Item 1.01 Entry into a Material Definitive Agreement.
On February 15, 2021, we entered into a series of definitive agreements with
LINICO Corporation, a Nevada corporation, or LiNiCo, pursuant to which we
leased, with an option to purchase, our recycling facility at the Tahoe Reno
Industrial Center, or TRIC, located in McCarran, Nevada, and acquired an
approximately 11% equity interest in LiNiCo.
Industrial Lease and Option to Purchase Agreement
We have entered into an Industrial Lease Agreement with LiNiCo dated February
15, 2021 pursuant to which we have leased to LiNiCo our 136,750 square foot
recycling facility at TRIC. The lease commences April 1, 2021 and expires on
March 31, 2023. During the lease term, LiNiCo has the option to purchase the
land and facilities at a purchase price of $14.25 million if the option is
exercised and the sale is completed by October 1, 2022 and $15.25 million if the
option is exercised and the sale is completed after October 1, 2022 and prior to
March 31, 2023. The purchase option is subject to LiNiCo's payment of a
nonrefundable deposit of $1.25 million by October 15, 2021 and a second
nonrefundable deposit of $2 million by November 22, 2022, both of which will be
applied towards the purchase price. The lease agreement is a triple-net lease
pursuant to which LiNiCo's will be responsible for all fixed costs, including
maintenance, utilities, insurance, and property taxes. The lease agreement
provides for LiNiCo's monthly lease payments starting at $68,000 per month and
increasing to $100,640 in the last six months of the lease. The lease agreement
allows us to retain the use of a portion of the facility for our ongoing
research and development activities, including operation of the lab and the use
of office space.
With respect to the portion of the facility that was damaged in the November
2019 fire, consisting of approximately 30,000 square feet, we our obligated to
complete the clean-up of the damaged area, at our expense, by July 31, 2021 and
repair all damage to the damaged area, at our expense, by November 15, 2021.
With regard to the equipment on-site at TRIC, we have granted LiNiCo the right
of first offer to purchase any equipment we offer for sale. The lease agreement
contains customary representations, warranties and indemnities on the part of
both parties.
Investment Agreement
On February 15, 2021, we entered into a Series A Preferred Stock Purchase
Agreement with LiNiCo that provides for our issuance of 375,000 shares ("Aqua
Shares") of our common stock in consideration of LiNiCo's issuance 1,500 shares
of its Series A Preferred Stock, at a stated aggregate value of $1,500,000,
along with a three-year warrant ("Series A Warrant") to purchase an additional
500 shares of LiNiCo Series A Preferred Stock at an exercise price of $1,000 per
share. The 1,500 shares of the Series A Preferred Stock represents approximately
11% of LiNiCo common stock on a fully diluted basis, before giving effect to our
exercise of the Series A Warrant or any other outstanding warrants of LiNiCo.
The LiNiCo Series A Preferred Stock is senior to all other capital stock of
LiNiCo with regard to dividends and distributions upon liquidation, dissolution
and sale of the company. Each share of LiNiCo Series A Preferred Stock is
entitled to one vote per share and votes with the common stock on all matters,
subject to certain protective provisions that require the approval of the
holders of the Series A Preferred Stock voting as a class. The Series A
Preferred Stock accrues a cumulative dividend of 8% per annum on the original
stated value of $1,000 per share, and all accrued and unpaid dividends on the
Series A Preferred Stock must be paid in full prior to the payment of any
dividends on any other shares LiNiCo capital stock. In the event of any
liquidation or dissolution of LiNiCo, which would include a sale of LiNiCo, the
holders of the Series A Preferred Stock shall receive the return of their stated
value of $1,000 per share plus all accrued and unpaid dividends prior to any
distribution to the holders of any other capital stock of LiNiCo, following
which the holders of the Series A Preferred Stock shall participate in the
distribution of any remaining assets with the holders of the junior stock on an
as-converted basis. The Series A Preferred Stock is convertible into shares of
LiNiCo common stock at our option and is automatically converted into LiNiCo
common stock upon the election of the holders of a majority of the LiNiCo Series
A Preferred Stock or upon a qualifying IPO of LiNiCo common stock. The Series A
Preferred Stockholders are also provided with preemptive rights allowing them
the right to purchase their proportional share of certain future LiNiCo equity
issuances.
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The Series A Preferred Stock Purchase Agreement includes customary
representations, warranties, and covenants by LiNiCo and us, and an indemnity
from us in favor of LiNiCo.
In the event that LiNiCo's sale of the initial 281,250 of the Aqua Shares
results in net proceeds to LiNiCo of less than $1,500,000, we will be required
to pay LiNiCo the difference in cash. If the sale of the 281,250 Aqua Shares
results in net proceeds to LiNiCo of more than $1,500,000, such excess proceeds
shall be applied to the exercise of our Series A Warrant. The balance of the
93,750 Aqua Shares will be held by LiNiCo for six months after the closing, and
if the net proceeds received by LiNiCo from the sale of the 93,750 Aqua Shares,
plus the net proceeds from the sale of the initial 281,250 of the Aqua Shares
(including any shortfall payment by us), is greater than $2,000,000, such excess
shall be paid back to us.
In connection with the investment transactions, we also entered into an
Investors Rights Agreement and a Voting Agreement, each dated February 15, 2021,
pursuant to which LiNiCo granted us customary demand and piggyback registration
rights, information rights and the right to nominate one person to the LiNiCo
board of directors as long as we are the owner of at least 10% of the LiNiCO
common stock on a fully-diluted basis.
Comstock Mining Inc., a Nevada corporation (NYSE-MKT: LODE), is the beneficial
owner of approximately 50% of the common shares of LiNiCo. Our Chief Financial
Officer, Judd Merrill, is a member of the board of directors of Comstock Mining.
The Aqua Shares will be issued pursuant to a shelf registration statement that
we filed with the Securities and Exchange Commission, which became effective on
December 2, 2019 (File No. 333-235238). A prospectus supplement relating to the
offering will be filed with the Securities and Exchange Commission. The closing
of the offering is expected to take place on or about February 17, 2021, subject
to the satisfaction of customary closing conditions.
A copy of the legal opinion and consent of Greenberg Traurig, LLP relating to
the Aqua Shares is attached hereto as Exhibit 5.1.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
The following exhibits are filed with this report:
Exhibit Exhibit Description Method of
Number Filing
5.1 Opinion of Greenberg Filed
Traurig, LLP Electronically
herewith
10.1 Industrial Lease Filed
Agreement dated February Electronically
15, 2021 between Aqua herewith
Metals Reno Inc. and
LINICO Corporation
10.2 Series A Preferred Filed
Stock Purchase Agreement Electronically
dated February 15, 2021 herewith
between Aqua Metals,
Inc. and LINICO
Corporation
10.3 Investor Rights Filed
Agreement dated February Electronically
15, 2021 between Aqua herewith
Metals, Inc. and LINICO
Corporation
10.4 Voting Agreement dated Filed
February 15, 2021 Electronically
between Aqua Metals, herewith
Inc. and LINICO
Corporation
23.1 Consent of Greenberg Filed
Traurig, LLP (included Electronically
in Exhibit 5.1) herewith
104 Cover page Interactive
Data File (formatted as
Inline XBRL and
contained in Exhibit
101)
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