Filed
Pursuant to Rule 424(b)(5)
Registration
Statement No. 333-235238
PROSPECTUS
SUPPLEMENT
(to the Prospectus dated December 2, 2019)
Up
to $10,000,000 Shares of Common Stock
Aqua
Metals, Inc. has entered into an At the Market Issuance Sales Agreement, or the Sales Agreement, with B. Riley FBR, Inc.,
or B. Riley FBR, relating to the sale of shares of our common stock, par value $0.001 per share, offered by this prospectus supplement.
In accordance with the terms of the Sales Agreement, under this prospectus supplement we may offer and sell our common stock having
an aggregate offering price of up to $10,000,000 from time to time through or to B. Riley FBR, acting as our sales agent. Sales
of our common stock, if any, under this prospectus supplement will be made by any method permitted that is deemed an “at
the market offering” as defined in Rule 415 under the Securities Act of 1933, as amended, or the Securities Act. B. Riley
FBR is not required to sell any specific amount but will act as our sales agent using commercially reasonable efforts consistent
with its normal trading and sales practices. There is no arrangement for funds to be received in escrow, trust or similar arrangement.
B.
Riley FBR will be entitled to compensation at a commission rate of 3% of the gross sales price per share sold under the Sales
Agreement. The net proceeds, if any, that we receive from the sales of our common stock will depend on the number of shares actually
sold and the offering price for such shares. See “Plan of Distribution” beginning on page S-23 for additional information
regarding the compensation to be paid to B. Riley FBR. In connection with the sale of our common stock on our behalf, B. Riley
FBR will be deemed to be an underwriter within the meaning of the Securities Act and the compensation of B. Riley FBR will be
deemed to be underwriting commissions or discounts. We have also agreed to provide indemnification and contribution to B. Riley
FBR with respect to certain liabilities, including liabilities under the Securities Act.
Our
common stock is listed on the NASDAQ Capital Market under the symbol “AQMS.” On June 3, 2020, the last reported sales
price of our common stock on the NASDAQ Capital Market was $0.95 per share. As of June 3, 2020, the aggregate market value of
our outstanding common stock held by non-affiliates, or public float, was $55,454,085 based on 60,272,542 outstanding
shares of common stock, of which approximately 58,372,722 shares of common stock were held by non-affiliates, and a per
share price of $0.95, the closing sale price of our common stock on June 3, 2020. Pursuant to General Instruction I.B.6 of Form S-3,
in no event will we sell securities pursuant to this prospectus supplement with a value more than one-third of the aggregate market
value of our common stock held by non-affiliates in any 12-month period, so long as the aggregate market value of our common stock
held by non-affiliates remains less than $75.0 million. We have not previously offered pursuant to General Instruction I.B.6.
of Form S-3 any securities during the prior twelve calendar month period that ends on, and includes, the date of this prospectus
supplement.
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 base prospectus and the documents incorporated
by reference herein and therein, including the risks and uncertainties described under “Risk Factors” beginning on
page S-7 of this prospectus supplement and the risk factors incorporated by reference into this prospectus supplement and the
accompanying base 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.
B.
Riley FBR
The
date of this prospectus supplement is June 5, 2020.
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 November 22, 2019 and declared effective by the SEC on December
2, 2019. 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, and B. Riley FBR, Inc. is 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 B. Riley FBR, Inc. 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 studies, independent industry publications and other publicly available information.
Although we believe these sources are reliable, we have not independently verified the information. Further 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 U.S. trademark registration for “AQMS” and the U.S. trademark applications
for “AQUA METALS,” “AQUAFIT,” and “AQUAREFINING.” 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-7 of this prospectus
supplement 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 equipment supply, technology licensing and related services for 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 consumer use of all lead produced in the
world. Because the chemical and metallurgical properties of lead allow it to be recycled and reused indefinitely, LABs are also
the dominant feed source for lead production across the world. As such, LABs are almost 100% recycled for purposes of capturing
the lead contained therein for re-use. Our proprietary AquaRefining equipment and technology provides for the recycling of LABs
and the production of a high purity lead with fewer environmental and regulatory issues than is possible with conventional methods
of lead production.
In
recent years, recycled lead has become increasingly important to LAB production. Recycled lead surpassed mined lead in the 1990s
and now represents more than 60% 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, metallurgical/chemical reduction, energy intensive
and often a highly polluting process. As a consequence of the environmental and health issues, lead smelting has become increasingly
regulated in many countries. In the U.S., regulatory non-compliance has forced the closure of large lead smelters in Vernon, California,
Frisco, Texas and Herculaneum, Missouri over the last several years. In response to increasing environmental regulation over the
past three decades, 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 U.S. to smelters in Mexico, South Korea, the Philippines and elsewhere
is 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 a grade of lead of moderate purity, known as “secondary lead.” Secondary lead can 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.
AquaRefining
uses a novel, proprietary and patented 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 produces lead of
a purity which is equivalent to primary lead (i.e., higher than 99.99% purity). As such, we believe that AquaRefining reduces
environmental plant emissions, health concerns and permitting needs compared with lead smelting. We believe that the combined
advantages offered by AquaRefining represent a potential step change in lead recycling technology and recovered product quality,
one that can deliver advantages in footprint and logistics while reducing the environmental impact of lead recycling.
The
modular nature of AquaRefining makes it possible to start LAB recycling at a smaller scale than is possible with a typical smelter
setup, add AquaRefining to existing battery recycling operations, design AquaRefining into greenfield builds and apply AquaRefining
to other specific applications. We believe AquaRefining will allow operators to expand production capacity, improve end-product
quality with a higher value and higher lead purity and reduce the environmental impact of smelting processes. Our plan is to pursue
the licensing of our AquaRefining technology. This strategy is designed to supply AquaRefining and supporting equipment to battery
recyclers to improve emissions, throughput and product quality from their battery recycling operations.
We
completed the development of our first LAB recycling facility at Nevada’s Tahoe Reno Industrial Center, or TRIC, in McCarran,
Nevada and commenced production of battery breaking and limited operations during the first quarter of 2017. In April 2017, we
commenced the shipment of products for sale, consisting of lead compounds as well as plastics. In April 2018, we commenced the
limited production of lead bullion, including AquaRefined lead. In July 2018, we commenced the sale of pure AquaRefined lead in
the form of two tonne blocks and in October 2018 we commenced the sale of AquaRefined lead in the form of battery manufacturing
ready ingots. In November 2018, we received official vendor certification from Clarios for our AquaRefined lead and, in December
2018, we commenced shipments directly to Clarios owned and partner battery manufacturing facilities. In 2019, we operated our
demonstration AquaRefinery at commercial quantity production levels and produced over 35,000 AquaRefined ingots by operating the
AquaRefinery 24 hours a day and 7 days a week for sustained periods of time. The AquaRefining electrolyzers produced at or above
the target 100 Kg/Hr of production throughput per module of six electrolyzers or ~ 16-17 Kg/Hr per electrolyzer and ran sustained
endurance runs for over one month several times.
In
order to expand the demonstration AquaRefinery to its full capacity, we chose to idle the AquaRefinery beginning in September
2019 to facilitate contracting work required to step the plant up to the next level of capacity planned for late 2019 or early
2020. On the evening of November 29, 2019, a fire occurred in the AquaRefining area of the recycling facility at TRIC. The cause
of the fire was not due to the technology or process of AquaRefining but rather to contracting activities. The fire and related
intense heat and smoke caused significant damage to a material amount of equipment in the AquaRefinery area, including all 16
AquaRefining modules, electrical and tank infrastructure, steel superstructure, control wiring and other supporting infrastructure.
The floor to ceiling firewall between the AquaRefining area and the rest of the plant isolated the worst of the damage to the
AquaRefining area. The firewall also appears to have spared material damage to much of the key front-end process equipment, such
as the battery breaker/separation system, concentrate production area, kettles and ingot casting, water treatment and recovery
and other important areas of the plant. The administrative office area also remained intact.
Based
on preliminary estimates, as of the date of this prospectus supplement, we believe that the replacement value of the equipment
and plant lost or damaged in the fire could be over $30 million excluding any business interruption cost recovery. Assets on our
balance sheet as of March 31, 2020 that were not affected by the fire total approximately $38 million in book value, including
the battery breaker, melting kettles, kiln, filter presses, mixing and storage tanks, water recovery system and the building infrastructure
plus the land. We have $50 million dollars in combined property, equipment and business interruption insurance. Initial estimates
for property, plant and business interruption claims may reach total limits. However, this number could change pending detailed
analysis and review.
Pursuant
to our loan agreement with Veritex Community Bank, or Veritex, the successor in interest to Green Bank, N.A., for approximately
$9.2 million ($8.6 million net of issuance costs), Veritex is the loss payee on our insured claims and all funds are paid directly
to Veritex, which in turn disburses the proceeds to us subject to their approval. In March 2020, we entered into a memorandum
of agreement with Veritex pursuant to which the parties agreed on the allocation of funds from collected insurance payments. Pursuant
to the memorandum of agreement, 90% of the initial $5 million and 55% of the next $7.5 million of insurance proceeds will be allocated
to us and the balance will be allocated towards the retirement of the Veritex loan. Thereafter, 60% of the next $12.5 million
of insurance proceeds will be allocated to us, and the balance towards the repayment of the Veritex loan, until such time as the
Veritex loan has been paid in full, after which 100% of all future insurance payouts will be disbursed directly to us.
As
of the date of this prospectus supplement, of the $15 million of insurance proceeds received from our insurance carriers, Veritex
has put into escrow $4.875 million and we have received $10.125 million. We expect the insurance carriers to pay an additional
$10.0 to $15.0 million in insurance proceeds over the next three to six months, of which we should receive $6 million to $11 million.
This estimate is based upon the cadence of receipts to date. We intend to vigorously pursue receipt of insurance proceeds to satisfy
in full all of our property, casualty and business interruption losses, subject to the coverage limits.
We
have engaged a public adjuster to support our legal and finance team and provide forensic accounting, construction expertise and
direct interface with the insurers to assist us in quickly and properly documenting the loss and maximizing our insurance recovery
amounts on the best possible timeline.
As
a result of the fire we have suspended all commercial operations and the date on which we can resume revenue producing operations
is currently undetermined. Following the fire, an investigation of the fire was commenced by the Storey County Fire Marshal and
we were denied access to the fire damaged portion of the facility until late December 2019, at which time we were given access
to the fire damaged area. Since then, we have been engaged in the process of analyzing the fire damage and the clean-up and disposal
of the damaged equipment.
As
of the date of this prospectus supplement, we have accelerated our capital light business strategy designed to optimize shareholder
value that focuses on equipment supply and licensing opportunities, which have always been a core part of our business plans.
We believe this path has the potential to maximize shareholder value in that it could be far less capital intensive than a rebuild
and could be funded solely or primarily from a combination of cash on hand, insurance proceeds and asset dispositions.
Our
capital light strategy is consistent with our long-held business strategy and objectives. When we designed and developed TRIC
in 2016, we did so at a time when our business model assumed that TRIC would be the first of many LAB recycling facilities owned
and operated by us. Commencing in 2017, we began to shift our focus away from the development of additional Company-owned LAB
recycling facilities and towards the licensing of our AquaRefining technology to partners engaged in LAB recycling. We continued
to develop TRIC as a LAB recycling facility for purposes of further demonstrating AquaRefining on a commercial scale. However,
as a result of the fire and our high costs of capital we believe that the cost of restoring TRIC to its pre-fire state would not
be the best use of our available and projected cash and that we may be able to achieve the benefits of operating our facility
at TRIC in its pre-fire state, namely the development and demonstration of the licensing ready iteration of our AquaRefining technologies,
which we call Version 1.25L, through a less costly commercialization program. Further, we believe that our results of operations
to date can demonstrate to potential licensees the value proposition of our AquaRefining technologies. Although we had negative
contribution margins in operating our AquaRefinery throughout 2019, based on our results of operations during 2019, we believe
that our AquaRefining technology would be a commercially attractive valuable proposition in the hands of battery recyclers, who
typically have access to lower cost feedstock and ability to process all materials on site through a furnace.
Our
capital light strategy is to pursue licensing opportunities within the lead battery recycling marketplace without maintaining
and operating a capital-intensive lead recycling facility. We plan to continue securing our cash position by working on the successful
collection of additional insurance proceeds with the assistance of our retained public adjuster and special counsel to facilitate
the collection for property and business interruption losses. We intend to dispose certain assets that are not essential to the
capital light licensing strategy. We believe our capital light business strategy will require less space and less equipment and
focus on the needs of our future licensees.
Our
principal executive offices are located at 2500 Peru Drive, McCarran, Nevada 89437, and our telephone number is (775) 525-1936.
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 “The Securities We May Offer – Common Stock” in the accompanying base
prospectus.
Common
stock offered by us
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Shares
of our common stock, par value $0.001 per share, having an aggregate offering price of up to $10,000,000.
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Common
stock to be outstanding immediately after this offering
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Up
to 70,798,857 shares, assuming sales of 10,526,315 shares of our common stock in this offering at a price of $0.95
per share, which was the closing price of our common stock on the Nasdaq Capital Market on June 3, 2020. The actual number
of shares issued will vary depending on the sales price under this offering.
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Manner
of Offering
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We
have entered into an At the Market Issuance Sales Agreement, or the Sales Agreement, with B. Riley FBR, Inc., relating to
the sale of shares of our common stock offered by this prospectus supplement. In accordance with the terms of the Sales Agreement,
under this prospectus supplement we may offer and sell common stock having an aggregate offering price of up to $10,000,000
from time to time through or to B. Riley FBR acting as our sales agent. Sales of common stock, if any, under this prospectus
supplement will be made by any method permitted that is deemed an “at the market offering” as defined in Rule
415 under the Securities Act of 1933, as amended. See the section entitled “Plan of Distribution” on page S-23
of this prospectus supplement.
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Use
of Proceeds
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We
expect to use the net proceeds from this offering for working capital, which could include expenditures related to the acceleration
of licensing opportunities, and general corporate purposes. See “Use of Proceeds” on page S-21.
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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 the risk that we may not receive payments from our insurance carriers in amounts sufficient to compensate
us for our losses; our insurance recovery and proceeds from the sale of legacy assets will not be sufficient to fund our accelerated
licensing strategy; we may not be able to satisfactorily demonstrate to potential licensees the technical and commercial viability
of our AquaRefining process; potential licensees may refuse or be slow to adopt our AquaRefining process as an alternative
to smelting in spite of the perceived benefits of AquaRefining; we may not realize the expected economic benefits from any
licenses we may enter into; securities class action lawsuits and shareholder derivative lawsuits; our ability to conclude
a development agreement with Clarios or other strategic partners; we may need to raise additional funds; and we may be unable
to comply with our debt service covenant with Veritex. See “Risk Factors” beginning on page S-7 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 outstanding as of March 31, 2020 is 59,836,897, and excludes the following:
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435,645
shares of common stock issued between April 1, 2020 and
the date of this prospectus supplement;
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1,709,106
shares of common stock issuable upon exercise of options outstanding as of March 31, 2020, which have a weighted average exercise
price of $3.75 per share;
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1,567,299
shares of common stock issuable upon vesting of restricted stock units as of March 31, 2020, plus an additional 1,970,475
shares of common stock issuable upon vesting of restricted stock units granted between April 1, 2020 and the date of this
prospectus supplement;
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300,163
shares of common stock reserved for issuance and available for future grant under our 2014 Stock Incentive Plan as of March
31, 2020;
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5,105,407
shares of common stock reserved for issuance and available for future grant under our 2019 Stock Incentive Plan as of the
date of this prospectus supplement;
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242,835
shares of common stock reserved for issuance under our Officer and Director Share Purchase Plan as of March 31, 2020; and
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805,747
shares of common stock issuable upon exercise of warrants outstanding as of March 31, 2020, which have a weighted average
exercise price of $3.15 per share.
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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 the Recent Fire at TRIC
We
have experienced a fire at our TRIC facility which has caused significant damage and resulted in the suspension of all revenue
producing operations. On the evening of November 29, 2019, a fire occurred at our LAB recycling facility at TRIC. The
cause of ignition is likely related to on-site contractor work that was being performed on the day of the fire. The fire was substantially
contained to the AquaRefining area of the plant, however the fire destroyed or impaired beyond recovery substantially all of the
AquaRefining equipment, including all 16 AquaRefining modules, control wiring and other supporting infrastructure. While we continue
to assess the economic loss due to the fire, as of the date of this prospectus supplement we estimate the value of the equipment
and plant lost or damaged due to the fire to be over $30 million excluding any business interruption cost recovery. We maintain
insurance policies covering a total of up to $50 million of combined property, equipment and business interruption insurance.
As of the date of this prospectus supplement, the insurance carriers have paid a total of $15 million on the covered claims and
we expect the carriers to make significant additional payments over the coming months up to the presently estimated value of the
equipment and plant lost or damaged due to the fire. However, there can be no assurance that we will be able to collect additional
insurance proceeds to cover the loss. In the meantime, we have suspended all revenue producing operations pending our clean-up
of the fire damage and development of our plan for the overall business. As of the date of this prospectus supplement, we are
unable to estimate when we expect to resume any meaningful commercial or revenue producing operations. As of the date of this
prospectus supplement, we intend to fund our resumption of commercial operations, in part, through our receipt of insurance proceeds,
however there can be no assurance that we will receive additional insurance payments or, if we do, that any such payments will
materially contribute to our ongoing costs of operations.
While
we have $50 million of combined property, equipment and business interruption insurance, there can be no assurance that one or
more carriers will not attempt to deny coverage. To date, we have submitted claims to each of our insurance carriers.
Each of the insurance carriers has accepted coverage under the polices subject to the customary reservation of rights, but no
carrier has to our knowledge indicated that it would deny or attempt to deny coverage. Each of our insurance policies contains
customary exclusions from the carrier’s obligation to cover claims made under the policies, including exclusions based on
certain of our intentional acts or omissions, including our willful failure to maintain an adequate fire suppression system. We
had acquired and installed a comprehensive fire suppression at TRIC, however the preliminary investigation by the local fire marshal
indicates that the fire suppression system at TRIC failed to activate at the time of the fire. We had, at all times leading up
to the fire, engaged a nationally recognized fire detection and prevention service company to service and maintain our fire suppression
system. The service provider had serviced our fire suppression system as recent as November 12, 2019. As of the date of this prospectus
supplement, we have not determined the reason for the failure of our fire suppression system to activate at the time of the fire.
However, we have no reason to believe that the failure to activate is due to any action or failure to act on our part that would
justify a carrier to exclude payment on our insurance claim. However, there can be no assurance that a carrier may not deny coverage
based on its claim that we failed to maintain a fire suppression system as required by the policy or for some other exclusion
under the policy. In the event that one or more carriers deny coverage under their policies, we may be unable to finance our recovery
and resume commercial operations, in which case you could lose your investment.
Our
ability to utilize insurance payments is subject to a memorandum of agreement with our secured lender. As of the date
of this prospectus supplement, we are indebted to Veritex Community Bank, or Veritex, the successor in interest to Green Bank,
N.A., for approximately $9.2 million ($8.6 million net of issuance costs), which is secured by liens on substantially all of our
assets, including the proceeds of any payments made on our insurance claims. Pursuant to the credit agreement governing such indebtedness,
Veritex is the loss payee on our insured claims and all funds are paid directly to Veritex, which in turn disburses the proceeds
to us subject to their approval. In March 2020, we entered into a memorandum of agreement with Veritex pursuant to which the parties
agreed on the allocation of funds from collected insurance payments. Pursuant to the memorandum of agreement, 90% of the initial
$5 million and 55% of the next $7.5 million of insurance proceeds will be allocated to us and the balance will be allocated towards
the retirement of the Veritex loan. Thereafter, 60% of the next $12.5 million of insurance proceeds will be allocated to us, and
the balance towards the repayment of the Veritex loan, until such time as the Veritex loan has been paid in full, after which
100% of all future insurance payouts will be disbursed directly to us. Except as set forth in the memorandum of agreement, all
terms and conditions of the credit agreement remain in place and unchanged, including, without limitation, our obligation to make
monthly payments under the credit agreement and the effectiveness and enforceability of Veritex’s liens and security interests
under the credit agreement. To date, Veritex has disbursed to us funds based on the terms of the memorandum of agreement, however
there can be no assurance that Veritex will continue to disburse insurance proceeds in accordance with the memorandum of agreement
or that Veritex will not attempt to direct all insurance proceeds to the repayment to Veritex loan in full.
As
a result of the fire, we are revising our plans for the commercialization of our AquaRefining technologies and there can be no
assurance that such plans will be successful. When we designed and developed TRIC, we did so at a time when our business
model assumed that TRIC would be the first of many LAB recycling facilities owned and operated by us. Commencing in 2017, we began
to shift our focus away from the development of additional Company-owned LAB recycling facilities and towards the licensing of
our AquaRefining technology to partners engaged in LAB recycling. We continued to develop TRIC as a LAB recycling facility for
purposes of demonstrating AquaRefining on a commercial scale. However, as a result of the fire and our high costs of capital,
we believe that the cost of restoring TRIC to its pre-fire state would not be the best use of our available cash and that we may
be able to achieve the benefits of operating our facility at TRIC in its pre-fire state, namely the development and demonstration
of the licensing ready iteration of our AquaRefining technologies, which we call Version 1.25L, through a less costly commercialization
program. As of the date of this prospectus supplement, we plan to focus on licensing opportunities within the $20+ billion lead
battery recycling marketplace. We believe this path is far less capital intensive than a rebuild of TRIC to its pre-fire state
and we believe this plan could be funded solely or primarily from cash on hand plus ongoing insurance proceeds and asset disposition
of the AquaRefinery. However, there can be no assurance that our revised business model will be successful or that we will acquire
insurance proceeds sufficient to fund our revised business plan.
Risks
Related 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 March 31, 2020, we generated a total of $11.4 million of revenue, all of
which was derived primarily from the sale of lead compounds and plastics and, to a lesser extent, the sale of lead bullion and
Aqua Refined lead. To date, our operations have primarily consisted of the development and testing and limited operations 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 brought those LAB recycling operations online. As a result of
the November 2019 fire at TRIC, we have suspended all plant-based revenue producing operations pending our clean-up of the fire
damage and development of our plan for resuming operations. As of the date of this prospectus supplement, we are planning to begin
operating the first iteration of Version 1.25L electrolyzers by July 4, 2020 with additional iterations of improvements throughout
2020 leading up to what we believe will be the licensing ready iteration of 1.25L. Our limited operating history of the AquaRefinery,
coupled with our development of the Version 1.25L electrolyzers ahead of us, 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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the
timing and success of our plan of commercialization and the fact that we have suspended operations at TRIC;
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our
ability to demonstrate that our AquaRefining technology can be and has been operated on a commercial scale;
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our
ability to conduct our equipment supply, licensing and services operations on a profitable basis in the future; and
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our
ability to realize the expected benefits of our strategic partnerships with Clarios and Veolia North America Regeneration
Services, LLC, or Veolia.
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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 our successful implementation of novel technologies and processes and there can be no assurance that
we will be able to 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 with limited modest scale operations. While
we have shown that our proprietary technology can produce AquaRefined lead on a small commercial scale, we had just begun in 2019
to demonstrate that we can produce AquaRefined lead on a large commercial scale. Further, as we endeavored to complete our AquaRefining
production line, we continuously encountered unforeseen complications that delayed the ramping up of our AquaRefining modules
and the integration of our AquaRefining process with the traditional lead recycling operations. There can be no assurance that
we will not encounter similar unforeseen complications as we pursue our revised business model.
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 March 31, 2020, we had total cash of $6.4 million and working capital of $11.5
million, which includes $9.9 million of insurance proceeds receivable, of which we had received $5 million of insurance proceeds
following quarter-end. As of the date of this prospectus supplement, we believe that we will require additional capital in order
to fund our current level of ongoing costs and our proposed business plan over the next 12 months as we move forward with our
capital light licensing strategy. We intend to acquire the necessary capital though the recovery of insurance proceeds on our
fire related claims and the possible sale of certain equipment and assets at TRIC. However, there can be no assurance that we
will be able to collect insurance proceeds or acquire proceeds from the sale of TRIC in amounts sufficient to fund the capital
requirements or, if we are successful, that we will not require additional capital. If needed, we may seek funding through the
sale of equity or debt financing. Funding that includes the sale of our equity may be dilutive. 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.
Our
business may be adversely affected by the recent coronavirus outbreak. In December 2019, a novel strain of coronavirus
was reported to have surfaced in Wuhan, China. In January 2020, this coronavirus spread to other countries, including the United
States, and efforts to contain the spread of this coronavirus intensified. At this time, we and most of our partners and suppliers
are subject to travel restrictions, shelter in place requirements and limited, if any, operations. The outbreak and any preventative
or protective actions that we or our partners and suppliers may take in respect of this coronavirus may result in a period of
disruption to work in progress. Our partners’ and suppliers’ businesses could be disrupted, and our ongoing and future
recovery from the TRIC fire, resumption of limited Version 1.25L operations and license negotiations could be negatively affected.
Any resulting financial impact cannot be reasonably estimated at this time but may materially affect our business and financial
condition. The extent to which the coronavirus impacts our results will depend on future developments, which are highly uncertain
and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus and the actions
to contain the coronavirus or treat its impact, among others.
We
are currently under agreement with Veolia for the operations of TRIC, however there can be no assurance that we will continue
to partner with Veolia. In February 2019, we entered into an Operations, Management and Maintenance Agreement with Veolia
North America Regeneration Services, LLC, or Veolia. Pursuant to the Agreement, Veolia agreed to provide development of operations
programs, start-up of new equipment and operations, maintenance and management services at our AquaRefining facility at TRIC.
As a result of the November 2019 fire at TRIC, we have suspended all operations at TRIC pending our clean-up of the fire damage
and development of our plan for resuming operations. In January 2020, we declared a force majeure under the Veolia Operations,
Management and Maintenance Agreement and suspended payments to Veolia thereunder. If we follow through with our plans not to restore
TRIC, we would expect that our Operations, Management and Maintenance Agreement would expire according to its terms in February
2021. The Operations, Management and Maintenance Agreement with Veolia contemplates entering into good faith negotiations with
Veolia for a long-term agreement concerning Veolia’s participation in the commercial licensing and management of our future
AquaRefining facilities developed by licensees of Aqua Metals. We have agreed with Veolia to use our good faith commercial best-efforts
to conclude negotiations for the long-term licensing and future facilities agreement by June 30, 2020. Because of the force majeure
and suspension of activity with Veolia there can be no assurance that we will be able to negotiate and conclude definitive long-term
agreements with Veolia on commercially reasonable terms, or at all. If we are unable to conclude long-term agreements with Veolia,
it would be likely that we no longer work with Veolia as a partner in the commercial licensing and management of our future AquaRefining
facilities.
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 Veritex for approximately
$9.2 million ($8.6 million net of issuance costs), which is secured by liens on substantially all of our assets including insurance
proceeds. The credit agreement governing such indebtedness contains 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. If the
debt under the 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 Veritex is secured by substantially all of our assets, a default under
the credit facility could enable the debt holder 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.
Additionally,
we were not in compliance with the minimum debt service coverage ratio covenant on our loan from Veritex as of the fiscal quarter
ends between March 31, 2017, and March 31, 2020. We received a waiver for the minimum debt service coverage ratio covenant for
those periods. While we expect to continue to receive waivers from Veritex for non-compliance with such covenant, there is no
guarantee that we will receive such waivers. If Veritex determines not to grant us a waiver for non-compliance in the future,
we would be in default of the loan and Veritex would be able to accelerate the payment of all amounts under the loan.
In
the event of the acceleration of the Veritex loan, we will need additional financing to satisfy our obligations under the loan,
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 Veritex for approximately $9.2 million ($8.6 million net of issuance costs). The
credit agreement 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. If the debt under the 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
outstanding debt may make it difficult for us obtain additional financing using our future operating cash flow. We currently
owe approximately $9.2 million to Veritex 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
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 proven on a modest scale, 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, neither we nor anyone else has ever
successfully built a production line that commercially recycles LABs without smelting. Further, there can be no assurance that
either we or our licensees will be able to produce AquaRefined lead in commercial quantities at a cost of production that will
provide us and our proposed licensees with an adequate profit margin. The uniqueness of our AquaRefining process 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 and our future licensees’ 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. If LAB manufacturers and
others involved in the reverse supply chain for used LABs attempt to restrict our and our future licensees’ 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 and our future licensees 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 the production of 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 and our future licensees with a revenue premium
over the market price of lead on the London Metal Exchange, or LME, and, more importantly, the ability to produce AquaRefined
lead will be vital to confirming the efficacy and relevancy of our proprietary technology. Lead purchasers 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 and in November
2018, Clarios confirmed its approval of the purity of our AquaRefined lead by providing to us official vendor approval to receive
finished lead at its manufacturing facilities. However, we have not produced AquaRefined lead in significant 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 significant commercial
quantities, that such lead will continue to meet the required purity standards of our customers.
While
we have been successful in producing AquaRefined lead in small commercial volumes, there can be no assurance that either we or
our future licensees will be able to replicate the process, along with all of the expected economic advantages, on a large commercial
scale either for us or our prospective licensees. Our commercial operations have primarily involved the production
of lead compounds and plastics from recycled LABs, and more recently, the sale of lead bullion and AquaRefined lead. In April
2018, we commenced the limited production of cast lead bullion (mixture of lead purchased to prime the kettles and AquaRefined
lead from our AquaRefining process), and in June 2018, we commenced the sale of pure AquaRefined lead in the form of two tonne
blocks. While we believe that our results of operations to date can demonstrate to potential licensees the value proposition of
our AquaRefining technologies, there can be no assurance that potential licensees will recognize the economic and other benefits
of our AquaRefining technologies or that our future licensees will be to produce AquaRefined lead in commercial quantities at
a cost of production that will provide us and our proposed licensees with an adequate profit margin.
Our
intellectual property rights may not be adequate to protect our business. As of the date of this prospectus supplement,
we have secured granted/allowed patents in the following countries/regions: U.S. (9837689, 10566665, 10340561, 10316420, allowed
20180127888), Canada (2930945), China (105981212, 107849634, allowed 107889511 and 107923057), Europe (3072180), Eurasia (32371),
South Africa (2016/04083, 2017/08454, 2017/04123, 2017/08455), South Korea (101739414, 101882932, 101926033, allowed 20180080359),
Honduras (6074), India (318321), Indonesia (IDP000061176, allowed 2018/00318), Japan (6173595, 6592088), Mexico (357027), OAPI
(17808, 18736), ARIPO (4995), Ukraine (118037, 119580), Vietnam (6022968) and Australia (2014353227, 2015350562, 2017213449).
We
also have further patent applications pending in the United States and numerous corresponding patent applications pending in 20
additional 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 primarily 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 Clarios, among others. Although we are currently seeking to negotiate such an agreement with
Clarios as further discussed in the following paragraph, 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 Clarios, 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, insufficient revenue generation
to offset liabilities assumed and expenses associated with the transaction, potential additional challenges in protecting our
intellectual property, 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 Clarios on commercially reasonable terms, or at all.
In February 2017, we entered into a series of agreements with Clarios, including an equipment supply agreement pursuant to which,
among other things, we agreed to work with Clarios on the development of a program for the conversion of Clarios and certain strategic
partners of Clarios’ existing lead smelters throughout North and South 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. We have agreed not to license our AquaRefining technology
and equipment to third parties in the aforementioned regions until such time as we and Clarios have agreed on certain matters
relating to the initial conversion of a Clarios facility. In June 2019, we entered into an agreement with Clarios to amend the
equipment supply agreement pursuant to which we have agreed to use good faith, commercial best-efforts to conclude the discussion
and negotiation of, and enter into, a development program agreement no later than the 90th day following our satisfaction of certain
performance criteria agreed upon by Clarios and us, however those performance conditions were based on the operation of 16 AquaRefining
modules at TRIC, which is unlikely. We have initiated discussions with Clarios to revise the performance conditions, however as
of the date of this prospectus supplement we have been unable to reach an agreement with Clarios on revised performance standards.
If we are unable to agree with Clarios on revised performance standards, we may be unable to sell AquaRefining equipment or license
our AquaRefining technology to third-parties until the expiration of the Equipment Supply Agreement in June 2021 or the agreement’s
earlier termination. There can be no assurance that we will be able to negotiate and conclude a definitive development program
agreement with Clarios on commercially reasonable terms, or at all.
There
can be no assurance that Clarios will maintain the same level of interest in and commitment to the proposed joint development
of our AquaRefining technologies. Our agreements with Clarios were originally entered into with Johnson Controls Battery
Group, Inc. On May 1, 2019, Johnson Controls International plc announced that it had completed the sale of its battery group assets,
formerly held by Johnson Controls Battery Group, Inc., to Brookfield Business Partners L.P. The acquired battery group assets
now operates under the name Clarios. It is our understanding that the agreements and proposed business projects between us and
Johnson Controls Battery Group, Inc. (collectively, the “Aqua Metals Collaboration”) are now under the control of
Clarios, and that certain members of the former management of Johnson Controls Battery Group, Inc. are now employed in similar
capacities by Clarios. We have also been advised that Clarios and Brookfield Business Partners L.P. have expressed their interest
in continuing the Aqua Metals Collaboration initiated by us and Johnson Controls Battery Group, Inc. Although there can be no
assurance that Clarios currently has, and/or will maintain, the same level of interest in our joint collaboration as its predecessor,
as Clarios could, for example, no longer have an interest in our technologies or have competing priorities, we currently have
no reason to believe that Clarios and Brookfield Business Partners L.P. have lost interest. In addition, the change of control
of the battery group may cause disruptions and distractions that adversely affect its ability to further the Aqua Metals Collaboration.
For these and other reasons, Johnson Controls’ sale of its battery group assets to Brookfield Business Partners L.P. could
possibly have a material adverse effect on the Aqua Metals Collaboration.
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 the principal product to be produced by our AquaRefining
technologies, 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. Lead
price per tonne was approximately $1,700 per tonne at the end of March 2020 and has been in the $1,600 range to date during the
COVID-19 crisis. 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 downturn 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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diminished
ability to protect 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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compliance
with the Federal Corrupt Practices Act and other anti-corruption laws;
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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
and the operations of our licensees 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 including the Occupational Safety and Health Act (“OSHA”)
of 1970 and comparable state statutes. Our facilities and the facilities of our licensees will have to obtain environmental permits
or approvals to expand, including those associated with air emissions, water discharges, and waste management and storage. We
and our licensees 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 and the operations of our licensees will be 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.
We
and our future licensees will also be subject to inspection from time to time by various federal, state and local environmental,
health and safety regulatory agencies and, as a result of these inspections, we and our licensees may be cited for certain items
of non-compliance. For example, in August 2018, the Nevada Occupational Safety and Health Administration, or Nevada OSHA, delivered
to us a citation and notification of penalty. The citation listed a number of items related to our compliance with Nevada OSHA’s
Lead Standard. We reached a settlement agreement with Nevada OSHA on the amount of penalties associated with the citation. We
also agreed to engage a lead compliance expert to audit our facility at TRIC for compliance with all provision of the Lead Standard
and to generate a written report with findings of any noncompliance, recommended corrective actions, and a time frame to correct
the findings of noncompliance. We agreed with Nevada OSHA to correct all findings of noncompliance within the time frame proposed
by the lead compliance expert in their report. The lead compliance expert has been engaged, has visited the facility at TRIC and
has completed the written report. We have corrected all findings of noncompliance in a timely manner.
Failure
to comply with the requirements of federal, state and local environmental, health and safety laws could subject our business and
our licensees to significant penalties (civil or criminal) and other sanctions that could adversely affect our business. In addition,
in the event we are unable to operate and expand our AquaRefining process and operations as safe and environmentally responsible,
we and our licensees may face opposition from local governments, residents or public interest groups to the installation and operation
of our facilities.
The
development of new AquaRefining technology by us or our partners or licensees, and the dissemination of our AquaRefining process
will depend on our ability to acquire necessary permits and approvals, of which there can be no assurance. As noted above,
our AquaRefining processes 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 any use of AquaRefining operations
at our partner’s facilities 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
expansion, 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 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. Although we do not intend
to engage in the commercial production of recycled lead going forward, our planned reduced operations still 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 This Offering
We
have received a notice of delisting for failure to satisfy a continued listing rule from the Nasdaq based on our share price.
On January 15, 2020, we received a notice of delisting from the Nasdaq Stock Market, LLC. The notice stated that we had
fallen below compliance with respect to the continued listing standard set forth in Rule 5550(a)(2) of the Nasdaq Listing Rules
because the closing bid price of our common stock over the previous 30 consecutive trading-day period had fallen below $1.00 per
share.
Pursuant
to the initial Nasdaq notice and Rule 5810(c)(3)(A) of the Nasdaq Listing Rules, we have 180 days from the date of the notice,
or until July 13, 2020, to regain compliance with the minimum bid price requirement in Rule 5550(a)(2) by achieving a closing
bid price for our common stock of at least $1.00 per share over a minimum of 10 consecutive business days. However, on April 17,
2020, we received a second letter from the Nasdaq stating that due to extraordinary market conditions, the Nasdaq has determined,
effective as of April 16, 2020, to toll the compliance periods for the minimum bid price requirement in Rule 5550(a)(2) through
June 30, 2020. As a result, since we had 88 calendar days remaining in our bid price compliance period as of April 16, 2020, we
will, upon reinstatement of minimum bid price requirement, still have 88 calendar days from July 1, 2020, or until September 28,
2020, to regain compliance.
If
we do not regain compliance with Rule 5550(a)(2) by September 28, 2020, we may be eligible for additional time to regain compliance,
subject to our compliance with the Nasdaq’s continued listing requirement for market value of publicly-held shares and all
other initial listing standards for The Nasdaq Capital Market, with the exception of the bid price requirement, and our provision
of certain undertakings to the Nasdaq. However, there can be no assurance that we will be afforded additional time to regain compliance
with the minimum bid price requirement following September 28, 2020. If we are unable to regain compliance with Nasdaq Listing
Rule 5550(a)(2) in a timely manner, the Nasdaq will commence suspension and delisting procedures.
We
are also out of compliance with the Nasdaq continued listing rule concerning the composition of our audit committee. On
May 19, 2020, Sushil “Sam” Kapoor resigned from our board of directors, or Board. Mr. Kapoor was one of three members
of the audit committee of our Board. As a consequence of Mr. Kapoor’s resignation, we became out of compliance with Nasdaq
Listing Rule 5605(c)(2), which requires that the board of directors of a Nasdaq listed company have an audit committee made up
of at least three independent directors. On May 19, 2020, we advised The Nasdaq Stock Market LLC of Mr. Kapoor’s resignation,
its consequences with regard to compliance with Nasdaq Listing Rules 5605(c)(2) and our intention to regain compliance with Nasdaq
Listing Rule 5605(c)(2) in a timely manner. In accordance with Nasdaq Listing Rule 5605(c)(4), we have an automatic cure period
in order to regain compliance with Nasdaq Listing Rule 5605(c)(2) until (i) until the earlier of our next annual stockholders’
meeting or May 19, 2021; or (ii) if our next annual stockholders’ meeting is held before November 16, 2020, then we must
evidence compliance no later than November 16, 2020. We intend to appoint a third independent director to our Board and audit
committee, and thereby regain compliance Nasdaq Listing Rule 5605(c)(2), prior to our next annual meeting of stockholders. However,
if we are unable to regain compliance with Nasdaq Listing Rule 5605(c)(2) in a timely manner, the Nasdaq will commence suspension
and delisting procedures.
A
securities class action lawsuit and shareholder derivative lawsuit are pending against us and could have a material adverse effect
on our business, results of operations and financial condition. A putative consolidated class action lawsuit and shareholder
derivative lawsuit are pending against us and certain of our current and former directors and officers. These lawsuits may divert
financial and management resources that would otherwise be used to benefit our operations. Although we deny the material allegations
in the lawsuits and intend to defend ourselves vigorously, defending the lawsuits could result in substantial costs. No assurances
can be given that the results of these matters will be favorable to us. An adverse resolution of any of these lawsuits could have
a material adverse effect on our results of operations and financial condition. In addition, we may be the target of securities-related
litigation in the future, both related and unrelated to the existing class action and shareholder derivative lawsuits. Such litigation
could divert our management’s attention and resources, result in substantial costs, and have an adverse effect on our business,
results of operations and financial condition.
We
maintain director and officer insurance that we regard as reasonably adequate to protect us from potential claims; however, we
are responsible for meeting certain deductibles under the policies and, in any event, we cannot assure you that the insurance
coverage will adequately protect us from claims made. Further, as a result of the pending litigation the costs of insurance may
increase and the availability of coverage may decrease. As a result, we may not be able to maintain our current levels of insurance
at a reasonable cost, or at all, which might make it more difficult to attract qualified candidates to serve as executive officers
or directors.
Future
sales of substantial amounts of our common stock, or the possibility that such sales could occur, could adversely affect the market
price of our common stock. We cannot predict the effect, if any, that future issuances or sales of our securities
including sales of shares of our common stock pursuant to the Sales Agreement or the availability of our securities for future
issuance or sale, will have on the market price of our common stock. Issuances or sales of substantial amounts of our securities
including sales of our common stock pursuant to the Sales Agreement, or the perception that such issuances or sales might occur,
could negatively impact the market price of our common stock and the terms upon which we may obtain additional equity financing
in the future.
It
is not possible to predict the actual number of shares of our common stock we will sell under the Sales Agreement, or the gross
proceeds resulting from those sales. Subject to certain limitations in the Sales Agreement and compliance with applicable
law, we have the discretion to deliver a placement notice to the sales agent at any time throughout the term of the Sales Agreement.
The number of shares of our common stock that are sold through the sales agent after delivering a placement notice will fluctuate
based on a number of factors, including the market price of our common stock during the sales period, the limits we set with the
sales agent in any applicable placement notice, and the demand for our common stock during the sales period. Because the price
per share of each share sold will fluctuate during the sales period, it is not currently possible to predict the number of shares
that will be sold or the gross proceeds to be raised in connection with those sales.
The
common stock offered hereby will be sold in “at the market offerings,” and investors who buy shares at different
times will likely pay different prices. Investors who purchase common stock in this offering at different times will likely
pay different prices, and so may experience different levels of dilution and different outcomes in their investment results. We
will have discretion, subject to market demand, to vary the timing, prices, and numbers of shares sold in this offering. In addition,
there is no minimum or maximum sales price for shares to be sold in this offering. Investors may experience a decline in the value
of the shares they purchase in this offering as a result of sales made at prices lower than the prices they paid.
You
may experience immediate and substantial dilution in the net tangible book value per common share you purchase. The price
per common share being offered may be higher than the net tangible book value per common share outstanding prior to this offering.
Assuming that an aggregate of 10,526,315 shares are sold at a price of $0.95 per share, the last reported sale price of our common
stock on The Nasdaq Capital Market on June 3, 2020, for aggregate proceeds of up to $10,000,000 in this offering, and after deducting
commissions and estimated aggregate offering expenses payable by us, you will suffer immediate dilution of $0.17 per share, representing
the difference between the as adjusted net tangible book value per common share as of March 31, 2020 after giving effect to this
offering and the assumed offering price. See the section entitled “Dilution” below for a more detailed discussion
of the dilution you will incur if you purchase common stock in this offering.
Our
management will have broad discretion with respect to the use of the proceeds of this offering. Our management will have
broad discretion in the application of the net proceeds to us from this offering, including for any of the purposes described
in the section entitled “Use of Proceeds,” and you will not have the opportunity as part of your investment decision
to assess whether the net proceeds are being used appropriately. Because of the number and variability of factors that will determine
our use of the net proceeds to us from this offering, their ultimate use may vary from their currently intended use. The failure
by us to apply these funds effectively could harm our business.
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 stock. 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 stock, you may not be able to sell your common stock 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.
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
$1.07 billion, if we issue more than $1.07 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.
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;
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establish
an advance notice procedure for stockholders’ proposals to be brought before an annual meeting, including proposed nominations
of persons for election to our board of directors, 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
intend to use the net proceeds from the sale of our common stock offered under this prospectus supplement for general corporate
purposes and working capital, which may include expenditures related to the acceleration of licensing opportunities. We have not
determined the amount of net proceeds to be used specifically for such purposes. As a result, management will retain broad discretion
over the allocation of net proceeds. 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 may 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 March 31, 2020 was approximately $45.2 million, or approximately $0.76 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 our common stock during the term of the Sales Agreement at an assumed offering price of $0.95 per share, the last
reported sale price per common share on the Nasdaq Capital Market on June 3, 2020, and after deducting commissions of 3% of the
offering proceeds and estimated aggregate offering expenses payable by us our adjusted net tangible book value as of March 31,
2020 would have been approximately $54.8 million, or approximately $0.78 per share. This represents an immediate increase in net
tangible book value of approximately $0.02 per share to our existing stockholders and an immediate dilution in net tangible book
value of approximately $0.17 per share to investors participating in this offering. The following table illustrates this calculation
on a per share basis:
Public
offering price per share of common stock
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$
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0.95
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Net
tangible book value per share as of March 31, 2020
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$
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0.76
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Increase
per share attributable to investors participating in this offering
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$
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0.02
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Adjusted
net tangible book value per share after giving effect to this offering
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$
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0.78
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Dilution
per share to investors participating in this offering
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$
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0.17
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The
table above assumes for illustrative purposes that an aggregate of 10,526,315 shares of our common stock are sold during the term
of the Sales Agreement at a price of $.95 per share, the last reported sale price per common share on The Nasdaq Capital Market
on June 3, 2020, for aggregate gross proceeds of $10 million. The shares subject to the Sales Agreement are being sold from time
to time at various prices. An increase of $0.20 per share in the price at which the shares are sold from the assumed offering
price per share shown in the table above, assuming all common stock in the aggregate amount of $10 million during the remaining
term of the Sales Agreement are sold at that price, would increase our adjusted net tangible book value per share after the offering
to $0.80 per share and would increase the dilution in net tangible book value per share to new investors in this offering to $0.35
per share, after deducting commissions payable by us. A decrease of $0.20 per share in the price at which the shares are sold
from the assumed offering price per share shown in the table above, assuming all common stock in the aggregate amount of $10 million
during the term of the Sales Agreement are sold at that price, would instead decrease our adjusted net tangible book value per
share after the offering to $0.75 per share, but would result in no dilution in net tangible book value per share to new investors
in this offering, after deducting commissions payable by us. This information is supplied for illustrative purposes only.
The
above discussion and table is based on 59,836,897 shares of common stock outstanding as of March 31, 2020, and excludes the following:
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435,645
shares of common stock issued between April 1, 2020 and
the date of this prospectus supplement;
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1,709,106
shares of common stock issuable upon exercise of options outstanding as of March 31, 2020, which have a weighted average exercise
price of $3.75 per share;
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1,567,299
shares of common stock issuable upon vesting of restricted stock units as of March 31, 2020, plus an additional 1,970,475
shares of common stock issuable upon vesting of restricted stock units granted between April 1, 2020 and the date of this
prospectus supplement;
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300,163
shares of common stock reserved for issuance and available for future grant under our 2014 Stock Incentive Plan as of March
31, 2020;
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5,105,407
shares of common stock reserved for issuance and available for future grant under our 2019 Stock Incentive Plan as of the
date of this prospectus supplement;
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242,835
shares of common stock reserved for issuance under our Officer and Director Share Purchase Plan as of March 31, 2020; and
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805,747
shares of common stock issuable upon exercise of warrants outstanding as of March 31, 2020, which have a weighted average
exercise price of $3.15 per share.
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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. The exercise of outstanding options or warrants having an exercise or conversion price
less than the assumed 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.
PLAN
OF DISTRIBUTION
We
have entered into the sales agreement with B. Riley FBR under which we may issue and sell our common stock from time to time through
or to B. Riley FBR acting as sales agent or principal. Sales of shares of our common stock, if any, under this prospectus may
be made by any method that is deemed an “at the market offering” as defined in Rule 415 promulgated under the Securities
Act. We may instruct B. Riley FBR not to sell common stock if the sales cannot be effected at or above the price designated by
us from time to time. We or B. Riley FBR may suspend the offering of common stock upon notice and subject to other conditions.
B.
Riley FBR will offer our common stock, if any, subject to the terms and conditions of the sales agreement as agreed upon by us
and B. Riley FBR. Each time we wish to issue and sell common stock under the sales agreement, we will notify B. Riley FBR of the
number or dollar value of shares to be issued, the time period during which such sales are requested to be made, any limitation
on the number of shares that may be sold in one day, any minimum price below which sales may not be made and other sales parameters
as we deem appropriate. Once we have so instructed B. Riley FBR, unless B. Riley FBR declines to accept the terms of the notice,
B. Riley FBR has agreed to use its commercially reasonable efforts consistent with its normal trading and sales practices to sell
such shares up to the amount specified on such terms. The obligations of B. Riley FBR under the sales agreement to sell our common
stock are subject to a number of conditions that we must meet.
We
will pay B. Riley FBR commissions for its services in acting as sales agent in the sale of common stock at a commission rate equal
to 3.0% of the gross sales price per share sold. Because there is no minimum offering amount required as a condition to close
this offering, the actual total public offering amount, commissions and proceeds to us, if any, are not determinable at this time.
We have also agreed to reimburse B. Riley FBR for certain specified expenses, including the fees and disbursements of its legal
counsel in an amount not to exceed $50,000 and ongoing diligence arising from the transactions contemplated by this Agreement
in an amount not to exceed $2,500 in the aggregate per calendar quarter. We estimate that the total expenses for the offering,
excluding commissions and reimbursements payable to B. Riley FBR under the terms of the sales agreement, will be approximately
$50,000.
Settlement
for sales of common stock will generally occur on the second business day following the date on which any sales are made, or on
some other date that is agreed upon by us and B. Riley FBR in connection with a particular transaction, in return for payment
of the net proceeds to us. There is no arrangement for funds to be received in an escrow, trust or similar arrangement.
In
connection with the sale of the common stock on our behalf, B. Riley FBR will be deemed to be an “underwriter” within
the meaning of the Securities Act and the compensation of B. Riley FBR will be deemed to be underwriting commissions or discounts.
We have agreed to provide indemnification and contribution to B. Riley FBR against certain civil liabilities, including liabilities
under the Securities Act.
The
offering of our common stock pursuant to the sales agreement will terminate upon the earlier of (i) the sale of all of our common
stock subject to the sales agreement, or (ii) termination of the sales agreement as provided therein.
B.
Riley FBR and its affiliates may in the future provide various investment banking and other financial services for us and our
affiliates, for which services they may in the future receive customary fees. To the extent required by Regulation M, B. Riley
FBR will not engage in any market making activities involving our common stock while the offering is ongoing under this prospectus
supplement. This summary of the material provisions of the Sales Agreement does not purport to be a complete statement of its
terms and conditions. A copy of the Sales Agreement is filed with the SEC and is incorporated by reference into the registration
statement of which this prospectus supplement is a part.
LEGAL
MATTERS
The
validity of the securities offered by this prospectus supplement will be passed upon for us by Greenberg Traurig, LLP, Irvine,
California. Certain legal matters in connection with this offering will be passed upon for the sales agent by Duane Morris LLP,
New York, New York.
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, 2019 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:
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Our
Annual Report on Form 10-K for the fiscal year ended December 31, 2019, which was filed on March 11, 2020;
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Our
Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, which was filed on April 30, 2020;
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the
information specifically incorporated by reference into our Annual Report on Form 10-K for the fiscal year ended
December 31, 2019 from our Definitive Proxy Statement on Schedule 14A, filed on April 16, 2020;
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Our
Current Reports on Form 8-K, which were filed on January 22, 2020, March 30, 2020, April 14, 2020, April 20, 2020, May 20,
2020, and June 5, 2020 (in each case excluding any information furnished pursuant to Item 2.02 or Item 7.01 of any such Current
Report on Form 8-K unless otherwise indicated therein);
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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 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
2500 Peru Drive
McCarran, Nevada 89437
(775) 525-1936
WHERE
YOU CAN FIND MORE INFORMATION
We
have filed with the SEC a registration statement under the Securities Act (SEC File No. 333-235238) 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.
INDEMNIFICATION
OF DIRECTORS AND OFFICERS
The
Delaware General Corporation Law provides that corporations may include a provision in their certificate of incorporation relieving
directors of monetary liability for breach of their fiduciary duty as directors, provided that such provision shall not eliminate
or limit the liability of a director (i) for any breach of the director’s duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for
unlawful payment of a dividend or unlawful stock purchase or redemption, or (iv) for any transaction from which the director derived
an improper personal benefit. Our amended and restated certificate of incorporation provides that directors are not liable to
us or our stockholders for monetary damages for breach of their fiduciary duty as directors to the fullest extent permitted by
Delaware law. In addition to the foregoing, our amended and restated certificate of incorporation provides that we may indemnify
directors and officers to the fullest extent permitted by law and we have entered into indemnification agreements with each of
our directors and executive officers.
The
above provisions in our amended and restated certificate of incorporation may have the effect of reducing the likelihood of derivative
litigation against directors and may discourage or deter stockholders or management from bringing a lawsuit against directors
for breach of their fiduciary duty, even though such an action, if successful, might otherwise have benefited us and our stockholders.
However, we believe that the foregoing provisions are necessary to attract and retain qualified persons as directors.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling
persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC, such indemnification
is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
PROSPECTUS
$100,000,000
Common
Stock
Debt
Securities
Warrants
Subscription
Rights
Units
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 November 18, 2019, the last reported
sale price of our common stock on The NASDAQ Capital Market was $1.53 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 December 2, 2019
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 16 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. Neither this prospectus nor any accompanying prospectus supplement constitutes 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 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 consumer use of all lead produced in the world. Because the chemical and metallurgical properties of lead allow it
to be recycled and reused indefinitely, LABs are also the dominant feed source for lead production across the world. As such,
LABs are almost 100% recycled for purposes of capturing the lead contained therein for re-use. Our proprietary AquaRefining process
provides for the recycling of LABs and the production of a high purity lead with fewer environmental and regulatory issues than
is possible with conventional methods of lead production.
In
recent years, recycled lead has become increasingly important to LAB production. Recycled lead surpassed mined lead in the 1990s
and now represents more than 60% 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, metallurgical/chemical reduction, energy intensive
and often a highly polluting process. As a consequence of certain environmental and health issues, lead smelting has become increasingly
regulated in many countries. In the U.S., regulatory non-compliance has forced the closure of large lead smelters in Vernon, California,
Frisco, Texas and Herculaneum, Missouri over the last several years. In response to increasing environmental regulation over the
past three decades, 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 U.S. to smelters in Mexico, South Korea, the Philippines and elsewhere
is 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 a grade of lead of moderate purity, known as “secondary lead”. Secondary lead can 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 have expanded 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 and patented 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 produces lead of
a purity which is equivalent to primary lead (i.e., higher than 99.99% purity). As such, we believe that AquaRefining reduces
environmental plant emissions, health concerns and permitting needs compared with lead smelting. We believe that the combined
advantages offered by AquaRefining represent a potential step change in lead recycling technology and recovered product quality,
one that can deliver advantages in footprint and logistics while reducing the environmental impact of lead recycling. In addition,
the 99.99% purity lead created from the AquaRefining process can meet the growing need for ultrapure lead created by the growth
of the advanced battery industry.
The
modular nature of AquaRefining makes it possible both to start LAB recycling at a smaller scale than is possible with a typical
smelter setup, as well as to add AquaRefining to existing battery recycling operations to expand production capacity or to reduce
smelting processes. Our plan is to continue pursuing two complementary business streams. The first is to license AquaRefining
technology and supply AquaRefining equipment to third parties to supplement or replace smelting in their battery recycling operations.
We are pursuing this at least initially through our relationship with Clarios, a newly formed battery and energy solutions company
that is the successor to Johnson Controls Battery Group Inc., with which we are in discussions centered on the addition of AquaRefining
to one of its existing battery recycling operations. We also intend to pursue similar arrangements with other companies operating
recycling operations. The second component of our business plan is to expand our own lead recycling operations at the Tahoe Regional
Industrial Center, McCarran, Nevada, or TRIC.
Our
principal executive offices are located at 2500 Peru Drive, McCarran, Nevada 89437, and our telephone number is (775) 525-1936.
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 SEC, 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 licensing arrangements, 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 SEC, 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, subscription rights,
debt securities and units having an aggregate initial offering price not exceeding $100,000,000. In this prospectus, we refer
to the common stock, warrants, subscription rights, debt securities and units that we may offer collectively as “securities.”
Common
Stock
We
are authorized to issue 100,000,000 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 therefor, 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 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 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, which may be issued 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, which may be issued 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. While it is highly likely that any debt securities we issue will be issued under an indenture, we reserve the right to
issue debt securities other than under an indenture pursuant to an exemption from the indenture requirement under the Trust Indenture
Act of 1939. Any debt securities issued by us other than pursuant to an indenture will subject the purchasers of such debt securities
to certain unique risks arising from the lack of a trustee charged with the responsibility of monitoring the debt securities and
enforcing the rights of the holders of such debt securities, which will be set forth in a prospectus supplement filed with regard
to such unindentured debt securities.
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 any indentures that are filed as exhibits to the registration statement of which this
prospectus forms a part for additional information.
If
we issue debt securities other than under an indenture, we will likely be limited to issuing a maximum of $50 million of such
debt securities and it is also likely that such debt securities will be unsecured and subordinated. Any indenture regarding debt
securities issued by us will not limit the amount of debt securities that we may issue. The debt securities or applicable indenture,
if any, 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
following is a summary of the general terms of the debt securities we may issue under an indenture or otherwise, except as otherwise
described in a prospectus supplement.
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).
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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title and type of the debt securities;
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whether
the debt securities will be issued under an indenture;
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whether
the debt securities will be senior or subordinated debt securities, and, with respect to subordinated debt securities, the
terms on which they are subordinated;
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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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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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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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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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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 any 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 debt securities or any 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
The
following is a summary of the general terms of the senior debt securities we may issue under a senior indenture, except as otherwise
described in a prospectus supplement.
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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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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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
The
following is a summary of the general terms of the subordinated debt securities we may issue under a subordinated indenture, except
as otherwise described in a prospectus supplement.
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.
Subscription
Rights
We
may issue rights to purchase our securities. The rights may or may not be transferable by the persons purchasing or receiving
the rights. In connection with any rights offering, we may enter into a standby underwriting, standby purchase or other arrangement
with one or more underwriters or other persons pursuant to which such underwriters or other persons would purchase any offered
securities remaining unsubscribed for after such rights offering. In connection with a rights offering to holders of our capital
stock a prospectus supplement will be distributed to such holders on or after the record date for receiving rights in the rights
offering set by us.
We
will file as exhibits to the registration statement of which this prospectus is a part, or will incorporate by reference from
a current report on Form 8-K that we file with the SEC, forms of the subscription rights, standby underwriting agreement or other
agreements, if any. The prospectus supplement relating to any rights that we offer will include specific terms relating to the
offering, including, among other matters:
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the
date of determining the security holders entitled to the rights distribution;
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the
aggregate number of rights issued and the aggregate amount of securities purchasable upon exercise of the rights;
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the
exercise price;
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the
conditions to completion of the rights offering;
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the
date on which the right to exercise the rights will commence and the date on which the rights will expire; and
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any
applicable federal income tax considerations.
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Each
right would entitle the holder of the rights to purchase the principal amount of securities at the exercise price set forth in
the applicable prospectus supplement. Rights may be exercised at any time up to the close of business on the expiration date for
the rights provided in the applicable prospectus supplement. After the close of business on the expiration date, all unexercised
rights will become void.
Holders
may exercise rights as described in the applicable prospectus supplement. Upon receipt of payment and the rights certificate properly
completed and duly executed at the corporate trust office of the rights agent, if any, or any other office indicated in the prospectus
supplement, we will, as soon as practicable, forward the securities purchasable upon exercise of the rights. If less than all
of the rights issued in any rights offering are exercised, we may offer any unsubscribed securities directly to persons other
than stockholders, to or through agents, underwriters or dealers or through a combination of such methods, including pursuant
to standby underwriting or purchase arrangements, as described in the applicable prospectus supplement.
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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through
agents;
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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.
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, 2018 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, 2018, which was filed on February 28, 2019;
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Our
Quarterly Report on Form 10-Q for the quarter ended March 31, 2019, which was filed on May 5, 2019;
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Our
Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, which was filed on July 31, 2019;
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Our
Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, which was filed on November 12, 2019;
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Our
Current Reports on Form 8-K, which were filed on January 1, 2019, January 17, 2019, January 28, 2019, January 31, 2019, February
15, 2019, March 29, 2019, May 10, 2019, July 7, 2019, August 5, 2019 and September 25, 2019 (in each case excluding any information
furnished pursuant to Item 2.02 or Item 7.01 of any such Current Report on Form 8-K unless otherwise indicated therein);
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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
2500 Peru Drive
McCarran, Nevada 89437
(775) 525-1936
INDEMNIFICATION
OF DIRECTORS AND OFFICERS
The
Delaware General Corporation Law provides that corporations may include a provision in their certificate of incorporation relieving
directors of monetary liability for breach of their fiduciary duty as directors, provided that such provision shall not eliminate
or limit the liability of a director (i) for any breach of the director’s duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for
unlawful payment of a dividend or unlawful stock purchase or redemption, or (iv) for any transaction from which the director derived
an improper personal benefit. Our amended and restated certificate of incorporation provides that directors are not liable to
us or our stockholders for monetary damages for breach of their fiduciary duty as directors to the fullest extent permitted by
Delaware law. In addition to the foregoing, our amended and restated certificate of incorporation provides that we may indemnify
directors and officers to the fullest extent permitted by law and we have entered into indemnification agreements with each of
our directors and executive officers.
The
above provisions in our amended and restated certificate of incorporation may have the effect of reducing the likelihood of derivative
litigation against directors and may discourage or deter stockholders or management from bringing a lawsuit against directors
for breach of their fiduciary duty, even though such an action, if successful, might otherwise have benefited us and our stockholders.
However, we believe that the foregoing provisions are necessary to attract and retain qualified persons as directors.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling
persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC, such indemnification
is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
$10,000,000
Common
Stock
PROSPECTUS
SUPPLEMENT
B.
Riley FBR
June
5, 2020
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