Aqua Metals, Inc.

Aqua Metals is engaged in the business of applying its commercialized clean, water-based recycling technology principles to develop the clean and cost-efficient recycling solutions for both lead and lithium-ion (“Li”) batteries. Our recycling process is a patented hydro- and electrometallurgical technology that is a novel, proprietary and patented process we developed and named AquaRefining. AquaRefining is a low-emissions, closed-loop recycling technology that replaces polluting furnaces and hazardous chemicals with electricity-powered 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 metalone atom at a time, closing the sustainability loop for the rapidly growing energy storage economy.

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.

For the lead market, our focus is on providing equipment and licensing of our lead acid battery recycling technologies in an enabler model which allows us to work with anyone in the industry globally and address the entire marketplace. Our focus for the lithium market includes operating ourfirst-of-a-kind lithium battery recycling facility, utilizing electricity to recycle instead of intensive chemical processes, fossil fuels, or high-temperature furnaces.

Liquidity and Going Concern Assessment

For the years ended* December 31, 2024* and2023, the Company reported a net loss of $24,555,000 and $23,938,000, respectively, and cash used in operations of $13,632,000 and $3,193,000 (inclusive of $12,278,000 of non-recurring proceeds from the sale of real estate), respectively. As of* December 31, 2024*, the Company had cash and cash equivalents of approximately $4,079,000, a working capital deficit of approximately $(3,538,000) and an accumulated deficit of $247,770,000. In addition to cash required to fund operating activities, within the next12 months, the Company will be required to pay cash to settle notes payable of $3,000,000 on* April**27,* 2025 and $1,500,000 on* December 31, 2025.The Company hasnot* generated revenues from commercial operations over thetwo years ended* December 31, 2024and2023*, except for nominal sales of lead finished goods, and expects to continue incurring losses for the foreseeable future.

Management believes that the Company doesnot have sufficient capital resources to sustain operations through at least the nexttwelve months from the date of this filing. Additionally, in view of the Company’s expectation to incur significant losses for the foreseeable future 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, isnot assured. Accordingly, management believes that there is substantial doubt regarding the Company’s ability to continue operating as a going concern through the nexttwelve months from the date of this filing.

The accompanying consolidated financial statements have been prepared under the assumption the Company will continue to operate as a going concern, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. The consolidated financial statements donot include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts of liabilities that* may*result from uncertainty related to the Company’s ability to continue as a going concern.

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Basis of presentation and consolidation

The accompanying consolidated financial statements include those of Aqua Metals, Inc. and its subsidiaries (collectively, the “Company” or “Aqua Metals”), after elimination of all intercompany accounts and transactions. The Company has prepared the accompanying consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”).

Use of estimates

The preparation of the 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 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, valuation allowances for deferred tax assets, the determination of stock option expense and the determination of the fair value of stock warrants issued. Actual results could differ from those estimates.

Cash and cash equivalents

The Company considers all highly liquid instruments with original or remaining maturities ofninety days or less at the date of purchase to be cash equivalents. The Company maintains its cash balances in large financial institutions. Periodically, such balances* may*be in excess of federally insured limits.

Accounts receivable

The Company has traditionally sold 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. We determine if any allowance for credit losses using is required considering a combination of factors to reduce receivable balances to the net amount expected to be collected. As of* December 31, 2024and2023,* the Company hadno trade accounts receivable balance and hasnot created an allowance for credit losses . The total accounts receivable balance as of* December 31, 2023consisted of proceeds from the non-recurring engineering agreement with6K* Energy.

Note receivable

The Company records notes receivable when it extends credit or financing tothird parties. The Company evaluates notes receivable for collectability at each reporting period under the current expected credit loss (CECL) model, in accordance with ASC326 (Financial Instruments – Credit Losses). If necessary, an allowance for doubtful accounts is recorded to reflect potential losses. As of* December 31, 2024*, we evaluated the need for an allowance for credit loss using the guidelines set forth in ASC326 CECL, and have determined this note is fully collectible and, therefore, we havenot recorded an allowance against the note receivable balance.

Inventory

Inventory is stated at the lower of cost or net realizable value. Cost is recorded on afirst-in,first-out basis using the weighted average method. Net realizable value is determined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The Company records a write-down, if necessary, to reduce the carrying value of inventory to its net realizable value. The effect of these write-downs is to establish a new cost basis in the related inventory, which isnot subsequently written up. During thetwelve months ended* December 31, 2024**,* we recorded write-downs of $283,000 which were included in plant operations in the condensed consolidated statement of operations.

Property, plant and equipment, net

Property, plant and equipment are stated at cost net of accumulated depreciation. Depreciation on property, plant and equipment is calculated on the straight-line basis over the estimated useful lives of the assets. Leasehold improvements are depreciated over the shorter of the life of the asset or the remaining term of the lease.

Property, plant and equipment are stated at cost net of accumulated depreciation. Depreciation on property, plant and equipment is calculated on the straight-line basis over the estimated useful lives of the assets. Leasehold improvements are depreciated over the shorter of the life of the asset or the remaining term of the lease. We periodically evaluate our property, plant and equipment assets for indications that the carrying amount of an asset* may**not* be recoverable. At* December 31, 2024*, management reviewed the remaining estimated lives of our long-lived assets and determined that the estimated life of the property, plant and equipment properly reflected the current remaining economic life of the asset.

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Intellectual property, net

Intellectual property consists of patent applications contributed to the Company byfive founding stockholders and patent applications for technology developed by the Company. The useful life of this intellectual property has been determined to beten years and the assets are being amortized straight-line over this period. The Company periodically evaluates its intangible and other long-lived assets for indications that the carrying amount of an asset* may**not* be recoverable. In reviewing for impairment, the Company compares the carrying value of such assets to the estimated undiscounted future cash flows expected from the use of the assets and their eventual disposition. When the estimated undiscounted future cash flows are less than their carrying amount, an impairment loss is recognized equal to the difference between the assets’ fair value and their carrying value. In addition to the recoverability assessment, the Company routinely reviews the remaining estimated lives of its long-lived assets. Any reduction in the useful life assumption will result in increased depreciation and amortization expense in the period when such determination is made, as well as in subsequent periods. The Company evaluates the need to record impairment during each reporting period. As of* December 31, 2024* and2023, the Company determined that the estimated life of the intellectual property properly reflected the current remaining economic life of the asset.

Leases

The Company determines if an arrangement is a lease at inception. Operating lease right-of-use assets (“ROU assets”) and short-term and long-term lease liabilities are included in the consolidated balance sheets. ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating and finance lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases donot provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The Company’s lease terms* mayinclude options to extend or terminate the lease. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term. For lease agreements with terms less than12* months, the Company has elected the short-term lease measurement and recognition exemption, and the Company recognizes such lease payments on a straight-line basis over the lease term.

Research and development

The Company conducts research and development activities, primarily focusing on refining recycling processes to increase yield and purity of recovered materials. This entails experimenting with different techniques, equipment, and operational parameters to enhance efficiency. All research and development expenditures are expensed as incurred.

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Income taxes

The Company accounts for income taxes in accordance with the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred assets and liabilities are recognized based upon anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases. The provision for income taxes is comprised of the current tax liability and the changes in deferred tax assets and liabilities. The Company establishes a valuation allowance to the extent that it is more-likely-than-not that deferred tax assets willnot be recoverable against future taxable income.

The Company recognizes the effect of uncertain income tax positions only if those positions are more-likely-than-not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.

Fair value measurements

The carrying amounts of cash and cash equivalents, accounts receivable, inventory, prepaid expenses and other current assets, accounts payable, and accrued expenses approximate fair value due to the short-term nature of these instruments. The carrying value of short and long-term debt, and lease liabilities also approximates fair value since these instruments bear market rates of interest or are calculated using market rates of interest.None of these instruments are held for trading purposes.

Fair value is defined as an exit price, representing the amount that would be received upon the sale of an asset or payment to transfer a liability in an orderly transaction between market participants. Fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability. Athree-tier fair value hierarchy is used to prioritize the inputs in measuring fair value as follows:

Level1. Quoted prices in active markets for identical assets or liabilities.

Level2. Quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that arenot active, or other inputs that are observable, either directly or indirectly.

Level3. Significant unobservable inputs that cannot be corroborated by market data.

The asset or liability’s fair value measurement within the fair value hierarchy is based upon the lowest level of any input that is significant to the fair value measurement.

As of* December 31, 2024,the Company had a Level3* warrant liability related to freestanding warrants issued in connection with a private placement transaction that is measured at fair value on a recurring basis. As of* December 31, 2023,*the Company didnot have any assets or liabilities measured at fair value on a recurring basis.

Stock-based compensation

The Company recognizes compensation expense for stock-based compensation in accordance with ASC718 “Compensation – Stock Compensation.” The fair value of restricted stock units ("RSUs") is measured on the grant date based on the closing fair market value of our common stock. The resulting cost is recognized over the period during which an employee is required to provide service in exchange for the awards, usually the vesting period, which is generallythree years for RSUs. Stock-based compensation expense is recognized on a straight-line basis, net of actual forfeitures in the period.

The fair value of RSU grants with performance conditions is determined using the closing price of our common stock on date of grant. The calculated compensation cost is adjusted based on an estimate of awards ultimately expected to vest and our assessment of the probable outcome of the performance condition. The fair value of RSU grants with market conditions is calculated on the date of grant using a Monte Carlo simulation model utilizing several key assumptions, including expected share price volatility, the risk-free rate of return, the expected dividend yield and other award design features.

If at any point in time the Company doesnot currently have a sufficient quantity of shares authorized for issuance under their approved stock incentive plan, the Company has established a sequencing policy that shares are issued to grants with the earliest inception date first. When multiple grants have the same inception date, shares arefirst allocated to non-named executive officers, then to shares with satisfied market and performance conditions, and last to service-only grants made to named executive officers. Therefore, grants to named executive officers with service-only conditions with the latest grant date will be reclassified to liabilities first. For service-based grants, the value of grants required to be reclassified to liabilities will be re-measured on a periodic basis based on the closing fair market value of our common stock.

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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, options and warrants. Potential dilutive common shares include the dilutive effect of the common stock underlying in-the-money stock options and 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 hasnot 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, unvested restricted stock, stock options and warrants werenot included in the computation of diluted net loss per share because such inclusion would have had an antidilutive effect.

(1) Securities are presented on a weighted average outstanding calculation as required if the securities were dilutive and adjusted to give effect to the* November 4, 2024*reverse stock split.

Segment and geographic information

Our chief operating decision maker (“CODM”) is the Chief Executive Officer. 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 CODM in deciding how to allocate resources and in assessing performance. The CODM views its operations and manages its business inone operating segment. For further discussion related to segment reporting, please refer to Note18 - Segment reporting.

Concentration of credit risk

The Company didnot have a trade receivable balance as of* December 31, 2024* and* December 31, 2023*, respectively. The Company generated revenue of $25,000 for the year ended* December 31, 2023*, from the sale of lead finished goods to P. Kay Metals. Revenue from P. Kay Metals represented 100% of total revenue for the year ended* December 31, 2023*.

Recent accounting pronouncements

Recent accounting pronouncements adopted

In* November 2023,the Financial Accounting Standards Board (“FASB”) issued ASUNo.* 2023-07, Improvements to Reportable Segment Disclosures (Topic280). This ASU updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of a segment's profit or loss. This ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources. The Company retrospectively adopted this guidance during the year ended* December**31,* 2024. The adoption didnot have a significant impact on the consolidated financial statements.

Recently issued accounting pronouncementsnot* yet adopted*

In* November 2024,the FASB issued ASU2024*-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic220-40): Disaggregation of Income Statement Expenses, which introduced new guidance on disclosures of specified information about certain costs and expenses included within expenses presented on the face or the income statements, such as purchases of inventory and employee compensation. This guidance is effective for the Company for annual reporting periods beginning* January 1, 2027and interim reporting periods beginning January 1, 2028.*The Company is currently evaluating the impact that the adoption of this pronouncement will have on the Company's consolidated financial statements and disclosures.

In* December 2023,the FASB issued ASUNo.* 2023-09, Improvements to Income Tax Disclosures (Topic740). The ASU requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. The ASU is effective on a prospective basis for annual periods beginning after* December 15, 2024.Early adoption is also permitted for annual financial statements that havenot* yet been issued or made available for issuance. This ASU will result in the required additional disclosures being included in our consolidated financial statements, once adopted.

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The Company has historically generated revenues by recycling lead acid batteries (“LABs”) and selling the recovered lead to its customers.

The Company wasnot in commercial production in2024 or2023. The nominal revenue generated during the year ended* December 31, 2023* resulted from the sale of from the sale of lead finished goods that were generated during operation of the TRIC facility prior to the* November 2019fire at our TRIC facility. Revenue from products transferred to customers at a single point in time with the delivery of the Company’s products to customers accounted for 100% of our revenue during the year ended December 31, 2023.*

Inventory consisted of the following (in thousands):

We write-down inventory when evidence exists that the net realizable value of inventory is less than the cost. During thetwelve months ended* December 31, 2024**,* we recorded write-downs of $283,000 which were included in plant operations in the condensed consolidated statement of operations.

Property, plant and equipment, net, consisted of the following (in thousands):

Property, plant and equipment depreciation expense was $0.9 million and $0.9 million for the years ended* December 31, 2024and December 31, 2023*, respectively. Equipment under construction is comprised of our lithium-ion battery recycling commercial equipment along with various components being manufactured or installed by the Company.

In2024, management shifted its strategic focus to prioritizing lithium carbonate production alongside mixed hydroxide precipitate. This decision aimed to reduce capital and operational intensity while enabling a larger-scale facility with higher revenue and improved margins than the previous design. As a result of this strategic shift, at* December 31, 2024* the Company recognized an impairment of approximately $2,640,000 related to vendor equipment deposits for equipment that was initially required for Phase One of the recycling campus at TRIC but isno longer needed under the revised plan. The $2,640,000 write-down of vendor equipment deposits was recognized as an impairment expense and is included under “Impairment expense” in the Consolidated Statement of Operations for the year ended* December 31, 2024.The fair value of the impaired assets was determined based on management’s assessment of recoverability, as the equipment wasno* longer needed.

During2023, management had shifted focus away from the original service under the ACME lead recycling license agreement to a new primary focus on the Lithium recycling business as a Company. As a result, management sees a decrease in the utilization of the ACME plant and its related operations, and assessed that the future expected cash flows connected with ACME are at or near zero. Therefore, at* December 31, 2023,we recognized an impairment of approximately $3,451,000 to equipment under construction that wasnot* yet capitalized related to the ACME CIP as a result of the suspension of the development of recycling operations at the ACME Metals Taiwanese facility.

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Intellectual property, net, is comprised of the following (in thousands):

Amortization expense was $135,000 and $180,000 for the years ended* December 31, 2024and December 31, 2023*, respectively.

Estimated future amortization is as follows as of* December 31, 2024* (in thousands):

During the year ended* December**31,2023,* the Company sold its stock in LINICO and recorded an impairment of $1,400,000 and a receivable of $600,000. The proceeds were to be received over a12 month installment starting in* January 2024.As of December 31, 2024*, the Company's note receivable balance was $100,000. On* December 19, 2024the Company entered in an agreement with LINICO to receive the balance on March 31, 2025.*

Comstock Inc., a Nevada corporation (NYSE-MKT: LODE), is the beneficial owner of approximately 88% of the common shares of LINICO. The Company's Chief Financial Officer, Judd Merrill, was a member of the board of directors of Comstock Inc. until* April 5, 2023.*

Other assets consist of the following (in thousands):

(1) See Footnote10.

(2) Deposits for equipment to be acquired and utilized at the Company's Phase One build-out of our recycling campus at TRIC.

Accrued liabilities consist of the following (in thousands):

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As of* December 31, 2024*, the Company maintainedtwo operating leases for real estate. The Company's operating leases have terms of 36 and 37 months and includeone or more options to extend the duration of the agreements. These operating leases are included in "Other assets" on the Company's* December 31, 2024* and2023 consolidated balance sheets and represent the Company's right to use the underlying assets for the term of the leases. The Company's obligation to make lease payments are included in "Lease liability, current portion" and "Lease liability, non-current portion" on the Company's* December 31, 2024* and2023 consolidated balance sheets.

On* March 14, 2024**,* the Company extended its operating lease for its headquarters located at5370 Kietzke Lane, Reno, NV. The lease extension was determined to be a lease modification that qualified as a change of accounting on the existing lease andnot a separate contract. As such, the Right-of-Use (“ROU”) assets and operating lease liabilities were remeasured using an incremental borrowing rate at the date of modification of 9.61%, which resulted in an increase of the ROU asset of $170,000 and an increase in the operating lease liabilities of $166,000.

On* June 9, 2024**,* the Company extended its operating lease for its Innovation Center located at160 Denmark Dr, McCarran, NV. The lease extension was determined to be a lease modification that qualified as a change of accounting on the existing lease andnot a separate contract. As such, the Right-of-Use (“ROU”) assets and operating lease liabilities were remeasured using an incremental borrowing rate at the date of modification of 9.52%, which resulted in an increase of the ROU asset of $347,000 and an increase in the operating lease liabilities of $324,000.

Based on the present value of the lease payments for the remaining lease term of the Company's existing operating leases, as of* December 31, 2024*, total right-of-use assets were approximately $542,000 and operating lease liabilities were approximately $552,000. As of* December 31, 2023*, total right-of-use assets were approximately $222,000 and operating lease liabilities were approximately $231,000. For its real estate leases, the Company has elected the practical expedient tonot separate a lease into lease and nonlease components.

The Company currently maintainsone finance lease for equipment. On* April 1, 2024the Company entered into a finance lease for laboratory equipment which expires in2029**.In November 2021**,* the Company entered into a finance lease for a modular laboratory which expired in* October 2024.The Company's obligation to make finance lease payments are included in "Lease liability, current portion" and "Lease liability, non-current portion" on the Company's December 31, 2024* and2023 consolidated balance sheets.

Information related to the Company's right-of-use assets and related lease liabilities were as follows (in thousands):

Maturities of lease liabilities as of* December 31, 2024* were as follows (in thousands):

Due in12-month period ended* December 31,*

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On* February 1, 2023,Aqua Metals Reno, Inc., our wholly-owned subsidiary, entered into a Loan Agreement with Summit Investment Services, LLC, a Nevada limited liability company (the “Lender”), pursuant to which the Lender provided us with a loan in the amount of $3,000,000. The loan proceeds were used to purchase a building located at2999* Waltham Way McCarran, NV89434 (the “Building”). The loan accrues interest at a fixed annual rate of 9.50%. Interest-only payments are due monthly for thefirst twenty-four months and the principal and all unpaid interest is due on* February1,* 2025. During2025 we extended the existing maturity date to* April27,* 2025. We have the right to prepay the loan at any time, provided that we must pay guaranteed minimum interest of $213,750 (9-months of interest). The Loan Agreement includes representations, warranties, and affirmative and negative covenants that are customary of institutional loan agreements. As of * December 31, 2024* , the Company was in compliance with all of the covenants. The loan is collateralized by afirst priority lien on the building and site improvements, and is guaranteed by Aqua Metals, Inc. During* February 2025,* Eric Gangloff, founder and CEO of Summit Investment Services, LLC was appointed as a member of the Board of Directors of the Company.

On* December 18, 2024,Aqua Metals, Inc. (“Aqua Metals” or the “Company”) entered into a Securities Purchase Agreement with eight accredited investors, including executives and related parties of the Company, in connection with a private placement of secured promissory notes (“Notes”) in the aggregate principal amount of $1,500,000 and common stock purchase warrants (“Warrants") to purchase 750,000 shares of the Company’s common stock. The Securities Purchase Agreement includes customary representations, warranties, and covenants by the investors and the Company. Certain officers and directors of the Company purchased Notes in the aggregate amount of $850,000. The Notes accrue interest at the rate of 20% per annum, subject to a payment of a minimum of12* months interest in the event of prepayment. The entire principal amount evidenced by the Notes plus all accrued and unpaid interest is due on* December 31, 2025.We have the right to prepay the loan at any time. Additionally, upon the occurrence of an event of default, the note holders maydeclare the Notes to be forthwith due and payable, whereupon the principal and all accrued and unpaid interest thereon, plus all costs of enforcement and collection (including court costs and reasonable attorney’s fees), shall immediately become and be forthwith due and payable. The Company’s obligations under the Notes are secured by afirst* lien on the Company’s strategic metal inventory and asecond lien on all other assets of the Company. Each Note purchaser received a Warrant to purchase share of the Company’s common stock in an amount equal to the principal amount of the investor’s Note divided by two, for a total of 750,000 shares of common stock. The Warrants are exercisable over afive-year period at an exercise price of $1.92 and $1.93 per share and are convertible to shares of common stock of the Company upon a change in control of the Company. The private placement closed on* December 19, 2024for the gross proceeds of $1,500,000. Proceeds from the transaction werefirst* allocated to the warrants and then to the notes on a residual basis resulting in $986,000 allocated to liability-classified warrants and $514,000 to the notes, creating a discount on the notes. Any subsequent changes to the fair value of the Warrant Liability will be recorded in current period earnings. The Company incurred issuance costs of $58,000, which were proportionally allocated between the notes and warrants. Costs related to the warrants were immediately expensed, while costs associated with the notes were included in the note discount and are amortized as interest expense over the loan term. As of* December 31, 2024,*the outstanding principal balance on the secured notes was $1,500,000, with accrued interest of $10,000. The notes payable are presented net of discount, and the amortization of the discount is recorded as interest expense in the Company’s consolidated financial statements.

Notes payable is comprised of the following (in thousands):

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The Company accounted for the warrants issued in connection with the Securities Purchase Agreement on Note11, to purchase 750,000 shares in accordance with the guidance contained in ASC Topic815 “Derivatives and Hedging”. These warrants contain provisions—such as a mandatory conversion feature upon a change in control—that preclude equity classification were recorded as a liability. Accordingly, the Company classified the warrants as a liability at fair value and adjusts them to fair value at each reporting period. This liability is re-measured at each balance sheet date until the warrants are exercised or expire, and any change in fair value will be recognized in the Company’s statement of operations. The fair value of the warrants was estimated using the Monte-Carlo option pricing modelto determine the fair value of its liability-classified warrants. These instruments are classified within Level3 of the fair value hierarchy due to the use of unobservable inputs. Key assumptions used in the valuation as of* December 19, 2024and December 31, 2024,*included:

The following table provides a rollforward of the Level3 warrant liability for the year ended* December 31, 2024 (*in thousands):

The warrant liability was initially recorded at a fair value of $986,000 and subsequently remeasured to $1,493,000 as of* December 31, 2024.The change in fair value of $507,000 was recognized as a non-cash expense in the statement of operations for the year ended December 31, 2024.*

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Effective* November 5, 2024**,* the Company effected aone-for-20 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 consolidated financial statements and notes thereto have been adjusted retrospectively to reflect this reverse stock split.

Authorized capital

The authorized capital stock of the Company consists of 300,000,000 shares of common stock, par value $0.001 per share. In the event of liquidation of the Company, dissolution or winding up, the holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities. The common stock hasno preemptive or conversion rights or other subscription rights. There areno redemption or sinking fund provisions applicable to the common stock. The outstanding shares of common stock are fully paid and non-assessable.

The holders of the Company’s common stock are entitled toone vote per share. Holders of common stock are entitled to receive a ratable share of dividends, if any, as* may*be declared by the board of directors.

Other shares issued

During the year ended* December 31, 2023*, the Company issued 73,141 shares of common stock upon vesting of Restricted Stock Units ("RSUs") granted by the Company to management and employees, including 25,532 of reissued treasury stock. We withheld 46,960 shares to satisfy approximately $1,092,000 of employees’ tax obligations. We treat shares of common stock withheld for tax purposes on behalf of our employees in connection with the vesting of RSUs in a similar manner as common stock repurchases and reported as treasury stock.

During the year ended* December 31, 2023*, the Company issued 8,534 shares of common stock upon vesting of RSUs granted to Board members.

During the year ended* December 31, 2023*, the Company issued 5,212 shares of common stock to a Board member related to director fees and other director incentives.

During the year ended* December 31, 2023*, the Company issued 789 shares of common stock to a former Board member to fulfill obligations related to consulting services.

During the year ended* December 31, 2023*, the Company issued 162,215 shares of common stock pursuant to the At The Market Issuance Sales Agreement for net proceeds of $3,786,000.

During the year ended* December 31, 2023*, the Company issued 9,635 shares of common stock pursuant to the employee stock purchase plan.

During the year ended* December 31, 2023*, the Company issued 23,468 shares of common stock upon the settlement of the securities class action lawsuit.

In* July 2023,*the Company completed a public offering of 909,650 shares of its common stock, for net proceeds of $18,318,000.

In* August 2023,*the Company issued 227,273 shares of its common stock pursuant to that certain Securities Purchase Agreement (the “Yulho SPA”), with Yulho Co, Ltd., for net proceeds of approximately $4,629,000.

During the year ended* December 31, 2024*, the Company issued 78,564 shares of common stock upon vesting of Restricted Stock Units ("RSUs") granted by the Company to management and employees, including 44,261 of reissued treasury stock. We withheld 52,252 shares to satisfy approximately $552,000 of employees’ tax obligations. We treat shares of common stock withheld for tax purposes on behalf of our employees in connection with the vesting of RSUs in a similar manner as common stock repurchases and reported as treasury stock.

During the year ended* December 31, 2024*, the Company issued 20,111 shares of common stock for consulting services.

During the year ended* December 31, 2024*, the Company issued 10,680 shares of common stock upon vesting of RSUs granted to Board members.

During the year ended* December 31, 2024*, the Company issued 9,428 shares of common stock to a Board member related to director fees.

During the year ended* December 31, 2024*, the Company issued 6,607 shares of common stock to a former employee related to a severance agreement.

During the year ended* December 31, 2024*, the Company issued 10,635 shares of common stock pursuant to the employee stock purchase plan.

During the year ended* December 31, 2024*, the Company issued 1,195,034 shares of common stock pursuant to the At The Market Issuance Sales Agreement for net proceeds of $5,014,000.

In* May2024,* the Company completed a public offering of 1,006,250 shares of its common stock at the public offering price of $7.80 per share. In connection with the sale of common stock, the Company issued warrants to purchase shares of common stock at the rate ofone warrant for every share of purchased common stock, at the offering price of $0.20 per warrant. After the deduction of the underwriter’s discount and expenses payable by us, we received net proceeds of $7,306,000. The Company used the relative fair value method to allocate the net proceeds of approximately $7,306,000 between the common stock and the warrants. As presented below, the Company recorded the fair value of the warrants of $3,081,000 and common stock of $4,225,000.

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Warrants outstanding

In* July2023,* the Company issued a warrants to purchase 18,193 shares of the Company's common stock to the underwriter of the Company's public offering, equal to 2% of the909,650 shares sold. The warrants are exercisable at $27.50 per share, commencingsix months after* July 17,2023. The warrants have an expiration date of 5 years from the date of issuance and will expire on July17,* 2028. Using the Black Scholes Merton model, the Company estimated the warrants' fair value to be $388,000 with the assumptions as follows: $30.80 per share fair value on the date of issuance;5-year term;81.9% volatility;3.81% discount rate and 0% annual dividend rate. Warrants are accounted for under the equity classification.

In* August2023,* the Company issued a warrant to purchase 10,288 shares of the Company's common stock to the underwriter of the transaction in connection with the Yulho SPA. The warrants have an expiration date of 5 years from the date of issuance and are exercisable immediately at $25 per share. The warrant will expire on* August4,* 2028. Using the Black Scholes Merton model, the Company estimated the warrants' fair value to be $181,000 with the assumptions as follows: $25.40 per share fair value on the date of issuance;5-year term;82.3% volatility;3.81% discount rate and 0% annual dividend rate. Warrants are accounted for under the equity classification.

In* May2024,* the Company issued a warrant to purchase 39,125 shares of the Company's common stock to the underwriter of the Company's public offering, equal to 2% of the shares and the number of shares underlying the warrants sold in the offering. The warrants have an expiration date of 5 years from the date of issuance and are exercisable immediately at $9.75 per share. The warrant will expire on* May14,* 2029. Using the Black Scholes Merton model, the Company estimated the warrants' fair value to be $245,000 with the assumptions as follows: $9.42 per share fair value on the date of issuance;5-year term;80.3% volatility;4.46% discount rate and 0% annual dividend rate. Warrants are accounted for under the equity classification.

In* May2024,* in conjunction with the Company's public offering, the Company issued a warrant to purchase 1,006,250 shares of the Company's common stock. The warrants have an expiration date of 5 years from the date of issuance and are exercisable immediately at $7.80 per share. The warrant will expire on* May14,* 2029. Using the Black Scholes Merton model, the Company estimated the warrants' fair value to be $6,666,000 with the assumptions as follows: $9.42 per share fair value on the date of issuance;5-year term;80.3% volatility;4.46% discount rate and 0% annual dividend rate. Warrants are accounted for under the equity classification.

In* December2024,* the Company issued warrants to purchase 750,000 shares of the Company's common stock to theeight accredited investors, including executives and related parties of the Company, in connection with the private placement of secured promissory notes. The warrants are exercisable over afive-year period at an exercise price of $1.92 and $1.93 per share and are convertible to shares of common stock of the Company upon a change in control of the Company. The warrant will expire on* December19,* 2029.

See further discussion of the* December 2024warrants within Note12.*

Warrants outstanding to purchase shares of the Company’s common stock at a weighted average exercise price per share are as follows:

Stock-based compensation

2014 Stock Incentive Plan

In2014, the Board of Directors adopted the Company’s stock incentive plan (the*“2014* Plan”). The2014 Plan expired in* September 2024.*

2019 Stock Incentive Plan

In2019, the Board of Directors adopted the Company’s stock incentive plan (the*“2019* Plan”). The2019 Plan was most recently amended and restated effective as of the Company’s2024 Annual Stockholders’ Meeting. A total of 1,400,000 shares of common stock was authorized for issuance pursuant to the2019 Plan. The2019 Plan provides for the following types of stock-based awards: incentive stock options; non-statutory stock options; restricted stock; and performance stock. The2019 Plan, under which equity incentives* maybe granted to employees and directors under incentive and non-statutory agreements, requires that the option price maynot* be less than the fair value of the stock at the date the option is granted. Option awards are exercisable until their expiration, which* maynot* exceed 10 years from the grant date. The restricted shares that are issued from the2019 Plan normally vest insix equal tranches over three years.

As of* December 31, 2024,the Company granted 1,133,687 shares, all of which are subject to future vesting conditions under the2019* plan which exceeds the 821,837 shares available for issuance. The Company has established a sequencing policy such that grants with the latest grant date will be reclassified to liabilities first. Considering this policy and the terms of the underlying grants, this Company has reclassified 311,850 of their service-based RSUs to liabilities as of* December 31, 2024.*

Stock-based compensation expense recorded was allocated as follows (in thousands):

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The following table summarizes the stock-based compensation plan activity and related information through* December 31, 2024*.

There wereno option exercises during the year ended* December 31, 2024* and* December 31, 2023*, respectively. There wereno outstanding stock options as of* December 31, 2024*.

As of* December 31, 2024*, there is approximately $3,830,000 of total unrecognized compensation cost related to the unvested share-based (option and RSU) compensation arrangements granted under the stock-based compensation plans. The remaining unrecognized compensation cost will be recognized over a weighted-average period of 2.2 years.

Our policy is to fulfill the required shares for a restricted share vesting byfirst depleting any available Treasury Stock held by the Company and the remaining outstanding balance is satisfied with unissued shares.

Stock Price Hurdle Awards

In2023, the Company granted stock price hurdle restricted share units as a result of the pilot plant commissioning. The stock price hurdle restricted share units expirethree years from the date of grant and vest based on the Corporation’s common stock achieving an absolute stock price hurdles based on a5-day VWAP at any time over thethree-year term.

In2024, the Company granted stock price hurdle restricted share units as part of the long-term incentive bonus. The stock price hurdle restricted share units expirethree years from the date of grant and vest based on the Corporation’s common stock achieving an absolute stock price hurdles based for5 consecutive days closing prices at any time over thethree-year term.

The following is a summary of the changes in outstanding stock price hurdle awards share units for2024:

The fair value of stock price hurdle awards were calculated on the date of grant using a Monte Carlo simulation model utilizing several key assumptions, including expected Company share price volatility, the risk-free interest rate, the cost of equity, and other award design features. The following are weighted-average key assumptions for2024 and2023 grants.

Total Shareholder Return (TSR) Awards

In2024, the Company granted TSR restricted share units as part of the long-term incentive bonus. The TSR restricted share units vest based on the Corporation achieving atotal shareholder return relative to our Performance Peer Group and expirethree years from the date of grant if performance conditions arenot met.

The following is a summary of the changes in outstanding TSR awards share units for2024:

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2023 Restricted stock units

During thefirst quarter of2023, the Company granted 3,207 RSUs, all of which were subject to vesting, with a grant date fair value of $70,000 to employees. The shares vest inthree equal installments over athree-year period.

During thesecond quarter of2023, the Company granted 10,227 RSUs, all of which were subject to vesting, with a grant date fair value of $225,000 to Board Members. The shares vest infour equal installments over atwelve-month period.

During thethird quarter of2023, the Company granted 6,812 RSUs, all of which were subject to vesting, with a grant date fair value of $155,000 to employees. The shares vest inthree equal installments over athree-year period.

During thefourth quarter of2023, the Company granted 200,398 RSUs, all of which were subject to vesting, with a grant date fair value of $3,422,275 to employees. The shares vest insix equal semi-annual installments over athree-year period. In addition, the Company granted 2,631 RSUs, all of which were subject to vesting, with a grant date fair value of $41,513 to employees. The shares vest inthree equal installments over athree-year period.

During thefourth quarter of2023, the Company granted 3,289 RSUs, all of which were subject to vesting, with a grant date fair value of $51,891 to an employee. All shares vest aftersix-months.

During thefourth quarter of2023, the Company granted 23,764 stock price hurdle restricted stock units to employees. The stock price hurdle restricted share units expire three years from the date of grant and vest based on the Corporation’s common stock achieving an absolute stock price hurdles based on a5-day VWAP at any time over thethree-year term.

2024 Restricted stock units

During thefirst quarter of2024, the Company granted 5,574 RSUs, all of which were subject to vesting, with a grant date fair value of $60,000 to employees. The shares vest inthree equal installments over athree-year period.

During thesecond quarter of2024, the Company granted 6,248 RSUs, all of which were subject to vesting, with a grant date fair value of $40,000 to employees. The shares vest inthree equal installments over athree-year period.

During thethird quarter of2024, the Company granted 18,579 RSUs, all of which were subject to vesting, with a grant date fair value of $83,000 to Board Members. The shares vest infour equal installments with thefirst installment vesting immediately and the remainingthree installments vesting over anine-month period.

During thethird quarter of2024, the Company granted 20,111 RSUs, all of which were vested immediately, with a fair value of $150,000 for consulting fees.

During thethird quarter of2024, the Company granted 6,607 RSUs, all of which were vested immediately, with a fair value of $28,000 to an employee upon termination of a severance agreement.

During thefourth quarter of2024, the Company granted 3,968 RSUs, all of which were subject to vesting, with a grant date fair value of $10,000 to employees. The shares vest inthree equal installments over athree-year period.

During thefourth quarter of2024, the Company granted 177,763 RSUs, all of which were subject to vesting, with a grant date fair value of $311,000 to employees. The shares vest insix equal semi-annual installments over athree-year period.

On* October 3, 2024,the Company approved a supplemental retention program designed to retain business-critical resources essential to ongoing operations and strategic initiatives. Participation in the program is contingent upon management achieving specified fundraising targets and subject to the continued service of eligible employees. The program established specific funding tranches tied to cumulative fundraising milestones, which must be achieved on or before March 7, 2025.The grant terms included a fixed dollar, variable share, structure with potential settlement valued from $0 to $925,014 dependent upon satisfaction of performance conditions. Once performance conditions are met, the shares to be granted are fixed and subject to an additionalsix-month service condition. As of December 31, 2024,the Company hasnot* yet recognized any expenses related to this program as the performance conditions werenot deemed probable of achievement. In thefirst quarter of2025, thefirst funding tranche was achieved, triggering the issuance of 118,469 RSUs to qualified employees in accordance with the program’s terms. These shares will be granted subject to continued service requirements.

On* December**19,* 2024, the Company approved a long-term incentive plan for its Named Executive Officers (NEOs), consisting of 474,454 time-vested RSUs and 158,817 performance stock units (PSUs) with market-based goals. RSUs will continue to vest in equal semi-annual installments over athree-year period, subject to continuation of service,50% of PSUs granted in2024 will vest based on total shareholder return (TSR) attainment relative to our Performance Peer Group and 50% based on hitting certain stock price hurdles within 3-years. TSR shares issued vestone third annually. The number of shares issued each year is based on where the Company compares with a peer group such that 50% of shares vest at the25th percentile,100% of shares vest at the at50th percentile, and 200% of shares vest at75th percentile.

Total intrinsic value of RSUs vested and released during 2024 was $1,462,000. Intrinsic value of RSUs outstanding at * December 31, 2024* was $3,830,000.

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Reserved shares

At* December 31, 2024*, the Company has reserved shares of common stock for future issuance as follows:

We* may,from time to time, be party to litigation and subject to claims incident to the ordinary course of business. As our growth continues, we may*become party to an increasing number of litigation matters and claims. The outcome of litigation and claims cannot be predicted with certainty, and the resolution of any future matters could materially affect our future financial position, results of operations or cash flows. We are not party to any legal proceedings that, if determined adversely to us, would individually or taken together have a material adverse effect on our business, results of operations, financial condition or cash flows.

In* October 2021,we filed an action against Johnson Controls Fire Protections, LP (“Defendant”) relating to its involvement in the November 2019fire at our 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 alleges Defendant’s liability for a portion of the fire loss based on Defendant’s negligence, breach of contract and other causes of action. On March 25, 2025,*the Court dismissed our complaint without leave to amend.

The Company evaluated this matter under ASC 450-30 – Gain Contingencies, which requires a gain contingencynot be recognized before it is realized or realizable. The Company had not previously recognized any gains related to this matter. Accordingly, this dismissal will not have any impact on our consolidated financial statements.

The Company has adopted a policy that any transactions with directors, officers, beneficial owners offive percent or more of our common shares, any immediate family members of the foregoing or entities of which any of the foregoing are also officers or directors or in which they have a financial interest, will only be on terms consistent with industry standards and approved by a majority of the disinterested directors of our board.

As of* December 31, 2024,the Company hadtwo debt arrangements with related parties. For further details on these related party transactions, refer to Note11* – Notes Payable in the financial statements.

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Loss before income tax expense consists of the following (in thousands):

The components of the provision for income tax expense consist of the following (in thousands):

Reconciliation of the statutory federal income tax rates consist of the following:

The components of deferred tax assets (liabilities) included on the consolidated balance sheets are as follows (in thousands):

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Based on the available objective evidence at this time, management believes that it is more-likely-than-not that the net deferred tax assets of the Company willnot be realized. Accordingly, management has applied a full valuation allowance against net deferred tax assets at both* December 31, 2024and December 31, 2023*. The net valuation allowance increased by approximately $4.9 million during the year ended* December 31, 2024*. The increase in net valuation allowance primarily relates to net operating losses generated during2024.

As of* December 31, 2024*, the Company has total net operating loss carryforwards of $190.9 million for federal income tax purposes. Approximately $25.2 million of the federal net operating losses will begin to expire in* December 31, 2034,ifnot* utilized. Approximately $165.7 million of the federal net operating losses were generated after* December 31, 2017,and thus donot* expire. As of* December 31, 2024,the Company has state net operating loss carryforwards of $4.1 million, which will begin to expire in December 31, 2034.*

Utilization of the Company’s net operating loss* may*be subject to substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions. Such an annual limitation could result in the expiration of net operating loss carryforwards prior to utilization.

At* December 31, 2024*, the Company had research and development credits carryforward of approximately $0.6 million and $0.5 million for Federal and California income tax purposes, respectively. Ifnot utilized, the Federal research and development credits carryforward will begin to expire on* December 31, 2034.*The California credits can be carried forward indefinitely.

Effective* January 1, 2022,the Company is subject to mandatory capitalization of Section174* research and development expenditures. The capitalized expenditures are subject to amortization overfive years for expenses incurred within the U.S. The Company capitalized $3.5 million and $3.6 million during the years ended* December 31, 2024* and* December 31, 2023*, respectively.

The Company’s policy is to account for interest and penalties as income tax expense. As of* December 31, 2024*, the Company hadno interest related to unrecognized tax benefits.No amounts of penalties related to unrecognized tax benefits were recognized in the provision for income taxes.

The Company maintains liabilities for uncertain tax positions. These liabilities involve considerable judgement and estimation and are continuously monitored by management based on the best information available, including changes in tax regulations, the outcome of relevant court cases, and other information. The Company recognizes potential accrued interest and penalties related to unrecognized tax benefits as income tax expense. At* December 31, 2024*, the Company’s total amount of unrecognized tax benefit was approximately $0.5 million,none of which will affect the effective tax rate, if recognized. The Company doesnot expect its unrecognized benefits to change materially over the nexttwelve months.

The Company files income tax returns with the United States federal government and the State of California. The Company’s tax returns for 2021 to 2023 remain open to audit for Federal and California purposes.

The Company maintains a defined-contribution savings plan under Section401(k) of the Internal Revenue Code (the*“401*(k) Plan”). The401(k) Plan covers all employees who meet defined minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pretax or after tax basis. Beginning in* January 2021,the Plan included a maximum of 4% employer matching contributions with immediate vesting. We recognized $210,000 and $180,000 of expenses related to employer contributions for the401*(k) savings plan during the years ended* December 31, 2024* and2023, respectively.

Aqua Metals, Inc. hasone operating segment: sustainable metals recycling. The Company's operations are focused on the development and commercialization of AquaRefining technology for the clean and efficient recovery of valuable metals from lead-acid and lithium-ion batteries. The Company’s chief operating decision maker (“CODM”) is the Chief Executive Officer. The CODM evaluates financial performance at a consolidated, entity-wide level and doesnot assess operating results by individual business unit or product line. Financial results are reviewed in line with the Company’s consolidated financials, and resource allocation decisions are made based on overall Company performance.

The CODM assesses performance for the segment based on net loss, which is reported on the statement of operations as net loss. The measure of segment assets is reported on the balance sheet as total assets. Significant expenses within net loss, include plant operations, research and development cost, impairment expense, loss (gain) on disposal of property, plant and equipment, and general and administrative expenses, which are each separately presented on the Company’s Consolidated Statements of Operations.

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