1. Organization

Aqua Metals (NASDAQ: AQMS) is engaged in the business of applying its commercialized clean, water-based recycling technology principles to develop 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 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, decreased emissions, and with minimal waste. The modular “Aqualyzers” cleanly generate ultra-pure metal one atom at a time, closing the sustainability loop for the rapidly growing energy storage economy.

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. Our goal is to recycle commercial quantities of nickel, cobalt, and copper in a pure metal form that can be sold to the general metals and superalloy markets and can be made into battery precursor compound materials with known processes already used in the mining industry. We also plan to recycle commercial quantities of lithium that can be sold to the lithium-ion battery manufacturers. We have installed, commissioned, and began to operate the first Li AquaRefining pilot plant.

Our focus for the lead market is 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 our first-of-a-kind lithium battery recycling facility, utilizing electricity to recycle instead of intensive chemical processes, fossil fuels, or high-temperature furnaces and licensing.

Revision of Prior Period Financial Statements

For the quarter ended September 30, 2022, we identified a cash flow classification error relating to proceeds from leasing of our building. The effect of this classification error was to overstate cash flow from financing activities by $636,000 and understate cash flows from operating activities by an equal amount for the nine months ended September 30, 2022. The classification error did not have an effect on net increase in cash and cash equivalents reported in the condensed consolidated statement of cash flow , the condensed consolidated balance sheet or condensed consolidated statement of operations for the related periods.

Using the guidance in ASC Topic 250, Accounting Changes and Error Corrections, ASC Topic 250-S99-1, Assessing Materiality, and ASC Topic 250-S99-2, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, we evaluated whether our previously issued condensed consolidated financial statements were materially misstated due to this classification error. Based upon our evaluation of both quantitative and qualitative factors, we believe that the effect of this classification error was not material to any previously reported quarterly period.

We have revised the prior period financial statements included in this filing to reflect the correction of this classification error.