10-Q: Aqua Metals Faces Going Concern Doubt Despite Capital Raise

Aqua Metals reported increased net losses and a going concern warning, despite recent capital raises and strategic shifts towards lithium-ion battery recycling.

Summary

• Aqua Metals reported a net loss of $18,206,000 for the nine months ended September 30, 2025, an increase from $17,112,000 in the prior year period.
• The company recognized a significant non-cash impairment and loss on disposal of property, plant, and equipment of $9,037,000 related to the sale of its TRIC facility.
• Cash and cash equivalents decreased to $3,586,000 as of September 30, 2025, from $4,079,000 at December 31, 2024.
• Management expressed substantial doubt about the company's ability to continue as a going concern within one year from the filing date.
• A registered direct offering and concurrent private placement closed on October 16, 2025, generating approximately $12,000,000 in net proceeds.
• The company fully utilized its At-the-Market (ATM) offering program capacity of $30,000,000, selling 833,219 shares for $5,921,000 net proceeds during the nine months ended September 30, 2025.
• An Equity Line of Credit (ELOC) with Lincoln Park Capital Fund, LLC provided $903,000 in net proceeds, with $9,097,000 remaining available.
• Aqua Metals repaid approximately $4,500,000 in notes payable during the nine months ended September 30, 2025, including a $3,000,000 loan to Summit Investment Services, LLC and $1,500,000 to accredited investors.
• The company is focusing on Li AquaRefining technology for lithium-ion battery recycling and has expanded its vision to double lithium carbonate output by deferring nickel and cobalt plating.
• Exploratory initiatives include applying AquaRefining technology to polymetallic deep-sea nodules, with MOUs signed with Impossible Metals Inc. and MOBY Robotics Inc.

Sentiment

Score: 3

Explanation: The company faces significant financial challenges, including increasing net losses, a growing accumulated deficit, and an explicit 'going concern' warning. While strategic initiatives and recent capital raises provide some liquidity, management states these are insufficient for the next 12 months, indicating persistent financial instability and high risk. The large impairment charge also reflects past asset divestitures.

Positives

• Net cash used in operating activities decreased to $7,648,000 for the nine months ended September 30, 2025, from $11,637,000 in the prior year, indicating improved operational cash burn.
• Net cash provided by investing activities was $4,971,000 for the nine months ended September 30, 2025, a significant improvement from $11,062,000 used in the prior year, primarily due to asset sales.
• The company successfully raised approximately $12,000,000 in net proceeds from a registered direct offering and concurrent private placement in October 2025, improving its immediate liquidity.
• Repaid $4,500,000 in notes payable during the nine months ended September 30, 2025, reducing debt obligations.
• Increased interest and other income to $805,000 for the nine months ended September 30, 2025, primarily due to an Employee Retention Credit.
• The company's Li AquaRefining pilot facility has demonstrated the ability to recover key valuable minerals and completed an extended 24x7 endurance run, indicating commercial scale readiness.
• Strategic shift to focus on lithium carbonate and Mixed Hydroxide Precipitates (MHP) is expected to reduce capital expenditures, simplify product set, increase volume, and de-risk operations.

Negatives

• Net loss increased to $18,206,000 for the nine months ended September 30, 2025, compared to $17,112,000 for the same period in 2024.
• Accumulated deficit grew to $265,976,000 as of September 30, 2025, from $247,770,000 at December 31, 2024.
• Cash and cash equivalents decreased to $3,586,000 as of September 30, 2025, from $4,079,000 at December 31, 2024.
• A significant non-cash impairment and loss on disposal of property, plant, and equipment of $9,037,000 was recognized due to the sale of the TRIC facility.
• The company has not generated revenues from commercial operations and expects to continue incurring losses for the foreseeable future.
• Management believes that capital resources, even after the October 2025 offering, are insufficient to sustain operations through at least the next twelve months, necessitating further capital raises.
• The company is subject to a legal claim for approximately $3.5 million in attorneys' fees and costs, which could materially affect its financial condition if unsuccessful in defense.

Risks

• The company will need additional financing to execute its business plan and fund operations, which may not be available on reasonable terms or at all, potentially leading to an inability to continue operations.
• Funding that includes the sale of equity may be dilutive to existing shareholders.
• There is substantial doubt about the company's ability to continue as a going concern within one year after the date the financial statements are issued.
• The ongoing legal claim against Johnson Controls Fire Protections, LP for approximately $3.5 million in attorneys' fees and costs could have a material adverse effect on the company's financial condition if the defendant is successful.

Future Outlook

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. The company's expanded vision aims to more than double the output of lithium carbonate by deferring nickel and cobalt plating to a later phase, which is expected to reduce capital expenditures, simplify the product set, increase product volume, de-risk operations, and improve operating margins. The company believes its technology and partnerships position it to play a key role in building a resilient, low-carbon domestic supply chain for critical minerals.

Management Comments

• Management believes that there is substantial doubt about the entity's ability to continue as a going concern within one year after the date the financial statements are issued.
• Management does not expect the reduction in force to materially impact its current pilot operations or continuing research and development.
• Until additional funding is secured, employee-related and overhead expenses are expected to remain at the reduced levels throughout the remainder of 2025.
• 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.
• 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.

Industry Context

Aqua Metals operates in the rapidly growing critical minerals recovery and battery recycling industry, driven by the global transition to electric vehicles, growth in internet data centers, and alternative energy applications. Its AquaRefining technology aims to offer a cleaner, lower-emissions, and potentially more cost-efficient alternative to traditional smelting and hydrometallurgical processes for lithium-ion battery recycling. The company's focus on domestic supply chain aligns with U.S. government goals for strategic battery minerals. The exploration into deep-sea nodules indicates a broader strategy to diversify feedstock sources for critical minerals, tapping into emerging resource opportunities.

Comparison to Industry Standards

• AquaRefining is presented as a cleaner approach to LiB recycling, producing far less CO2 waste streams than smelting or chemical-driven hydrometallurgical processes currently on the market, based on Argonne National Labs modeling (EverBatt).
• The company believes its 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, positioning it as a low-cost producer compared to other processes.
• Aqua Metals aims to be the first company in North America to recycle battery minerals from black mass and sell them in the U.S., aligning with the U.S. government's goal of retaining strategic battery minerals within the domestic supply chain.

Management Changes

Corporate Governance

Legal Proceedings

• The company's complaint against Johnson Controls Fire Protections, LP, relating to the November 2019 fire at its former TRIC facility, was dismissed on March 25, 2025.
• Johnson Controls Fire Protections, LP filed a Memorandum for Costs seeking approximately $300,000 in litigation-related costs on May 12, 2025.
• Johnson Controls Fire Protections, LP filed a motion to recover attorneys' fees and costs in the aggregate approximate amount of $3.5 million on May 29, 2025.
• The company intends to vigorously defend against the motion for fees and costs, believing it has a strong defense, especially regarding legal fees.
• A successful award for all or a substantial portion of the requested amount could make the company unable to satisfy it without raising additional capital or liquidating assets.

Related Party Transactions

• Eric Gangloff, founder and CEO of Summit Investment Services, LLC, was appointed as a member of the Board of Directors in February 2025. The company had a $3,000,000 loan agreement with Summit Investment Services, LLC, which was paid off in June 2025.
• Certain officers and directors of the company purchased secured promissory notes in the aggregate amount of $1,250,000 as part of a private placement on December 18, 2024. This included $400,000 related to a holder appointed as a director in February 2025. These notes were repaid in full by May 5, 2025.

Stakeholder Impact

• **Shareholders**: Face significant dilution risk from ongoing and future equity financings, as well as the potential for further share price volatility due to the 'going concern' warning and legal liabilities. Reverse stock splits have also occurred.
• **Employees**: Workforce reductions have been implemented, impacting payroll and related costs, though management states current pilot operations are not materially impacted. Stock-based compensation remains a component of employee incentives.
• **Creditors**: Existing debt obligations have been significantly reduced through repayments, but the company's 'going concern' status indicates elevated risk for future lenders.
• **Customers/Partners**: The company's strategic focus on Li-ion recycling and new partnerships (e.g., Impossible Metals, MOBY Robotics) could lead to future commercial opportunities and a more robust supply chain for critical minerals.

Next Steps

• Continue pilot operations for Li AquaRefining technology.
• Advance site selection and permitting for the first commercial AquaRefining facility.
• Pursue additional strategic partnerships and grant opportunities to accelerate commercialization.
• Seek additional funding opportunities, including through the ATM, ELOC, and other potential financing arrangements.
• Vigorously defend against Johnson Controls Fire Protections, LP's motion for attorneys' fees and costs.

Key Dates

Recommendation

The company's financial position is highly precarious, marked by increasing net losses, a substantial accumulated deficit, and an explicit 'going concern' warning from management. Despite recent capital raises, the company states these funds are insufficient to cover operations for the next 12 months, signaling a high probability of further dilutive equity financing. The significant impairment charge and ongoing legal liabilities add to the financial instability. While the AquaRefining technology shows promise in a growing market, the immediate and severe liquidity concerns, coupled with the lack of commercial revenue, make this a high-risk investment with a strong likelihood of further value erosion for shareholders.

Keywords

Lithium-ion battery recycling, AquaRefining, Critical minerals, SEC filing, Going concern, Capital raise, Hydrometallurgy, Electroplating, EV batteries, Deep-sea nodules