Stephen Cotton

About Stephen Cotton

Stephen Cotton, 58, is President, Chief Executive Officer and Director of Aqua Metals; he has served as President since May 2, 2018 and was elevated to CEO and joined the Board in January 2019, following a prior stint as Chief Commercial Officer (Jan 2015–Jun 2017) . His background spans founding and scaling Canara (formerly Data Power Monitoring/IntelliBatt) through a 2012 sale and leading roles commercializing Sendmail and at Octel Communications (pre-Lucent acquisition); he managed private investments intermittently between roles . Company pay-versus-performance disclosure shows cumulative TSR values of 40.98 (2022), 24.92 (2023), and 10.24 (2024), alongside net losses of $(15.4)M, $(23.9)M, and $(24.6)M, respectively, indicating significant shareholder value pressure during 2023–2024 . The Board structure separates Chair and CEO roles, with a non-executive Chair (Vincent DiVito), which mitigates dual-role concentration risk even as Cotton serves as both CEO and director .

Past Roles

External Roles

• No current public company external directorships disclosed in the 2025 Proxy Statement section covering director nominees .

Fixed Compensation

• Salary rate increased to $511,056 effective Dec 31, 2023 per agreement amendment .
• Employment agreement (effective Aug 7, 2023) sets base salary initially at $491,400 and eligibility for STIP/LTIP up to 100%/200% of base salary, respectively .

Performance Compensation

Short-Term Incentive Plan (STIP)

Long-Term Incentive Plan (LTIP) – RSUs and PSUs

Pay vs. Performance (Company disclosure)

Equity Ownership & Alignment

Beneficial Ownership (as of June 5, 2025)

• Company-wide stock ownership guidelines disclosed for non-employee directors: must retain ≥3× annual base cash board fee; no specific executive ownership guideline disclosed .
• Hedging and pledging are prohibited (ban on short sales, options/hedges, margin accounts and pledged securities) .

Outstanding Equity Awards (as of Dec 31, 2024)

Notes: As of year-end 2024, only RSUs/PSUs are outstanding under the 2019 Plan; no options were outstanding .

Employment Terms

Illustrative severance (had a qualifying termination occurred on Dec 31, 2024): $1,022K base salary + $511K prorated annual bonus + $51K health insurance premiums = $1,584K total (rounded) .

Board Governance (service history, committee roles, dual-role implications)

• Board currently four members; three independent; Cotton serves as President, CEO, and Director (Executive Director) .
• Committees: Cotton is not listed as a member; Audit (DiVito—Chair, Gangloff, Henderson), Compensation (Henderson—Chair, DiVito, Gangloff), Nominating/Governance (Gangloff—Chair, DiVito, Henderson) .
• Leadership structure: Chair and CEO roles formally separated; Vincent L. DiVito serves as non-executive Chair and lead independent director; Board oversees risk with committees reporting to full Board—this structure helps mitigate potential conflicts from Cotton’s dual operating-and-director role .

Director Compensation (for context; executive directors not paid for board service)

• Executive directors (including Cotton) are not compensated for board service .
• Independent director policy: Annual cash fees—Chair $150,000; other directors $90,000; Committee members $7,500 (Audit $10,000); Committee Chairs $10,000 (Audit Chair $15,000); fees payable in cash or shares; plus annual RSU grants ($75,000 Chair; $60,000 Audit Chair; $50,000 other independent directors) .
• 2024 independent director compensation (examples): DiVito $228K total; Zhang $155K; Smith $97K .

Compensation Peer Group (used for benchmarking)

• Peer group spans recycling, battery manufacturing/materials, and IP-driven tech due to limited direct comps; examples include: 374Water, American Battery Technology Company, Aris Water Solutions, Arteris, Atomera, CECO Environmental, Comstock, Dragonfly Energy, Energous, Eos Energy Enterprises, ESS Tech, Perma-Fix Environmental Services, Quest Resource, Smith Micro, Telos .
• Compensation consultant: Pay Governance LLC; Compensation Committee met four times in 2024 .

Say-on-Pay & Shareholder Feedback

Performance & Track Record

Company Reverse Split/Nasdaq Compliance Context

• The company sought stockholder approval for a reverse split in 2024 to address Nasdaq minimum bid price deficiency and maintain listing, citing risks of delisting and thin trading if not approved .

Quarterly EBITDA (last 8 quarters)

Values retrieved from S&P Global.*

Quarterly Revenues (last 8 quarters)

Values retrieved from S&P Global.*
Note: “—” indicates no value available from the data source.*

Compensation Structure Analysis

• Mix shift toward equity settled as RSUs/PSUs; as of Dec 31, 2024 only RSUs were outstanding under the 2019 plan (no stock options outstanding), and the company did not grant options to NEOs around material information windows in 2024—reduces option-repricing risk and aligns retention to service and performance .
• 2024 introduced explicit performance PSUs with relative TSR percentiles and absolute price hurdles, increasing at-risk, performance-based pay linkage; however, under negative TSR and losses, realized value depends on future outperformance/hurdles .
• Base cash increased to $511,056 effective year-end 2023 while total compensation decreased in 2024 vs 2023 as equity grant-date fair values were lower and cash bonus decreased, indicating some moderation in total pay amid performance headwinds .
• Clawback policy adopted in line with SEC/Nasdaq—shareholder-friendly governance; hedging/pledging prohibitions further support alignment .

Risk Indicators & Red Flags

• Sustained operating losses (net loss of $(24.6)M in 2024 and $(23.9)M in 2023) alongside declining TSR in 2023–2024 signal elevated execution and financing risk .
• Reverse split necessity and Nasdaq deficiency underscore market cap and liquidity constraints .
• Double-trigger CoC severance includes accelerated vesting of all unvested equity, which could be costly in a change-of-control event but aligns with market practice for retention .
• No evidence of option repricing; clawback and anti-hedging/pledging mitigate governance risk .

Investment Implications

• Alignment: Cotton holds ~4.1% of outstanding shares and is subject to strict hedging/pledging prohibitions; LTI tilt to RSUs/PSUs (TSR- and price-based) tightens pay-performance linkage—positive for alignment if hurdles are rigorous .
• Retention and overhang: Large time-based RSU grants vest semi-annually through 2027, creating steady vesting supply; PSU hurdles (relative TSR and absolute price) add retention but limit realized value absent performance recovery .
• Change-of-control economics: 2× salary + 2× bonus + 2 years benefits + full vest acceleration (double trigger) could be material in a sale scenario—important in modeling potential M&A paths .
• Execution risk: Continued negative EBITDA and losses, plus reverse-split/ Nasdaq compliance history, point to funding and commercialization milestones as near-term stock drivers; compensation metrics (TSR percentile and price hurdles) explicitly bet on multi-year share price recovery .

Bottom line: Pay design has shifted toward performance-sensitive equity with explicit TSR and price hurdles; retention appears strong via sizeable multi-year RSUs, but value realization hinges on operational inflection and capital access amid sustained losses and prior TSR pressure .