Aqua Metals, Inc. Stock

Good afternoon, and welcome to Aqua Metals Second Quarter 2026 Earnings Conference Call and Webcast. My name is Paul, and I will be your operator this afternoon. [Operator Instructions] It is now my pleasure to turn the floor over to your host, Dan Scott, Investor Relations. Dan, please proceed.

Thank you, operator, and thank you, everyone, for joining us today. Earlier today, Aqua Metals issued a press release providing an operational update and discussing results for the second quarter ended June 30, 2026. This release is available in the Investor Relations section of the company's website at aquametals.com.

Hosting the call today are Steve Cotton, President and Chief Executive Officer; and Eric West, Chief Financial Officer. Before we begin, I would like to remind participants that during this call, management will be making forward-looking statements. Please refer to the company's report on Form 10-K for a summary of the forward-looking statements and the risks, uncertainties and other factors that could cause actual results to differ materially from those forward-looking statements. Aqua Metals cautions investors not to place undue reliance on any forward-looking statements.

The company does not undertake and specifically disclaims any obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur, except as required by law. As a reminder, after the formal remarks, we will conduct a question-and-answer session. With that, I'd like to turn the call over to Steve Cotton, President and CEO of Aqua Metals.

Thank you, Dan, and good afternoon, everyone, and thank you for joining us for our second quarter financial results and business update call. Aqua Metals has now shifted from proving a technology to commercial execution. Over the last several years, we've proven that AquaRefining works. We've demonstrated battery-grade products. We've expanded our operating hours and we validated multiple process flows.

Everything we're doing today is centered around building a profitable critical minerals processing business here in the United States. You will also hear us describe the company a little differently moving forward, and that is deliberate. Aqua Metals is a U.S. critical minerals processing company commercializing lower cost recovery and refining technologies. That is not a new business. It's a sharper description of the business we've been building.

We continue to believe one of the largest opportunities in the domestic battery supply chain isn't another battery factory. It's the infrastructure needed to process manufacturing scrap and end-of-life batteries as those factories ramp production. That's exactly what Headwaters Arc is designed to become. We are completing final diligence on a Midwest site with approximately 150,000 square feet of existing industrial infrastructure and approximately 50 or more acres, and it sits a short drive from 6 major LFP gigafactory projects.

Feedstock proximity drives the economics of this business, and that location puts us next to one of the fastest-growing sources of LFP manufacturing scrap in the country. At full campus configuration, Headwaters is designed for approximately 20,000 tons per year of processing capacity. That scope and timing remains subject to financing, permitting and commercial agreements.

One thing I'd like to emphasize is that we've intentionally evolved our commercialization strategy. Instead of attempting to build everything on day 1, we've broken the project into logical commercial phases. Phase 1 is designed to use commercially proven preprocessing equipment to domestically recover valuable aluminum, copper and high-specification black mass from segregated LFP battery materials.

That approach gives us a much earlier pathway toward commercial revenue while substantially reducing execution risk. Once that operating foundation is established, we integrate AquaRefining in Phase 2 to recover battery-grade lithium carbonate, iron phosphate and graphite from that same black mass. That second step is where we believe Aqua Metals creates significantly greater long-term value.

We're intentionally deploying capital in stages while increasing value at each step. We believe that's a much smarter commercialization strategy. And some of you have heard us describe commercial plans before, so let me be direct about our standard. We said we would build once and build right with feedstock, offtake and financing in place before deploying AquaRefining at commercial scale. That standard has not changed. The phased Headwaters model is how we satisfy those gates one step at a time.

During the quarter, we made meaningful progress across every major work stream required to make that happen. We've advanced site diligence. We've advanced engineering. We've continued evaluating commercially proven preprocessing partners. We've expanded discussions with feedstock suppliers and future offtake customers. We've progressed multiple financing structures, and our intent is to fund Headwaters substantially at the project level rather than off our balance sheet.

Eric will walk through that in more detail. And we've continued operating the innovation center, which now has exceeded 5,000 cumulative operating hours supporting commercial engineering. None of those work streams are happening in isolation. They're all converging toward the same objective, bringing headwaters into commercial operation as efficiently and with as little execution risk as possible.

One point I'd like investors to appreciate is why we're initially concentrating on LFP materials. LFP or lithium-ion phosphate is becoming the chemistry of choice across energy storage systems and an increasing percentage of electric vehicles. Gigafactory capacity is expanding rapidly. That means manufacturing scrap is expanding just as rapidly.

Our market analysis informed by third-party industry research projects, recyclable LFP scrap will grow roughly 15-fold by 2030, and Bloomberg NEF projects U.S. storage capacity of approximately 235 gigawatt hours by 2035. We believe that creates one of the largest underserved critical minerals processing opportunities in North America.

Unlike nickel and cobalt-rich batteries, LFP requires a different economic model. Our phased commercialization strategy is specifically designed around that opportunity.

And I want to be clear that LFP is where we start, not where we stop. The same platform architecture, mechanical preprocessing followed by refining and product recovery is intended to extend to NMC materials or nickel manganese cobalt and over time, to selected mined materials and industrial waste streams. We have already tested the process on mined feedstocks.

Headwaters is designed to be the first node in that platform, not the whole business. And at the same time, AquaRefining remains the technology that differentiates this company. Our process is designed to eliminate onetime use chemicals, reduce waste, improve worker safety and lower operating costs compared with conventional processing methods.

The innovation center continues validating commercial process flows while supporting engineering for Headwaters. So that technology foundation remains very strong. And another area we're pleased with is our financial discipline. We have entered this commercial phase debt-free. We're intentionally matching capital deployment with commercial milestones. And our objective isn't simply to build a facility. Our objective is to build a profitable business with disciplined capital allocation, and that's an important distinction.

Looking ahead, our priorities for the balance of 2026 are straightforward: complete the site diligence, secure long-term site control, select our Phase 1 processing partner, advance feedstock and offtake agreements, continue engineering, complete capital formation, advance permitting and continue moving toward a final investment decision. Those are tangible milestones investors can follow over the coming quarters. And I want to be clear about when the economics arrive.

At a final investment decision on Phase 1, we intend to provide capital cost, expected throughput, product mix and expected operating cost. I'll close with this. We believe Aqua Metals has reached an important inflection point. The technology foundation has been established and the market opportunity continues to strengthen.

Our commercialization strategy is now clearly defined, and our team is focused every day on executing that plan with discipline. We're excited about the opportunity ahead, and we appreciate the continued support of our shareholders. With that, let's have Eric review the financial results before opening the line for questions.

Thanks, Steve. Moving to highlight a few items on the income statement for the second quarter of 2026. We reported a net loss of approximately $4.5 million or $1.31 per basic and diluted share compared with a net loss of approximately $6.8 million or $7.44 per basic and diluted share in the second quarter of 2025. The per share comparison also reflects the increase in the weighted average shares outstanding during 2026.

The total operating expenses were approximately $4.6 million for the quarter compared with approximately $7 million in the prior year period. The current year quarter includes an additional noncash provision for credit loss of approximately $2.1 million related to Lion Energy, while the prior year quarter included a noncash impairment charge of approximately $3.8 million.

Plant operations, research and development and general and administrative expenses totaled approximately $2.5 million compared with approximately $3.3 million in the prior year quarter, reflecting our continued focus on managing our core operating cost structure.

On Lion Energy, based on developments during the quarter, we updated our estimate of expected recoveries. At June 30, our total allowance for credit losses was approximately $2.5 million, representing 60% of the approximately $4.2 million gross balance that also includes accrued interest.

This resulted in a net carrying amount of approximately $1.7 million. The allowance is an accounting estimate of the expected collections and does not represent a determination of the amount legally owed to Aqua Metals or a waiver of our rights. We remain committed to pursuing recovery through appropriate legal and commercial avenues.

We ended the quarter with approximately $4.7 million in cash and cash equivalents and working capital of approximately $4 million and no notes payables outstanding. Cash used in operating activities was approximately $6.5 million during the first 6 months of the year. During the second quarter, we raised approximately $581,000 in net proceeds under the ATM program, bringing the total ATM proceeds for the first 6 months of 2026 to approximately $1.9 million.

We continue to manage our operating spend carefully. As noted in today's release, we are advancing project financing, staged equipment financing, third-party real estate structures and economic development opportunities for Headwaters Arc with Newmark's advanced manufacturing practice group engaged as an adviser.

Our intent is to fund the project substantially at the project level so that the corporate capital supports operations and staged execution. Our objective is to preserve financial flexibility while advancing Headwaters Arc through disciplined milestone-based capital deployment. With that, I'll turn the call back over to the moderator to begin Q&A.

[Operator Instructions] We did have a question coming from Mickey Legg from Benchmark.

Maybe just start by expanding on how this is sort of a natural evolution of your previous project working from more of a recycling to a greenfield refinery to preprocessing infrastructure with the gigafactories in the area.

Can you just elaborate on that? Like how should we be viewing this evolution? And what gives you confidence this is an underserved piece of the supply chain?

Yes. Yes, Mickey, good question. And it's all about finding the market and having the right solution for the market. And what we are really focused on is the fact that there is just a huge underserved opportunity for LFP chemistry batteries with those 6 gigafactories in the region there.

And we see an opportunity to collect those batteries and focus on that chemistry, which is a simplified chemistry and also derisk the first phase of it by deploying a standard set of collection and processing equipment that preprocesses that into the aluminum copper fines as well as the black mass production and then put the AquaRefining in there and focus that on the lithium and not have to worry initially about the nickel and cobalt.

So we see it as a derisk, a lower cost of entry, a staged approach and in literally the middle of the market where it is most needed because we're building a lot of gigafactories and we're just not building as a country, the ability to process these materials and keep those materials in the country. So all that together is really the thesis behind the way that we're approaching this and being able to do so in such a way that we preserve our capital along the way.

Got it. Okay. That's helpful. And then that takes me to my next one, which is sort of about what you've learned from the equipment procurement and the progress you've made there. It seems like you're making good progress, but just curious what should we be looking for on that front? Is there anything particular that you've learned from that?

You mean on the equipment procurement for Phase 1?

Yes. Yes.

Yes. So we are definitely very close to a decision point on the equipment supplier for Phase 1. And that is really exciting for us because we've seen this equipment operating at scale, and we would be able to take the equipment that's been running at scale and deploy it and execute versus take any technology risk for the collection and preprocessing and production of those initial revenue-generating products.

And so that's really a key part of the next steps for Aqua Metals is to sign that agreement and get moving forward with the procurement of that equipment and deployment of that equipment at the Project Headwaters location.

Got it. Okay. And then last one, what are some of the milestones we should be looking for in the near to midterm? Is it more of these economics on the Phase 1 that's definitely high on my list.

Yes. So lots of milestones to come, of course, and that involves the indication of the final indication of the specific site and then the equipment supply portion of it, the financing of the real estate and tenant improvements of the real estate. Fortunately, it's a building that we believe that we can upfit very quickly. And you'll see news flow about that part of the supply on the equipment, on the facility, on the location and of course, the commercial side of things, which is feedstock and offtake contracts.

I would now like to turn the call back to Dan Scott to facilitate questions that were submitted online.

Thank you, operator, and thank you, Mickey, for the questions. The first one we got was, Steve, could you walk us through why the phased approach at Headwaters creates a path to revenue earlier than a greenfield build would and why the company is starting with LFP?

Yes, certainly. So really, the single most important fact about Headwaters is that the facility already exists, as I was saying. We are working with approximately 150,000 square feet of existing industrial infrastructure and 50 or more acres of land surrounding that. And starting inside a building that is already standing means we're not funding a full greenfield construction cycle before we can process a single ton of material. That's really what makes the phased approach work.

So Phase 1 is designed, again, like I was speaking with Mickey about to use commercially proven mechanical processing that is already scaled and produces valuable high-spec black mass, aluminum fines, copper fines as products and using that proven equipment that's available today from an established supplier.

Phase 2 is where we add our patented AquaRefining technology, and then we take that black mass and convert it to battery-grade lithium carbonate in iron phosphate and graphite right here in the United States. Later phases then would extend the platform to NMC or nickel manganese cobalt and other critical mineral type feedstocks.

But each phase is designed to be capitalized and validated on its own terms before we commit to the next phase. On the LFP, though, as asked, we're following the feedstock and the demand. And based on our market analysis informed by third-party and industry research, that recyclable LFP manufacturing scrap is expected to really increase quite a bit, approximately 15x by 2030.

And Bloomberg NEF projects that the battery storage installations in the U.S. are going to reach approximately 235 gigawatts of installed power capacity and 948 gigawatt hours, which is a staggering number of battery energy storage capacity by 2035. And the existing U.S. shredders today that do that preprocessing are concentrated on the nickel and manganese and cobalt or that NMC scrap today, which raises the cost of that feedstock and thus leaves the LFP underserved. And the Headwaters sits, as I mentioned earlier, a really short drive from 6 major LFP gigafactory projects. And we'd rather build where the feedstock is growing fastest and the processing capacity there just simply does not exist yet.

Great, Steve. The next question is, Sierra Arc was announced and then sold and management has said build once, build right with concentrated feedstock, committed offtake and bankable financing as the gates before building.

What is structurally different about Headwaters? And does Phase 1 clear those same gates?

Yes, that's a fair question. And the gates have not moved. The contracted feedstock, committed offtake and bankable financing remain the conditions for deploying capital at a commercial scale. What has changed is that we now have a structure that lets us satisfy those conditions in sequence rather than trying to clear all of them before anyone turns a shovel.

Sierra Arc was the first-of-kind build that required the full capital commitment upfront. And when the market moved against the industry where we saw lithium prices die bomb, we made the disciplined decision at that time to sell the asset and protect the balance sheet.

And Headwaters is close to the opposite profile. Phase 1 is designed to use commercially proven equipment, as I mentioned, rather than the first-of-kind technology. We've engaged Newmark, who is a leading global commercial real estate adviser to pursue those third-party real estate structures for the land, building and site development. And equipment payments are being negotiated on stage terms that are tied to milestones.

So Phase 1 does not go around the gates. It's really more how we get to them. And a facility with feedstock coming in the door and product going out is what converts feedstock discussions into contracts and what makes a Phase 2 project financeable on a project level terms. Same discipline, but sequenced differently to summarize.

All right. Next one is share count has increased significantly over the past 5 quarters. How should existing shareholders think about the funding of Phase 1 across real estate structures, staged equipment terms and the ATM? And how do you think about funding the company through a final investment decision?

Yes. This is Eric. I'll take that one. So let me start with where we ended the quarter. We finished June 30 with approximately $4.7 million in cash and approximately $4 million in working capital. And we used approximately $2.7 million of the cash in operations during the quarter. We raised approximately $581,000 under the ATM during the quarter with approximately $48 million of capacity remaining on the ATM. And we continue to carry no debt.

On dilution, I will be direct. We raised capital through one of the most difficult stretches this sector has seen, and that decision is the reason the company is in the position to pursue headwaters at all. We raised proactively rather than reactively and we ran the business lean while we did it.

Going forward, the objective is to fund Phase 1 with little capital equity as possible. The architecture of the 3 layers is, first, land, building and site development represent a significant component of the Phase 1 cost, and Newmark is engaged to pursue third-party real estate structures, including a long-term triple net lease or similar arrangement.

Second, we were pursuing staged equipment payment terms aligned with project milestones rather than paying all that upfront. Third, corporate capital is reserved for the operations and staged execution with ATM uses in a measured way.

Alongside those, we've submitted state and local economic development packages and are -- and those discussions are advancing. And then on the period between here and the final investment decision, the work ahead of us is diligence, engineering, permitting and negotiating rather than construction and our operating cost structure is lower than it was a year ago.

We manage to milestones rather than to a calendar. None of these structures are signed, and we are going to characterize -- I'm not going to characterize them as any of them as complete until they are. But the preference is clear project level and asset-backed capital ahead of corporate equity and the capital deployed against milestones rather than ahead of them.

We'll not deploy any capital into construction ahead of these conditions we have set, and we will report against milestone list every quarter.

Thanks, Eric. The next question on the durability of the model, how does Headwaters perform if lithium prices fall back toward last year's lows? And is there a genuine domestic demand for the Phase 1 products? Or does that material get exported the way most U.S. black mass is today?

Yes. So 2 things protect the model. The first is that Phase 1 is not primarily a lithium story. Phase 1 is black mass, aluminum fines and copper fines, as the products. And in this segment, processors are generally paid to take in feedstock. So you're in revenue before you even begin processing. The combination is considerably less sensitive to the lithium prices than a pure refining operation would be.

The second is cost position. AquaRefining is designed to eliminate those onetime use chemicals and reduce the waste streams as we've been talking about all along and associated disposal costs and do so in a far safer and less labor-intensive environment, which is where the operating cost advantage primarily comes from.

We believe still that a lower operating cost position is what allows the platform to operate through a full price cycle rather than only in a strong one. And for context, you could -- anyone listening can go back and look at lithium carbonate prices and see how they've recovered substantially from 2025 lows.

In the meantime. On domestic demand, aluminum and copper, of course, have deep established U.S. offtake channels and pricing has been strong, particularly recently. Black mass is the exception, and it's that exception that makes our point. Most black mass produced in the country today is exported because there's not enough commercial scale refining capacity here to process it. That is precisely the gap that Phase 2 is designed to close. And we view domestic refining as a demand problem that has already got an answer waiting for capacity, not one that has to be created.

Great. And then we have one last question. You have described Headwaters as designed for approximately 20,000 tons per year at full campus configuration. What does that capacity mean for the business? And can you give investors any sense of the Phase 1 unit economics behind it?

Sure. Let me be precise about the structure because it does clarify the question. So Phase 1 is the preprocessing. And getting into some more detail, we expect to install 2 preprocessing lines that will be approximately 10,000 tons per year each. So that's approximately 20,000 tons per year at full Phase 1 configuration. Phase 2 does not add tonnage to the building, but rather it takes that black mass that Phase 1 produces at its capacity and turns that into refined products.

So rather than selling black mass at that point, we would refine it ourselves and sell more lithium carbonate, iron phosphate and graphite than black mass. The scope and timing remains subject, of course, to financing, permitting and all those commercial agreements. And I'll point out that this is not a production forecast and it is not guidance yet at this point.

But that structure is deliberate and is central to how we are managing that risk. We are not betting the company on a single build. And this first line establishes the operation and the commercial relationships.

The second line scales what we have already proven. And Phase 2 then adds the value to the material that we're already going to be handling rather than requiring new or different types of feedstock. The capacity is sized against us receiving a portion of the LFP manufacturing scrap that's being generated by the Gigafactory projects within that short drive of the site that I mentioned earlier.

On economics, I'll give you a standard that we're holding this to rather than a specific forecast. Phase 1 has to earn its own return. And we're not asking anyone to fund Phase 1 on the promise of Phase 2. Before we take Phase 1 to a final investment decision, the case has to demonstrate positive EBITDA and positive cash flow at the project level and return on invested capital that meets our investment criteria in each case after ramp and under commercial assumptions that we can support.

If it does not clear that bar, we don't proceed. Two things I want to be precise about. That is an investment criterion, not financial guidance. And it is project level economics, which is a different measure than consolidated company results that carry corporate costs. Also on sizing, the Phase 1 products are, again, copper and aluminum and high-specification black mass, all of which price off of observable markets.

Between the throughput and the product set, you have the framework really to do the math. And that math varies depending on metals prices, obviously. The variables that determine where we land inside it are commercial, therefore, rather than technical, what we pay for the feedstock or even paid to take the feedstock, the mix of material we receive, what we recover and what those products fetch at the time.

Several of those terms are terms that we are actively negotiating have not quite yet signed, which is why we're not putting estimates on the record ahead of the agreements that determine them. As a final investment decision on Phase 1, we intend to provide the capital cost, expected throughput, product mix and existing operating costs, and you'll be able to model it more properly at that point.

Thanks, Steve. That's the end of our questions. Maybe I could just turn it back to you for some closing remarks.

Appreciate that, Dan, and I appreciate everybody attending the call and listening in on Project Headwaters and Aqua Metals, and we're really looking forward to continuing to keep the market updated as we make those milestones one by one between Q3 and Q4. Looking forward to reporting more news soon.

Thank you. This does conclude today's conference call and webcast. You may disconnect at this time, and have a wonderful day. Thank you for your participation.

Good afternoon. Welcome to Aqua Metals' First Quarter 2026 Earnings Conference Call. My name is Tom, and I will be your operator this afternoon. [Operator Instructions]

It is now my pleasure to turn the call over to your host, [ Dan Scott, ] Investor Relations. Dan, please proceed.

Thank you, operator, and thank you, everyone, for joining us today. Earlier today, Aqua Metals issued a press release providing an operational update and discussing results for the first quarter ended March 31, 2026. This release is available in the Investor Relations section of the company's website at aquametals.com. Hosting the call today are Steve Cotton, President and Chief Executive Officer; and Eric West, Chief Financial Officer.

Before we begin, I would like to remind participants that during this call, management will be making forward-looking statements. Please refer to the company's report on Form 10-K for a summary of the forward-looking statements and the risks, uncertainties and other factors that could cause actual results to differ materially from those forward-looking statements. Aqua Metals cautions investors not to place undue reliance on any forward-looking statements. The company does not undertake and specifically disclaims any obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur, except as required by law. As a reminder, after the formal remarks, we will conduct a question-and-answer session.

With that, I'd like to turn the call over to Steve Cotton, President and CEO of Aqua Metals.

Thank you, Dan. Good afternoon, everyone, and thank you for joining us. The first quarter of 2026 was an important quarter for Aqua Metals as we continued advancing a commercialization pathway for our AquaRefining platform while also broadening the strategic scope of the business across both critical minerals and energy storage markets.

During the quarter, we continued advancing site selection and engineering work for what we intend to be our first commercial lithium battery recycling facility. We are now evaluating a short list of U.S. locations with a focus on feedstock access, logistics, strategic relationships and long-term operating economics. At the same time, we continued refining plant configuration, operating parameters and capital planning so that we are positioned to move quickly as we advance towards commercialization.

One thing I want to emphasize is that Aqua enters this next phase from a position of resilience and operational readiness. Over the last 2 years, the battery materials industry went through a very significant downturn. Battery-grade lithium carbonate pricing, which had generally remained above roughly $20,000 per metric tonne fell below the $10,000 per tonne level during portions of 2024 and 2025. Projects across the industry were delayed or canceled and a number of companies in the sector faced restructurings or insolvencies.

Throughout that period, Aqua Metals remained disciplined. We preserved capital, protected shareholder value, maintained our core technical capabilities and continued operating and advancing our innovation center and demonstration plant here in Reno. Today, we believe those actions position us differently from many companies that either paused development entirely or significantly scaled back operations during the downturn.

At our innovation center, we have now surpassed 5,000 cumulative operating hours across extended multi-feedstock campaigns, which continues to validate both the AquaRefining platform and our pathway to broader commercialization. During the quarter, we achieved several important technical milestones. We successfully produced battery-grade lithium carbonate from multiple recycled feedstocks, including both NMC or nickel manganese cobalt and LFP or lithium iron phosphate materials with independent validation confirming industry-grade specifications from our processes.

We also achieved manganese sulfate production purity of approximately 99.8%, demonstrating the broader applicability of AquaRefining across additional critical minerals and battery precursor markets. In parallel, we continued advancing our iron phosphate recovery work from LFP materials, which we believe is increasingly important as LFP adoption continues to accelerate, particularly in stationary energy storage applications.

With LFP continuing to grow its share across both electric vehicles and stationary storage applications, we believe our demonstrated ability to recycle it economically strengthens our competitive position and expands our addressable feedstock opportunity in a meaningful way.

On the strategic side, we continue pursuing opportunities designed to broaden our participation across the battery and energy storage ecosystem and create additional pathways towards future revenue generation. That includes our previously announced commercial relationships with companies, including 6K Energy, Westwin Elements, Impossible Metals, Mobi Robotics and American Battery Factory.

Now let me provide an update regarding Lion Energy. Following detailed diligence, we have determined not to proceed with the acquisition under the structure contemplated in the previously announced non-binding term sheet. We continue to see long-term strategic value in the integration of energy storage solutions with domestic battery materials infrastructure, and we are evaluating alternative strategic structures and pathways that could potentially accomplish those objectives in a more capital-efficient manner.

Our approach remains disciplined and focused on protecting shareholder value while maintaining strategic flexibility. Looking ahead through the balance of 2026, our priorities remain clear. Advancing site selection, continuing engineering and technical validation, expanding commercial engagement and evaluating strategic opportunities that can accelerate long-term value creation.

We believe AquaRefining has the potential to become an important part of a more domestic, efficient and resilient battery material supply chain in North America. Our process eliminates the waste streams and chemical costs that make traditional recycling uncompetitive in North America. And we have demonstrated battery-grade lithium carbonate at fluorine levels we believe are the best-in-class for any recycled source globally. We believe our cost profile is highly competitive with incumbent processes, both domestically and internationally, and that is the foundation we are building the commercial business on to drive that value creation.

As we move forward, we do so with a validated technology platform, growing intellectual property portfolio, operating infrastructure already in place and what we believe is an increasingly favorable backdrop for domestic critical minerals development and battery supply chain localization.

With that, I'll turn the call over to Eric for the financial review.

Thanks, Steve. For the first quarter of 2026, we reported a net loss of approximately $4 million or $1.22 per basic and diluted share compared to a net loss of approximately $8.3 million or $10.27 per basic and diluted share in the first quarter of 2025. The improvement year-over-year was primarily driven by the noncash impairment charges that were recorded in the prior year period and did not repeat in Q1 of 2026.

Total operating expenses were approximately $4.1 million for the quarter compared to approximately $8.7 million for the first quarter of 2025. We ended the quarter with approximately $6.8 million in cash and cash equivalents and working capital of approximately $7.5 million. Cash used in operating activities was approximately $3.8 million during the quarter. We continue to manage spend carefully while still supporting the technical, engineering and strategic work that Steve discussed.

During the quarter, we raised approximately $1.3 million in net proceeds under our ATM program. As of the quarter ended, approximately $48.6 million remained available underneath the ATM. We continue to evaluate financing alternatives and are focused on maintaining flexibility as we move through the next phase of commercialization and strategic planning.

On Lion Energy, during the quarter, we contributed the previously outstanding note balance and advanced an additional $2 million to acquire a subordinated participation interest in Lion Energy's senior secured credit facility. As disclosed in the 10-Q, we recorded a provision for credit losses of approximately $437,000 during the quarter based on our assessment of the exposure and the expected recovery assumptions.

Subsequent to quarter end, we elected to not proceed with the acquisition under the structure and terms outlined in the February 11, 2026, non-binding term sheet, but we continue to evaluate alternative structures that may better align with our capital discipline and shareholder value objectives.

Overall, our approach remains consistent, preserve capital, stay disciplined with spending and focus our resources on the activities we believe best support commercialization, strategic flexibility and our long-term shareholder value.

With that, I'll turn the call back over to the moderator to begin Q&A.

[Operator Instructions] And we have a question from Mickey Legg from Benchmark.

Just got to ask about the Lion Energy transaction. Any additional color you can give us there on what led to the decision not to follow through and just how discussions are going, if they're ongoing at all about potential alternatives and that exposure on the note you have out there. Just any comments on that and how confident you are you can recover that or any alternative plans there?

Mickey, thanks for hopping on and asking the question. So yes, so I think we'll do a 2-part answer. I'll answer part of your question. I'll turn it over to Eric to answer the second part. But my part, as we progress through the diligence, it became clear to us that the originally contemplated structure just no longer aligned with our capital discipline, risk profile or shareholder value objectives. We approached the process really thoughtfully and objectively. And ultimately, we concluded that preserving flexibility and protecting the balance sheet for the company was really the right decision.

But that said, we do continue to believe that there is a strategic value at this intersection of energy storage systems and domestic battery materials. So the broader thesis has not changed. What did change was our view that the structure that's required to responsibly pursue that opportunity would need to change. So we are evaluating alternatives, and that could potentially allow us to participate in selected assets, technologies, customer relationships or customer channels in a much more capital-efficient and risk-balanced manner. But we're not -- excuse me, we are going to remain disciplined, and we're not interested in pursuing growth really at any cost, and we are interested in applying that discipline.

I'll let Eric answer the second half of your question.

Yes. Thanks for the question, Mickey. So at the quarter end, our total exposure associated with the Lion Energy financing activities was approximately $4.1 million. Given the evolving situation and the prudent accounting standards, we recorded a partial reserve during the quarter, reflecting the increased uncertainty at this time. It's really driven by GAAP principles.

So importantly, our position remains as a senior secured second to their current ABL who has first position. We're actively developing or actively monitoring developments and evaluating a range of potential recovery outcomes tied to the collateral base and of course, any future restructuring scenarios. I'd also add that throughout this process, we remain very focused on downside protection and capital preservation. We approached the financing strategically, and we continue to believe that our secured position provides us with multiple paths to potentially preserve value while maintaining optionality around future strategic outcomes.

Okay. Got it. Yes. That's all super helpful. And then maybe just one more on how the -- where should we be looking over the next 12 to 18 months? Where -- what milestones should we kind of be looking for? It seems like there's a lot of focus like you're saying, Steve, on the energy storage market. So just curious on what we should be looking for.

Yes, for sure. So a lot of the milestones from our core Aqua Metals business, of course, is a site selection for our first commercial art facility. And that is something that is very far along and underway, in fact, a big portion of our team is returning today from some more visits at a short list of sites that we're looking at selection. So that is something that we expect we'll be able to proceed with in a reasonable time frame on the site selection.

And so the criteria for those site selection hasn't really changed materially and all that, and we've always prioritized for that site selection, things like feedstock logistics and infrastructure availability, utility economics, permitting environment, access to workforce and really importantly, proximity to the strategic ecosystem partners we're looking for, for feedstock and offtake.

So in some ways, stepping back from the originally contemplated structure with Lion actually increases our flexibility on that milestone because it allows us to optimize purely around long-term operating economics and strategic positioning for our core business. But that doesn't mean that alternative structures with Lion Energy and/or other initiatives that we would take to achieve an earlier revenue production in the energy storage space is something that we're working on and expect to update the markets accordingly as we make progress on that portion of the initiative. I hope that answers the question.

Yes, it does. That's all I had. Congrats on another quarter guys.

I would now like to turn the call back to Dan Scott to facilitate questions that were submitted online. Dan, the floor is yours.

Thanks, Tom. We have a couple that have come in. The first is for Steve. The question is, you've surpassed 5,000 cumulative operating hours in independently validated battery-grade lithium carbonate from both NMC and LFP feedstocks. What specific remaining technical or commercial milestones need to be cleared before you can commit to a site and begin FEL2 engineering?

Yes. So we're continuing to make very solid progress across the remaining milestones. At this stage, our focus is less about proving the core chemistry and process flows because we've already done that and achieved that with our innovation center and pilot and demonstration plant and a lot more about optimization, integration, throughput validation and commercial configuration aspects.

We've now demonstrated that battery-grade lithium carbonate across multiple feedstocks. And that was really an important validation point for us. And we're also continuing to refine impurity management, leveraging our assets and our operations for things like reagent efficiency and operation stability as well as the overall process economics, which are really important.

On the commercial side, that site selection that I talked about answering the prior question from Mickey with the team that's in the field literally this week, as I mentioned, feedstock alignment and infrastructure considerations and customer qualification discussions, things like project financing conversations, all come together in parallel as we take our disciplined phased development approach because we really want the first commercial facility positioned for long-term success and not just to get the short-term gratification of celebrating a groundbreaking.

Okay. Great, Steve. And then there's one more question also for Steve. You've maintained commercial relationships with 6K Energy, Westwin, American Battery Factory, Impossible Metals and Mobi. Have any of these moved from MOU or LOI status towards binding agreements? And what does the commercial conversion timeline look like?

Yes. So we continue to, of course, actively engage with all of those parties named in the question and others. I would characterize several of those relationships is continuing to deepen both technically and commercially. And that said, at this stage, many of these discussions really naturally evolve alongside that timing of commercialization and site selection. And then getting into qualification work and overall project structure. So it's a sequencing thing that's really important to converting those to full force commercial agreements because you really have to have the site secured and line that out before you finalize everything else.

What's encouraging is that we continue to see really strong interest in domestic refining solutions, recycled battery materials and low-carbon supply chain positioning. And the industry really understands that North America needs a scalable domestic refining capacity. And we're also really pleased that the lithium prices have recovered from the 2024 and 2025, I'll call it, lithium lull, where lithium prices went well below $20,000 to $10,000 a tonne, as I mentioned. And now we're in an environment where we feel that we're in a great position as one of the few companies remaining in North America to be able to fulfill this commercial plant and those commercial contracts as it relates to the commercial plant.

Okay. Steve, thanks. That's it for online submissions. I'll turn it over to Steve for closing remarks.

Yes. Well, thank you, everyone, for calling in, and we really appreciate the continued support of Aqua Metals. We expect that we'll have new information to report to the market soon. So stay tuned.

Thank you. This does conclude today's conference call and webcast. You may disconnect at this time, and have a wonderful day. Thank you once again for your participation.

Greetings, and welcome to Aqua Metals Fourth Quarter 2025 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, [ Dan Scott ]. Thank you. You may begin.

Thank you, operator, and thank you, everyone, for joining us today. Earlier today, Aqua Metals issued a press release providing an operational update and discussing results for the full year ended December 31, 2025. This release is available in the Investor Relations section of the company's website at aquametals.com.

Hosting the call today are Steve Cotton, President and Chief Executive Officer; and Eric West, Chief Financial Officer.

Before we begin, I would like to remind participants that during this call, management will be making forward-looking statements. Please refer to the company's report on Form 10-K filed today for a summary of the forward-looking statements and the risks, uncertainties and other factors that could cause actual results to differ materially from those forward-looking statements. Aqua Metals cautions investors not to place undue reliance on any forward-looking statements. The company does not undertake and specifically disclaims any obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur, except as required by law. As a reminder, after the formal remarks, we will conduct a question-and-answer session.

With that, I'd like to turn the call over to Steve Cotton, President and CEO of Aqua Metals.

Thank you, Dan, and good afternoon, everyone. I appreciate you joining us for Aqua Metals Fourth Quarter and Full 2025 Earnings Call. Today, I'll walk through what was an active and milestone-filled year for our company, covering how we evolved our technology, what we accomplished on the product side, how our strategic partnerships developed and the financial foundation we built heading into 2026. Eric will then follow with a detailed financial review.

Let me start with the overall frame for 2025. It was a year in which discipline and execution went hand-in-hand. We made deliberate adjustments to our commercialization approach as market conditions evolved, cleared important technical hurdles, extended our platform with new strategic initiatives and put the balance sheet in meaningfully better shape than where we started the year.

On the technology and product front, I would call 2025 the most expansive year in Aqua Metals' history in terms of what the AquaRefining process demonstrated that it can do. We grew the product portfolio. We raised the bar with product specs and proved the feedstock flexibility of our platform in ways that matter commercially and allow us to address the variability of material, not only in the battery recycling market, but beyond to include other markets like rare earths and undersea mining, for example.

One of the most important strategic decisions we made this year was to sharpen the commercial scope of our first ARC facility. With the AquaRefining platform that's capable of producing a broader range of outputs, we made the deliberate decision to simplify the first commercial plant around 2 core feedstock streams, NMC black mass and LFP black mass. From those inputs, our initial commercial focus will be on 3 primary outputs: battery-grade lithium carbonate, nickel, cobalt mixed hydroxide precipitate or MHP, and iron phosphate. We have already successfully produced these materials at our innovation center, which gives us confidence that this is the right first commercial configuration. That decision is expected to reduce execution risk, shorten time to market, lower upfront capital requirements and support attractive unit economics and a stronger payback profile.

In short, we are intentionally designing the first commercial ARC to be simpler, faster and more capital efficient to deploy while preserving the flexibility to expand the product slate over time as we scale. We believe that it is the right disciplined approach to commercialization and long-term shareholder value creation.

On product quality, our team delivered results that we believe set a new benchmark for the recycling industry. Our lithium carbonate achieved fluorine levels under 30 parts per million, a specification that to our knowledge, places us at or above the quality standard for any recycled lithium source globally. Material meeting this threshold has been produced at meaningful scale and distributed to strategic counterparties for evaluation. The responses have been substantive and encouraging.

On the broader product side, we generated product qualification representative volumes of multiple products and advanced those materials through partner qualification processes. We also developed nickel carbonate, producing initial samples calibrated to specific downstream partner requirements, which opens additional product pathways and gives us greater optionality as partner discussions mature.

Now an LFP or lithium iron phosphate battery chemistry, which is cobalt and nickel-free, I want to get this attention it deserves because I consider proving that we can economically recycle this type of material is one of the most significant technical achievements in this company's history. We moved from engineering analysis and bench scale work on lithium iron phosphate recycling all the way through to processing an entire metric ton of LFP cathode scrap at our pilot facility. Recovering battery-grade lithium carbonate that was validated by OEM and third-party testing. That is not a lab result. That is demonstration at commercially meaningful scale. And because LFP chemistry is capturing an increasing share of both EV and stationary storage deployments, the ability to handle it gives our platform a decisive competitive advantage in terms of addressable feedstock.

We also initiated trials on sodium sulfate regeneration, a process that could allow P-CAM producers to convert a problematic waste stream back into a usable chemical inputs, creating cost and sustainability advantages for our partners. And we extended our alternative feedstock testing to include nickel refinery residue alongside polymetallic nodule materials, rare earth-bearing magnets and e-waste, which underscores the core flexibility built into our electrochemical process.

One achievement from 2025 stands out beyond the product and process milestones. We were central to producing the first cathode active material made entirely from recycled nickel sourced within the United States. That material has now entered qualification at a Tier 1 battery manufacturer. This matters not just as a technical accomplishment for Aqua Metals, but as a demonstration that a fully domestic closed-loop battery material supply chain is not a theoretical goal. It is something that can actually be built. As the field of players in this market continues to consolidate, we intend to be at the center of it.

On the commercial development side, we advanced our ARC facility design to support a processing range of 10,000 to 60,000 metric tons of black mass input feedstock annually. That flexibility is intentional. It allows us to size the first commercial facility to the specific partner configuration and capital structure we ultimately bring together rather than being locked into a single predetermined scale. We also conducted structured due diligence on several candidate sites for the first commercial ARC, working through factors like feedstock proximity, offtake accessibility, utility infrastructure, permitting pathways and the strategic alignment of potential partners at each location. The process has been thorough, and we are in a good position to move forward with final site selection later this year as the remaining commercial conditions come together. And I want to be direct about the build decision because I think our approach is sometimes misread as a hesitation.

In fact, this is exactly the opposite. We are not going to build before we are ready. And what ready means is contracted feedstock, committed offtake and project financing that is genuinely bankable. Our posture is simple: build once, build right and execute from a position of confidence. That approach protects shareholders and gives us the best possible path to a facility that ramps to profitability on a reasonable time line.

We also remain actively engaged in diligence with Lion Energy around a transaction structure that we believe could be highly strategic and meaningfully additive to Aqua Metals. If completed, this opportunity would not only provide immediate commercial revenue and extend our reach downstream into branded energy storage systems across portable, residential, commercial, data center and industrial applications, but it would also position Aqua Metals and its shareholders to participate more directly in 2 of the fastest-growing segments of the electrification economy, distributed energy storage and domestic LFP battery manufacturing of cells.

Importantly, through Lion's existing relationship with an equity stake in American Battery Factory, or ABF, this transaction would also bring with it a meaningful equity interest in ABF, creating exposure to the emerging U.S. GigaFactory build-out and LFP cell production market. We view this as a compelling strategic fit that could broaden our platform, advance our long-term circularity vision, enhance our commercial relevance and create additional pathways for shareholder value creation. We remain disciplined and thoughtful in our process, and we look forward to updating the market in the near term.

Let me now turn to our partnership activity in 2025, which was broad and meaningful. I'll walk through the key relationships because the pattern they reveal is important. With 6K Energy, we formalized a multiyear supply agreement that establishes the commercial terms under which we would deliver battery-grade nickel metal and lithium carbonate into their domestic cathode active material manufacturing operations. This moves the relationship beyond technical collaboration and into a defined commercial framework, positioning Aqua Metals as a main supplier into a domestic CAM production chain.

With Westwin Elements, we entered a nonbinding LOI outlining terms for a potential supply of recycled nickel carbonate that would support Westwin's efforts to build a domestic nickel supply chain. What makes this relationship particularly interesting is the downstream implication. We believe that a Westwin Aqua Metals commercial partnership and relationship can help stand up nickel production and refining capability on U.S. soil that simply does not exist at scale today.

We also signed 2 MOUs that extend the AquaRefining platform into adjacent critical minerals territory. The first with Impossible Metals explores applying our refining process to material collected responsibly from the seafloor, feedstocks that contain nickel, cobalt, copper, manganese and rare earth elements. The second with Moby Robotics evaluates whether AquaRefining can be applied to polymetallic nodules with the potential to recover true rare earth elements as well. Both extend our platform well beyond battery recycling and into strategic areas of focus on critical minerals in today's world.

I want to address the strategic logic here directly. These are not departures from our mission. The chemistry underlying AquaRefining, electrochemical refining of dissolved critical mineral streams is the same whether the feedstock originates from black mass, refinery residue, e-waste or deep sea nodules. The intellectual property travels. What these agreements do is extend our total addressable market and create optionality that a licensing and partnership-oriented business model can monetize without heavy incremental capital. Battery recycling remains our primary commercial path to these adjacencies, add strategic depth.

We also continued active industry engagement at our Tahoe Reno-based Innovation Center and demonstration plant throughout the year, hosting the National Battery Conference, automotive OEMs, battery manufacturers, recyclers and upstream material suppliers for facility tours and technical reviews. The consistency of the feedback about the quality of our output and the operational sophistication of our pilot plant continues to build credibility in commercial discussions. And you can see some of that feedback on our blog, the current on our website.

On the governance front, we made targeted additions to the Board of Directors, bringing in directors with specific expertise in growth strategy, commercialization and financial markets. These additions reflect where we are in our development, a company that is transitioning from technology validation to commercial execution, and the Board now reflects that stage appropriately. We also completed a CFO transition with Eric West stepping into the role of bringing both deep Aqua Metals institutional knowledge and a fresh financial perspective to this next phase.

On intellectual property, the U.S. Patent Office granted allowance of a foundational patent covering key elements of our lithium battery recycling process. This is a significant addition to an already substantial IP estate and reinforces the long-term defensibility of the AquaRefining platform at commercial scale. We also filed a provisional application covering a novel low-cost leaching approach applicable to mined manganese ores and deep sea nodule feedstocks, which is further evidence of the expanding reach of our IP program.

As we enter 2026, our priorities are well defined. We are advancing engineering and permitting work to support site selection for our first commercial ARC. We are deepening commercial negotiations with supply, offtake and project financing partners. And we are moving strategic partner qualifications for our lithium carbonate and MHP forward in a deliberate milestone-oriented way.

The broader environment for domestic critical minerals has continued to shift in our direction. The policy and geopolitical case for building domestic battery material production capability has never been stronger, and we are increasingly recognized as a technically validated credibly financed player in that space. We have the process, the people, the operating demonstration plant and the strategic relationships to move from validation to commercialization. Now it is about refining that momentum into commercial results, and I am confident in our team's ability to deliver.

With that, I will turn it over to Eric for the financial review. Eric, over to you.

Thanks, Steve. We'll now provide an overview of our full year 2025 financial results and balance sheet position. Given this is our fourth quarter and full year call, I will focus primarily on annual figures while noting fourth quarter specifics where relevant.

Let me start with the balance sheet. We ended the year with cash and cash equivalents of approximately $10.8 million. The significant capital raise activity in 2025 is the most important context for understanding our year-end position. In October, we closed a $13 million investment from a leading institutional investor, combined with approximately $7 million raised through our ATM and equity line programs. Our total new capital raised in 2025 was approximately $20 million. This was a proactive raise made from a position of strength and strategic momentum, and it provides us with multiple quarters of operating runway and the resources needed to advance engineering, permitting and site selection work for our first commercial scale AquaRefining facility.

I also want to highlight a key balance sheet improvement that I'm particularly proud of. We ended the year with no long-term debt. This is the result of the deliberate financial management decisions made throughout 2025, including the completion of the Sierra ARC asset sale in the second quarter and the associated retirement of the $3 million Summit Building loan. Having fully eliminated our debt, we entered 2026 with a cleaner, more flexible capital structure than we have had in years.

Now moving to the income statement. I will cover the full year 2025 results with prior year comparisons where described. Total operating expense for the full year 2025 was approximately $23.3 million compared to approximately $23.8 million for the full year 2024. While total expenses were relatively consistent year-over-year, 2025 included approximately $9.1 million of impairment and loss on the disposal charges, compared to approximately $3.1 million in 2024. These impairment charges are nonroutine and noncash in nature. Excluding these items, underlying operating expenses declined meaningful year-over-year, reflecting the sustained cost discipline we have maintained throughout 2025, including the benefit of workforce reductions implemented in the prior periods while continuing to support our key technical and commercial development programs. We are running a lean, mission-focused operation.

General and administrative expenses for the full year were approximately $10.5 million, down from approximately $12 million in the prior year. The decline was driven primarily by lower payroll and related costs following prior year workforce reductions, reduced professional fees and broader overhead efficiencies. For the fourth quarter, specifically G&A came in at approximately $3.8 million. Research and development expense for the full year totaled approximately $1.3 million, reflecting our continued investment in process optimization and product expansion, including lithium carbonate quality improvement, MHP production, nickel carbonate development and LFP processing capability.

For the fourth quarter, R&D was approximately $0.4 million. While we maintain disciplined cost controls, we are intentional about funding the technical work that derisks commercialization and advances partner qualification. Every dollar spent in this area has a clear commercial purpose.

Our full year 2025 net loss was approximately $22.6 million or negative $15.15 per basic and diluted share compared to a net loss of approximately $24.6 million or negative $38.25 per share for the full year 2024.

For the fourth quarter, our net loss was approximately $4.4 million or negative $2.97 per share. These figures reflect the pre-revenue development stage of our business, and they continue to trend in the right direction as our cost structure matures.

I want to take a moment on the year-over-year net loss comparison because the 2025 figures also reflect some noncash items that are worth noting for investors evaluating our underlying operating trajectory. Our 2025 results include noncash items associated with warrant liability remeasurement, impairment on disposal of property, plant and equipment and other noncash adjustments similar to prior periods. We are pleased that the core operating cash consumptions continue to trend lower year-over-year, which is a direct reflection of the cost discipline we have discussed on every call this year.

Moving to the cash flow statement. Net cash used in operating activities for the full year 2025 was approximately $10.3 million compared to approximately $13.6 million in 2024. This improvement, a reduction of more than 24.8% year-over-year reflects our disciplined overhead management and the lower cost structure we have built over the past 18 months. Investing activities for the year primarily reflect the Sierra ARC building and equipment sale proceeds received in Q2, partially offset by minor fixed asset activity.

In December of 2025, we also provided approximately $2.1 million of short-term financing to Lion Energy, which remained outstanding at the year-end as a note receivable. Subsequent to year-end in February 2026, we entered into a nonbinding term sheet contemplating the potential acquisition of Lion Energy and contributed the outstanding note along with an additional $2 million to acquire a subordinated position interest in its senior secured credit facility in connection with our evaluation of the potential transaction.

On the financing side, the year was characterized by meaningful capital inflows from our October institutional raise and ongoing ATM and equity line activities, partially offset by debt repayment activity completed earlier in the year. Looking ahead, as Steve outlined, we anticipate a measured increase in cash usage as we ramp engineering, process optimization and site readiness activities in support of our first commercial facility. We will continue to manage our spending with rigorous discipline. Every dollar invested must advance a clear strategic and technical milestone.

The focus remains on maintaining adequate liquidity, aligning investment pace with commercialization progress and ensuring we have the financial platform to reach our goals. The balance sheet improvements we achieved in 2025, eliminating debt, raising $20 million in new capital and continuing to reduce our operating cash burn has positioned Aqua Metals to approach 2026 from a place of genuine financial stability. We have the runway we need and we intend to use it wisely.

That concludes my prepared remarks. I will now turn the call back to the operator for the question-and-answer session.

[Operator Instructions] Our first question comes from Mickey Legg with The Benchmark Company.

Congrats on another quarter. Just a couple here on the Lion Energy acquisition. Assuming that it does get approved and closes, just what are your main areas of focus near term and some of the most natural areas of synergy you see for Aqua Metals?

Yes. Mickey, good question. And yes, so first off, we're really been very deep in due diligence across all the key work streams associated with this acquisition. That's like inclusive of financial, legal, operational and commercial. And that's included everything from auditing the financials to completing a detailed independent market, product assessment across Lion's revenue, generating portable residential, commercial, industrial and data center offerings. So we've had -- the team is spending a lot of time talking about synergies with each other in each other's facilities and working closely through all the discussions. So on the process, it's been very active, very substantive, and we expect to bring it to a conclusion in the near term and update the market accordingly.

And in a greater sense, what we see with the synergies is an integrated battery materials and battery energy storage company is much stronger than those that stand on their own. And that's because of the synergies you can get with the circularity with the ingredients that go into the batteries, the production of the batteries, inclusive of the ownership that Lion Energy has in American battery factory with their planned GigaFactory in Tucson, Arizona, and being able to put that all together and expose the shareholder, frankly, to the optionality of having a stock they can buy that is really a combination of energy storage, battery materials and GigaFactory production. It's much how it's done in China. And the one reason that China has been successful is by integrating these solutions and creating those kinds of synergies to reduce costs, increase efficiency and have a better story about the overall solution.

So we're really excited about that opportunity to work everything out with Lion Energy and come out swinging is what we think will be the first integrated energy solution provider and battery materials provider in North America.

Great. Okay. Okay. That's very helpful. And then just one more on the acquisition. And I want to understand a little bit better the equity stake it could bring in American Battery Factory, how does that fit in there? Does it just sort of align with your closing remarks there, your ending remarks about fitting into the domestic end-to-end battery ecosystem?

Yes. So definitely, the equity stake in American Battery Factory is a huge value creator and a huge synergistic opportunity. But American Battery Factory is planning a first GigaFactory in Tucson, Arizona. They've already secured the land about 270 acres, where we see synergistic opportunities as one of the sites we're considering to deploy our ARC facility at a commercial grade plus Lion Energy having some battery fabrication.

So if you can think of like a single location that would have cells being generated, the agreement that we already have with American Battery Factory in an MOU form today, which is that we would take the scrap from that GigaFactory as an input to our recycling facility and get lithium carbonate right back to that GigaFactory. While right in that same area, you've got Lion Energy putting together really innovative battery energy storage products for the various segments of the marketplace I was talking about earlier.

So the GigaFactory plays are large plays. And what American Battery Factory is seeking is the final phase of financing to get that GigaFactory started this year -- later this year. And those are hundreds of millions of dollars of investment -- based on project finance, we think our equity position would still be still quite meaningful post financing and a GigaFactory produces a heck of a lot of revenue and a heck of a lot of product that also adds to those synergies. So we really see that as a key aspect of our relationship with Lion Energy and American Battery Factories kind of tying that all together.

I would now like to turn the call back to Dan to facilitate questions that were submitted online.

All right. Thank you very much. First question for Steve. Could you give us a site selection update? Where does the process stand? And when can we expect an announcement?

Sure, sure. So the biggest gating factors now are really site selection, project structure, lining up the right capital and commercial partners. And as we've already mentioned, we're in active due diligence on 2 specific potential sites, looking at things like feedstock access, logistics, utilities, permitting and of course, the overall economics of the project in that particular type of location. And our goal is to settle on and secure the lead site and then spend the balance of the year making real progress on site-specific FEL2 engineering. And that's really basically the stage where you move from concept into a much more defined and specific plant design down to every nut and bolt for that particular location, cost estimate and the execution plan to begin executing a bond.

Excellent. The second question, Steve, is what is the status of the feedstock market? There's been a lot of volatility in battery metal prices. How does that affect your commercial position?

Yes, great question. So today, effectively all of the black mass produced in the United States and really North America is being exported offshore, simply because there really aren't yet commercial scale refining options here domestically. And that's exactly the opportunity we're pursuing with the first build of our commercial ARC. The market does demand competitive payables for feedstock, but we believe our lithium AquaRefining process puts us in a very strong position because of its potential CapEx and OpEx advantages. And importantly, we're already working to diversify through both end-of-life batteries and GigaFactory scrap, as I mentioned earlier. And that includes our announced MOU, like I mentioned earlier, with American Battery Factory in Tucson.

So we can take end-of-life and beginning of life batteries that didn't make it. And that's about half of the scrap of the overall material is GigaFactory scrap at this point in time. It's also important to note that the overall economics around refining black mass have improved meaningfully over the last year. A number of projects across the industry, which including ours, slowed or paused when lithium carbonate prices fell to around $8,000 a ton in 2024. With pricing now having recovered to roughly the $20,000 plus or minus range per ton, we think that creates a much healthier backdrop. And that's, in turn, a real opportunity for the remaining U.S. players and especially for Aqua Metals given the stage that we're at today.

Thanks, Steve. Next one we got is, can you talk about the LFP breakthrough in more detail? Why is it significant? And what does it mean for your business model?

Yes, great. As I mentioned in my prepared remarks, the LFP breakthrough is really about our ability to economically recover lithium while also recovering the iron phosphate into a reusable form. And that's really a big deal. LFP does not have nickel or cobalt to support the economics. So you really have to run an efficient process. And that's exactly where our lithium AquaRefining technology stands out. That matters not just for future end-of-life batteries, but for the growing volume of LFP GigaFactory scrap such as American Battery Factory already being generated today and what we expect from American Battery Factory as they come online. As LFP continues to scale across energy storage and EVs, we really think that puts us in a strong position to be a leader in the new LFP batteries.

All right. Eric, next one is for you. Can you expand on your liquidity position coming out of 2025? And how long is the current capital -- and how long your current capital supports your operations?

Yes, definitely happy to expand on that. Point to, we ended the year with $10.8 million of cash, no long-term debt and a lower operating burn. This has put us in a pretty strong position as compared to prior periods. We continue to exercise cost discipline as we continue to progress. And just to add some additional context, the capital raised during 2025 was about $20 million in total, which really helped us to strengthen the balance sheet and put us in a position to fund all of the work that we're doing now.

So really that gives us the solid flexibility as we continue to move forward on the overall engineering site selection and our partnerships that we've discussed that really lead us to our first commercial facility. So overall, we feel good about where we are. The focus now is just continuing to be disciplined and making sure that we deploy the capital against the right milestones.

All right. A couple more. Steve, you've announced MOUs with Impossible Metals and Moby Robotics for deep sea mineral applications and also an LOI with Westwin Elements. How do these partnerships fit with Aqua Metals core business? And what do they look like commercially?

Yes. So at a high level, all of these partnerships are about applying our core AquaRefining platform to new sources of critical minerals and importantly, opening up to a very large high TAM market set access to that, where we can really monetize that capability. So we view them as directionally aligned and not a distraction at all. Whether it's black mass or GigaFactory scrap or primary resources like deep sea nodules or refining intermediates from partners like Westwin, the common thread is our ability to process these complex materials efficiently and with a lower environmental footprint and have access to the TAM of those gigantic markets in addition to battery recycling in our sites.

Okay. The last question we have is, Steve, how do you view the ongoing consolidation in the battery recycling industry? And does it create opportunity or risk for Aqua Metals?

So we view the consolidation overall as a net positive for Aqua Metals. The reality is that the lithium price collapse that happened in 2024 exposed which models were resilient and which were not. And at the same time, the industry is learning that simply copying China's chemical-intensive hydro approach into North America is really a very tough economic proposition. That's why we built AquaRefining differently from the beginning. And that is inclusive, again, as a reminder of vastly lower chemical intensity and costs, lower waste because we don't produce sodium sulfate waste streams.

Whereas the incumbent China hydro process produces more sodium sulfate waste stream than product, we produce 0 sodium sulfate waste stream and don't have all the costs associated with it. And it's a process that we believe is much better suited to North American permitting and operating realities with safe jobs and a much more clean type of an operation without the cost in those waste streams. So as the weaker models fall away, we think that our position does become increasingly and interestingly more differentiated and stronger.

Okay. Thank you. There are no further questions at this time. I'd like to pass the call back over to Steve for any closing remarks.

All right. Well, thank you, everybody, for listening in. And for those of you that are reading the transcript in the future, we look forward to continued communicating our updates in the near future as we continue to develop Aqua Metals and the rest of 2026. We're really excited to keep everybody in the loop. Thanks again.

This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.

Greetings, and welcome to the Aqua Metals Q3 2025 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Rob Fink, Investor Relations. Thank you, Rob. You may begin.

Thank you, operator, and thank you, everybody, for joining. Earlier today, Aqua Metals issued a press release providing an operational update and discussing financial results for the third quarter ended September 30, 2025. This release is available on the Investor Relations section of the company's website at aquametals.com. Hosting the call today are Steve Cotton, President and Chief Executive Officer; and Eric West, Chief Financial Officer. Before we begin, I would like to remind participants that during this call, management will be making forward-looking statements. Please refer to the company's report on Form 10-Q that was filed today, November 12, for a summary of the forward-looking statements and the risks, uncertainties and other factors that could cause actual results to differ materially from those forward-looking statements. Aqua Metals cautions investors not to place undue reliance on any forward-looking statements. The company does not undertake and specifically disclaims any obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur, except required by law. As a reminder, after the formal remarks, we'll be taking questions. We'll take as many questions as we can fit in and as time is allowed. And with that, I'd like to turn the call over to Steve Cotton. Steve, the call is yours.

Thanks, everyone, and welcome to our Q3 update. This past quarter and the subsequent weeks represent a meaningful strengthening of Aqua Metals. We advanced our technology, expanded commercial pathways across both battery and emerging critical mineral supply chains and strengthened our balance sheet with $17.1 million in new funding. I want to start there. Combined with our disciplined operating approach, this capital provides Aqua Metals multiple quarters of strategic runway and flexibility. Eric will speak more to the details, but it's important to note, this was a proactive raise, not a reactive one. Capital raised from a position of strength and strategic momentum. We brought in capital proactively to accelerate the plan and strengthen our strategic footing, and we believe that decision positions us exceptionally well as we move towards full commercialization. On the technology front, Q3 marked continued validation of the AquaRefining platform.

We successfully processed 1 metric ton of lithium iron phosphate or LFP cathode scrap at pilot scale, producing battery-grade lithium carbonate validated by OEM and third-party testing. To our knowledge, Aqua Metals remains the only company to demonstrate an economically viable path for producing battery-grade lithium carbonate by recycling from LFP at commercially relevant scale. As the industry evolves with both NMC and LFP chemistries, our feedstock flexible refining technology positions us for the next phase of market demand. We also saw the strategic network effects of our platform really beginning to compound. Our MOU agreements with MOBY Robotics and Impossible Metals extend the AquaRefining platform into deep sea mineral feedstocks rich in nickel, cobalt, manganese and rare earth elements, while our LOI agreement with Westwin Elements advances discussions for the potential supply of 500 to 1,000 metric tons, which is approximately $12 million of recycled nickel carbonate annually based on today's nickels prices. Together, these initiatives reinforce Aqua Metals' expanding role in sustainable domestic critical mineral supply. These are pivots. They're deliberate extensions of our core technology into adjacent markets, reinforcing our role in securing strategic metals for the energy transition.

We also regained compliance with NASDAQ listing requirements, strengthening our market position as we advance toward commercial operations and continued active industry engagement through events such as the Battery Show and the battery recycling workshop in Quzhou, China. Throughout, we remain disciplined. Aqua Metals has always taken a long-term view, partnering with the right stakeholders, deploying capital efficiency and building a platform designed to scale rationally and sustainably. I'm really proud of how consistently the team has delivered on that balanced approach, executing near-term priorities while keeping clear focus on long-term creation. Looking ahead, we see a consolidating industry centering around a smaller number of technically validated financially strong recyclers with proven solutions. That environment plays to our strengths. While we don't front-run announcements, we continue to evaluate compelling opportunities, and we expect to remain selectively active as the market evolves. This is a dynamic period in energy and critical mineral supply chains, and we intend to help shape what comes next from a position of strength. And to our shareholders, partners and employees. Thank you all for your continued support. Our mission remains clear. Our strategy is intact and our momentum is building at a pivotal moment for the clean energy supply chain. With that, I'll turn it over to Eric to review the financials.

Thanks, Steve. I'll provide an overview of our financial results and current balance sheet position. We ended the quarter with $2.9 million in cash and cash equivalents, up from $1.9 million at the end of Q2. During the quarter, we raised approximately $4.1 million through our ATM and equity line programs, maintaining flexibility while supporting pilot operations and commercial plan activities.

Subsequent to the quarter end, we closed a $13 million investment from a leading institutional investor, bringing total recent capital raise to over $17 million. With this funding, we now have multiple quarters of operating runway and the resources needed to complete engineering and permitting work as we finalize site selection for our first commercial scale AquaRefining facility. Now moving to highlight a few items on the income statement. Total operating costs were approximately $2.7 million for the quarter compared to $3 million in the prior year period. The decrease reflects continued cost discipline while maintaining key technical and commercial development programs. General and administrative expense was approximately $2.1 million, down from $2.5 million last year, and R&D expense totaled about $0.6 million, which is consistent with our focus on continued process improvement and expanding our suite of offtake material options. We reported a net loss of $2.8 million for the quarter or negative $1.52 per share compared to a net loss of $4.7 million or negative $6.87 per share in Q3 of 2024. Year-to-date net loss improved to $12.3 million or negative $7.41 per share from $19.2 million or negative $27.63 per share in the same period last year, a reduction of more than 1/3, reflecting lower operating expense and disciplined management of overhead.

Operating cash used year-to-date was approximately $7.2 million compared to $10.4 million in the same period last year. Looking ahead, as Steve outlined, we anticipate a modest increase in cash use as we ramp R&D, process optimization and site readiness efforts in support of commercialization. We will continue to manage spending with discipline and ensure that every dollar invested advances our strategic and technical objectives. Our focus remains on maintaining liquidity, aligning investment with clear milestones and advancing the commercialization plan efficiently. With the strengthened balance sheet, disciplined cost structure and growing technical momentum, Aqua Metals enters 2026 from a position of stability and focus. That concludes my prepared remarks. I will now turn the call back to the moderator for Q&A.

Our first question comes from the line of Mickey Legg with The Benchmark Company.

Congrats on the quarter. I'd like to start with maybe what are a few of the biggest gating factors to securing first build? And if you were able to clear those, how long do you expect to get to commissioning from there?

Mickey, good to hear your voice as always, and thanks for the question. So really, I think what you're asking is with a stronger cash position, why not begin building the ARC commercial facility now? And ask me how I know that's a great question. The answer is really simple, discipline. While it may be tempting to accelerate the construction immediately as we have seen several players attempt in the past, prior market conditions have informed our philosophy on a go forward, which is really build once and build right and build when the demand is contracted and not when we would build on speculation as the industry has done in the past.

We're really sequencing the ARC launch to align with market timing and feedstock certainty and offtake and really being fully ready from a capital perspective. So this approach will ensure that we avoid unnecessary dilution and maintain strategic leverage, and we can really execute that build from a position of confidence. I hope that answers your question.

Yes. Yes, it does. I was more talking about securing that partnership so that you feel comfortable with the timing of the build. What's keeping the partnership discussions? How are those going? Any color on those and how they're progressing? Maybe that would be helpful.

Yes. So on the OEMs and commercial partnerships, I would say interest is really increasing meaningfully. And our pilot scale run that we just announced of the 1 metric ton of LFP or lithium iron phosphate cathode scrap producing that battery-grade lithium carbonate has even further resonated on the commercial side and those commercial developments with OEMs and other ecosystem potential partners.

We've really seen growing inbound interest, I would say, deeper engagement from existing and prospective partners and continued validation of our results, really all the while we're utilizing the strength of our team and what I would characterize as our mature innovation center right here in Tahoe-Reno with what we think is North America's most sophisticated and proven lab and bench and full-blown pilot operation. So we expect that interest to continue as we continue to move through the commercialization milestones. And a lot of that is about product qualification and building those relationships. And we also think that our recently strengthened balance sheet certainly will enhance the additional credibility that we have in those discussions and expect to be able to report some things soon. But as I said earlier, it's kind of a condition precedent for us to feel very good about the commercial relationships to be one of the key ingredients to justify the capital spend on a commercial sized build.

Got it. Got it. Okay. I'll keep an eye out for more info on that front as it's released. Maybe shifting gears a little bit to the feedstock front. You mentioned that before, wanting to feel comfortable with having that secured before you do anything to committle. Maybe could you just talk about your comfortability there, specifically on the black mass front and how secure you feel about locking that down in the near term, given a pretty volatile macro?

So yes, the feedstock, a, there's plenty of it. But b, what's really happening to that feedstock today with the preprocessors to collect the batteries and deenergize and crush them and produce the black mass, which is the input to our process. Those materials are being sent to commercial scale refiners that already exist in the Asia Pac region.

And so the metals, the payables on those black mass are high because those entities out there have large facilities that they need to feed in order to keep them moving economically, whereas here in the U.S. and frankly, all of the Americas, let alone North America, there is currently 0 commercial scale refining capacity. And so what that means is that feedstock needs to get diverted to the commercial facilities that have the refining capacity here. And that's the classic chicken and the egg. Do you build the facility on speculation and then go for the feedstock? Or do you secure the feedstock and then build the facility to suit? We've chosen the latter path. And so we're not concerned about being able to get the feedstock. And we also, because of the economics of our process are very confident in our ability to process that black mass at the same payables that are being sold to the folks in Asia, but we need to get those contracts in a place where we feel they're truly bankable and another key ingredient of that build process. But we're making great progress on that, and we feel like we're getting closer and closer, while in the meantime, we strengthened the balance sheet.

Okay. Very helpful. Last one here. Can you give us maybe a little more color on the pathway for the nickel product and maybe just a runway there, saw the LOI with Westwin, but that's not delivery until 2027. So maybe just more near term, what sort of demand you're seeing on that front? Any particular directions that, that demand is trending? Just curious.

Yes, sure. So you mentioned specifically nickel and the agreement we have with Westwin. And that is exciting because we believe that our partnership that we're developing with Westwin will produce the first U.S. nickel production and refinery in the U.S. in a long time. And so that really creates a great opportunity. That's not an overnight sensation. This is a longer-term view on the nickel for that. That's also an example of nickel supply not necessarily going directly into the battery supply chain.

One of the things that we think is special and unique about Aqua Metals is that we can produce nickel as an example, and cobalt in metal form to go into the metals markets in general because currently, in the U.S., there are no significant pCAM and CAM refineries. So those metals need to be able to come out of a process like ours and get into the hands of players like a Westwind that can produce those materials. Additionally, I would say another longer-term thing that we are working on is the deep sea mining where we can go after some other critical minerals, including more manganese and additional elements, including rare earths. So we really see those relationships as an expansion of our opportunity and optionality and not a deviation from the core mission that we have. So the still nearer-term play is to take the black mass, produce the lithium carbonate and the nickel and the cobalt and forms that can get into the supply chain here in the U.S., be it a battery supply chain and/or otherwise.

I would like to turn the call back to Rob to facilitate questions that were submitted online.

Thank you. And Steve, Eric, we've received a number of questions from investors ahead of today's call, and I'll be reading those on behalf of those who submitted them. To keep the call flowing smoothly, we've consolidated some similar topics and combined related questions where it was appropriate. So our first question is, can you expand on your financial position and the runway that you see?

Absolutely. The most important point for investors to understand is that Aqua Metals is now operating from a position of strength and not necessity. With the $17 million of capital infusion that we received and our continued disciplined operating model, we secured multiple quarters of meaningful financial runway.

The funding also supports our ongoing engineering, permitting and ultimately the site selection for our first commercial scale facility. This gives us the ability to make measured choices, continued execution upon our commercialization plan and pursuing additional strategic initiatives with confidence and credibility. The capital infusion also sends a strong signal of external confidence in the company and our vision. We raised proactively and not reactively, which gives us the flexibility to sequence our steps responsibly. So the main highlight here is really from a position of stability, momentum and control.

Awesome. How do you guys view the current consolidation that's happening in the battery recycling industry today?

Yes, Rob, this is Steve. I'll take that one. So what we are seeing now is what I would characterize as a natural phase in the evolution of the new industrial category. The early entrants proves the need and now the market is really selecting for technologies, business models and just as importantly, capital structures capable of scaling profitability with commercial-sized facilities. Some really good assets are becoming available, and we do expect that trend to continue.

So Aqua Metals, we feel, is very well positioned with our proven technology, the discipline that we've been talking about throughout this call, the continued NASDAQ listing and the strength of the balance sheet. We're not going to chase scale for scale's sake. And we really expect the market to center on a few technically validated financially prudent operators, and we intend to be one of them. And as the industry consolidation enters its later stages, we see it a bit like the finals at the Olympics, let's say. We've earned our lane, and we really believe that we're positioned to metal.

That is helpful. You guys didn't mention the specific site for your first commercial facility. Can you provide an update on where you are, the time line and some more information there?

Yes, lots of activity on that front. We continue to make strong progress, I would say, on our site evaluation process. And we've advanced diligence on specific key locations, and that includes things like engineering and permitting reviews and utility access studies so we can get the power and all the other utility aspects that we need for our facility.

This includes alignment with the related developing strategic partners, which is key to that whole process that we don't just pop a facility down in the middle of nowhere that we find the right partner where we have synergies. So we're solving for that as well. And we aim to bring forward the most capital-efficient and strategically advantageous path, and we do expect that we'll be able to provide more updates as early as this quarter. Our priority is to launch the commercial facility at that right location or even locations sequenced appropriately with the right partner or partners under the right market conditions. And it's aligning those things that make the most sense. And I believe that our continued disciplined approach does put us in the best position for long-term success and really execution certainty.

Great. Thank you for that. And to round out here with our final question, should investors expect more business development updates in the near term?

Yes. Our philosophy remains consistent. We'll only announce when we can provide clear visibility and confidence. We'll report the news more than we'll forecast the weather. But that said, we are actively advancing the multiple initiatives that we've been talking about, both in that commercial and strategic partnership side, and we do expect to share those additional developments as they mature, as I said earlier, potentially as early as this quarter. This is definitely an exciting period for us, and we are executing across multiple fronts. And our mandate is that we keep moving forward steadily and ensuring that each step that we take builds towards our mission of long-term value creation and for platform scale.

There are no further questions at this time. I'd like to pass the call back over to Steve for any closing remarks.

Well, thank you, everybody, for listening in on our report for what we think was a very productive and exciting quarter with great prospects for the future for Aqua Metals and our shareholders, and we look forward to keeping everybody updated as we continue to make progress as we always promise to do, and we look forward to chatting with everybody soon. Thanks for your attendance and support of the company.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.