Annual report pursuant to Section 13 and 15(d)

Note 1 - Organization and Operations

Note 1 - Organization and Operations

12 Months Ended

Dec. 31, 2023

1.	Organization and Operations

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 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 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.

Liquidity and Going Concern Assessment

For the years ended December 31, 2023 and 2022, the Company reported a net loss of $23.9 million and $15.4 million, respectively, and negative cash from operations of $3.2 million (inclusive of $12.3 million of non-recurring proceeds from the sale of real estate) and $10.1 million, respectively. As of December 31, 2023, the Company had cash and cash equivalents of approximately $16.5 million, a working capital surplus of approximately $13.7 million and an accumulated deficit of $223.2 million. The Company has not generated revenues from commercial operations over the two years ended December 31, 2023, except for nominal sales of lead finished goods, and expects to continue incurring losses for the foreseeable future.

Management believes that the Company does not have sufficient capital resources to sustain operations through at least the next twelve 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, is not assured. Accordingly, management believes that there is substantial doubt regarding the Company’s ability to continue operating as a going concern through the next twelve 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 do not 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.

Reclassification of Prior Period Financial Statements

For the year ended December 31, 2023, impairment expense and gain on disposal of property and equipment were presented in the Consolidated Statement of Operations within loss from operations.

We have reclassified the prior period Consolidated Statement of Operations included in this filing to conform to the current period presentation, as shown in the following table:

	*Twelve Months Ended December 31, 2022*
	*As Reported*			*Reclassification*			*As Reclassified*
Operating cost and expense
Impairment expense		—			579			579
Gain on disposal of property, plant and equipment		—			(596	)		(596	)
Total operating expense	$	15,587		$	(17	)	$	15,570
Income (loss) from operations	$	(15,583	)	$	17		$	(15,566	)

Other income and expense
Impairment expense		(579	)		579			—
Gain on disposal of property, plant and equipment		596			(596	)		—
Total other income (expense), net	$	154		$	(17	)	$	137

In connection with the foregoing, we have also identified the following reclassifications which will be made to the 2023 periods to be presented in the interim financial statements in our 2024 10-Q filings:

	Three Months Ended September 30, 2023								Nine Months Ended September 30, 2022
	As Reported			Reclassification		As Reclassified			As Reported			Reclassification			As Reclassified
Operating cost and expense
Gain on disposal of property, plant and equipment		—			-		-			—			(23	)		(23	)
Total operating expense	$	4,974		$	-	$	4,974		$	14,345		$	(23	)	$	14,322
Income (loss) from operations	$	(4,949	)	$	-	$	(4,949	)	$	(14,320	)	$	23		$	(14,297	)

Other income and expense
Gain on disposal of property, plant and equipment		-			-		—			23			(23	)		—
Total other income (expense), net	$	402		$	-	$	402		$	408		$	(23	)	$	385

	Three Months Ended June 30, 2023									Six Months Ended June 30, 2023
	As Reported			Reclassification			As Reclassified			As Reported			Reclassification			As Reclassified
Operating cost and expense
Gain on disposal of property, plant and equipment		—			(3	)		(3	)		—			(23	)		(23	)
Total operating expense	$	4,855		$	(3	)	$	4,852		$	9,371		$	(23	)	$	9,348
Income (loss) from operations	$	(4,855	)	$	3		$	(4,852	)	$	(9,371	)	$	23		$	(9,348	)

Other income and expense
Gain on disposal of property, plant and equipment		3			(3	)		—			23			(23	)		—
Total other income (expense), net	$	96		$	(3	)	$	93		$	6		$	(23	)	$	(17	)

	Three Months Ended March 31, 2023
	As Reported			Reclassification			As Reclassified
Operating cost and expense
Gain on disposal of property, plant and equipment		—			(20	)		(20	)
Total operating expense	$	4,516		$	(20	)	$	4,496
Income (loss) from operations	$	(4,516	)	$	20		$	(4,496	)

Other income and expense
Gain on disposal of property, plant and equipment		20			(20	)		—
Total other income (expense), net	$	(90	)	$	(20	)	$	(110	)