12.        Subsequent Events

On May 18, 2016, the Company entered into definitive agreements with Interstate Battery System International, Inc. (“Interstate Battery”) and other investors for the sale of approximately $15.1 million of the Company’s equity and debt securities, including a $10 million investment by Interstate Battery. The Company also agreed to enter into a supply agreement with Interstate Battery pursuant to which Interstate Battery will supply the Company with used liquid acid batteries (“LABs”) as feedstock for its AquaRefineries. The investment transactions are subject to customary closing conditions and are expected to close on May 27, 2016.

At the closing of the investment transactions, the Company will enter into a supply agreement with Interstate Battery pursuant to which Interstate Battery will agree to sell to the Company, and the Company will agree to buy from Interstate Battery, used LABs. Interstate Battery will sell the Company used LABs on a cost-plus basis and the agreement subjects the Company and Interstate Battery to certain minimum purchase and sale requirements. The Company will grant Interstate Battery limited rights of first refusal to partly supply its future AquaRefineries. The Company’s agreement with Interstate Battery is for an initial term of 18 months and will be subject to automatic renewals thereafter unless either party elects to terminate the agreement. The agreement allows each party the right to seek early termination based on certain commercial contingencies. The supply agreement contains representations, warranties and indemnities that are customary to commercial agreements of this nature.

Pursuant to the investment agreements with Interstate Battery, Interstate Battery has agreed to:

•          Purchase 702,247 shares of the Company’s common stock at $7.12 per share for the gross proceeds of approximately $5,000,000; and

•          Loan the Company $5,000,000 pursuant to a secured convertible promissory in the original principal amount of $5,000,000. The note will bear interest at the rate of eight percent (8%) per annum, compounding monthly, and all interest shall be payable upon the earlier of maturity or conversion of the principal amount. The outstanding principal is convertible into the Company’s common shares at a conversion price of $7.12 per share. The Company’s obligations under the loan are secured by a second priority lien interest on its assets, other than the Company’s intellectual property. The loan will mature on May 18, 2019.

In connection with the agreements, the Company granted Interstate Battery warrants to purchase its common stock, including:

•          a fully vested warrant to purchase 702,247 shares of the Company’s common stock, at an exercise price of $7.12 per share, expiring on May 18, 2018; and

•          a warrant to purchase 1,605,131 shares of the Company’s common stock, at an exercise price of $9.00 per share, vesting on November 18, 2016 and expiring on May 18, 2019.

The Company granted Interstate Battery customary demand and piggyback registration rights, limited board observation rights over the next three years and limited preemptive rights allowing it to purchase its proportional share of certain any future equity issuances by the Company over the next three years.

The $7.12 per share price represents a slight premium to the 30-day volume-weighted average price of Aqua Metals’ common stock as of April 12, 2016, which was the day the parties agreed in principle to pricing.  If Interstate converts its convertible note and exercises both warrants in their entirety, it will own slightly less than 20% of the common stock of Aqua Metals at an average price per share of approximately $7.93.

The Company has also entered into a definitive agreement with certain accredited investors to sell approximately $5.1 million of its common stock through National Securities Corporation as placement agent. Pursuant to this agreement, the Company has agreed to sell 719,333 of shares of its common stock, at the price of $7.12 per share, for the gross proceeds of approximately $5,121,650. The Company has granted the investors certain demand and piggyback registration rights, including its best efforts commitment to register their shares for resale on or before August 1, 2016. The Company has agreed to pay National Securities a commission of six percent (6%) on the sale of its common shares to the accredited investors. There are no commissions payable by the Company on the sale of its securities to Interstate Battery.

The Company has evaluated subsequent events through the date which the condensed consolidated financial statements were available to be issued.