Aqua Metals, Inc.

Current report

Our allowance for credit losses related to our Lion Energy exposure may not be adequate to cover actual credit losses, which could adversely affect our financial condition and results of operations. As of March 31, 2026, we had approximately $4,100,000 of exposure related to Lion Energy through a subordinated participation interest and related note receivable. Lion Energy was in default under its senior secured revolving credit facility as of March 31, 2026, and our participation interest is subordinated to the senior secured lender.

Current report

In accordance with U.S. generally accepted accounting principles (“GAAP”), we maintain an allowance for expected credit losses under the current expected credit loss (“CECL”) model. As of March 31, 2026, we recorded an allowance for credit losses of approximately $437,000 related to the Lion Energy exposure. Our allowance for credit losses requires significant management judgment and is based on a number of factors, including Lion Energy’s operating performance and liquidity, the value and recoverability of underlying collateral, expected inventory recoveries, accounts receivable collections, and management’s estimate of the probability of various recovery outcomes.

Current report

There are many factors that could result in actual credit losses exceeding the recorded allowance. For example, collateral values may decline, inventory recoveries may be lower than expected, customer demand may deteriorate, costs to realize collateral may increase, or accounts receivable collections may be lower than anticipated. In addition, our recovery assumptions depend in part on the outcome of ongoing discussions regarding alternative transaction structures involving Lion Energy and its senior secured lender. These efforts may not be successful.

Current report

The amount of future credit losses is also susceptible to changes in economic, operating, market, and other conditions beyond management’s control. As a result, our allowance for credit losses may not be adequate to cover actual losses, and we may be required to record additional material provisions for credit losses in future periods. Any such additional provisions could materially adversely affect our financial condition, results of operations, and liquidity.

Previous report

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