Authorized capital

The authorized capital stock of the Company consists of 100,000,000 shares of common stock, par value $0.001 per share. In the event of liquidation of the Company, dissolution or winding up, the holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities. The common stock has no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the common stock. The outstanding shares of common stock are fully paid and non-assessable.

The holders of the Company’s common stock are entitled to one vote per share. Holders of common stock are entitled to receive a ratable share of dividends, if any, as may be declared by the board of directors.  

Veolia Agreement

On February 26, 2019, the Company signed a contract with Veolia North America Regeneration Services LLC ("Veolia") to provide operations, maintenance and management services at Aqua Metals’ AquaRefining facility in McCarran, Nevada. Pursuant to the agreement, Veolia contributes operational and technological expertise and organizational capabilities in aqueous-based process chemistries and electrolysis along with assumption of responsibility for operations, supply chain, offtake and management of the plant. Veolia employees began working onsite starting March 4, 2019 at the McCarran facility.

In consideration of the services to be provided by Veolia under the agreement, we agreed to issue to Veolia a total of 2,350,000 shares of our common stock in eight quarterly installments of 293,750 shares. We also agreed to issue to Veolia, on the one-year anniversary of the agreement, warrants to purchase an additional 2,000,000 shares of our common stock at an exercise price of $5.00 per share and, on the second anniversary of the agreement, warrants to purchase an additional 2,000,000 shares of our common stock at an exercise price $7.00 per share. The warrants will have a term of ten years from the date of issuance.

During the year ended December 31, 2019, the Company issued 1,184,985 shares of common stock valued at $3.6 million to Veolia North America Regeneration Services, LLC pursuant to the Operations, Maintenance and Management Agreement between Veolia and the Company. As a result of the November 2019 fire at the McCarran facility, the Company has declared a force majeure event under the Agreement and suspended all further issuance of common stock and all of the warrants.

2019 Public Offerings

On January 22, 2019, the Company completed a public offering of 5,175,000 shares of its common stock, at the price of $1.90 per share, for gross proceeds of $9.8 million. After the payment of underwriter discounts and offering expenses, the Company received net proceeds of approximately $9.1 million.

On May 14, 2019, the Company completed a public offering of 11,000,000 shares of its common stock, at the price of $2.00 per share, for gross proceeds of $22 million. After the payment of underwriter discounts and offering expenses, the Company received net proceeds of approximately $20.3 million.

Other shares issued 

During the year ended  December 31, 2019, the Company issued 533,655 shares of common stock upon vesting of Restricted Stock Units granted by the Company.

During the year ended December 31, 2019, the Company issued 202,905 shares of common stock upon vesting of Restricted Stock Units ("RSUs") granted to Board members.

During the year ended  December 31, 2019, the Company issued 161,362 shares of common stock to prior Company executives to fulfill obligations related to separation agreements and other consulting services.

During the year ended December 31, 2019, the Company issued 807,436 shares of common stock valued at $1.3 million to Clarios pursuant to the Clarios Investor Rights Agreement dated February 7, 2017 between Clarios and the Company.

During the year ended December 31, 2020, the Company issued 691,820 shares of common stock upon vesting of RSUs granted by the Company.

During the year ended December 31, 2020, the Company issued 1,776,680 shares of common stock granted to Company employees.

During the year ended December 31, 2020, the Company issued 356,492 shares of common stock upon vesting of RSUs granted to Board members.

During the year ended December 31, 2020, the Company issued 347,892 shares of common stock to a prior Company executive to fulfill obligations related to a separation agreement.

During the year ended December 31, 2020, the Company issued 67,522 shares of common stock to a consultant to fulfill obligations related to a consulting agreement.

During the year ended December 31, 2020, the Company issued 5,453 shares of common stock pursuant to the Officers and Directors Purchase Plan for proceeds of $5,750.

During the year ended December 31, 2020, the Company issued 3,217,426 shares of common stock pursuant to the At The Market Issuance Sales Agreement for net proceeds of $3.7 million.

Warrants issued

In January 2019, the Company issued a warrant to purchase 103,500 shares of the Company's common stock to the underwriter of the Company's January 22, 2019 public offering, equal to 2% of the 5,175,000 shares sold. The warrant is exercisable at $1.90 per share (100% of the price of the common stock sold in the offering), commencing the later of six months after January 22, 2019 or such time as the Company amends its charter to increase its authorized shares of common stock. The warrant will expire on January 22, 2024.

Pursuant to the Operations, Maintenance and Management Agreement dated February 26, 2019, the Company has agreed to issue to Veolia, on the one-year anniversary of the Agreement, warrants to purchase 2,000,000 shares of its common stock at an exercise price of $5.00 per share and, on the second anniversary of the Agreement, warrants to purchase an additional 2,000,000 shares of its common stock at an exercise price $7.00 per share. The warrants will have a term of ten years from the date of issuance. The warrants were valued as of the agreement date using the Black-Scholes-Merton pricing model. The value of the warrants is being amortized over the applicable period until the warrants are issued. As a result of the November 2019 fire at the McCarran facility, the Company has declared a force majeure event under the Agreement and suspended all related warrants.

The following assumptions were used in the Black-Scholes-Merton pricing model to estimate the fair value of the warrants (FV of warrants in thousands).

The fair value of each of the warrants was recorded as an increase to business development and management costs and as an increase in additional paid in-capital.

Warrants outstanding

Warrants outstanding to purchase shares of the Company’s common stock at a weighted average exercise price of $1.90 per share are as follows.

Stock-based compensation

In 2014, the Board of Directors adopted the Company’s stock incentive plan (the “2014 Plan”). The 2014 Plan was most recently amended and restated effective as of the Company’s 2017 Annual Stockholders’ Meeting. A total of 2,113,637 shares of common stock was authorized for issuance pursuant to the 2014 Plan at the time of its most recent amendment and restatement in 2017. The 2014 Plan provides for the following types of stock-based awards: incentive stock options; non-statutory stock options; restricted stock; and performance stock. The 2014 Plan, under which equity incentives may be granted to employees and directors under incentive and non-statutory agreements, requires that the option price may not be less than the fair value of the stock at the date the option is granted. Option awards are exercisable until their expiration, which may not exceed 10 years from the grant date.

In 2019, the Board of Directors adopted the Company’s stock incentive plan (the “2019 Plan”). The 2019 Plan was most recently amended and restated effective as of the Company’s 2020 Annual Stockholders’ Meeting. A total of 11,500,000 shares of common stock was authorized for issuance pursuant to the 2019 Plan. The 2019 Plan provides for the following types of stock-based awards: incentive stock options; non-statutory stock options; restricted stock; and performance stock. The 2019 Plan, under which equity incentives may be granted to employees and directors under incentive and non-statutory agreements, requires that the option price may not be less than the fair value of the stock at the date the option is granted. Option awards are exercisable until their expiration, which may not exceed 10 years from the grant date.

Stock-based compensation expense recorded was allocated as follows (in thousands):

The following assumptions were used in the Black-Scholes-Merton option pricing model to estimate the fair value of the awards granted during the year ended  December 31, 2019. There were no options issued during the year ended  December 31, 2020.

The risk-free interest rate assumption was based on the United States Treasury’s zero-coupon bonds with maturities similar to those of the expected term of the award being valued. The assumed dividend yield was based on the Company’s expectation of not paying dividends in the foreseeable future. The weighted-average expected life of the options was calculated using the simplified method as prescribed by the Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin No. 107 and No. 110 (“SAB No. 107 and 110”). This decision was based on the lack of relevant historical data due to the Company’s limited historical experience. In addition, due to the Company’s limited historical data, the estimated volatility also reflects the application of SAB No. 107 and 110, using the weighted average of the Company’s historical volatility and the historical volatility of several unrelated public companies within the recycling industry. Forfeitures are recognized as they occur.

The following table summarizes the stock-based compensation plan activity and related information through December 31, 2020.

There were no stock option exercises during the years ended December 31, 2020 and December 31, 2019.

Additional information related to the status of options at December 31, 2020 is as follows:

The intrinsic value of options is the fair value of the Company’s stock at December 31, 2020 less the per share exercise price of the option multiplied by the number of shares.

As of December 31, 2020, there is approximately $3.3 million of total unrecognized compensation cost related to the unvested share-based (option and RSU) compensation arrangements granted under the stock-based compensation plans. The remaining unrecognized compensation cost will be recognized over a weighted-average period of 2.4 years.

The following table summarizes information about stock options outstanding as of December 31, 2020:

2019 Stock option issuances

In January 2019, Stephen Cotton, President and CEO, was awarded options to purchase up to 232,461 shares of the Company's common stock. The options were vested immediately and are exercisable over a five-year period at an exercise price of $1.88 per share.

In January 2019, Judd Merrill, CFO, was awarded options to purchase up to 56,698 shares of the Company's common stock. The options were vested immediately and are exercisable over a five-year period at an exercise price of $1.88 per share.

In February 2019, Stephen Cotton, President and CEO, was awarded options to purchase up to 1.26 million shares of the Company’s common stock. Options to purchase 420,000 common shares are exercisable over a five-year period at an exercise price of $3.08 per share. Options to purchase 420,000 common shares are exercisable over a five-year period at an exercise price of $3.68 per share and options to purchase 420,000 common shares are exercisable over a five-year period at an exercise price of $4.18 per share. The options will vest over three years in three equal installments.

In March 2019, Judd Merrill, CFO, was awarded options to purchase up to 250,000 shares of the Company’s common stock. Options to purchase 125,000 common shares are exercisable over a five-year period at an exercise price of $3.79 per share. Options to purchase 62,500 common shares are exercisable over a five-year period at an exercise price of $4.39 per share and options to purchase 62,500 common shares are exercisable over a five-year period at an exercise price of $4.89 per share. The options will vest over three years in three equal installments.

In May 2019, the Company awarded options to the Directors to purchase up to 172,915 shares of the Company's common stock. The options vest equally over 12 months and are exercisable over a five-year period at an exercise price of $2.48 per share.

In July 2019, the Company awarded options to purchase up to 150,000 shares of the Company's common stock. The options vest equally over three years and are exercisable over a five-year period at an exercise price of $1.65 per share.

In July 2019, the Company awarded options to purchase up to 50,000 shares of the Company's common stock. The options vest equally over three years and are exercisable over a five-year period at an exercise price of $1.87 per share.

2019 Restricted stock units

In January 2019, the Company granted 263,660 restricted stock units (RSUs), all of which were subject to vesting, with a grant fair value of $490,000 to the employees. The shares vest in six equal semi-annual installments over a three-year period.

In July 2019, the board of directors were granted 60,560 RSUs, all of which were subject to vesting, with a grant fair value of $97,500. The shares fully vest on September 30, 2019.

In August 2019, the Company granted 134,419 RSUs, all of which were subject to vesting, with a grant fair value of $231,000 to the employees. The shares vest in three equal installments over a twelve-month period.

In September 2019, Stephen Cotton, President and CEO, was granted 59,414 RSUs, all of which were subject to vesting, with a grant fair value of $109,000. The shares fully vest on March 20, 2020.

2020 Restricted shares

In  March 2020, the Company granted 830,000 restricted shares, all of which were subject to vesting, with a grant fair value of $280,000 to employees. The shares vest in three equal annual installments over a three-year period. 

Total intrinsic value of Restricted Shares outstanding at December 31, 2020 was $2.5 million.

2020 Restricted stock units

In  March 2020, the Company granted 1,293,164 RSUs, all of which were subject to vesting, with a grant fair value of $440,000 to employees. The shares vest in six equal semi-annual installments over a three-year period. 

In  May 2020, the Company issued 1,970,475 RSUs, that were originally granted in  March 2020, but were subject to approval of the amendment of the 2019 stock incentive plan at the Annual Shareholders Meeting. All of the RSUs were subject to vesting, with a grant fair value of $670,000 to employees. The shares vest in six equal semi-annual installments over a three-year period. 

In  May 2020, the Company granted 17,500 RSUs, all of which were subject to vesting, with a grant fair value of $16,000 to an employee. The shares vest in three equal installments over a three-year period. 

In  August 2020, the Company granted 367,500 RSUs, all of which were subject to vesting, with a grant fair value of $380,000 to employees. The shares vest upon the signing of a licensing agreement. 

In  December 2020, the Company granted 1,714,252 RSUs, all of which were subject to vesting, with a grant fair value of $1,971,000 to employees. The shares vest in six equal semi-annual installments over a three-year period. 

Total intrinsic value of RSUs vested and released during 2020 was $2.1 million. Intrinsic value of RSUs outstanding at December 31, 2020 was $14.4 million.

Reserved shares

At December 31, 2020, the Company has reserved shares of common stock for future issuance as follows: