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Stockholders' equity | 12 Months Ended
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Dec. 31, 2018
Equity [Abstract] |
Stockholders' equity | Stockholders’ equity In May 2018, the Company’s shareholders approved a reduction in the number of authorized shares from 240 million to 55 million shares of stock, of which 5 million are authorized as preferred stock and 50 million as common stock. At December 31, 2018, the Company had zero shares (2017: zero) of preferred stock and 15,098,837 shares (2017: 8,895,094) of common stock, issued and outstanding. In December 2016, the shareholders approved a reverse share split ratio of 1-for-30 to be implemented on January 5, 2017. All share balances in the Financial Statements and accompanying notes have been restated to reflect this change. Common stock The holders of the common stock are entitled to one vote for each share held at all meetings of stockholders. Dividends and distribution of assets of the Company in the event of liquidation are subject to the preferential rights of any outstanding preferred shares. At December 31, 2018, the Company had reserved 339,964 shares of common stock for the exercise of options and 1,745,868 shares of common stock for the exercise of warrants. Recent issuances In January 2017, the Company closed an equity subscription of $25 million with Intrexon for 2,421,073 common shares at a price of $10.326. In January 2018, the Company completed a public offering of 3,692,307 Common Shares and warrants for 4,246,153 Common Shares. Net proceeds to the Company were $10.6 million after deducting discounts, fees, and expenses. Intrexon Corporation, the Company’s majority shareholder, participated in the offering, purchasing 1,538,461 Common Shares and warrants for 1,538,461 Common Shares for gross proceeds of $5.0 million. On October 24, 2018, 2,250,461 Common Shares were issued through the exercise of outstanding warrants at a discounted price of $2.00. Net proceeds to the Company were $4.3 million after deducting discounts, fees, and expenses. Intrexon participated in the exercise, converting warrants for the issuance of 1,538,461 Common Shares, resulting in gross proceeds of $3.1 million. Additionally during 2018, the Company issued 249,824 Common Shares in conjunction with the exercise of warrants, with total proceeds of $0.8 million. Warrants In connection with the public offering of Common Shares that was completed in January 2018, the Company issued warrants to purchase 4,246,153 Common Shares. Each warrant has an exercise price per share of $3.25, is immediately exercisable, and will expire five years from the date of issuance. During 2018 249,824 warrants were exercised at $3.25 and the Board approved the exercise of 2,250,461 warrants in October 2018 at a discounted price of $2.00. The intrinsic value of the warrants that were converted at the discounted price was $1.8 million. The warrant inducement was treated as an extinguishment of an equity contract, as the warrant holders had to exercise their warrants in order to take advantage of the discounted conversion price. In accounting for the transaction the Company analogized to guidance regarding the treatment of preferred stock extinguishments and recognized the intrinsic value of the inducement, totaling $1.8 million, as a return of capital and as an addition to net loss for the purpose of calculating basic and diluted earnings per share. The following table summarizes information about outstanding warrants at December 31, 2018:
|  | Number of warrant shares |  | Weighted average exercise price
Outstanding at December 31, 2017 |  | — |  |  |  | $— |
Issued |  | 4,246,153 |  |  | 3.25 |
Exercised |  | (2,500,285 | ) |  | 2.12 |
Outstanding at December 31, 2018 |  | 1,745,868 |  |  |  | $3.25 |
Exercisable at December 31, 2018 |  | 1,745,868 |  |  |  | $3.25 |
Share-based compensation In 2006, the Company established the 2006 Equity Incentive Plan (the “2006 Plan”). The 2006 Plan provided for the issuance of incentive stock options to employees of the Company and non-qualified stock options and awards of restricted stock to Directors, officers, employees, and consultants of the Company. In accordance with its original terms, the 2006 Plan terminated on March 18, 2016. All outstanding awards under the 2006 Plan will continue until their individual termination dates. In March 2016, the Company’s Board of Directors adopted the AquaBounty Technologies, Inc. 2016 Equity Incentive Plan (the “2016 Plan”) to replace the 2006 Plan. The 2016 Plan provides for the issuance of incentive stock options, non-qualified stock options, and awards of restricted and direct stock purchases to Directors, officers, employees, and consultants of the Company. The aggregate number of shares of common stock that may be issued pursuant to awards granted under the 2016 Plan cannot exceed 450,000. The 2016 Plan was approved by the Company’s shareholders at its Annual Meeting on April 26, 2016. Restricted stock The Company’s restricted stock activity under the 2006 Plan and the 2016 Plan is summarized as follows:
|  | Shares |  | Weighted average grant date fair value
Unvested at December 31, 2017 |  | 2,697 |  |  | $ | 11.37 |
Granted |  | 11,151 |  |  | 2.50 |
Vested |  | (4,981 | ) |  | 5.50 |
Unvested at December 31, 2018 |  | 8,867 |  |  | $ | 3.51 |
During 2018, the Company expensed $27,298 (2017: $26,400; 2016: $18,070) related to restricted stock awards. At December 31, 2018, the balance of unearned share-based compensation to be expensed in future periods related to the restricted stock awards is $31,015. The period over which the unearned share-based compensation is expected to be earned is approximately 2.2 years. Stock options The Company’s option activity under the 2006 Plan and the 2016 Plan is summarized as follows:
|  | Number of options |  | Weighted average exercise price
Outstanding at December 31, 2017 |  | 227,203 |  |  | $ | 9.39 |
Issued |  | 113,561 |  |  | 2.50 |
Expired |  | (800 | ) |  | 9.90 |
Outstanding at December 31, 2018 |  | 339,964 |  |  | $ | 7.09 |
Exercisable at December 31, 2018 |  | 303,986 |  |  | $ | 6.94 |
Unless otherwise indicated, options issued to employees, members of the Board of Directors, and non-employees are vested over one to three years and are exercisable for a term of ten years from the date of issuance. The weighted average fair value of stock options granted during 2018 was $2.50 (2017: $4.55; 2016: $4.46). There were no options exercised in 2018. The total intrinsic value of options exercised in 2017 was $43,420 (2016: $6,338). At December 31, 2018, the total intrinsic value of all options outstanding was $0 (2017: $17,454; 2016: $602,773), the total intrinsic value of exercisable options was $0 (2017: $17,454; 2016 $597,872), and the total number of shares available for grant under the 2016 Plan was 268,138 (2017: 397,500; 2016: 450,000). The following table summarizes information about options outstanding and exercisable at December 31, 2018:
Weighted average exercise price of outstanding options |  | Number of options outstanding |  | Weighted average remaining estimated life (in years) |  | Number of options exercisable |  | Weighted average price of outstanding and exercisable options
$2.50 - $5.70 |  | 204,034 |  |  | 5.6 |  | 185,985 |  |  |
$6.90 - $9.60 |  | 53,175 |  |  | 3.7 |  | 53,175 |  |  |
$10.50 - $10.80 |  | 4,000 |  |  | 5.1 |  | 4,000 |  |  |
$14.20 - $23.40 |  | 78,755 |  |  | 7.2 |  | 60,826 |  |  |
|  | 339,964 |  |  |  |  | 303,986 |  |  | $6.94
The fair values of stock option grants to employees and members of the Board of Directors during 2018, 2017, and 2016 were measured on the date of grant using Black-Scholes, with the following weighted average assumptions:
|  | 2018 |  | 2017 |  | 2016
Expected volatility |  | 81% |  | 78% |  | 53%
Risk free interest rate |  | 2.60% |  | 1.80% |  | 1.31%
Expected dividend yield |  | 0.0% |  | 0.0% |  | 0.0%
Expected life (in years) |  | 5 |  | 5 |  | 5
The risk-free interest rate is estimated using the Federal Funds interest rate for a period that is commensurate with the expected term of the awards. The expected dividend yield is zero because the Company has never paid a dividend and does not expect to do so for the foreseeable future. The expected life was based on a number of factors including historical experience, vesting provisions, exercise price relative to market price, and expected volatility. The Company believes that all groups of employees demonstrate similar exercise and post-vesting termination behavior and, therefore, does not stratify employees into multiple groups and forfeitures are recognized as they occur. The expected volatility was estimated using the Company’s historical price volatility over a period that is commensurate with the expected term of the awards. Total share-based compensation on stock-option grants amounted to $236,098 in 2018 (2017: $95,734; 2016: $200,224). At December 31, 2018, the balance of unearned share-based compensation to be expensed in future periods related to unvested share-based awards is $111,243. The period over which the unearned share-based compensation is expected to be earned is 1.2 years. Share-based compensation The following table summarizes share-based compensation costs recognized in the Company’s Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2018, 2017, and 2016:
|  | 2018 |  | 2017 |  | 2016
Research and development |  | $ | 3,238 |  |  | $ | 3,168 |  |  | $ | 2,115 |
Sales and marketing |  | — |  |  | 9,315 |  |  | 65,517 |
General and administrative |  | 260,158 |  |  | 109,651 |  |  | 150,662 |
Total share-based compensation |  | $ | 263,396 |  |  | $ | 122,134 |  |  | $ | 218,294 |

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- Definition The entire disclosure for accounts comprising shareholders' equity, comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income, and compensation-related costs for equity-based compensation. Includes, but is not limited to, disclosure of policies, compensation plan details, equity-based arrangements to obtain goods and services, deferred compensation arrangements, and employee stock purchase plan details. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -URI http://asc.fasb.org/topic&trid=2208762 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -URI http://asc.fasb.org/topic&trid=2228938 + Details
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