Filed
Pursuant to Rule 424(b)(5)
Registration No. 333-213501
PROSPECTUS
SUPPLEMENT
(to the Prospectus dated September 26, 2016)
7,150,000
Shares of Common Stock
We
are selling 7,150,000 shares of our common stock. Our common stock is listed on the NASDAQ
Capital Market under the symbol “AQMS.” On December 7, 2017, the last reported sales price of our common stock
on the NASDAQ Capital Market was $2.63 per share.
Investing
in our securities involves a high degree of risk. Before making an investment decision, you should carefully review and consider
all of the information set forth in this prospectus supplement, the accompanying prospectus and the documents incorporated by
reference herein and therein, including the risks and uncertainties described under “Risk Factors” beginning on page S-5
of this prospectus supplement and the risk factors incorporated by reference into this prospectus supplement and the accompanying
prospectus.
Neither
the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or
determined if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary
is a criminal offense.
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Per
Share
|
|
Total
|
Public Offering Price
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|
$
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2.10
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$
|
15,015,000
|
Underwriting Discount (1)
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|
$
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0.131
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$
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938,438
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Proceeds to Us (Before Expenses)
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$
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1.969
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$
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14,076,562
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(1)
|
See
“Underwriting” for additional information about the underwriter compensation
arrangements.
|
We
have granted the underwriter an option to purchase up to an additional 1,072,500 shares of common stock from
us at the public offering price less the underwriting discounts and commissions, and on the same terms and conditions as set forth
above, for 30 days after the date of this prospectus supplement. If the underwriter exercises the option in full, the total
public offering price will be $17,267,250, the total underwriting discounts and commissions will be $1,079,203,
and the total proceeds, before expenses, to us will be $16,188,047.
The
underwriter expects to deliver the shares against payment through the facilities of the Depository Trust Company on or about
December 12, 2017.
Oppenheimer
& Co.
The
date of this prospectus supplement is December 7, 2017.
TABLE
OF CONTENTS
Prospectus
Supplement
Base
Prospectus
ABOUT
THIS PROSPECTUS SUPPLEMENT
This
prospectus supplement and the accompanying base prospectus is part of a registration statement that we filed with the Securities
and Exchange Commission (the “SEC”) utilizing a “shelf” registration process. Each time we conduct
an offering to sell securities under the accompanying base prospectus we will provide a prospectus supplement that will contain
specific information about the terms of that offering, including the price, the amount of securities being offered and the plan
of distribution. The shelf registration statement was initially filed with the SEC on September 2, 2016, and was declared
effective by the SEC on September 26, 2016. This prospectus supplement describes the specific details regarding this offering
and may add, update or change information contained in the accompanying base prospectus. The accompanying base prospectus provides
general information about us and our securities, some of which, such as the section entitled “Plan of Distribution,”
may not apply to this offering. This prospectus supplement and the accompanying base prospectus are an offer to sell only the
securities offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. We are not making offers
to sell or solicitations to buy our common stock in any jurisdiction in which an offer or solicitation is not authorized or in
which the person making that offer or solicitation is not qualified to do so or to anyone to whom it is unlawful to make an offer
or solicitation.
If
information in this prospectus supplement is inconsistent with the accompanying base prospectus or the information incorporated
by reference with an earlier date, you should rely on this prospectus supplement. This prospectus supplement, together with the
base prospectus, the documents incorporated by reference into this prospectus supplement and the accompanying base prospectus
and any free writing prospectus we have authorized for use in connection with this offering include all material information relating
to this offering. We have not, and the underwriter has not, authorized anyone to provide you with different or additional information
and you must not rely on any unauthorized information or representations. You should assume that the information appearing in
this prospectus supplement, the accompanying base prospectus, the documents incorporated by reference in this prospectus supplement
and the accompanying base prospectus and any free writing prospectus we have authorized for use in connection with this offering
is accurate only as of the respective dates of those documents. Our business, financial condition, results of operations and prospects
may have changed since those dates.
You should carefully read this prospectus supplement, the accompanying base prospectus
and the information and documents incorporated herein by reference herein and therein, as well as any free writing prospectus
we have authorized for use in connection with this offering, before making an investment decision. See “Incorporation of
Certain Documents by Reference” and “Where You Can Find More Information” in this prospectus supplement and
in the accompanying base prospectus
.
This
prospectus supplement and the accompanying base prospectus contain summaries of certain provisions contained in some of the documents
described herein, but reference is made to the actual documents for complete information. All of the summaries are qualified in
their entirety by the full text of the actual documents, some of which have been filed or will be filed and incorporated by reference
herein. See “Where You Can Find More Information” in this prospectus supplement. We further note that the representations,
warranties and covenants made by us in any agreement that is filed as an exhibit to any document that is incorporated by reference
into this prospectus supplement or the accompanying base prospectus were made solely for the benefit of the parties to such agreement,
including, in some cases, for the purpose of allocating risk among the parties to such agreements, and should not be deemed to
be a representation, warranty or covenant to you. Moreover, such representations, warranties or covenants were accurate only as
of the date when made. Accordingly, such representations, warranties and covenants should not be relied on as accurately representing
the current state of our affairs.
This
prospectus supplement and the accompanying base prospectus contain and incorporate by reference certain market data and industry
statistics and forecasts that are based on Company-sponsored studies, independent industry publications and other publicly available
information. Although we believe these sources are reliable, estimates as they relate to projections involve numerous assumptions,
are subject to risks and uncertainties, and are subject to change based on various factors, including those discussed under “Risk
Factors” in this prospectus supplement and the accompanying base prospectus and under similar headings in the documents
incorporated by reference herein and therein. Accordingly, investors should not place undue reliance on this information.
Unless
otherwise stated or the context requires otherwise, all references in this prospectus supplement to the “Company,”
“we,” “us,” “our” and “Aqua Metals” refer to Aqua Metals, Inc., a Delaware corporation,
and its wholly-owned subsidiaries. We own the trademark applications for our corporate name “Aqua Metals” and the
terms “AquaRefining”, “AquaRefinery” and “AquaRefine”. All other trademarks, trade names and
service marks included or incorporated by reference into this prospectus supplement, the accompanying base prospectus and any
applicable free writing prospectus are the property of their respective owners.
PROSPECTUS
SUPPLEMENT SUMMARY
This
prospectus summary highlights information contained elsewhere in this prospectus supplement, the accompanying base prospectus
and the documents incorporated by reference herein and therein. This summary does not contain all of the information that you
should consider before deciding to invest in our securities. You should read this entire prospectus supplement and the accompanying
base prospectus carefully, including the section entitled “Risk Factors” beginning on page S-5 and our
consolidated financial statements and the related notes and the other information incorporated by reference into this prospectus
supplement and the accompanying base prospectus, before making an investment decision.
Our
Company
We
are engaged in the business of recycling lead through a novel, proprietary process that we developed and named “AquaRefining”.
Lead is a globally traded commodity with a worldwide market value in excess of $20 billion. Lead acid batteries, or LABs, are
the primary use of all lead produced in the world. The chemical properties of lead allow it to be recycled and reused repeatedly
without degradation. Consequently, LABs are the primary source of lead production. As such, LABs are almost 100% recycled for
purposes of capturing the lead contained therein for re-use. We believe that our proprietary AquaRefining process will provide
for the recycling of LABs and the production of a pure grade lead with a significantly lower cost of production, and with fewer
environmental and regulatory issues, than conventional methods of lead production.
In
recent years, many lead-zinc mines have become exhausted and recycled lead has become increasingly important to LAB production.
Recycled lead surpassed mined lead in the 1990s and now represents more than 50% of the lead content in new LABs. Whether it
is produced from lead ore or recycled LABs, lead has historically been produced by smelting. Smelting is a high-temperature,
endothermic chemical reduction, making it inefficient, energy intensive and often a highly polluting process. As a
consequence of its environmental and health issues, lead smelting has become increasingly regulated in developed countries.
In the US, regulatory non-compliance has forced the closure of large high-capacity lead smelters in Vernon, California,
Frisco, Texas and Herculaneum, Missouri over the last four years. In response, there has been an expansion of LAB smelting
capacity outside of the US and often in less regulated countries. The resulting transportation of used LABs from where they
originate in the US to smelters overseas represents an increasingly significant logistical and global environmental
cost.
LAB’s
require two forms of lead. High purity lead is required for the active material and lead alloy is required for the lead grids
which support the active material. Conventionally, lead for use as the active material was produced from lead ore which is known
as “primary lead”. The Herculaneum smelter was the last US based producer of primary lead. This closure is part of
a worldwide trend in which production of primary lead is failing to keep up with demand as primary lead ore bodies become worked
out and lead ore (galena or lead sulfide) is supplemented with lower purity lead concentrates produced as a byproduct of other
metal production (typically zinc and copper).
Conventional
lead recycling produces an intermediate grade of lead of moderate purity, known as “secondary lead”. Secondary lead
must be further processed to reach a level of purity suitable for use as the active material in a LAB or alloyed before it can
be used as grid material in a LAB. The additional processing requires additional cost and brings further inefficiency, loss of
material and the potential for further environmental impact. As applications for LABs develop and expand, beyond their use simply
as engine starter batteries, factors such as energy storage capacity, depth of discharge and cycle life become increasingly important.
The more advanced LABs typically require higher purity lead. In turn, this has started to drive increasing worldwide demand for
lead previously supplied as primary lead, produced from galena.
AquaRefining
uses a novel, proprietary process which first produces a water-based and bio-degradable lead rich electrolyte, from which lead
is electro-plated. The combination of the electrolyte production and the electro-plating processes produce lead of a purity which
is equivalent to primary lead (i.e., higher than 99.99% purity). As such, we believe that AquaRefining can meet the growing shortage
of primary lead with significantly reduced production and environmental costs as compared with smelter-based methods. This cost
reduction is partly because our novel electro-chemical process requires less energy than the endothermic high temperature (1000°C)
chemical reduction that is at the core of smelting. It is also partly because our process does not generate toxic high temperature
dust and gas, or the levels of lead containing waste that are unavoidable byproducts of smelting and which require capital and
energy intensive processes to meet environmental compliance.
We
believe that AquaRefining offers significant environmental emissions, health and safety benefits over smelting-based LAB recycling.
We believe that in obtaining permits for our first facility, we have demonstrated AquaRefining’s simplified permitting needs
as compared with lead smelting and our ability to co-locate with battery collection and distribution facilities. We believe that
the combined advantages offered by AquaRefining represent a potential step change in lead recycling technology, one that can deliver
advantages in economics, footprint and logistics while greatly reducing the environmental impact of lead recycling.
We
have completed the development of our first LAB recycling facility at the Tahoe Regional Industrial Center, McCarran, Nevada,
or “TRIC,” and commenced production during the first quarter of 2017. The TRIC facility will produce recycled lead,
consisting of lead compounds, ingoted hard lead and ingoted AquaRefined lead as well as plastic. We commenced the shipment of
products for sale, consisting of lead compounds and plastics, in April 2017 and as of the date of this prospectus supplement all
revenue has been derived from the sale of lead compounds and plastics.
As
of the date of this prospectus supplement, all 16 AquaRefining modules planned for TRIC have been delivered. Eight are in-place
and fully assembled, of which four are being used to produce small quantities of lead and to complete the evaluation of operating
parameters. The final eight modules are in-place and undergoing final assembly. However, we have encountered an unexpected development
in the form of “sticky lead”, whereby the AquaRefined lead produced by our electrolyzers sticks to the AquaRefining
module’s exit chute and fails to exit without manual intervention. We believe we have developed a process that will allow
for the exit of the AquaRefined lead without manual intervention; however, this additional process will require a certain amount
of retrofitting of our 16 modules that will cause a delay in our planned commercial operation of all 16 modules by year-end. Testing
of this retrofit package is underway, with the expectation that modifications to the 16 AquaRefining modules will begin in December
and we will place into commercial operation modules on a rolling basis, with the initial modules expected to be placed into continuous
operation during January 2018. Due to the delays and unforeseen issues in the completion of the AquaRefining production line we
have experienced to date, there can be no assurance that we will not encounter additional delays and issues. We expect a ramp-up
of AquaRefined lead production during 2018. In addition, due to the retrofit of the AquaRefining modules, we expect to report
revenue for the fourth quarter of 2017 at or slightly below the prior revenue guidance range of $1.2 million to $1.8 million.
As
of the date of this prospectus supplement, we have secured international patents in South Africa, Korea, Australia and Japan.
We have also received Notifications of Allowance from the USPTO and the Canadian PTO. We also have 64 patent applications pending
in the United States and other jurisdictions relating to our AquaRefining process, equipment, material produced and related processes,
materials, apparatus and chemical formulations, and 17 patent applications to be filed.
Our
plan of operations for the 12-month period following the date of this prospectus supplement is to complete the assembly
and commissioning of all 16 AquaRefining modules planned for TRIC in early 2018 and to ramp up the production of AquaRefined
lead during 2018. We also intend to expand our production capacity at TRIC during 2018. Our 12-month plan of operations also
includes our proposal to provide planning, engineering, technical assistance, equipment and other services in support of the
addition of an AquaRefining facility to a battery recycling facility owned by Johnson Controls. This proposed work is
expected to produce a blueprint for further additions of AquaRefining facilities under a proposed definitive development
agreement with Johnson Controls pursuant to which we will collaborate with Johnson Controls for the conversion of Johnson
Controls’ and certain strategic partners’ of Johnson Controls existing lead smelters to a lead recycling process
utilizing our proprietary AquaRefining technology and equipment, know-how and services. Finally, our 12-month plan of
operations includes our continued pursuit of the licensing of our recycling technology and equipment to third parties.
Additional funding will be required to expand our production capacity at TRIC and to expand into the business of
supplying equipment and services to third parties. There can be no assurance that we will be able to acquire the necessary
funding on commercially reasonable terms or at all. There can also be no assurance we will be able to conclude the proposed
development agreement with Johnson Controls.
In
April 2017, we acquired Ebonex IPR Limited, a non-operating company whose only assets were patents and proprietary technology
in the field of advanced materials and manufacturing methods for advanced lead acid batteries. The total consideration paid by
us for Ebonex IPR was $2.5 million, consisting of cash, transaction costs and our common shares. We acquired Ebonex IPR with the
intention of warehousing its patents and proprietary technology for further use sometime in the future. For accounting purposes,
we were required to obtain an independent valuation of the Ebonex IPR technology using an income approach. The fair value of the
Ebonex IPR technology, as determined by the independent valuation, was $112,000. We believe that the fair value of the Ebonex
IPR technology was significantly impacted by the fact that the assets were not commercially deployed at the time of valuation
nor did we have current plans to commercialize the Ebonex IPR assets. We initially recorded the Ebonex IPR acquisition as an increase
of $2.5 million to intellectual property, net on our balance sheet. Subsequently, due to the fair value of the patents and proprietary
technology being significantly less than total consideration, the early development stage of the technology acquired and the uncertainties
inherent in research and development, we recorded a non-cash impairment charge of $2.4 million for the period ended June 30, 2017.
Our
principal executive offices are located at 1010 Atlantic Avenue, Alameda, California 94501, and our telephone number is (510) 479-7635.
Our website is www.aquametals.com. Information contained in, or accessible through, our website does not constitute part of this
prospectus supplement and inclusions of our website address in this prospectus supplement are inactive textual references only.
The
Offering
The
following is a brief summary of some of the terms of the offering and is qualified in its entirety by reference to the more detailed
information appearing elsewhere in this prospectus supplement and the accompanying base prospectus. For a more complete description
of the terms of our common stock, see “Description of Our Capital Stock” in the accompanying base prospectus.
Common
stock offered by us
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7,150,000
shares of our common stock (8,222,500 shares if the underwriter exercises its over-allotment option in full).
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Offering price
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$2.10
per share of common stock.
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Common stock to
be outstanding after this offering
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27,552,762
shares (28,625,262 shares if the underwriter exercises its over-allotment option in full).
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Use of proceeds
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We
estimate that our net proceeds from this offering will be approximately
$13,626,562 (or approximately
$15,738,047 if the underwriter exercises its over-allotment option in full),
after deducting the underwriting discount and the estimated offering expenses payable by us. We expect to use the net
proceeds from this offering for working capital, which could include capital expenditures related to the expansion of
production activities at TRIC, and general corporate purposes. See “Use
of Proceeds” on page S-16.
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Risk factors
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Investing
in our common stock involves a high degree of risk. These risks include all of the risks typically relating to an early
stage company, including our ability to develop and commercialize novel and unproven technologies, bring modules online, ramp
up production and profitably operate our AquaRefining process on a commercial scale, and our ability to conclude a development
agreement with Johnson Controls or other strategic partners. They also include our need to raise additional funds,
claims by Interstate Battery that we are in breach of a negative covenant, and our ability to comply with our debt service
covenant with Green Bank. See “Risk Factors” beginning on page S-5 and the other information
included or incorporated by reference in this prospectus supplement and the accompanying base prospectus for a discussion
of factors you should carefully consider before deciding to invest in our common stock.
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NASDAQ Capital Market
symbol
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“AQMS”
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The
number of shares of our common stock expected to be outstanding after this offering is based on 20,402,762 shares of common stock
outstanding as of November 30, 2017, and excludes the following:
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●
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781,941
shares of common stock issuable upon exercise of options outstanding as of November 30,
2017, which have a weighted average exercise price of $4.97 per share;
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●
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1,042,826
shares of common stock reserved for issuance and available for future grant under our
2014 Stock Incentive Plan as of November 30, 2017;
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●
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248,910
shares of common stock reserved for issuance under our Officer and Director Share Purchase
Plan;
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●
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2,340,828
shares of common stock issuable upon exercise of warrants outstanding as of November
30, 2017, which have a weighted average exercise price of $8.45 per share; and
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|
●
|
702,247
shares of common stock issuable upon conversion of $5 million of outstanding principal
under a convertible note issued to Interstate Battery Systems International, Inc., which
is convertible into shares of our common stock at a conversion price of $7.12 per share.
|
Unless
otherwise stated or the context requires otherwise, all information in this prospectus supplement assumes that the option to
purchase up to 1,072,500 additional shares of common stock that we have
granted to the underwriter is not exercised.
RISK
FACTORS
Investing
in our common stock involves a high degree of risk. Before purchasing our common stock, you should read and consider carefully
the following risk factors as well as all other information contained and incorporated by reference in this prospectus supplement
and the accompanying base prospectus, including our consolidated financial statements and the related notes. Each of these risk
factors, either alone or taken together, could adversely affect our business, operating results and financial condition, as well
as adversely affect the value of an investment in our common stock. There may be additional risks that we do not presently know
of or that we currently believe are immaterial, which could also impair our business and financial position. If any of the events
described below were to occur, our financial condition, our ability to access capital resources, our results of operations and/or
our future growth prospects could be materially and adversely affected and the market price of our common stock could decline.
As a result, you could lose some or all of any investment you may make in our common stock.
Risks
Relating to Our Business
Since
we have a limited operating history and have only recently commenced revenue producing operations, it is difficult for
potential investors to evaluate our business
.
We formed our corporation in June 2014 and only commenced
revenue producing operations in the first quarter of 2017. From inception through September 30, 2017, we have generated a
total of $1.2 million of revenue, all of which was derived from the sale of lead compounds and plastics during the nine-month
period ended September 30, 2017. To date, our operations have consisted of the development and testing of our AquaRefining
process, the construction of our initial LAB recycling facility at TRIC, the continuing development of our LAB recycling operations at TRIC and limited revenue producing
operations as we bring those LAB recycling operations online. Our limited operating history makes it difficult for potential
investors to evaluate our technology or prospective operations. As an early stage company, we are subject to all the risks
inherent in the initial organization, financing, expenditures, complications and delays in a new business, including, without
limitation:
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●
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the
timing and success of our plan of commercialization and the fact that we continue to
experience delays in completing our LAB recycling operations at TRIC;
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●
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our
ability to bring modules online and ramp up production on a commercial scale;
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●
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our
ability to profitably operate our AquaRefining process on a commercial scale;
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●
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our
ability to realize the expected benefits of our strategic partnership with Johnson Controls;
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●
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our
ability to procure LABs in sufficient quantities at competitive prices; and
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●
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our
ability to receive proper certification from and meet the requirements of our customers
regarding the purity of our AquaRefined lead.
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Investors
should evaluate an investment in us in light of the uncertainties encountered by developing companies in a competitive environment.
There can be no assurance that our efforts will be successful or that we will ultimately be able to attain profitability.
Our
business is dependent upon on our development and successful implementation of novel and unproven technologies and processes and
there can be no assurance that we will be able to develop and implement such technologies and processes in a manner that supports
the successful commercial roll-out of our business model.
While much of the technology and processes involved in our lead
recycling operations are widely used and proven, the AquaRefining component of our lead recycling operations is largely novel
and unproven. While we have shown that our proprietary technology can produce AquaRefined lead on a small scale, we have only
recently completed, and have not put into operation, the processes that we believe will support the production of AquaRefined
lead on a commercial scale. Further, as we complete our AquaRefining production line, we continue to encounter unforeseen complications
that have delayed the installation and commissioning of our Aqua Refining modules. For example, we most recently had to develop
special processes and equipment to deal with an unexpected development in the form of “sticky lead,” whereby the AquaRefined
lead produced by our electrolyzers sticks to the AquaRefining modules’ exit chute and fails to exit without manual intervention.
We believe we have developed a process that will allow for the exit of the AquaRefined lead without manual intervention; however,
this additional process will require a certain amount of retrofitting of our modules that will delay our planned commercial operation
of all 16 modules by year-end. There can be no assurance that we will not encounter additional unforeseen complications that will
cause further delays in our planned commercial operation of our AquaRefining modules or prevent us from commencing commercial
production of AquaRefined lead at all.
We
will need additional financing to execute our business plan and fund operations, which additional financing may not be
available on reasonable terms or at all
.
As of September 30, 2017, we had total cash of $17.5 million and
working capital of $15.1 million. As of the date of this prospectus supplement, and after giving effect to our receipt of the
estimated net proceeds of this offering, we believe that we have working capital sufficient to fund the commissioning and
commercial operation of at least 16 AquaRefining modules at TRIC over the 12 months from the date of this
prospectus supplement. However, we will require additional capital within the next 12 months in order to increase production
of AquaRefined lead at TRIC beyond that planned for 16 modules and to work with Johnson Controls on equipment integration and
licensing to third parties. In addition, if we experience further delays in the commissioning of the initial 16 AquaRefining
modules or if we are not able to achieve significant positive cash flow from operations based on our operation of the initial
16 AquaRefining modules within the next 12 months, then we will require additional capital in order to finance continued losses from operations or capital expenditures, or
both, until such time as we are able to achieve significant positive cash flow from operations. We intend to seek additional
funds through various financing sources, including the sale of our equity and debt securities, licensing fees for our
technology, joint ventures with capital partners and/or project financing of our recycling facilities. However, there can be
no assurance that such funds will be available on commercially reasonable terms, if at all. If such funding is not available
on satisfactory terms, we may be unable to further pursue our business plan and we may be unable to continue operations, in
which case you may lose your entire investment.
We
are subject to restrictive debt covenants that may limit our ability to run our business, finance our capital needs and pursue
business opportunities and activities
.
As of the date of this prospectus supplement, we are indebted to Green Bank for
approximately $9.9 million and Interstate Battery for approximately $5.8 million, all of which is secured by liens on substantially
all of our assets. The credit agreements governing such indebtedness contain covenants that limit our ability to take certain
actions. These covenants could limit our ability to finance our future operations and capital needs and our ability to pursue
business opportunities and activities that may be in our interest. If we breach any of these covenants, the debt holder could
declare a default under the credit agreement, in which case all of the indebtedness may then become immediately due and payable.
In addition, any default under one credit agreement could lead to an acceleration of debt under the other credit agreement pursuant
to cross-acceleration or cross-default provisions. If the debt under either credit agreement is accelerated, we may not have,
or be able to obtain, sufficient funds to make these accelerated payments. In addition, since all of the indebtedness to Green
Bank and Interstate Battery is secured by substantially all of our assets, a default under either credit facility could enable
the debtholder to foreclose on its security interest and attempt to seize our assets. The affirmative and negative debt covenants
could materially adversely impact our ability to operate and finance our business. In addition, our default under any of these
covenants could subject us to accelerated debt payments or foreclosure proceedings that could threaten our ability to continue
as a going concern.
Interstate
Battery currently claims that we are in breach of a negative covenant with Interstate Battery and we have not been able to comply
with our debt service covenant with Green Bank
. As of the date of this prospectus supplement, Interstate Battery has raised
a claim that we are in technical breach of a negative covenant under our loan with Interstate Battery. The claimed breach relates
to our failure to obtain Interstate Battery’s prior written consent to our acquisition of Ebonex IPR, Ltd. We are in negotiations
with Interstate Battery to resolve the claim and we believe we will be able to resolve the matter. However, in the event we are
unable to resolve the matter, Interstate Battery may declare a default under the loan and attempt to accelerate the payment of
all amounts thereunder. There can be no assurance we will be able to resolve the claimed breach or that Interstate Battery will
not declare a default under the loan and attempt to accelerate the payment of all amounts thereunder. In addition, our credit
agreement with Green Bank requires, among other affirmative and negative covenants, that we maintain a minimum debt service coverage
ratio of 1.25 to 1.0 beginning with the twelve-month period ending March 31, 2017. We failed to meet the minimum debt service
coverage ratio covenant as of March 31, June 30 and September 30, 2017, and we were required to obtain a waiver of the minimum
debt service coverage ratio covenant from Green Bank for such periods. There can be no assurance that Green Bank will provide
waivers of this covenant, or any other covenant that we may fail to satisfy, going forward. Our default under either the Interstate
Battery or Green Bank loan covenants could subject us to accelerated debt payments or foreclosure proceedings that could threaten
our ability to continue as a going concern.
In
the event of the acceleration of either the Interstate Battery or Green Bank loans, we will need additional financing to satisfy
our obligations under the loans, which additional financing may not be available on reasonable terms or at all
.
As noted above, as of the date of this prospectus supplement, we are indebted to Green Bank for approximately $9.9 million and
Interstate Battery for approximately $5.8 million. The credit agreements governing such indebtedness contain various affirmative
and negative covenants and if we breach any of these covenants, the debt holder could declare a default under the credit agreement,
in which case all of the indebtedness may then become immediately due and payable. In addition, any default under one credit agreement
could lead to an acceleration of debt under the other credit agreement pursuant to cross-acceleration or cross-default provisions.
If the debt under either credit agreement is accelerated, we may not have sufficient funds to make the accelerated payments, in
which case we would be required to seek additional funds through various financing sources, most likely through the sale of our
equity or debt securities. However, there can be no assurance that such funds will be available on commercially reasonable terms,
if at all. Further, any sale of our equity or equity-linked securities will result in additional dilution to our stockholders.
Our
business model is new and has not been proven by us or anyone else
.
We are engaged in the business of producing
recycled lead through a novel and unproven technology. While the production of recycled lead is an established business, to date
all recycled lead has been produced by way of traditional smelting processes. To our knowledge, no one has successfully produced
recycled lead in commercial quantities other than by way of smelting. In addition, our lead recycling production line at TRIC
is the first-of-its-kind and neither we nor anyone else has ever successfully built a production line that commercially recycles
LABs without smelting. While we have commenced limited lead recycling operations at our TRIC facility, to date all revenues have
been derived from the sale of lead compounds and plastics and we have not commenced the commercial production of AquaRefined lead.
In addition to the general risks associated with a novel and unproven technology, our business model is subject to a number of
related risks, including:
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our
ability to acquire sufficient quantities of used LABs at competitive prices;
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our
ability to produce AquaRefined lead on a commercial scale and at an adequate gross profit;
and
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our
ability to sell our AquaRefined lead at prices and in quantities that provide an adequate
net profit from operations.
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Further,
there can be no assurance that we will be able to produce AquaRefined lead in commercial quantities at a cost of production that
will provide us with an adequate profit margin. The uniqueness of our AquaRefining process and our production line at TRIC presents
potential risks associated with the development of a business model that is untried and unproven.
Certain
industry participants may have the ability to restrict our access to used LABs and otherwise focus significant competitive pressure
on us
. We believe that our primary competition will come from operators of existing smelters and other parties invested
in the existing supply chain for smelting, both of which may resist the change presented by our AquaRefining process. Competition
from such incumbents may come in the form of restricted access to used LABs. We believe that LAB manufacturers who also maintain
their own smelting operations control a significant part of the market for used LABs. We will require access to used LABs at market
prices in order to carry out our business plan. If those LAB manufacturers and others involved in the reverse supply chain for
used LABs attempt to restrict our access to used LABs, that may adversely affect our prospects and future growth. There can be
no assurance that we will be able to effectively withstand the pressures applied by our competition.
Even
if we are successful in recycling lead using our processes, there can be no assurance that the AquaRefined lead will meet the
certification and purity requirements of our potential customers.
A key component of our business plan is to produce recycled
lead through our AquaRefining process of the highest purity (at least 99.99% pure lead), which we refer to as AquaRefined lead.
We believe that our AquaRefined lead will provide us with the highest gross profit margin and, more importantly, our ability to
produce AquaRefined lead will be vital to confirming the efficacy and relevancy of our proprietary technology. Our customers will
require that our AquaRefined lead meet certain minimum purity standards and, in all likelihood, require independent assays to
confirm the lead’s purity. As of the date of this prospectus supplement, we have produced limited quantities of AquaRefined
lead. However, we have not produced AquaRefined lead in commercial quantities and there can be no assurance that we will be able
to do so or, if we are able to produce AquaRefined lead in commercial quantities, that such lead will meet the required purity
standards of our customers. If we are unable to commercially produce AquaRefined lead that meets the purity stands established
by our customers, our entire business plan may be invalidated and you may suffer the loss of your entre investment.
While
we have been successful in producing AquaRefined lead in small volumes, there can be no assurance that we will be able to replicate
the process, along with all of the expected economic advantages, on a large commercial scale
.
While we have been
successful in producing AquaRefined lead in small volumes, there can be no assurance that we will be able to replicate the process,
along with all of the expected economic advantages, on a commercial scale. As of the date of this prospectus supplement, our commercial
operations have involved the production of lead compounds and plastics from recycled LABs and we have not commenced the commercial
production of AquaRefined lead. While we believe that our development, testing and limited production to date has validated the
concept of our AquaRefining process, the limited nature of our operations to date are not sufficient to confirm the economic returns
on our production of recycled lead. There can be no assurance that the commencement of commercial production of AquaRefined lead
at our TRIC facility will not incur unexpected costs or setbacks that might restrict the desired scale of our intended operations
or that we will be to produce AquaRefined lead in commercial quantities at a cost of production that will provide us with an adequate
profit margin.
We
have completed the construction of our initial LAB recycling facility at TRIC, however we have been delayed in the completion
of our lead recycling operations at TRIC and we may encounter further delays.
We completed the construction of our initial
LAB recycling facility at TRIC in August 2016 and commenced the limited production of recycled lead in January 2017. However,
as of the date of this prospectus supplement, our commercial operations have involved the production of lead compounds and plastics
from recycled LABs and we have not commenced the commercial production of AquaRefined lead. As of the date of this prospectus
supplement, all 16 AquaRefining modules planned for TRIC have been delivered. Eight are in-place and fully assembled, of which
four are commissioned. The final eight modules are in-place and undergoing final assembly. We have been delayed in the installation
and commissioning of our AquaRefining modules and the completion of our lead recycling operations at TRIC and we continue to conduct
refinements to the production line in order to accommodate commercial production of AquaRefined lead. We expect to commence the
commercial production of AquaRefined lead in early 2018, however, due to the delays and unforeseen issues in the completion of
the AquaRefining production line we have experienced to date, there can be no assurance that we will not encounter additional
delays and issues. In addition, since our lead recycling production line at TRIC is the first-of-its-kind, neither we nor anyone
else has ever built a facility of this nature and there can be no assurance that we will not experience continuing operational
delays and issues, including significant downtime from time to time, as we progress into the commercial production of AquaRefined
lead. There can be no assurance that the commencement of commercial AquaRefining operations at our TRIC facility will not incur
unexpected costs or hurdles that might restrict the desired scale of our intended operations or negatively impact our projected
gross profit margin.
Our
outstanding debt may make it difficult for us obtain additional financing using our future operating cash flow.
We currently
have a substantial amount of indebtedness, including approximately $9.9 million owed to Green Bank and approximately $5.8 million
owed to Interstate Battery as of the date of this prospectus supplement. Such indebtedness could limit our ability to borrow additional
funds to fund operations or expansion or increase the cost of any such borrowing, or both. Our inability to conduct additional
debt financing could:
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limit
our flexibility in developing our business operations and planning for, or reacting to,
changes in our business;
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increase
our vulnerability to, and reduce our flexibility to respond to, general adverse economic
and industry conditions; and
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place
us at a competitive disadvantage as compared to our competitors that are not as highly
leveraged.
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Any
of these or other consequences or events could have a material adverse effect on our ability to finance our business and our operations.
Our
intellectual property rights may not be adequate to protect our business
.
As of the date of this prospectus supplement,
we have secured international patents in South Africa (2016/04083), Korea (Korea Patent No. 10-1739414), Japan (Japan Patent No.
6173595) and Australia (Australia Patent No. AU2014353227), and secured allowances in South Africa and the United States for “Devices
and Method for Smelterless Recycling of Lead Acid Batteries.” There are five patent families. The first patent family
has the four issued patents, with two allowance and 17 pending applications. The second patent family has 21 pending applications.
The third and fourth patent families have ten pending applications, and seven applications instructed to be filed. The fifth
patent family has one pending application with three applications instructed to be filed. There is also another PCT application,
one US utility application and three US provisional applications that are pending. In total, there are 64 patent applications
pending with 17 patent applications instructed to be filed in 20 other jurisdictions relating to certain elements of the technology underlying our AquaRefining
process and related apparatus and chemical formulations. However, no assurances can be given that any patent issued, or any patents
issued on our current and any future patent applications, will be sufficiently broad to adequately protect our technology. In
addition, we cannot assure you that any patents issued now or in the future will not be challenged, invalidated, or circumvented.
Even
patents issued to us may not stop a competitor from illegally using our patented processes and materials. In such event, we would
incur substantial costs and expenses, including lost time of management in addressing and litigating, if necessary, such matters.
Additionally, we rely upon a combination of trade secret laws and nondisclosure agreements with third parties and employees having
access to confidential information or receiving unpatented proprietary know-how, trade secrets and technology to protect our proprietary
rights and technology. These laws and agreements provide only limited protection. We can give no assurance that these measures
will adequately protect us from misappropriation of proprietary information.
Our
processes may infringe on the intellectual property rights of others, which could lead to costly disputes or disruptions
.
The applied science industry is characterized by frequent allegations of intellectual property infringement. Though we do
not expect to be subject to any of these allegations, any allegation of infringement could be time consuming and expensive to
defend or resolve, result in substantial diversion of management resources, cause suspension of operations or force us to enter
into royalty, license, or other agreements rather than dispute the merits of such allegation. If patent holders or other holders
of intellectual property initiate legal proceedings, we may be forced into protracted and costly litigation. We may not be successful
in defending such litigation and may not be able to procure any required royalty or license agreements on acceptable terms or
at all.
Our
business strategy includes licensing arrangements and entering into joint ventures and strategic alliances, however as of the
date of this prospectus supplement we have no such agreements in place and there can be no assurance we will be able to do so.
Failure to successfully integrate such licensing arrangements, joint ventures, or strategic alliances into our operations could
adversely affect our business
.
We propose to commercially exploit our AquaRefining process, in part, by licensing
our technology to third parties and entering into joint ventures and strategic relationships with parties involved in the manufacture
and recycling of LABs, including Johnson Controls, among others. However, as of the date of this prospectus supplement, we have
not entered into any such licensing, joint venture or strategic alliance agreements, apart from our equipment supply agreement
with Johnson Controls, and there can be no assurance that we will be able to do so on terms that benefit us, if at all. In addition,
licensing programs, joint ventures and strategic alliances may involve significant other risks and uncertainties, including distraction
of management’s attention away from normal business operations, insufficient revenue generation to offset liabilities assumed
and expenses associated with the transaction, and unidentified issues not discovered in our due diligence process, such as product
quality, technology issues and legal contingencies. In addition, we may be unable to effectively integrate any such programs and
ventures into our operations. Our operating results could be adversely affected by any problems arising during or from any licenses,
joint ventures or strategic alliances.
There
can be no assurance that we will be able to negotiate our key agreement with Johnson Controls on commercially reasonable terms,
or at all
. In February 2017, we entered into a series of agreements with Johnson Controls, including an equipment supply
agreement pursuant to which, among other things, we agreed to work with Johnson Controls on the development of a program for the
conversion of Johnson Controls and certain strategic partners of Johnson Controls’ existing lead smelters throughout North
America, China and Europe to a lead recycling process utilizing our AquaRefining technology and equipment, know-how and services.
The equipment supply agreement discusses the development of the conversion program in general terms and contemplates that the
parties will enter into a definitive development program agreement that is based on the general terms set forth in the equipment
supply agreement and provides more detailed terms and conditions, including the economic obligations and rights of each party.
In September 2017, we commenced discussions with Johnson Controls concerning the development program agreement, however, as of
the date of this prospectus supplement our discussions with Johnson Controls concerning the development program agreement remain
preliminary in nature. There can be no assurance that we will be able to negotiate and conclude a definitive development program
agreement with Johnson Controls on commercially reasonable terms, or at all.
We
are dependent on a limited number of suppliers of certain materials used in our AquaRefining process and our inability to obtain
these materials as and when needed could cause a material disruption in our operations
.
Our AquaRefining process
involves a significant number of elements, chemicals, solvents and other materials, in addition to used LABs. There are a limited
number of suppliers of certain materials used in our AquaRefining process and we have no agreements in place for our supply of
such materials. Our ability to conduct our AquaRefining process on a commercial scale will depend significantly on obtaining timely
and adequate supply of these materials on competitive terms. Our inability to source these materials on a timely and cost-efficient
manner could interrupt our operations, significantly limit our revenue sales and increase our costs. This factor could also impair
our ability to meet our commitments to supply our customers. Our inability to obtain these materials as and when needed could
cause a material disruption in our operations.
If
we are unable to manage future expansion effectively, our business, operations and financial condition may suffer significantly,
resulting in decreased productivity
.
If our AquaRefining process proves to be commercially viable, growth and expansion
activities could place a significant strain on our managerial, administrative, technical, operational and financial resources.
Our organization, procedures and management may not be adequate to fully support the expansion of our operations or the efficient
execution of our business strategy. If we are unable to manage future expansion effectively, our business, operations and financial
condition may suffer significantly, resulting in decreased productivity.
Certain
industry participants may have the ability to restrict our access to used LABs and otherwise focus significant competitive pressure
on us
.
We believe that our primary competition will come from operators of existing smelters and other parties
invested in the existing supply chain for smelting, both of which may resist the change presented by our AquaRefining process.
Competition from such incumbents may come in the form of restricted access to used LABs. We believe that LAB manufacturers who
also maintain their own smelting operations control approximately 50% of the market for used LABs. We will require access to used
LABs at market prices in order to carry out our business plan. If those LAB manufacturers and others involved in the reverse supply
chain for used LABs attempt to restrict our access to used LABs that may adversely affect our prospects and future growth. There
can be no assurance that we will be able to effectively withstand the pressures applied by our competition.
We
may experience significant fluctuations in raw material prices and the price of our principal product, either of which could have
a material adverse effect on our liquidity, growth prospects and results of operations
.
Used LABs are our primary
raw material and we believe that in recent years the cost of used LABs has been volatile at times. In addition, we believe that
the cost of used LABs can be seasonal, with prices trending lower in the winter months (as automobile owners increase their purchase
of new LABs, thereby putting a greater number of used LABs on the market) and trend higher in the spring (as the purchase of new
LABs, and supply of used LABs, decreases). Our principal product, recycled lead, has also experienced price volatility from time
to time as well. For example, the market price of lead on the London Metal Exchange, or LME, during 2015 and 2016 ranged from
$1,554 to $2,456 per tonne. While we intend to pursue supply and tolling arrangements as appropriate to offset any price volatility,
the volatile nature of prices for used LABs and recycled lead could have an adverse impact on our liquidity, growth prospects
and results of operations.
Global
economic conditions could negatively affect our prospects for growth and operating results
.
Our prospects for growth
and operating results will be directly affected by the general global economic conditions of the industries in which our suppliers,
partners and customer groups operate. We believe that the market price of our principal product, recycled lead, is relatively
volatile and reacts to general global economic conditions. Lead prices decreased from $2,139 per tonne on May 5, 2015 to a low
of $1,554 per tonne on November 23, 2015 because of fluctuations in the market. A month later, the price per tonne increased back
up to $1,801 per tonne; the price per tonne was $1,983 on December 31, 2016. Our business will be highly dependent on the economic
and market conditions in each of the geographic areas in which we operate. These conditions affect our business by reducing the
demand for LABs and decreasing the price of lead in times of economic down turn and increasing the price of used LABs in times
of increasing demand of LABs and recycled lead. There can be no assurance that global economic conditions will not negatively
impact our liquidity, growth prospects and results of operations.
We
are subject to the risks of conducting business outside the United States
.
A part of our strategy involves our
pursuit of growth opportunities in certain international market locations. We intend to pursue licensing or joint venture arrangements
with local partners who will be primarily responsible for the day-to-day operations. Any expansion outside of the US will require
significant management attention and financial resources to successfully develop and operate any such facilities, including the
sales, supply and support channels, and we cannot assure you that we will be successful or that our expenditures in this effort
will not exceed the amount of any resulting revenues. Our international operations expose us to risks and challenges that we would
otherwise not face if we conducted our business only in the United States, such as:
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increased
cost of enforcing our intellectual property rights;
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heightened
price sensitivities from customers in emerging markets;
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our
ability to establish or contract for local manufacturing, support and service functions;
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localization
of our LABs and components, including translation into foreign languages and the associated
expenses;
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compliance
with multiple, conflicting and changing governmental laws and regulations;
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foreign
currency fluctuations;
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laws
favoring local competitors;
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weaker
legal protections of contract terms, enforcement on collection of receivables and intellectual
property rights and mechanisms for enforcing those rights;
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market
disruptions created by public health crises in regions outside the United States;
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difficulties
in staffing and managing foreign operations, including challenges presented by relationships
with workers’ councils and labor unions;
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issues
related to differences in cultures and practices; and
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changing
regional economic, political and regulatory conditions.
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U.S.
Government regulation and environmental, health and safety concerns may adversely affect our business
.
Our operations
in the United States will be subject to the Federal, State and local environmental, health and safety laws applicable to the reclamation
of lead acid batteries. Our facilities will have to obtain environmental permits or approvals to operate, including those associated
with air emissions, water discharges, and waste management and storage. We may face opposition from local residents or public
interest groups to the installation and operation of our facilities. In addition to permitting requirements, our operations are
subject to environmental health, safety and transportation laws and regulations that govern the management of and exposure to
hazardous materials such as the lead and acids involved in battery reclamation. These include hazard communication and other occupational
safety requirements for employees, which may mandate industrial hygiene monitoring of employees for potential exposure to lead.
Failure to comply with these requirements could subject our business to significant penalties (civil or criminal) and other sanctions
that could adversely affect our business.
In
the event we are unable to present and operate our AquaRefining process and operations as safe and environmentally responsible,
we may face opposition from local governments, residents or public interest groups to the installation and operation of our facilities.
The
development of new AquaRefining facilities by us or our partners or licensees, and the expansion of our operations at TRIC, will
depend on our ability to acquire necessary permits and approvals, of which there can be no assurance.
As noted above,
our AquaRefining facilities will have to obtain environmental permits or approvals to operate, including those associated with
air emissions, water discharges, and waste management and storage. In addition, we expect that our planned expansion of AquaRefining
operations at TRIC will require additional permitting and approvals. Failure to secure (or significant delays in securing) the
necessary permits and approvals could prevent us and our partners and licensees from pursuing additional AquaRefining facilities
or expanding operations at TRIC, and otherwise adversely affect our business, financial results and growth prospects. Further,
the loss of any necessary permit or approval could result in the closure of an AquaRefining facility and the loss of our investment
associated with such facility.
Our
business involves the handling of hazardous materials and we may become subject to significant fines and other liabilities in
the event we mishandle those materials
. The nature of our operations involves risks, including the potential for exposure
to hazardous materials such as lead, that could result in personal injury and property damage claims from third parties, including
employees and neighbors, which claims could result in significant costs or other environmental liability. Our operations also
pose a risk of releases of hazardous substances, such as lead or acids, into the environment, which can result in liabilities
for the removal or remediation of such hazardous substances from the properties at which they have been released, liabilities
which can be imposed regardless of fault, and our business could be held liable for the entire cost of cleanup even if we were
only partially responsible. We are also subject to the possibility that we may receive notices of potential liability in connection
with materials that were sent to third-party recycling, treatment, and/or disposal facilities under the Federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended (“CERCLA”), and comparable state statutes,
which impose liability for investigation and remediation of contamination without regard to fault or the legality of the conduct
that contributed to the contamination, and for damages to natural resources. Liability under CERCLA is retroactive, and, under
certain circumstances, liability for the entire cost of a cleanup can be imposed on any responsible party. Any such liability
could result in judgments or settlements that restrict our operations in a manner that materially adversely effects our operations
and could result in fines, penalties or awards that could materially impair our financial condition and even threaten our continued
operation as a going concern.
We
will be subject to foreign government regulation and environmental, health and safety concerns that may adversely affect our business
.
As our business expands outside of the United States, our operations will be subject to the environmental, health and safety laws
of the countries where we do business, including permitting and compliance requirements that address the similar risks as do the
laws in the United States, as well as international legal requirements such as those applicable to the transportation of hazardous
materials. Depending on the country or region, these laws could be as stringent as those in the US, or they could be less stringent
or not as strictly enforced. In some countries in which we are interested in expanding our business, such as Mexico and China,
the relevant environmental regulatory and enforcement frameworks are in flux and subject to change. Compliance with these requirements
will cause our business to incur costs, and failure to comply with these requirements could adversely affect our business.
In
the event we are unable to present and operate our AquaRefining process and operations as safe and environmentally responsible,
we may face opposition from local governments, residents or public interest groups to the installation and operation of our facilities.
Risks
Related to Owning Our Common Stock
Our
common stock is thinly traded and our share price has been volatile.
Our common stock has traded on the Nasdaq Capital
Market, under the symbol “AQMS”, since July 31, 2015. Since that date, our common stock has at times been relatively
thinly traded and subject to price volatility. There can be no assurance that we will be able to successfully maintain a liquid
market for our common shares. The stock market in general, and early stage public companies in particular, has experienced extreme
price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of such companies.
If we are unable to develop and maintain a liquid market for our common shares, you may not be able to sell your common shares
at prices you consider to be fair or at times that are convenient for you, or at all. In addition, following periods of volatility
in the market price of a company’s securities, litigation has often been brought against that company and we may become
the target of litigation as a result of price volatility. Litigation could result in substantial costs and divert our management’s
attention and resources from our business. This could have a material adverse effect on our business, results of operations and
financial condition.
Control
by management and others may limit your ability to influence the outcome of director elections and other transactions requiring
stockholder approval
. As of November 30, 2017, our directors and executive officers beneficially own approximately 12.9%
of our outstanding common stock. In addition, two other stockholders, Johnson Controls and Interstate Battery, together, beneficially
own an additional 19.5%. As a result, such persons acting together will have significant influence over corporate actions requiring
stockholder approval, including the following actions:
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to
elect or defeat the election of our directors;
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to
amend or prevent amendment of our certificate of incorporation or bylaws;
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to
effect or prevent a merger, sale of assets or other corporate transaction; and
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to
control the outcome of any other matter submitted to our stockholders for vote.
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Such
persons’ stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain
control of our company, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our
stock price.
We
are an “emerging growth company” under the JOBS Act of 2012 and we cannot be certain if the reduced disclosure requirements
applicable to emerging growth companies will make our common stock less attractive to investors
.
We are an “emerging
growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”), and we may take
advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not
“emerging growth companies” including, but not limited to:
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not
being required to comply with the auditor attestation requirements of Section 404 of
the Sarbanes-Oxley Act;
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reduced
disclosure obligations regarding executive compensation in our periodic reports and proxy
statements;
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exemptions
from the requirements of holding a nonbinding advisory vote on executive compensation
and stockholder approval of any golden parachute payments; and
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extended
transition periods available for complying with new or revised accounting standards.
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We
have chosen to “opt out” of the extended transition periods available for complying with new or revised accounting
standards, but we intend to take advantage of all of the other benefits available under the JOBS Act, including the exemptions
discussed above. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions.
If some investors find our common stock less attractive as a result, there may be a less active trading market for our common
stock and our stock price may be more volatile.
We
will remain an “emerging growth company until 2020, although we will lose that status sooner if our revenues exceed $1 billion,
if we issue more than $1 billion in non-convertible debt in a three-year period, or if the market value of our common stock that
is held by non-affiliates exceeds $700 million as of any June 30.
Our
status as an “emerging growth company” under the JOBS Act may make it more difficult to raise capital as and when
we need it
.
Because of the exemptions from various reporting requirements provided to us as an “emerging
growth company,” we may be less attractive to investors and it may be difficult for us to raise additional capital as and
when we need it. Investors may be unable to compare our business with other companies in our industry if they believe that our
reporting is not as transparent as other companies in our industry. If we are unable to raise additional capital as and when we
need it, our financial condition and results of operations may be materially and adversely affected.
We
have not paid dividends in the past and have no plans to pay dividends
.
We plan to reinvest all of our earnings,
to the extent we have earnings, in order to develop our recycling centers and cover operating costs and to otherwise become and
remain competitive. We do not plan to pay any cash dividends with respect to our securities in the foreseeable future. We cannot
assure you that we would, at any time, generate sufficient surplus cash that would be available for distribution to the holders
of our common stock as a dividend. Therefore, you should not expect to receive cash dividends on our common stock.
Shares
eligible for future sale may adversely affect the market for our common stock
.
Of the 20,402,762 shares of our
common stock outstanding as of the date of this prospectus supplement, approximately 17,411,694 shares are held by “non-affiliates”
and are freely tradable without restriction pursuant to Rule 144. In addition, in August 2016, we filed with the SEC a Registration
Statement on Form S-3 for purposes of registering the resale of 3,711,872 shares of restricted common stock sold to Interstate
Battery in May 2016, including 3,009,625 shares of common stock issuable to Interstate Battery upon exercise of its warrants and
conversion of its convertible note, and in February 2017, we filed with the SEC a Registration Statement on Form S-3 for purposes
of registering the resale of the 939,005 shares of restricted common stock we sold to Johnson Controls in February 2017. Both
registration statements were declared effective by the SEC and the shares registered thereunder are eligible for sale without
restriction. Any substantial sale of our common stock pursuant to Rule 144 or pursuant to any resale prospectus may have a material
adverse effect on the market price of our common stock.
Our
management will have broad discretion over the use of the net proceeds from this offering, and we may not use these proceeds effectively
or in a manner with which you agree
. We intend to use the net proceeds from this offering for working capital and general
corporate purposes. Our management will have broad discretion in the application of the net proceeds we receive from this offering,
and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used effectively
or in a manner with which you agree. The net proceeds may be used for corporate purposes that do not increase our operating results
or market value. Until the net proceeds are used, they may be placed in investments that do not produce income or that lose value.
Our
charter documents and Delaware law may inhibit a takeover that stockholders consider favorable
.
Provisions of our
certificate of incorporation and bylaws and applicable provisions of Delaware law may delay or discourage transactions involving
an actual or potential change in control or change in our management, including transactions in which stockholders might otherwise
receive a premium for their shares, or transactions that our stockholders might otherwise deem to be in their best interests.
The provisions in our certificate of incorporation and bylaws:
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limit
who may call stockholder meetings;
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do
not permit stockholders to act by written consent;
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do
not provide for cumulative voting rights; and
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provide
that all vacancies may be filled by the affirmative vote of a majority of directors then
in office, even if less than a quorum.
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In
addition, Section 203 of the Delaware General Corporation Law may limit our ability to engage in any business combination with
a person who beneficially owns 15% or more of our outstanding voting stock unless certain conditions are satisfied. This restriction
lasts for a period of three years following the share acquisition. These provisions may have the effect of entrenching our management
team and may deprive you of the opportunity to sell your shares to potential acquirers at a premium over prevailing prices. This
potential inability to obtain a control premium could reduce the price of our common stock.
Our
bylaws designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain litigation that may
be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes
with the Company
.
Our bylaws provide that, unless we consent in writing to the selection of an alternative forum,
the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (i) any derivative action or proceeding
brought on our behalf, (ii) any action asserting a claim of breach of fiduciary duty owed by any of our directors, officers or
other employees to us or our stockholders, (iii) any action asserting a claim against us or any our directors, officers or other
employees arising pursuant to any provision of the Delaware General Corporation Law or our certificate of incorporation or bylaws,
or (iv) any action asserting a claim against us or any our directors, officers or other employees governed by the internal affairs
doctrine. This forum selection provision in our bylaws may limit our stockholders’ ability to obtain a favorable judicial
forum for disputes with us or any our directors, officers or other employees.
FORWARD-LOOKING
STATEMENTS
This
prospectus supplement, the accompanying base prospectus and the documents we have filed with the SEC that are incorporated by
reference herein and therein contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section
21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In addition, from time to time we or
our representatives have made or will make forward-looking statements in various other filings that we make with the SEC or in
other documents, including press releases or other similar announcements. Forward-looking statements concern our current plans,
intentions, beliefs, expectations and statements of future economic performance. Statements containing terms such as “will,”
“may,” “believe,” “do not believe,” “plan,” “expect,” “intend,”
“estimate,” “anticipate” and other phrases of similar meaning are considered to be forward-looking statements.
Forward-looking
statements are based on our assumptions and are subject to known and unknown risks and uncertainties that could cause actual results
to differ materially from those reflected in or implied by these forward-looking statements. Factors that might cause actual results
to differ include, among others, those set forth under “Risk Factors” in this prospectus supplement and those discussed
in “Management’s Discussion and Analysis of Financial Condition and Results of Operation” in our most recent
Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q and in our future periodic reports filed with the SEC,
all of which are incorporated by reference herein. Readers are cautioned not to place undue reliance on any forward-looking statements
contained in this prospectus supplement, the accompanying base prospectus or the documents we have filed with the SEC that are
incorporated by reference herein and therein, which reflect management’s views and opinions only as of their respective
dates. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes
in other factors affecting such forward-looking statements, except to the extent required by applicable securities laws. You are
advised, however, to consult any additional disclosures we have made or will make in the filings we make with the SEC, including
reports on Forms 10-K, 10-Q and 8-K. All subsequent forward-looking statements attributable to us or persons acting on our behalf
are expressly qualified in their entirety by the cautionary statements contained in this prospectus supplement, the accompanying
base prospectus or any related issuer free writing prospectus.
USE
OF PROCEEDS
We
estimate that our net proceeds from this offering will be approximately $13,626,562 (or approximately
$15,738,047 if the underwriter exercises its over-allotment option in full), after
deducting the underwriting discount and estimated offering expenses payable by us.
We
expect to use the net proceeds from this offering for working capital, which could include capital expenditures related to
the expansion of production activities at TRIC, and general corporate purposes. This represents our best
estimate of the manner in which we will use the net proceeds we receive from this offering based upon the current status of
our business, but we have not reserved or allocated amounts for specific purposes and we cannot specify with certainty how
or when we will use any of the net proceeds. Amounts and timing of our actual expenditures will depend on numerous
factors, including our success in the large scale recycling of used LABs, operational decisions concerning the expansion of
production of recycled lead at our TRIC facility and the amount of cash we use in our operations. Our management will have
broad discretion in applying the net proceeds from this offering.
Pending
the uses described above, we intend to invest the net proceeds from this offering in short-term, investment-grade interest-bearing
securities such as money market accounts, certificates of deposit, commercial paper, and guaranteed obligations of the U.S. government.
DILUTION
If
you invest in our common stock, you will experience immediate dilution to the extent of the difference between the price per share
you pay in this offering and the net tangible book value per share of our common stock after this offering.
Our
net tangible book value as of September 30, 2017 was approximately $45.4 million, or approximately $2.23 per share. Net tangible
book value is determined by subtracting our total liabilities from our total tangible assets, and net tangible book value per
share is determined by dividing our net tangible book value by the number of outstanding shares of our common stock. After giving
effect to the sale of 7,150,000 shares of our common stock in this offering at the public offering price of $2.10 per
share, and after deducting the underwriting discount and estimated offering expenses payable by us, our adjusted net tangible
book value as of September 30, 2017 would have been approximately $59.0 million, or approximately $2.14 per share. This represents
an immediate decrease in net tangible book value of approximately $0.09 per share to our existing stockholders and an immediate
increase in net tangible book value of approximately $0.04 per share to investors participating in this offering. The following
table illustrates this calculation on a per share basis:
Public offering price
per share of common stock
|
|
|
|
|
|
|
$
|
2.10
|
|
Net
tangible book value per share as of September 30, 2017
|
|
$
|
2.23
|
|
|
|
|
|
|
Decrease
per share attributable to investors participating in this offering
|
|
$
|
0.09
|
|
|
|
|
|
|
Adjusted net tangible
book value per share after giving effect to this offering
|
|
|
|
|
|
$
|
|
2.14
|
|
Increase in net
tangible book value
per share to investors participating in this
offering
|
|
|
|
|
|
$
|
|
0.04
|
|
If
the underwriter exercises in full its option to purchase an additional 1,072,500 shares
of common stock at the public offering price of $2.10 per share, our adjusted net
tangible book value as of September 30, 2017, after giving effect to this offering, would have been approximately
$2.14 per share, representing a decrease in net tangible book value of
approximately $0.09 per share to existing stockholders and immediate increase in
net tangible book value of approximately $0.04 per share to investors
participating in this offering.
The
above discussion and table is based on 20,402,762 shares of common stock outstanding as of November 30, 2017, and excludes the
following:
|
●
|
781,941
shares of common stock issuable upon exercise of options outstanding as of November 30,
2017, which have a weighted average exercise price of $4.97 per share;
|
|
●
|
1,042,826
shares of common stock reserved for issuance and available for future grant under our
2014 Stock Incentive Plan as of November 30, 2017;
|
|
●
|
248,910
shares of common stock reserved for issuance under our Officer and Director Share Purchase
Plan;
|
|
●
|
2,340,828
shares of common stock issuable upon exercise of warrants outstanding as of November
30, 2017, which have a weighted average exercise price of $8.45 per share; and
|
|
●
|
702,247
shares of common stock issuable upon conversion of $5 million of outstanding principal
under a convertible note issued to Interstate Battery Systems International, Inc., which
is convertible into shares of our common stock at a conversion price of $7.12 per share.
|
The
above illustration of dilution per share to investors participating in this offering assumes no exercise of outstanding options
or warrants to purchase our common stock and no conversion of our outstanding convertible note. The exercise of outstanding options
or warrants, or the conversion of our outstanding convertible note, having an exercise or conversion price less than the offering
price would increase dilution to investors participating in this offering. In addition, we may choose to raise additional capital
depending on market conditions, our capital requirements and strategic considerations, even if we believe we have sufficient funds
for our current or future operating plans. To the extent that additional capital is raised through our sale of equity or convertible
debt securities, the issuance of these securities could result in further dilution to our stockholders.
UNDERWRITING
We
entered into an underwriting agreement on December 7, 2017 with Oppenheimer & Co. Inc. The underwriting agreement provides
for the purchase of a specific number of shares of common stock by the underwriter. Subject to the terms and conditions of the
underwriting agreement, the underwriter has agreed to purchase the number of shares set forth opposite its name below:
Underwriter
|
|
Number of Shares
|
|
Oppenheimer & Co. Inc.
|
|
|
7,150,000
|
|
|
|
|
|
|
Total
|
|
|
7,150,000
|
|
The
underwriter has agreed to purchase all of the shares offered by this prospectus (other than those covered by the option described
below) if any are purchased.
The
shares of common stock offered hereby are expected to be ready for delivery on or about December 12,
2017 against payment in immediately available funds.
The
underwriter is offering the shares subject to various conditions and may reject all or part of any order. The underwriter
has advised us that the underwriter proposes to offer the shares directly to the public at the public offering price that
appears on the cover page of this prospectus supplement. After the shares are released for sale to the public, the
underwriter may change the offering price and other selling terms at various times. The underwriter may offer the shares of
common stock to securities dealers at the public offering price less a concession not in excess of $0.079 per
share.
We
have granted the underwriter an option to purchase additional shares. This option, which is exercisable for up to 30 days
after the date of this prospectus supplement, permits the underwriter to purchase a maximum of additional shares
from us. If the underwriter exercises all or part of this option, it will purchase shares covered by the option at the
public offering price that appears on the cover page of this prospectus supplement, less the underwriting discounts
and commissions.
The
following table provides information regarding the amount of the discounts and commissions to be paid to the underwriter by us,
before expenses:
|
|
|
Per
Share
|
|
|
|
Total
Without Exercise of Underwriter’s Option
|
|
|
|
Total
With Full Exercise of Underwriter’s Option
|
|
Public offering price
|
|
$
|
2.10
|
|
|
$
|
15,015,000
|
|
|
$
|
17,267,250
|
|
Underwriting discounts
and commissions
|
|
$
|
0.131
|
|
|
$
|
938,438
|
|
|
$
|
1,079,203
|
|
Proceeds, before expenses, to us
|
|
$
|
1.969
|
|
|
$
|
14,076,562
|
|
|
$
|
16,188,047
|
|
We
estimate that our total expenses of the offering, excluding the estimated underwriting discounts and commissions, will be approximately
$450,000, which includes the fees and expenses for which we have agreed to reimburse the underwriter, provided that any such
fees and expenses in excess of an aggregate of $200,000 will be subject to prior written approval by the Company.
We
have agreed to indemnify the underwriter against certain liabilities, including liabilities under the Securities Act of 1933.
We
and our officers and directors have agreed to a 90-day “lock-up” with respect to shares of our common stock and other
of our securities that they beneficially own, including securities that are convertible into shares of common stock and securities
that are exchangeable or exercisable for shares of common stock. This means that, subject to certain exceptions, for a period
of 90 days following the date of this prospectus supplement, we and such persons may not offer, sell, pledge or otherwise dispose
of these securities without the prior written consent of Oppenheimer & Co. Inc.
Rules
of the Securities and Exchange Commission may limit the ability of the underwriter to bid for or purchase shares before the distribution
of the shares is completed. However, the underwriter may engage in the following activities in accordance with the rules:
|
●
|
Stabilizing
transactions — The underwriter may make bids or purchases for the purpose of
pegging, fixing or maintaining the price of the shares, so long as stabilizing bids do
not exceed a specified maximum.
|
|
●
|
Over-allotments
and syndicate covering transactions — The underwriter may sell more shares of
our common stock in connection with this offering than the number of shares than they
have committed to purchase. This over-allotment creates a short position for the underwriter.
This short sales position may involve either “covered” short sales or “naked”
short sales. Covered short sales are short sales made in an amount not greater than the
underwriter’s over-allotment option to purchase additional shares in this offering
described above. The underwriter may close out any covered short position either by
exercising its over-allotment option or by purchasing shares in the open market. To determine
how it will close the covered short position, the underwriter will consider, among
other things, the price of shares available for purchase in the open market, as compared
to the price at which it may purchase shares through the over-allotment option. Naked
short sales are short sales in excess of the over-allotment option. The underwriter
must close out any naked short position by purchasing shares in the open market. A naked
short position is more likely to be created if the underwriter is concerned that, in
the open market after pricing, there may be downward pressure on the price of the shares
that could adversely affect investors who purchase shares in this offering.
|
|
●
|
Penalty
bids — If the underwriter purchases shares in the open market in a stabilizing
transaction or syndicate covering transaction, it may reclaim a selling concession from selling group members who sold those shares as part of this offering.
|
|
●
|
Passive
market making — Market makers in the shares who are underwriters or prospective
underwriters may make bids for or purchases of shares, subject to limitations, until
the time, if ever, at which a stabilizing bid is made.
|
Similar
to other purchase transactions, the underwriter’s purchases to cover the syndicate short sales or to stabilize the market
price of our common stock may have the effect of raising or maintaining the market price of our common stock or preventing or
mitigating a decline in the market price of our common stock. As a result, the price of the shares of our common stock may be
higher than the price that might otherwise exist in the open market. The imposition of a penalty bid might also have an effect
on the price of the shares if it discourages resales of the shares.
Neither
we nor the underwriter makes any representation or prediction as to the effect that the transactions described above may have
on the price of the shares. These transactions may occur on The NASDAQ Capital Market or otherwise. If such transactions are commenced,
they may be discontinued without notice at any time.
Electronic
Delivery of Preliminary Prospectus: A prospectus supplement in electronic format may be delivered to potential investors
by the underwriter. The prospectus supplement in electronic format will be identical to the paper version of such
preliminary prospectus supplement. Other than the prospectus supplement in electronic format, the information on the
underwriter’s website and any information contained in any other website maintained by the underwriter is not part of
this prospectus supplement, the accompanying prospectus or the registration statement of which this prospectus supplement and
the accompanying prospectus form a part.
Notice
to Non-U.S. Investors
Canada
.
The common stock may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors,
as defined in National Instrument 45-106
Prospectus Exemptions
or subsection 73.3(1) of the
Securities Act
(Ontario),
and are permitted clients, as defined in National Instrument 31-103
Registration Requirements, Exemptions and Ongoing Registrant
Obligations
. Any resale of the common stock must be made in accordance with an exemption from, or in a transaction not subject
to, the prospectus requirements of applicable securities laws.
Securities
legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this
prospectus supplement (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission
or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s
province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s
province or territory for particulars of these rights or consult with a legal advisor.
Pursuant
to section 3A.3 of National Instrument 33-105
Underwriting Conflicts
(NI 33-105), the underwriter is not required to
comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.
United
Kingdom.
The underwriter has represented and agreed that:
|
●
|
it
has not made or will not make an offer of the securities to the public in the United
Kingdom within the meaning of section 102B of the Financial Services and Markets Act
2000 (as amended) (FSMA) except to legal entities which are authorized or regulated to
operate in the financial markets or, if not so authorized or regulated, whose corporate
purpose is solely to invest in securities or otherwise in circumstances which do not
require the publication by us of a prospectus pursuant to the Prospectus Rules of the
Financial Services Authority (FSA);
|
|
●
|
it
has only communicated or caused to be communicated and will only communicate or cause
to be communicated an invitation or inducement to engage in investment activity (within
the meaning of section 21 of FSMA) to persons who have professional experience in matters
relating to investments falling within Article 19(5) of the Financial Services and Markets
Act 2000 (Financial Promotion) Order 2005 or in circumstances in which section 21 of
FSMA does not apply to us; and
|
|
●
|
it
has complied with and will comply with all applicable provisions of FSMA with respect
to anything done by it in relation to the securities in, from or otherwise involving
the United Kingdom.
|
Switzerland.
The securities will not be offered, directly or indirectly, to the public in Switzerland and this prospectus does not constitute
a public offering prospectus as that term is understood pursuant to article 652a or 1156 of the Swiss Federal Code of Obligations.
European
Economic Area.
In relation to each Member State of the European Economic Area (the “EEA”) which has implemented
the European Prospectus Directive (each, a “Relevant Member State”), an offer of our shares may not be made to the
public in a Relevant Member State other than:
|
●
|
to
any legal entity which is a qualified investor, as defined in the European Prospectus
Directive;
|
|
●
|
to
fewer than 100 or, if the Relevant Member State has implemented the relevant provision
of the 2010 PD Amending Directive, 150 natural or legal persons (other than qualified
investors as defined in the European Prospectus Directive), subject to obtaining the
prior consent of the relevant dealer or dealers nominated by us for any such offer; or
|
|
●
|
in
any other circumstances falling within Article 3(2) of the European Prospectus Directive,
provided that no such offer of our shares shall require us or any underwriter to publish
a prospectus pursuant to Article 3 of the European Prospectus Directive or supplement
prospectus pursuant to Article 16 of the European Prospectus Directive
|
For
the purposes of this description, the expression an “offer to the public” in relation to the securities in any Relevant
Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the
securities to be offered so as to enable an investor to decide to purchase or subscribe for the securities, as the expression
may be varied in that Relevant Member State by any measure implementing the European Prospectus Directive in that member state,
and the expression “European Prospectus Directive” means Directive 2003/71/EC (and amendments hereto, including the
2010 PD Amending Directive, to the extent implemented in the Relevant Member State) and includes any relevant implementing measure
in each Relevant Member State. The expression 2010 PD Amending Directive means Directive 2010/73/EU.
Israel.
In the State of Israel this prospectus shall not be regarded as an offer to the public to purchase shares of common stock
under the Israeli Securities Law, 5728 – 1968, which requires a prospectus to be published and authorized by the Israel
Securities Authority, if it complies with certain provisions of Section 15 of the Israeli Securities Law, 5728–1968, including,
inter alia, if: (i) the offer is made, distributed or directed to not more than 35 investors, subject to certain conditions (the
“Addressed Investors”); or (ii) the offer is made, distributed or directed to certain qualified investors defined
in the First Addendum of the Israeli Securities Law, 5728 – 1968, subject to certain conditions (the “Qualified Investors”).
The Qualified Investors shall not be taken into account in the count of the Addressed Investors and may be offered to purchase
securities in addition to the 35 Addressed Investors. The company has not and will not take any action that would require it to
publish a prospectus in accordance with and subject to the Israeli Securities Law, 5728 – 1968. We have not and will not
distribute this prospectus or make, distribute or direct an offer to subscribe for our common stock to any person within the State
of Israel, other than to Qualified Investors and up to 35 Addressed Investors.
Qualified
Investors may have to submit written evidence that they meet the definitions set out in of the First Addendum to the Israeli Securities
Law, 5728 – 1968. In particular, we may request, as a condition to be offered common stock, that Qualified Investors will
each represent, warrant and certify to us and/or to anyone acting on our behalf: (i) that it is an investor falling within one
of the categories listed in the First Addendum to the Israeli Securities Law, 5728 – 1968; (ii) which of the categories
listed in the First Addendum to the Israeli Securities Law, 5728 – 1968 regarding Qualified Investors is applicable to it;
(iii) that it will abide by all provisions set forth in the Israeli Securities Law, 5728 – 1968 and the regulations promulgated
thereunder in connection with the offer to be issued common stock; (iv) that the shares of common stock that it will be issued
are, subject to exemptions available under the Israeli Securities Law, 5728 – 1968: (a) for its own account; (b) for investment
purposes only; and (c) not issued with a view to resale within the State of Israel, other than in accordance with the provisions
of the Israeli Securities Law, 5728 – 1968; and (v) that it is willing to provide further evidence of its Qualified Investor
status. Addressed Investors may have to submit written evidence in respect of their identity and may have to sign and submit a
declaration containing, inter alia, the Addressed Investor’s name, address and passport number or Israeli identification
number.
We
have not authorized and do not authorize the making of any offer of securities through any financial intermediary on our
behalf, other than offers made by the underwriter and its respective affiliates, with a view to the final placement of the
securities as contemplated in this document. Accordingly, no purchaser of the shares, other than the underwriter, is
authorized to make any further offer of shares on our behalf or on behalf of the underwriter.
LEGAL
MATTERS
The
validity of the securities offered by this prospectus supplement will be passed upon for us by Greenberg Traurig, LLP, Irvine,
California. Proskauer Rose LLP, New York, New York, is acting as counsel for the underwriter in connection with this offering.
EXPERTS
The
consolidated financial statements of Aqua Metals, Inc. and its wholly-owned subsidiaries included in the Company’s Annual
Report on Form 10-K for the year ended December 31, 2016 have been audited by Armanino LLP, an independent registered public accounting
firm, as stated in their report which is incorporated by reference herein, and has been so incorporated in reliance upon such
report and upon the authority of such firm as experts in accounting and auditing.
INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
The
SEC permits us to “incorporate by reference” the information and reports we file with it. This means that we can disclose
important information to you by referring to another document. The information that we incorporate by reference is considered
to be part of this prospectus supplement, and later information that we file with the SEC automatically updates and supersedes
this information. We incorporate by reference the documents listed below, except to the extent information in those documents
is different from the information contained in this prospectus supplement, and all future documents filed with the SEC under Sections
13(a), 13(c), 14, or 15(d) of the Exchange Act (other than the portions thereof deemed to be furnished to the SEC pursuant to
Item 9 or Item 12) until we terminate the offering of these securities:
|
●
|
Our
Annual Report on Form 10-K for the fiscal year ended December 31, 2016, which was filed
on March 2, 2017;
|
|
●
|
Our
Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, which was filed on
May 10, 2017;
|
|
●
|
Our
Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, which was filed on
August 9, 2017;
|
|
●
|
Our
Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, which was filed
on November 9, 2017;
|
|
●
|
Our
Current Reports on Form 8-K, which were filed on April 18, 2017, April 21, 2017, May
24, 2017, June 15, 2017, July 31, 2017, August 11, 2017, August 28, 2017, September 6,
2017 and December 1, 2017;
|
|
●
|
The
description of our common stock in our Form 8-A12B, which was filed on July 24, 2015,
and any amendments or reports filed for the purpose of updating this description; and
|
|
●
|
All
documents we file with the SEC under Sections 13(a), 13(c), 14 and 15(d) of the Exchange
Act after the date of this prospectus and prior to the termination of this offering made
by way of this prospectus.
|
To
the extent that any statement in this prospectus supplement is inconsistent with any statement that is incorporated by reference
and that was made on or before the date of this prospectus supplement, the statement in this prospectus supplement shall supersede
such incorporated statement. The incorporated statement shall not be deemed, except as modified or superseded, to constitute a
part of this prospectus supplement or the registration statement. Statements contained in this prospectus supplement as to the
contents of any contract or other document are not necessarily complete and, in each instance, we refer you to the copy of each
contract or document filed as an exhibit to our various filings made with the SEC.
You
may request a copy of these filings, at no cost, by writing or telephoning us at the following address or telephone number:
Aqua
Metals, Inc.
Attn: Investor Relations
1010 Atlantic Avenue
Alameda, California 94501
(510) 479-7635
WHERE
YOU CAN FIND MORE INFORMATION
We
have filed with the SEC a registration statement under the Securities Act (SEC File No. 333-213501) that registers the securities
offered hereby. The registration statement, including the exhibits and schedules attached thereto and the information incorporated
by reference therein, contains additional relevant information about the securities and our Company, which we are allowed to omit
from this prospectus supplement pursuant to the rules and regulations of the SEC. In addition, we file annual, quarterly and current
reports and proxy statements and other information with the SEC. You may read and copy any document that we file at the SEC’s
Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information
on the Public Reference Room. Our SEC filings are also available on the SEC’s website at www.sec.gov. Copies of certain
information filed by us with the SEC are also available on our website at www.aquametals.com. We have not incorporated by reference
into this prospectus supplement the information on our website and it is not a part of this document.
PROSPECTUS
$100,000,000
AQUA
METALS, INC.
Common Stock
Warrants
Units
Debt Securities
We may issue securities
from time to time in one or more offerings of up to $100,000,000 in aggregate offering price. This prospectus describes the general
terms of these securities and the general manner in which these securities will be offered. We will provide the specific terms
of these securities in supplements to this prospectus. The prospectus supplements will also describe the specific manner in which
these securities will be offered and may also supplement, update or amend information contained in this document. You should read
this prospectus and any applicable prospectus supplement before you invest.
We may offer these
securities in amounts, at prices and on terms determined at the time of offering. The securities may be sold directly to you, through
agents, or through underwriters and dealers. If agents, underwriters or dealers are used to sell the securities, we will name them
and describe their compensation in a prospectus supplement.
Our common stock is
listed on The NASDAQ Capital Market under the symbol “AQMS”. On August 31, 2016, the last reported sale price
of our common stock on The NASDAQ Capital Market was $9.24 per share.
Investing in these
securities involves significant risks. See “Risk Factors” included in any accompanying prospectus supplement and in
the documents incorporated by reference in this prospectus for a discussion of the factors you should carefully consider before
deciding to purchase these securities.
Neither the Securities
and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is September
26, 2016
TABLE OF CONTENTS
ABOUT
THIS PROSPECTUS
This prospectus is
part of a registration statement that we filed with the Securities and Exchange Commission, which we refer to as the “SEC,”
utilizing a “shelf” registration process. Under this shelf registration process, we may from time to time sell any
combination of the securities described in this prospectus in one or more offerings for an aggregate initial offering price of
up to $100,000,000.
This prospectus provides
you with a general description of the securities we may offer. From time to time, we may provide one or more prospectus supplements
that will contain specific information about the terms of the offering. The prospectus supplement may also add, update or change
information contained in this prospectus. You should read both this prospectus and any accompanying prospectus supplement together
with the additional information described under the heading “Where You Can Find More Information” beginning on page 19
of this prospectus.
We have not authorized
anyone to provide you with information different from that contained in or incorporated by reference in this prospectus, any accompanying
prospectus supplement or in any related free writing prospectus filed by us with the SEC. We do not take any responsibility for,
and cannot provide any assurance as to the reliability of, any information other than the information contained or incorporated
by reference in this prospectus, any accompanying prospectus supplement or in any related free writing prospectus filed by us with
the SEC. This prospectus and any accompanying prospectus supplement do not constitute an offer to sell or the solicitation of an
offer to buy any securities other than the securities described in the accompanying prospectus supplement or an offer to sell or
the solicitation of an offer to buy such securities in any circumstances in which such offer or solicitation is unlawful. You should
assume that the information appearing in this prospectus, any prospectus supplement, the documents incorporated by reference and
any related free writing prospectus is accurate only as of their respective dates. Our business, financial condition, results of
operations and prospects may have changed materially since those dates.
Unless the context
otherwise indicates, references in this prospectus to “we,” “our” and “us” refer, collectively,
to Aqua Metals, Inc., a Delaware corporation and its subsidiaries.
ABOUT
AQUA METALS, INC.
We are engaged in
the business of recycling lead through a novel, proprietary and patent-pending process that we developed and named “AquaRefining”.
Lead is a globally traded commodity with a worldwide market value in excess of $20 billion. Lead acid batteries, or LABs, are the
primary use of all lead produced in the world. Because the chemical properties of lead allow it to be recycled and reused indefinitely,
LABs are also the primary source of all lead production. As such, LABs are almost 100% recycled for purposes of capturing the lead
contained therein for re-use. We believe that our proprietary AquaRefining process will provide for the recycling of LABs and the
production of a pure grade lead with a significantly lower cost of production, and with fewer environmental and regulatory issues,
than conventional methods of lead production.
In recent years, many
lead mines have become exhausted and recycled lead has become increasingly important to LAB production. Recycled lead surpassed
mined lead in the 1990s and now represents more than 50% of the lead content in new LABs. Whether it is produced from lead ore
or recycled LABs, lead has historically been produced by smelting. Smelting is a high-temperature, endothermic chemical reduction,
making it inefficient, energy intensive and often a highly pollutive process. As a consequence of its environmental and health
issues, lead smelting has become increasingly regulated in developed countries. In the US, regulatory non-compliance has forced
the closure of large high-capacity lead smelters in Vernon, California, Frisco, Texas and Herculaneum, Missouri over the last three
years. Herculaneum was the last remaining primary lead-mine operation (i.e., smelting lead from ore) in the US, though secondary
lead smelters that process recycled lead continue to operate in the US. In response, there has been an expansion of LAB smelting
capacity in Mexico and other less regulated countries. The resulting transportation of used LABs from where they originate in the
US to smelters in Mexico, the Philippines and elsewhere is an increasingly significant logistical and global environmental cost.
AquaRefining uses
an aqueous solvent and a novel electro-chemical process to produce pure lead (i.e., higher than 99.99% purity). We believe that
AquaRefining can significantly reduce production costs as compared with alternative methods of producing pure lead. This cost reduction
is partly because our novel electro-chemical process requires less energy than the endothermic high temperature (1400°C) chemical
reduction that is at the core of smelting. It is also partly because our process does not generate toxic high temperature dust
and gas, or the lead containing slag and dross that are unavoidable byproducts of smelting, and which require capital and energy
intensive processes to meet environmental compliance. We also have the potential to locate multiple smaller recycling facilities
in areas closer to the source of used LABs, thereby reducing transport costs and supply chain bottlenecks. AquaRefining is a water-based
ambient temperature process. On this basis, we believe that it significantly reduces environmental emissions, health concerns and
permitting needs as compared with lead smelting. We believe that the combined advantages offered by AquaRefining represent a potential
step change in lead recycling technology, one that can deliver advantages in economics, footprint and logistics while greatly reducing
the environmental impact of lead recycling.
The modular nature
of AquaRefining makes it possible to start LAB recycling at a much smaller scale than is possible with smelters, thereby significantly
reducing the investment risk associated with building a lead production facility. Our plan is to actively explore distributed recycling
in the US by establishing our own initial recycling operation near Reno, Nevada. This plan is based on our belief that Reno has
become a significant hub of the West Coast’s LAB distribution infrastructure and yet is very poorly served by the LAB recycling
industry. From our initial recycling facility near Reno, we intend to expand first throughout the US and then overseas. We will
seek to own our own recycling facilities but will also evaluate joint ventures and licensing in respect of our technologies.
Our principal executive
offices are located at 1010 Atlantic Avenue, Alameda, California 94501, and our telephone number is (510) 479-7635.
RISK
FACTORS
Investing in our securities
involves significant risks. You should carefully consider the risks and uncertainties described in this prospectus and any accompanying
prospectus supplement, including the risk factors in our most recent Annual Report on Form 10-K, any subsequently filed Quarterly
Report on Form 10-Q or Current Report on Form 8-K,
together with all of the other information
appearing in or incorporated by reference into this prospectus and any applicable prospectus supplement
, before making an
investment decision pursuant to this prospectus and any accompanying prospectus supplement relating to a specific offering.
Our business, financial
condition and results of operations could be materially and adversely affected by any or all of these risks or by additional risks
and uncertainties not presently known to us or that we currently deem immaterial that may adversely affect us in the future.
NOTE
REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains,
and any accompanying prospectus supplement will contain, forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation
Reform Act of 1993. Also, documents that we incorporate by reference into this prospectus, including documents that we subsequently
file with the Commission, will contain forward-looking statements. Forward-looking statements are those that predict or describe
future events or trends and that do not relate solely to historical matters. You can generally identify forward-looking statements
as statements containing the words “may,” “will,” “could,” “should,” “expect,”
“anticipate,” “intend,” “estimate,” “believe,” “project,” “plan,” “assume”
or other similar expressions, or negatives of those expressions, although not all forward-looking statements contain these identifying
words. All statements contained or incorporated by reference in this prospectus and any prospectus supplement regarding our business
strategy, future operations, projected financial position, potential strategic transactions, proposed participation or casino projects,
projected sales growth, estimated future revenues, cash flows and profitability, projected costs, potential outcome of litigation,
potential sources of additional capital, future prospects, future economic conditions, the future of our industry and results that
might be obtained by pursuing management’s current plans and objectives are forward-looking statements.
You should not place
undue reliance on our forward-looking statements because the matters they describe are subject to certain risks, uncertainties
and assumptions that are difficult to predict. Our forward-looking statements are based on the information currently available
to us and speak only as of the date on the cover of this prospectus, the date of any prospectus supplement, or, in the case of
forward-looking statements incorporated by reference, the date of the filing that includes the statement. Over time, our actual
results, performance or achievements may differ from those expressed or implied by our forward-looking statements, and such difference
might be significant and materially adverse to our security holders. Except as required by law, we undertake no obligation to update
publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
We have identified
some of the important factors that could cause future events to differ from our current expectations and they are described in
this prospectus and supplements to this prospectus under the caption “Risk Factors,” as well as in our most recent Annual
Report on Form 10-K, including under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial
Condition and Results of Operations,” and in other documents that we may file with the Commission, all of which you should
review carefully. Please consider our forward-looking statements in light of those risks as you read this prospectus and any prospectus
supplement.
THE
SECURITIES WE MAY OFFER
We may offer and sell,
from time to time in one or more offerings, any combination of common stock, warrants, units and debt securities having an aggregate
initial offering price not exceeding $100,000,000. In this prospectus, we refer to the common stock, warrants, units
and debt securities that we may offer collectively as “securities.”
We are authorized to
issue 50,000,000 shares of $0.001 par value common stock. Holders of shares of common stock are entitled to one vote per share
on all matters to be voted upon by the stockholders generally. Stockholders are entitled to receive such dividends as may be declared
from time to time by the board of directors out of funds legally available therefore, and in the event of liquidation, dissolution
or winding up of the company to share ratably in all assets remaining after payment of liabilities. The holders of shares of common
stock have no preemptive, conversion, subscription rights or cumulative voting rights.
This prospectus provides
a general description of the securities we may offer other than our common stock. Each time we sell any of our securities
under this prospectus, we will, to the extent required by law, provide a prospectus supplement that will contain specific information
about the terms of the offering. The prospectus supplement may also add, update or change information in this prospectus. For
more information, see “About this Prospectus.”
DESCRIPTION
OF DEBT SECURITIES
We may offer and sell,
from time to time in one or more offerings, any combination of common stock, warrants, units and debt securities having an aggregate
initial offering price not exceeding $100,000,000. In this prospectus, we refer to the common stock, warrants, units
and debt securities that we may offer collectively as “securities.”
We may offer debt securities
which may be senior or subordinated. We refer to the senior debt securities and the subordinated debt securities collectively as
debt securities. The following description summarizes the general terms and provisions of the debt securities. We will describe
the specific terms of the debt securities and the extent, if any, to which the general provisions summarized below apply to any
series of debt securities in the prospectus supplement relating to the series and any applicable free writing prospectus that we
authorize to be delivered.
We may issue senior
debt securities from time to time, in one or more series under a senior indenture to be entered into between us and a senior trustee
to be named in a prospectus supplement, which we refer to as the senior trustee. We may issue subordinated debt securities from
time to time, in one or more series under a subordinated indenture to be entered into between us and a subordinated trustee to
be named in a prospectus supplement, which we refer to as the subordinated trustee. The forms of senior indenture and subordinated
indenture are filed as exhibits to the registration statement of which this prospectus forms a part. Together, the senior indenture
and the subordinated indenture are referred to as the indentures and, together, the senior trustee and the subordinated trustee
are referred to as the trustees. This prospectus briefly outlines some of the provisions of the indentures. The following summary
of the material provisions of the indentures is qualified in its entirety by the provisions of the indentures, including definitions
of certain terms used in the indentures. Wherever we refer to particular sections or defined terms of the indentures, those sections
or defined terms are incorporated by reference in this prospectus or the applicable prospectus supplement. You should review the
indentures that are filed as exhibits to the registration statement of which this prospectus forms a part for additional information.
None of the indentures
will limit the amount of debt securities that we may issue. The applicable indenture will provide that debt securities may be issued
up to an aggregate principal amount authorized from time to time by us and may be payable in any currency or currency unit designated
by us or in amounts determined by reference to an index.
General
The senior debt
securities will constitute our unsubordinated general obligations and will rank pari passu with our other unsubordinated
obligations. The subordinated debt securities will constitute our subordinated general obligations and will be junior in
right of payment to our senior indebtedness (including senior debt securities), as described under the heading “—
Certain Terms of the Subordinated Debt Securities — Subordination.”
The debt securities
will be our unsecured obligations unless otherwise specified in the applicable prospectus supplement. Any secured debt or other
secured obligations will be effectively senior to the debt securities to the extent of the value of the assets securing such debt
or other obligations.
The applicable prospectus
supplement and any free writing prospectus will include any additional or different terms of the debt securities or any series
being offered, including the following terms:
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the title and type of the debt securities;
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whether the debt securities will be senior or subordinated debt securities, and, with respect to
debt securities issued under the subordinated indenture the terms on which they are subordinated;
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the aggregate principal amount of the debt securities;
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the price or prices at which we will sell the debt securities;
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the maturity date or dates of the debt securities and the right, if any, to extend such date or
dates;
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the rate or rates, if any, per year, at which the debt securities will bear interest, or the method
of determining such rate or rates;
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the date or dates from which such interest will accrue, the interest payment dates on which such
interest will be payable or the manner of determination of such interest payment dates and the related record dates;
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the right, if any, to extend the interest payment periods and the duration of that extension;
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the manner of paying principal and interest and the place or places where principal and interest
will be payable;
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provisions for a sinking fund, purchase fund or other analogous fund, if any;
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any redemption dates, prices, obligations and restrictions on the debt securities;
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the currency, currencies or currency units in which the debt securities will be denominated and
the currency, currencies or currency units in which principal and interest, if any, on the debt securities may be payable;
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any conversion or exchange features of the debt securities;
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whether and upon what terms the debt securities may be defeased;
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any events of default or covenants in addition to or in lieu of those set forth in the indenture;
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whether the debt securities will be issued in definitive or global form or in definitive form only
upon satisfaction of certain conditions;
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whether the debt securities will be guaranteed as to payment or performance;
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if the debt securities of the series will be secured by any collateral and, if so, a general description
of the collateral and the terms and provisions of such collateral security, pledge or other agreements; and
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any other material terms of the debt securities.
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The applicable prospectus
supplement will also describe any applicable material U.S. federal income tax consequences. When we refer to “principal”
in this section with reference to the debt securities, we are also referring to “premium, if any.”
We may from time to
time, without notice to or the consent of the holders of any series of debt securities, create and issue further debt securities
of any such series ranking equally with the debt securities of such series in all respects (or in all respects other than (1) the
payment of interest accruing prior to the issue date of such further debt securities or (2) the first payment of interest following
the issue date of such further debt securities). Such further debt securities may be consolidated and form a single series with
the debt securities of such series and have the same terms as to status, redemption or otherwise as the debt securities of such
series.
You may present debt
securities for exchange and you may present debt securities for transfer in the manner, at the places and subject to the restrictions
set forth in the debt securities and the applicable prospectus supplement. We will provide you those services without charge, although
you may have to pay any tax or other governmental charge payable in connection with any exchange or transfer, as set forth in the
indenture.
Debt securities may
bear interest at a fixed rate or a floating rate. Debt securities bearing no interest or interest at a rate that at the time of
issuance is below the prevailing market rate (original issue discount securities) may be sold at a discount below their stated
principal amount.
We may issue debt securities
with the principal amount payable on any principal payment date, or the amount of interest payable on any interest payment date,
to be determined by reference to one or more currency exchange rates, securities or baskets of securities, commodity prices or
indices. You may receive a payment of principal on any principal payment date, or a payment of interest on any interest payment
date, that is greater than or less than the amount of principal or interest otherwise payable on such dates, depending on the value
on such dates of the applicable currency, security or basket of securities, commodity or index. Information as to the methods for
determining the amount of principal or interest payable on any date, the currencies, securities or baskets of securities, commodities
or indices to which the amount payable on such date is linked.
Certain Terms of the Senior Debt Securities
Covenants.
Unless
we indicate otherwise in a prospectus supplement, the senior debt securities will not contain any financial or restrictive covenants,
including covenants restricting either us or any of our subsidiaries from incurring, issuing, assuming or guaranteeing any indebtedness
secured by a lien on any of our or our subsidiaries’ property or capital stock, or restricting either us or any of our subsidiaries
from entering into sale and leaseback transactions.
Consolidation, Merger
and Sale of Assets.
Unless we indicate otherwise in a prospectus supplement, we may not consolidate with or merge into any
other person, in a transaction in which we are not the surviving corporation, or convey, transfer or lease our properties and assets
substantially as an entirety to any person, in either case, unless:
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the successor entity, if any, is a U.S. corporation, limited liability company, partnership or
trust (subject to certain exceptions provided for in the senior indenture);
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the successor entity assumes our obligations on the senior debt securities and under the senior
indenture;
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immediately after giving effect to the transaction, no default or event of default shall have occurred
and be continuing; and
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certain other conditions are met.
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No Protection in
the Event of a Change in Control
. Unless we indicate otherwise in a prospectus supplement with respect to a particular series
of senior debt securities, the senior debt securities will not contain any provisions that may afford holders of the senior debt
securities protection in the event we have a change in control or in the event of a highly leveraged transaction (whether or not
such transaction results in a change in control).
Events of Default
.
Unless we indicate otherwise in a prospectus supplement with respect to a particular series of senior debt securities, the following
are events of default under the senior indenture for any series of senior debt securities:
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failure to pay interest on any senior debt securities of such series when due and payable, if that
default continues for a period of 90 days (or such other period as may be specified for such series);
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failure to pay principal on the senior debt securities of such series when due and payable whether
at maturity, upon redemption, by declaration or otherwise (and, if specified for such series, the continuance of such failure for
a specified period);
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default in the performance of or breach of any of our covenants or agreements in the senior indenture
applicable to senior debt securities of such series, other than a covenant breach which is specifically dealt with elsewhere in
the senior indenture, and that default or breach continues for a period of 90 days after we receive written notice from the trustee
or from the holders of 25% or more in aggregate principal amount of the senior debt securities of such series;
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certain events of bankruptcy or insolvency, whether or not voluntary; and
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any other event of default provided for in such series of senior debt securities as may be specified
in the applicable prospectus supplement.
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Unless we indicate
otherwise in a prospectus supplement, the default by us under any other debt, including any other series of debt securities, is
not a default under the senior indenture.
If an event of default
other than an event of default specified in the fourth bullet point above occurs with respect to a series of senior debt securities
and is continuing under the senior indenture, then, and in each such case, either the trustee or the holders of not less than 25%
in aggregate principal amount of such series then outstanding under the senior indenture (each such series voting as a separate
class) by written notice to us and to the trustee, if such notice is given by the holders, may, and the trustee at the request
of such holders shall, declare the principal amount of and accrued interest on such series of senior debt securities to be immediately
due and payable, and upon this declaration, the same shall become immediately due and payable.
If an event of default
specified in the fourth bullet point above occurs with respect to us and is continuing, the entire principal amount of and accrued
interest, if any, on each series of senior debt securities then outstanding shall become immediately due and payable.
Unless otherwise specified
in the prospectus supplement relating to a series of senior debt securities originally issued at a discount, the amount due upon
acceleration shall include only the original issue price of the senior debt securities, the amount of original issue discount accrued
to the date of acceleration and accrued interest, if any.
Upon certain conditions,
declarations of acceleration may be rescinded and annulled and past defaults may be waived by the holders of a majority in aggregate
principal amount of all the senior debt securities of such series affected by the default, each series voting as a separate class.
Furthermore, prior to a declaration of acceleration and subject to various provisions in the senior indenture, the holders of a
majority in aggregate principal amount of a series of senior debt securities, by notice to the trustee, may waive an existing default
or event of default with respect to such senior debt securities and its consequences, except a default in the payment of principal
of or interest on such senior debt securities or in respect of a covenant or provision of the senior indenture which cannot be
modified or amended without the consent of the holders of each such senior debt security. Upon any such waiver, such default shall
cease to exist, and any event of default with respect to such senior debt securities shall be deemed to have been cured, for every
purpose of the senior indenture; but no such waiver shall extend to any subsequent or other default or event of default or
impair any right consequent thereto. For information as to the waiver of defaults, see “—Modification and Waiver.”
The holders of a majority
in aggregate principal amount of a series of senior debt securities may direct the time, method and place of conducting any proceeding
for any remedy available to the trustee or exercising any trust or power conferred on the trustee with respect to such senior debt
securities. However, the trustee may refuse to follow any direction that conflicts with law or the senior indenture, that may involve
the trustee in personal liability or that the trustee determines in good faith may be unduly prejudicial to the rights of holders
of such series of senior debt securities not joining in the giving of such direction and may take any other action it deems proper
that is not inconsistent with any such direction received from holders of such series of senior debt securities. A holder may not
pursue any remedy with respect to the senior indenture or any series of senior debt securities unless:
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the holder gives the trustee written notice of a continuing event of default;
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the holders of at least 25% in aggregate principal amount of such series of senior debt securities
make a written request to the trustee to pursue the remedy in respect of such event of default;
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the requesting holder or holders offer the trustee indemnity satisfactory to the trustee against
any costs, liability or expense;
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the trustee does not comply with the request within 60 days after receipt of the request and the
offer of indemnity; and
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during such 60-day period, the holders of a majority in aggregate principal amount of such series
of senior debt securities do not give the trustee a direction that is inconsistent with the request.
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These limitations,
however, do not apply to the right of any holder of a senior debt security to receive payment of the principal of and interest,
if any, on such senior debt security in accordance with the terms of such debt security, or to bring suit for the enforcement of
any such payment in accordance with the terms of such debt security, on or after the due date for the senior debt securities, which
right shall not be impaired or affected without the consent of the holder.
The senior indenture
requires certain of our officers to certify, on or before a fixed date in each year in which any senior debt security is outstanding,
as to their knowledge of our compliance with all covenants, agreements and conditions under the senior indenture.
Satisfaction and
Discharge
. We can satisfy and discharge our obligations to holders of any series of senior debt securities if:
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we pay or cause to be paid, as and when due and payable, the principal of and any interest on all
senior debt securities of such series outstanding under the senior indenture; or
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all senior debt securities of such series have become due and payable or will become due and payable
within one year (or are to be called for redemption within one year) and we deposit in trust a combination of cash and U.S. government
or U.S. government agency obligations that will generate enough cash to make interest, principal and any other payments on the
debt securities of that series on their various due dates.
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Under current U.S.
federal income tax law, the deposit and our legal release from the senior debt securities would be treated as a taxable event,
and beneficial owners of such debt securities would generally recognize any gain or loss on such senior debt securities. Purchasers
of the senior debt securities should consult their own advisers with respect to the tax consequences to them of such deposit and
discharge, including the applicability and effect of tax laws other than the U.S. federal income tax law.
Defeasance
.
Unless the applicable prospectus supplement provides otherwise, the following discussion of legal defeasance and discharge and
covenant defeasance will apply to any senior series of senior debt securities issued under the indentures.
Legal Defeasance
.
We can legally release ourselves from any payment or other obligations on the senior debt securities of any series (called “legal
defeasance”) if certain conditions are met, including the following:
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We deposit in trust for your benefit and the benefit of all other direct holders of the senior
debt securities of the same series a combination of cash and U.S. government or U.S. government agency obligations that will generate
enough cash to make interest, principal and any other payments on the senior debt securities of that series on their various due
dates.
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There is a change in current U.S. federal income tax law or an IRS ruling that lets us make the
above deposit without causing you to be taxed on the senior debt securities any differently than if we did not make the deposit
and instead repaid the senior debt securities ourselves when due.
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We deliver to the trustee a legal opinion of our counsel confirming the tax law change or ruling
described above.
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If we ever did accomplish
legal defeasance, as described above, you would have to rely solely on the trust deposit for repayment of the debt securities.
You could not look to us for repayment in the event of any shortfall.
Covenant Defeasance
.
Without any change of current U.S. federal tax law, we can make the same type of deposit described above and be released from some
of the covenants in the senior debt securities (called “covenant defeasance”). In that event, you would lose the protection
of those covenants but would gain the protection of having money and securities set aside in trust to repay the senior debt securities.
In order to achieve covenant defeasance, we must do the following (among other things):
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We must deposit in trust for your benefit and the benefit of all other direct holders of the senior
debt securities of the same series a combination of cash and U.S. government or U.S. government agency obligations that will generate
enough cash to make interest, principal and any other payments on the senior debt securities of that series on their various due
dates.
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We must deliver to the trustee a legal opinion of our counsel confirming that under current U.S.
federal income tax law we may make the above deposit without causing you to be taxed on the senior debt securities any differently
than if we did not make the deposit and instead repaid the senior debt securities ourselves when due.
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If we accomplish covenant
defeasance, you can still look to us for repayment of the senior debt securities if there were a shortfall in the trust deposit.
In fact, if one of the events of default occurred (such as our bankruptcy) and the debt securities become immediately due and payable,
there may be such a shortfall. Depending on the events causing the default, you may not be able to obtain payment of the shortfall.
Modification and
Waiver.
We and the trustee may amend or supplement the senior indenture or the senior debt securities without the consent of
any holder:
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to comply with the requirements of the SEC in order to effect or maintain the qualification of
the indenture under the Trust Indenture Act of 1939, as amended, or the Trust Indenture Act;
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to convey, transfer, assign, mortgage or pledge any assets as security for the senior debt securities
of one or more series;
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to evidence the succession of a corporation, limited liability company, partnership or trust to
us, and the assumption by such successor of our covenants, agreements and obligations under the senior indenture;
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to add to our covenants such new covenants, restrictions, conditions or provisions for the protection
of the holders, and to make the occurrence, or the occurrence and continuance, of a default in any such additional covenants, restrictions,
conditions or provisions an event of default;
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to cure any ambiguity, defect or inconsistency in the senior indenture or in any supplemental indenture
or to conform the senior indenture or the senior debt securities to the description of senior debt securities of such series set
forth in this prospectus or any applicable prospectus supplement;
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to provide for or add guarantors with respect to the senior debt securities of any series;
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to establish the form or forms or terms of the senior debt securities as permitted by the senior
indenture;
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to evidence and provide for the acceptance of appointment under the senior indenture by a successor
trustee, or to make such changes as shall be necessary to provide for or facilitate the administration of the trusts in the senior
indenture by more than one trustee;
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to add to, delete from or revise the conditions, limitations and restrictions on the authorized
amount, terms, purposes of issue, authentication and delivery of any series of senior debt securities;
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to make any change to the senior debt securities of any series so long as no senior debt securities
of such series are outstanding; or
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to make any change that does not adversely affect the rights of any holder in any material respect.
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Other amendments and
modifications of the senior indenture or the senior debt securities issued may be made, and our compliance with any provision of
the senior indenture with respect to any series of senior debt securities may be waived, with the consent of the holders of a majority
of the aggregate principal amount of the outstanding senior debt securities of all series affected by the amendment or modification
(voting together as a single class); provided, however, that each affected holder must consent to any modification, amendment
or waiver that:
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extends the final maturity of any senior debt securities of such series;
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reduces the principal amount of any senior debt securities of such series;
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reduces the rate or extends the time of payment of interest on any senior debt securities of such
series;
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reduces the amount payable upon the redemption of any senior debt securities of such series;
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changes the currency of payment of principal of or interest on any senior debt securities of such
series;
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reduces the principal amount of original issue discount securities payable upon acceleration of
maturity or the amount provable in bankruptcy;
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waives a default in the payment of principal of or interest on the senior debt securities;
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changes the provisions relating to the waiver of past defaults or changes or impairs the right
of holders to receive payment or to institute suit for the enforcement of any payment or conversion of any senior debt securities
of such series on or after the due date therefor;
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modifies any of the provisions of these restrictions on amendments and modifications, except to
increase any required percentage or to provide that certain other provisions cannot be modified or waived without the consent of
the holder of each senior debt security of such series affected by the modification; or
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reduces the above-stated percentage of outstanding senior debt securities of such series whose
holders must consent to a supplemental indenture or to modify or amend or to waive certain provisions of or defaults under the
senior indenture.
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It shall not be necessary
for the holders to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if the
holders’ consent approves the substance thereof. After an amendment, supplement or waiver of the senior indenture in accordance
with the provisions described in this section becomes effective, the trustee must give to the holders affected thereby certain
notice briefly describing the amendment, supplement or waiver. Any failure by the trustee to give such notice, or any defect therein,
shall not, however, in any way impair or affect the validity of any such amendment, supplemental indenture or waiver.
No Personal Liability
of Incorporators, Stockholders, Officers, Directors.
The senior indenture provides that no recourse shall be had under any
obligation, covenant or agreement of ours in the senior indenture or any supplemental indenture, or in any of the senior debt securities
or because of the creation of any indebtedness represented thereby, against any of our incorporators, stockholders, officers or
directors, past, present or future, or of any predecessor or successor entity thereof under any law, statute or constitutional
provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise. Each holder, by accepting
the senior debt securities, waives and releases all such liability.
Concerning the Trustee.
The senior indenture provides that, except during the continuance of an event of default, the trustee will not be liable except
for the performance of such duties as are specifically set forth in the senior indenture. If an event of default has occurred and
is continuing, the trustee will exercise such rights and powers vested in it under the senior indenture and will use the same degree
of care and skill in its exercise as a prudent person would exercise under the circumstances in the conduct of such person’s
own affairs.
The senior indenture
and the provisions of the Trust Indenture Act incorporated by reference therein contain limitations on the rights of the trustee
thereunder, should it become a creditor of ours or any of our subsidiaries, to obtain payment of claims in certain cases or to
realize on certain property received by it in respect of any such claims, as security or otherwise. The trustee is permitted to
engage in other transactions, provided that if it acquires any conflicting interest (as defined in the Trust Indenture Act), it
must eliminate such conflict or resign.
We may have normal
banking relationships with the senior trustee in the ordinary course of business.
Unclaimed Funds.
All funds deposited with the trustee or any paying agent for the payment of principal, premium, interest or additional amounts
in respect of the senior debt securities that remain unclaimed for two years after the date upon which such principal, premium
or interest became due and payable will be repaid to us. Thereafter, any right of any holder of senior debt securities to such
funds shall be enforceable only against us, and the trustee and paying agents will have no liability therefor.
Governing Law.
The
senior indenture and the senior debt securities will be governed by, and construed in accordance with, the internal laws of the
State of New York.
Certain Terms of the Subordinated Debt
Securities
Other than the terms
of the subordinated indenture and subordinated debt securities relating to subordination or otherwise as described in the prospectus
supplement relating to a particular series of subordinated debt securities, the terms of the subordinated indenture and subordinated
debt securities are identical in all material respects to the terms of the senior indenture and senior debt securities.
Additional or different
subordination terms may be specified in the prospectus supplement applicable to a particular series.
Subordination.
The
indebtedness evidenced by the subordinated debt securities is subordinate to the prior payment in full of all of our senior indebtedness,
as defined in the subordinated indenture. During the continuance beyond any applicable grace period of any default in the payment
of principal, premium, interest or any other payment due on any of our senior indebtedness, we may not make any payment of principal
of or interest on the subordinated debt securities (except for certain sinking fund payments). In addition, upon any payment or
distribution of our assets upon any dissolution, winding-up, liquidation or reorganization, the payment of the principal of and
interest on the subordinated debt securities will be subordinated to the extent provided in the subordinated indenture in right
of payment to the prior payment in full of all our senior indebtedness. Because of this subordination, if we dissolve or otherwise
liquidate, holders of our subordinated debt securities may receive less, ratably, than holders of our senior indebtedness. The
subordination provisions do not prevent the occurrence of an event of default under the subordinated indenture.
The term “senior
indebtedness” of a person means with respect to such person the principal of, premium, if any, interest on, and any other
payment due pursuant to any of the following, whether outstanding on the date of the subordinated indenture or incurred by that
person in the future:
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all of the indebtedness of that person for money borrowed;
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all of the indebtedness of that person evidenced by notes, debentures, bonds or other securities
sold by that person for money;
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all of the lease obligations that are capitalized on the books of that person in accordance with
generally accepted accounting principles;
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all indebtedness of others of the kinds described in the first two bullet points above and all
lease obligations of others of the kind described in the third bullet point above that the person, in any manner, assumes or guarantees
or that the person in effect guarantees through an agreement to purchase, whether that agreement is contingent or otherwise;
and
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all renewals, extensions or refundings of indebtedness of the kinds described in the first, second
or fourth bullet point above and all renewals or extensions of leases of the kinds described in the third or fourth bullet point
above;
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unless, in the case of any particular indebtedness,
renewal, extension or refunding, the instrument creating or evidencing it or the assumption or guarantee relating to it expressly
provides that such indebtedness, renewal, extension or refunding is not superior in right of payment to the subordinated debt securities.
Our senior debt securities constitute senior indebtedness for purposes of the subordinated debt indenture.
DESCRIPTION
OF WARRANTS
We may issue warrants
for the purchase of shares of common stock, debt securities, and/or units from time to time. We may issue warrants independently
or together with common stock and/or debt securities, and the warrants may be attached to or separate from those securities. If
we issue warrants, they will be evidenced by warrant agreements or warrant certificates issued under one or more warrant agreements,
which will be contracts between us and the holders of the warrants or an agent for the holders of the warrants. We encourage you
to read the prospectus supplement that relates to any warrants we may offer, as well as the complete warrant agreement or warrant
certificate that contain the terms of the warrants. If we issue warrants, the forms of warrant agreements and warrant
certificates, as applicable, relating to the warrants will be filed as exhibits to the registration statement that includes this
prospectus, or as an exhibit to a filing with the SEC that is incorporated by reference into this prospectus.
DESCRIPTION
OF UNITS
We may issue units
comprised of one or more of the other securities described in this prospectus in any combination from time to time. Each unit will
be issued so that the holder of the unit is also the holder of each security included in the unit. Thus, the holder of a unit will
have the rights and obligations of a holder of each included security. If we issue units, they will be evidenced by unit agreements
or unit certificates issued under one or more unit agreements, which will be contracts between us and the holders of the units
or an agent for the holders of the units. The unit agreement under which a unit is issued may provide that the securities included
in the unit may not be held or transferred separately, at any time or at any time before a specified date. We encourage you to
read the prospectus supplement that relates to any units we may offer, as well as the complete unit agreement or unit certificate
that contain the terms of the units. If we issue units, the forms of unit agreements and unit certificates, as applicable,
relating to the units will be filed as exhibits to the registration statement that includes this prospectus, or as an exhibit to
a filing with the SEC that is incorporated by reference into this prospectus.
PLAN
OF DISTRIBUTION
We may sell our securities
from time to time in any manner permitted by the Securities Act of 1933, as amended, or the Securities Act, including any one or
more of the following ways:
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to or through underwriters;
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to or through broker-dealers (acting as agent or principal);
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in “at the market” offerings, within the meaning of Rule 415(a)(4) of the Securities
Act, to or through a market maker or into an existing trading market, on an exchange or otherwise; and/or
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directly to purchasers, through a specific bidding or auction process or otherwise.
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The securities may
be sold at a fixed price or prices, which may be changed, at market prices prevailing at the time of sale, at prices relating to
the prevailing market prices or at negotiated prices.
Offers to purchase
offered securities may be solicited by agents designated by us from time to time. Any agent involved in the offer or sale of the
offered securities in respect of which this prospectus is delivered will be named, and any commissions payable by us will be set
forth, in the applicable prospectus supplement. Unless otherwise set forth in the applicable prospectus supplement, any agent will
be acting on a reasonable best efforts basis for the period of its appointment. Any agent may be deemed to be an underwriter, as
that term is defined in the Securities Act, of the offered securities so offered and sold.
We will set forth in
a prospectus supplement the terms of the offering of our securities, including:
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the name or names of any agents, underwriters or dealers;
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the purchase price of our securities being offered and the proceeds we will receive from the sale;
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any over-allotment options under which underwriters may purchase additional securities from us;
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any agency fees or underwriting discounts and commissions and other items constituting agents’
or underwriters’ compensation;
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the public offering price;
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any discounts or concessions allowed or reallowed or paid to dealers; and
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any securities exchanges on which such securities may be listed.
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If offered securities
are sold to the public by means of an underwritten offering, either through underwriting syndicates represented by managing underwriters
or directly by the managing underwriters, we will execute an underwriting agreement with an underwriter or underwriters, and the
names of the specific managing underwriter or underwriters, as well as any other underwriters, will be set forth in the applicable
prospectus supplement. In addition, the terms of the transaction, including commissions, discounts and any other compensation of
the underwriters and dealers, if any, will be set forth in the applicable prospectus supplement, which prospectus supplement will
be used by the underwriters to make resales of the offered securities. If underwriters are utilized in the sale of the offered
securities, the offered securities will be acquired by the underwriters for their own account and may be resold from time to time
in one or more transactions, including:
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transactions on The NASDAQ Capital Market or any other organized market where the securities may
be traded;
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in the over-the-counter market;
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in negotiated transactions; or
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under delayed delivery contracts or other contractual commitments.
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We may grant to the
underwriters options to purchase additional offered securities to cover over-allotments, if any, at the public offering price with
additional underwriting discounts or commissions, as may be set forth in the applicable prospectus supplement. If we grant any
over-allotment option, the terms of the over-allotment option will be set forth in the applicable prospectus supplement.
We may authorize agents
or underwriters to solicit offers by certain types of institutional investors to purchase securities from us at the public offering
price set forth in the prospectus supplement pursuant to delayed delivery contracts providing for payment and delivery on a specified
date in the future. We will describe the conditions to these contracts and the commissions we must pay for solicitation of these
contracts in the prospectus supplement.
We may indemnify agents,
underwriters and dealers against specified liabilities, including liabilities incurred under the Securities Act, or to contribution
by us to payments they may be required to make in respect of such liabilities. Agents, underwriters or dealers, or their respective
affiliates, may be customers of, engage in transactions with or perform services for us or our respective affiliates, in the ordinary
course of business.
Unless otherwise specified
in the applicable prospectus supplement, each class or series of securities will be a new issue with no established trading market,
other than our common stock, which is traded on The NASDAQ Capital Market. We may elect to list any other class or series of securities
on any exchange and, in the case of our common stock, on any additional exchange. However, unless otherwise specified in the applicable
prospectus supplement, we will not be obligated to do so. It is possible that one or more underwriters may make a market in a class
or series of securities, but the underwriters will not be obligated to do so and may discontinue any market making at any time
without notice. We cannot give any assurance as to the liquidity of the trading market for any of the offered securities.
Any underwriter may
engage in over-allotment, stabilizing transactions, short-covering transactions and penalty bids in accordance with Regulation
M under the Securities Exchange Act of 1934, as amended. Over-allotment involves sales in excess of the offering size, which create
a short position. Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not
exceed a specified maximum price. Syndicate-covering or other short-covering transactions involve purchases of the securities,
either through exercise of the over-allotment option or in the open market after the distribution is completed, to cover short
positions. Penalty bids permit the underwriters to reclaim a selling concession from a dealer when the securities originally sold
by the dealer are purchased in a stabilizing or covering transaction to cover short positions. Those activities may cause the price
of the securities to be higher than it would otherwise be. If commenced, the underwriters may discontinue any of the activities
at any time.
To comply with the
securities laws of certain states, if applicable, the securities offered by this prospectus will be offered and sold in those states
only through registered or licensed brokers or dealers.
In compliance with
guidelines of the Financial Industry Regulatory Authority, or FINRA, the maximum consideration or discount to be received by any
FINRA member or independent broker dealer may not exceed 8% of the aggregate amount of the securities offered pursuant to this
prospectus and any applicable prospectus supplement.
LEGAL MATTERS
The validity of the
issuance of the securities offered by this prospectus has been passed upon for us by Greenberg Traurig, LLP, Irvine, California.
EXPERTS
The financial statements
incorporated in this Prospectus by reference to the Annual Report on Form 10-K for the year ended December 31, 2015 have been so
incorporated in reliance on the report of Armanino LLP, an independent registered public accounting firm, given on the authority
of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly
and current reports and other information with the SEC. You may read and copy any document we file at the SEC’s Public Reference
Room located at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the public reference
room by calling the SEC at 1-800-SEC-0330. Our filings with the SEC also are available from the SEC’s internet site at http://www.sec.gov,
which contains reports, proxy and information statements, and other information regarding issuers that file electronically.
This prospectus is
part of a registration statement that we filed with the SEC. As permitted by SEC rules, this prospectus and any accompanying prospectus
supplement that we may file, which form a part of the registration statement, do not contain all of the information that is included
in the registration statement. The registration statement contains more information regarding us and our securities,
including certain exhibits. You can obtain a copy of the registration statement from the SEC at the address listed above or from
the SEC’s website.
INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
The SEC permits us
to “incorporate by reference” the information and reports we file with it. This means that we can disclose important
information to you by referring to another document. The information that we incorporate by reference is considered to be part
of this prospectus, and later information that we file with the SEC automatically updates and supersedes this information. We incorporate
by reference the documents listed below, except to the extent information in those documents is different from the information
contained in this prospectus, and all future documents filed with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Exchange
Act (other than the portions thereof deemed to be furnished to the SEC pursuant to Item 9 or Item 12) until we terminate the offering
of these securities:
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Our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, which was filed on
March 28, 2016;
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Our Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, which was filed on May 19,
2016;
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Our Quarterly Report on Form 10-Q for the quarter ended June 30, 2016, which was filed on August 10,
2016;
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Our Current Reports on Form 8-K, which were filed on March 25, 2016 and May 24, 2016;
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The description of our common stock in our Form 8-A12B, which was filed on July 24, 2015, and any
amendments or reports filed for the purpose of updating this description; and
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All documents we file with the SEC under Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act
after the date of this prospectus and prior to the termination of this offering made by way of this prospectus.
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To the extent that
any statement in this prospectus is inconsistent with any statement that is incorporated by reference and that was made on or before
the date of this prospectus, the statement in this prospectus shall supersede such incorporated statement. The incorporated statement
shall not be deemed, except as modified or superseded, to constitute a part of this prospectus or the registration statement. Statements
contained in this prospectus as to the contents of any contract or other document are not necessarily complete and, in each instance,
we refer you to the copy of each contract or document filed as an exhibit to our various filings made with the SEC.
You may request a copy
of these filings, at no cost, by writing or telephoning us at the following address or telephone number:
Aqua Metals, Inc.
Attn: Investor Relations
1010 Atlantic Avenue
Alameda, California 94501
(510) 479-7635
7,150,000
Shares of Common Stock
Oppenheimer
& Co.
December
7, 2017
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