Business Context and Reporting Period
This Form 8-K, dated February 6, 2026, reports that Aqua Metals, Inc. (AQMS) entered into a Term Sheet to acquire all equity interests of Lion Energy, LLC. The filing also details a concurrent Subordinated, Last Out Participation Agreement providing working capital to Lion Energy.
Key Financial Metrics and Transaction Structure
The proposed acquisition consideration is capped at $94.9 million, structured as follows:
- Cash Consideration: $4.1 million, representing prior investments by Aqua Metals in Lion Energy.
- Equity Consideration: $25.8 million in Aqua Metals common stock (subject to a 45% ownership cap) and potentially Series X Preferred Stock.
- Earn-Out Consideration: Up to $65 million contingent on Lion Energy achieving greater than $55 million in revenue and specific EBITDA margins over a 12-month period post-closing.
Additionally, Aqua Metals provided $4.1 million in working capital to Lion Energy by purchasing a subordinated participation interest in Lion Energy's existing credit facility. This was funded via $2.0 million in cash and $2.1 million in previously delivered product.
Material Changes and Conditions
The transaction is not yet finalized and is subject to several material conditions, including:
- Execution of a definitive acquisition agreement by March 31, 2026.
- Receipt of a fairness opinion and satisfactory quality of earnings diligence.
- Closing of a new asset-based lending facility with at least $25 million in committed availability.
- Execution of a supply and offtake agreement with American Battery Factory Inc.
- Nasdaq approval for the listing of shares to be issued and stockholder approval.
Lion Energy is under an exclusivity period until May 31, 2026, with a $1 million break-up fee for breach.
Outlook, Risks, and Management Commentary
Management anticipates that post-closing, the Board of Directors will initially include three existing independent directors, CEO Steve Cotton, and the majority owner of Lion Energy. The first $10 million of capital raised post-closing is earmarked for Lion Energy's growth initiatives.
Risks and Contingencies:
- There is no assurance the definitive agreement will be executed or the transaction consummated.
- The earn-out is highly performance-dependent; if Lion Energy's EBITDA margin is 8% or less, the EBITDA portion of the earn-out is zero.
- Integration risks and potential inability to secure necessary capital for operations are cited as forward-looking risks.
Investor Verification Checklist
- Verify the execution of the definitive acquisition agreement by the March 31, 2026 deadline.
- Confirm the closing of the $25 million asset-based lending facility required as a condition precedent.
- Monitor the status of the supply and offtake agreement with American Battery Factory Inc.
- Review the upcoming proxy statement for details on director interests and voting procedures.
- Assess the impact of the 45% common stock cap on the final equity dilution and the issuance of Series X Preferred Stock.