium-ion batteries[115] - The company aims to demonstrate that Li AquaRefining can produce the highest quality and yields of recovered minerals from lithium-ion batteries with lower waste streams and costs[116] - The construction of the first commercial facility is contingent on securing additional financing, with active engagement with potential supply, off-take, and funding partners[116] Results of Operations This section analyzes the company's financial performance, detailing operating expenses, other income, and net loss - The Company did not engage in commercial operations or earn any revenue during the three and six months ended June 30, 2025 and 2024[118] | Operating Cost and Expense (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (Favorable/Unfavorable) | % Change | | :---------------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :------- | | Plant operations | $1,501 | $4,582 | $3,081 | (67.2)% | | Research and development cost | $631 | $951 | $320 | (33.6)% | | Impairment and loss on disposal of property, plant and equipment | $9,012 | — | $(9,012) | 0.0% | | General and administrative expense | $4,571 | $6,421 | $1,850 | (28.8)% | | Total operating expense | $15,715 | $11,954 | $(3,761) | 31.5% | - Plant operations, research and development, and general and administrative expenses decreased primarily due to workforce reductions and restructuring efforts[119][120][122] | Other Income and (Expense) (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (Favorable/Unfavorable) | % Change | | :---------------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :------- | | Interest expense | $(647) | $(190) | $(457) | 240.5% | | Loss on extinguishment of debt | $(825) | — | $(825) | 0.0% | | Interest and other income | $777 | $245 | $532 | 217.1% | | Change in fair value of warrant liability | $1,327 | $0 | $1,327 | 0.0% | | Total other income, net | $632 | $55 | $577 | 1049.1% | - The increase in interest and other income was primarily driven by the approval of a payroll tax employee retention credit[127] Liquidity and Capital Resources This section assesses the company's cash position, working capital, and ability to fund operations, highlighting going concern doubts - As of June 30, 2025, the Company had cash and cash equivalents of $1.933 million, current liabilities of $3.633 million, and a working capital deficit of $1.264 million[129] - Management believes the Company lacks sufficient capital resources to sustain operations for the next twelve months, indicating substantial doubt about its ability to continue as a going concern[130] | Cash Flows Summary (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(5,299) | $(8,002) | | Net cash provided by (used in) investing activities | $4,936 | $(9,762) | | Net cash provided by (used in) financing activities | $(1,783) | $9,075 | - Net cash provided by investing activities of $4.936 million for the six months ended June 30, 2025, was primarily from the sale of the building and equipment ($4.347 million) and equipment deposits refund ($1.141 million)[133] - Net cash used in financing activities of $1.783 million for the six months ended June 30, 2025, mainly due to $4.5 million in principal payments on notes payable, partially offset by proceeds from ATM and ELOC share sales[134] Critical Accounting Estimates This section confirms no material changes to critical accounting estimates since the 2024 Form 10-K filing - There have been no material changes to critical accounting estimates from what was reported in the 2024 Form 10-K[136] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section states that there are no applicable quantitative and qualitative disclosures about market risk for the company - This item is not applicable to the Company[137] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, and reported no material changes in internal control over financial reporting during the quarter Evaluation of Disclosure Controls and Procedures This section confirms management's conclusion that the company's disclosure controls and procedures were effective - Management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025[138] Changes in Internal Control Over Financial Reporting This section reports no material changes in the company's internal control over financial reporting during the quarter - There were no material changes in the Company's internal control over financial reporting during the three-month period ended June 30, 2025[139] PART II - OTHER INFORMATION This section provides updates on risk factors, other material information, and a list of filed exhibits Item 1A. Risk Factors This section updates risk factors, emphasizing the critical need for additional financing due to insufficient capital, substantial doubt about going concern, and the material adverse effect of a potential $3.5 million litigation award - The Company requires additional financing to execute its business plan and fund operations, which may not be available on reasonable terms or at all, posing a risk to continued operations[142] - There is substantial doubt about the Company's ability to continue as a going concern within one year[143] - The Company is subject to a claim for approximately $3.5 million in attorney's fees and costs related to a dismissed lawsuit, which, if awarded, could materially adversely affect its financial condition and require additional capital or asset liquidation[144] Item 5 Other Information This section reports no Rule 10b5-1 trading arrangement changes by directors or officers and confirms the sale of the Sierra Arc Property for $4.3 million, which closed on June 12, 2025 - No director or officer adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during the quarter ended June 30, 2025[145] - The Company's wholly-owned subsidiary sold the Sierra Arc Property for a purchase price of $4.3 million, with the transaction closing on June 12, 2025[146] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including various corporate governance documents, agreements related to the Equity Line of Credit, and Sarbanes-Oxley certifications - The exhibits include amendments to the Certificate of Incorporation, the Purchase Agreement and Registration Rights Agreement with Lincoln Park Capital Fund, LLC, and certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[148]