8-K: Aqua Metals to Acquire Lion Energy, Boosts Energy Storage

Aqua Metals, Inc. has entered into a term sheet to acquire Lion Energy, LLC, aiming to integrate energy storage products, software, and recycling into a single platform.

Summary

• Aqua Metals, Inc. (AQMS) has entered into a binding term sheet to acquire all issued and outstanding equity interests of Lion Energy, LLC.
• The acquisition aims to transform Aqua Metals into a comprehensive domestic power player by integrating energy storage products, proprietary energy management software, recycling, and battery materials.
• The aggregate consideration for the acquisition will not exceed $94.9 million.
• Upfront consideration at closing will be $35 million, comprising $9.2 million in cash (representing a previous investment by Aqua Metals in Lion Energy) and $25.8 million in Aqua Metals common stock.
• An additional earn-out consideration of up to $65 million is contingent upon Lion Energy realizing greater than $55 million in revenue over a 12-month period following the closing date, calculated based on weighted revenue and EBITDA performance.
• Aqua Metals provided $4.1 million in working capital to Lion Energy by purchasing a 100% subordinated, last-out participation interest in Lion Energy's existing credit facility.
• This $4.1 million participation interest was funded through $2.0 million in cash and $2.1 million in product previously delivered to Lion Energy, which became part of the collateral for the senior facility.
• The parties intend to execute a definitive acquisition agreement by March 31, 2026, with the transaction expected to close in the second quarter of 2026.

Sentiment

Score: 8

Explanation: StockSavvy.ai views this as a strategically positive move, expanding Aqua Metals' market reach and integrating complementary technologies, despite the inherent risks of integration and the subordinated nature of the interim financing.

Positives

• Adds meaningful revenue to Aqua Metals, with Lion Energy achieving approximately $50 million in revenue in 2025 (subject to audit adjustments).
• Expands Aqua Metals' participation in the rapidly growing energy storage market, a natural extension of its battery materials strategy.
• Integrates Lion Energy's software-driven intelligence, including proprietary energy management systems and mobile applications, for real-time optimization of energy assets.
• Acquires Lion Energy's minority stake in American Battery Factory (ABF), strengthening the strategic link between domestic battery manufacturing and sustainable recycling.
• Positions Aqua Metals to support advanced use cases such as demand response, fleet-level orchestration, and the aggregation of distributed assets into virtual power plants.
• Leverages the significant growth in the U.S. energy storage market, which is expanding by 59% annually according to the U.S. Energy Information Administration (EIA).
• Aqua Metals' CEO brings extensive experience in scaling integrated battery reserve power platforms, which is beneficial for the combined entity.

Negatives

• The $4.1 million participation interest purchased by Aqua Metals is fully subordinated to all other obligations under Lion Energy's senior credit facility, meaning Aqua Metals is last to be paid.
• Aqua Metals, as the participant in the credit facility, has no voting or consent rights other than restrictions on reducing the principal or interest of the Supplemental Advance.
• Aqua Metals bears the full economic risk of its participation interest, which is without recourse to the Assigning Lender.
• The issuance of up to $25.8 million in Aqua Metals common stock, plus potential earn-out shares, could lead to significant dilution for existing shareholders.
• The transaction is subject to numerous closing conditions, including due diligence, financing, and regulatory/shareholder approvals, with no assurance of completion.
• If issued, the Series X Preferred Stock includes anti-dilution protection for Lion Energy stockholders to maintain 45% voting power, which could limit Aqua Metals' future capital raising flexibility or strategic options.

Risks

• The acquisition transaction may not be completed in the second quarter of fiscal 2026, or at all.
• Risks related to the integration of Lion Energy's products, technology, and operations with Aqua Metals' existing and planned products, technology, and operations.
• Inability to obtain, or meet conditions imposed for, governmental and other approvals of the transaction, including approval by stockholders of Aqua Metals.
• Risks related to any uncertainty surrounding the transaction and the associated costs.
• The impact on Aqua Metals' ongoing operational results from the transaction may be more adverse than anticipated.
• Aqua Metals may not be able to obtain the additional capital necessary to expand its recycling facilities or even sustain its current level of operations.
• Other risks disclosed in the section 'Risk Factors' included in Aqua Metals' Annual Report on Form 10-K filed with the SEC on March 31, 2025.

Future Outlook

Aqua Metals expects the acquisition to transform it into a comprehensive domestic power player capable of managing the entire battery lifecycle, from manufacturing and deployment to intelligent grid participation and end-of-life recovery. The combined entity aims to strengthen the U.S.-based battery supply chain and capture growth in the rapidly expanding energy storage market, including advanced use cases such as demand response, fleet-level orchestration, and the aggregation of distributed assets into virtual power plants.

Management Comments

• "This transaction is intended to add meaningful revenue to Aqua Metals while expanding our participation in the rapidly growing energy storage market." Steve Cotton, President and CEO of Aqua Metals.
• "Energy storage is a natural extension of our battery materials strategy, and Lion Energy has built a complementary platform that spans systems, software, and customer relationships." Steve Cotton, President and CEO of Aqua Metals.
• "Together, we believe this combination would strengthen our path toward a more vertically integrated, U.S.-based battery supply chain and supports our long-term vision for a robust domestic battery materials industry led by our new combined entity." Steve Cotton, President and CEO of Aqua Metals.
• "From the beginning, Lion Energy has focused on building more than batteries. We have invested heavily in a U.S.-based energy management platform combining software, firmware, hardware, and cloud connectivity designed to give customers intelligent control over their energy systems." Tyler Hortin, CEO of Lion Energy.
• "This transaction could accelerate that vision, our energy management systems and virtual power plant capabilities, and help extend our platform across portable, residential, commercial, and grid-connected applications." Tyler Hortin, CEO of Lion Energy.
• "We believe the companies platforms are complimentary across the battery lifecycle, from deployment and operation through end-of-life recovery and recycling." Tyler Hortin, CEO of Lion Energy.

Industry Context

StockSavvy.ai notes that the U.S. energy storage market is experiencing rapid growth, with battery storage capacity increasing by 59% annually according to the U.S. Energy Information Administration (EIA), and the overall market growing at over a 30% compound annual rate (Wood Mackenzie and SEIA). This acquisition positions Aqua Metals to capitalize on this trend, driven by electrification, AI data centers, grid resilience, and the need for decentralized power. The integration of energy storage systems with battery recycling addresses the increasing demand for a circular supply chain for critical minerals, aligning with broader industry and policy priorities for domestic and secure supply chains.

Comparison to Industry Standards

• The U.S. battery energy storage market is growing at more than a 30% compound annual rate, with utility-scale deployments up approximately 66% in 2024 and nearly 13 gigawatt hours added through the first three quarters of 2025, according to Wood Mackenzie and the Solar Energy Industries Association (SEIA). This growth rate indicates a highly attractive market for the combined entity.
• The U.S. Energy Information Administration (EIA) reports a 59% annual growth in U.S. battery storage capacity, highlighting a robust market environment that supports the strategic rationale for Aqua Metals' expansion into energy storage.
• The acquisition of Lion Energy's minority stake in American Battery Factory (ABF) aligns with the industry trend towards vertical integration and strengthening domestic battery manufacturing capabilities, similar to efforts by major players to secure critical mineral supply chains and reduce reliance on foreign sources.

Management Changes

Corporate Governance

Related Party Transactions

• The Term Sheet contemplates the termination of any related party arrangements as a closing condition for the acquisition.
• The $9.2 million Cash Consideration is described as an 'investment previously made by the Company in Lion Energy,' indicating a prior related party transaction between Aqua Metals and Lion Energy.

Stakeholder Impact

• Shareholders (Aqua Metals): Potential for significant growth and market expansion through diversification into energy storage, but also face potential dilution from the issuance of new equity and integration risks associated with the acquisition. The subordinated participation interest carries full economic risk.
• Shareholders (Lion Energy): Will receive a combination of cash, Aqua Metals common stock, and potential earn-out consideration, becoming shareholders of Aqua Metals. They will be subject to customary lock-up provisions for 180 days post-closing.
• Employees (Lion Energy): Key employees are expected to enter into employment agreements with Aqua Metals and will be offered a long-term incentive program. Lion Energy's executive and management team is expected to remain in place, providing continuity.
• Customers (Lion Energy): Potential for enhanced product offerings, increased R&D, and greater stability under a larger combined entity with broader capabilities.
• Creditors (Lion Energy): The $4.1 million participation interest purchased by Aqua Metals is fully subordinated to all other obligations under Lion Energy's senior credit facility, meaning other creditors maintain priority.

Next Steps

• Negotiate and execute a definitive acquisition agreement by March 31, 2026.
• Lion Energy to deliver audited financial statements for fiscal years ended December 31, 2025 and 2024, prepared in accordance with U.S. GAAP, by February 20, 2026.
• Complete quality of earnings and market/commercial diligence with no material adverse findings.
• Obtain a fairness opinion satisfactory to Aqua Metals' board of directors.
• Close a fully executed and funded asset-based lending facility or similar credit facility providing for aggregate committed availability of not less than $25 million simultaneously with the Closing.
• Execute a supply and offtake agreement with American Battery Factory Inc.
• Obtain Nasdaq approval for the listing of the shares to be issued to Lion Energy members.
• Receive all required board and stockholder approvals for the transaction.
• Promptly following the Closing, prepare and file with the SEC a registration statement for the resale of the Equity Consideration, aiming for effectiveness no later than 90 days after Closing.
• Key employees of Lion Energy (Tyler Hortin, Ryan Mackerell, Troy Asberry, and Brady Hoggan) shall each enter into employment agreements with Aqua Metals.
• Aqua Metals will use commercially reasonable efforts to retain its current senior management team (Steve Cotton, Eric West, and Benjamin Taecker) for at least 12 months after the Closing.
• The board of directors of the combined company will identify up to two additional independent directors following the Closing.

Key Dates

Recommendation

The proposed acquisition of Lion Energy by Aqua Metals represents a significant strategic pivot and expansion into the rapidly growing energy storage market, complementing Aqua Metals' existing battery recycling business. Lion Energy's reported $50 million in 2025 revenue provides immediate scale, and its software-driven platform and minority stake in American Battery Factory offer strong synergistic potential for a vertically integrated battery lifecycle solution. While integration risks and potential dilution exist, the strategic rationale for capturing market demand in electrification and distributed power is compelling, positioning the combined entity for substantial long-term growth.

Keywords

Aqua Metals, Lion Energy, Acquisition, Energy Storage, Battery Recycling, Battery Materials, Energy Management Software, Virtual Power Plant, SEC Filing, Merger, AQMS, Renewable Energy, Clean Technology