Stockholders' Equity

12 Months Ended

Dec. 31, 2020

8. Stockholders’ equity

The Company’s shareholders have authorized 85 million shares of stock, of which 5 million are authorized as preferred stock and 80 million as common stock. At December 31, 2020, the Company had zero shares (2019: zero) of preferred stock and 55,497,133 shares (2019: 21,635,365) of common stock, issued and outstanding.

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.

Recent issuances

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. Precigen, the Company’s then 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. Precigen participated in the exercise, converting warrants for the issuance of 1,538,461 Common Shares, resulting in gross proceeds of $3.1 million.

During 2018, the Company issued 249,824 Common Shares in conjunction with the exercise of warrants, with total proceeds of $0.8 million.

During 2019, the Company issued 83,564 Common Shares in connection with the exercise of warrants, with total proceeds of $0.3 million.

On March 21, 2019, the Company completed a public offering of 3,345,282 Common Shares for net proceeds of approximately $6.6 million.

On April 5, 2019, the Company completed a public offering of 2,554,590 Common Shares for net proceeds of approximately $5.1 million. On April 17, 2019, the Company issued 346,488 Common Shares in conjunction with the over-allotment exercise of its underwriters for net proceeds of approximately $0.7 million.

On May 6, 2020, the Company issued 20,000 restricted common shares to a consultant. The Company recorded a charge of $41 thousand in conjunction with the share issuance.

On August 7, 2020, the Company completed a public offering of 11,000,000 Common Shares for net proceeds of approximately $25.8 million. On August 17, 2020, the Company issued 1,650,000 Common Shares in conjunction with the over-allotment exercise of its underwriters for net proceeds of approximately $3.9 million.

On December 14, 2020, the Company completed a public offering of 10,028,000 Common Shares for net proceeds of approximately $60.4 million.

During 2020, the Company issued 713,449 Common Shares in connection with the exercise of warrants, with total proceeds of $2.3 million.

On February 8, 2021, the Company completed a public offering of 14,950,000 Common Shares for net proceeds of approximately $119.2 million.

Warrants

The following table summarizes information about outstanding warrants at December 31, 2020:



	Number of ‎warrants	Weighted ‎average ‎exercise price
Outstanding at December 31, 2019	1,662,304	$	3.25
Exercised	(713,449)		3.25
Outstanding at December 31, 2020	948,855	$	3.25
Exercisable at December 31, 2020	948,855	$	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 2016 Plan was approved by the Company’s shareholders at its Annual Meeting on April 26, 2016 and the aggregate number of shares of common stock that were to be issued pursuant to awards granted under the 2016 Plan could not exceed 450,000. At the April 30, 2019, Annual Meeting, an additional 450,000 shares of common stock that may be issued pursuant to awards granted under the 2016 Plan were authorized, for a total of 900,000. At the April 28, 2020, Annual Meeting, an additional 1,000,000 shares of common stock that may be issued pursuant to awards granted under the 2016 Plan were authorized, for a total of 1,900,000.

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, 2019	39,900	$	2.31
Granted	100,319		1.88
Vested	(67,566)		2.12
Unvested at December 31, 2020	72,653	$	1.90

During 2020, the Company expensed $186 thousand (2019: $385 thousand; 2018: $27 thousand) related to restricted stock awards. At December 31, 2020, the balance of unearned share-based compensation to be expensed in future periods related to the restricted stock awards is $95 thousand. 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, 2019	573,925	$	4.94
Issued	104,458		1.99
Expired	(20,969)		11.04
Outstanding at December 31, 2020	657,414	$	4.28
Exercisable at December 31, 2020	598,139	$	4.51

Unless otherwise indicated, options issued to employees, members of the Board of Directors, and non-employees are vested over one year 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 2020 was $1.49 (2019: $1.62; 2018: 2.50.). There were no options exercised in 2020, 2019 or 2018. The total intrinsic value of options exercised in 2020, 2019 and 2018 was $0. At December 31, 2020, the total intrinsic value of all options outstanding was $3.6 million (2019: $1 thousand; 2018: $0), the total intrinsic value of exercisable options was $3.2 million (2019: $1 thousand; 2018 $0), and the total number of shares available for grant under the 2016 Plan was 996,767 (2019: 198,034; 2018: 268,138).

The following table summarizes information about options outstanding and exercisable at December 31, 2020:


Weighted		Weighted		Weighted average
average exercise	Number of	average remaining	Number of	price of outstanding
price of outstanding	options	estimated life	options	and exercisable
options	outstanding	(in years)	exercisable	options
$1.88 - $2.50	531,519	8.3	472,244
$3.30 - $6.90	33,805	1.3	33,805
$7.50 - $10.80	20,503	3.5	20,503
$14.20 - $23.40	71,587	5.3	71,587
	657,414		598,139	$4.51

The fair values of stock option grants to employees and members of the Board of Directors during 2020, 2019, and 2018 were measured on the date of grant using Black-Scholes, with the following weighted average assumptions:



	2020	2019		2018
Expected volatility	101% - 104%		89% - 100%		81%
Risk free interest rate	0.31% - 1.67%		1.55% - 2.85%		2.60%
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 $251 thousand in 2020 (2019: $487 thousand; 2018: $236 thousand). At December 31, 2020, the balance of unearned share-based compensation to be expensed in future periods related to

unvested share-based awards is $84 thousand. The period over which the unearned share-based compensation is expected to be earned is 2.5 years.

In June 2019, the Company recognized share based compensation of $134 thousand related to the accelerated vesting and exercisable term change for options to purchase an aggregate of 153,940 shares for the Company’s former CEO, who retired June 30, 2019. Each option granted was revalued as of June 30, 2019, using the following Black-Scholes values to determine the incremental charges for the option modification: expected volatility of 97%, risk free interest rate of 1.71% to 1.92%, expected dividend yield of 0.0%, and expected life of 1.5 to 5 years.

The following table summarizes the expense related to the options revalued in June 2019:


Grant date	Number of options	Previous		Accelerated		Incremental		Total
1/11/2011	16,667	$	109,769	$	—	$	11,782	$	121,551
1/20/2014	6,667		120,712		—		7,621		128,333
2/27/2018	60,606		99,738		—		12,313		112,051
4/21/2017	20,000		70,346		20,736		13,485		104,567
4/30/2019	50,000		13,453		67,047		1,274		81,774
	153,940	$	414,018	$	87,783	$	46,475	$	548,276

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, 2020, 2019, and 2018:



		2020	2019		2018
Research and development	$	497	$	3,127	$	3,238
Sales and marketing		—		12,578		—
General and administrative		436,194		856,472		260,158
Total share-based compensation	$	436,691	$	872,177	$	263,396