Annual report pursuant to Section 13 and 15(d)

Stockholders' Equity

v3.21.1
Stockholders' Equity
12 Months Ended
Dec. 31, 2020
Stockholders’ Equity  
Stockholders' Equity

11.        Stockholders’ Equity

Authorized Capital

Heat has authorized 10,000,000 shares of Preferred Stock (par value $0.0001) as of December 31, 2020 and 2019. As of December 31, 2020 and 2019, there were no outstanding shares of Preferred Stock.

Heat had 250,000,000 shares and 100,000,000 shares of common stock (par value $0.0002) authorized as of December 31, 2020 and 2019. On March 20, 2020, an amendment to the Company’s third amended and restated certificate of incorporation to increase the authorized shares of common stock to 250,000,000 was filed. On December 10, 2020, Heat announced a reverse stock split of its shares of common stock at a ratio of 1-for-7. The reverse stock split took effect as of 12:01 a.m. ET on December 11, 2020, to trade on a post-split basis at the market open on December 11, 2020. During the Company’s annual shareholder meeting held February 27, 2020, shareholders approved the Company’s reverse stock split, and granted the board of directors the authority to implement and determine the exact split ratio. When the reverse stock split became effective, every 7 shares of the Company’s issued and outstanding common stock were combined into one share of common stock. Effecting the reverse stock split reduced the number of issued and outstanding common stock from approximately 159.8 million shares to approximately 22.8 million. As of December 31, 2020, and 2019,  22,592,500 and 4,826,565  common stock shares were issued and outstanding.

Underwritten Registered Offering

On January 21, 2020, the Company closed on a public offering consisting of 2,857,142 shares of common stock together with Warrants to purchase 1,428,571 shares of common stock. The gross proceeds to the Company from this offering were approximately $7,000,000, before deducting underwriting discounts, commissions, and other offering expenses.

The Company has accounted for the warrants as liabilities and recorded them at fair value in our consolidated balance sheets (see Note 2).

At-The-Market-Offering

From January 1, 2020 to December 31, 2020 the Company sold approximately 13,175,677 shares of common stock under the Common Stock Sales Agreement, and the Amended and Restated Common Stock Sales Agreement, at an average price of approximately $8.69 per share, raising aggregate net proceeds of approximately $114.4 million, after deducting an aggregate commission up to 3%.

Common Stock Warrants

In connection with the November 26, 2018 public offering, the Company issued 657,142 common stock warrants each of which are exercisable for one share of common stock. The common stock warrants have an exercise price of $11.55 per share and expire five years from the issuance date. The warrants have been accounted for as equity instruments.

In connection with the May 7, 2018 public offering, the Company issued 1,357,142 pre-funded warrants and 1,026,785 common stock warrants each of which are exercisable for one share of common stock. The pre-funded warrants had an exercise price of $0.07 per share and as of December 31, 2019 all pre-funded warrants have been exercised. The common stock warrants have an exercise price of $11.09 per share and expire five years from the issuance date. As of December 31, 2020,  497,094 common stock warrants have been exercised. The warrants have been accounted for as equity instruments.

In connection with the March 23, 2016 public offering, the Company issued warrants to purchase 97,500 shares of common stock with an exercise price of $70.00 per share that expire five years from the issuance date. In connection with the Company’s July 23, 2013 initial public offering, the Company issued warrants to the underwriters for 1,785 shares of common stock issuable at $875.00 per share which expired July 22, 2018. On March 10, 2011, the Company issued warrants to purchase shares of common stock to third parties in consideration for a private equity placement transaction of which 248 warrants remain outstanding. The warrants have an exercise price of $33.60 per share and expire ten years from the issuance date.

During the year ended December 31, 2020,  1,959,735 common stock warrants have been exercised and exchanged and no common stock warrants expired. No warrants were issued or exercised during the same period in 2019.

The Company has a total of 758,939 warrants outstanding at a weighted average exercise price of $14.57 to purchase its common stock as of December 31, 2020. These warrants are summarized as follows:

 

 

 

 

 

 

 

 

 

Issuance Date

    

Number of Shares

    

Exercise Price

    

Expiration Date

3/10/2011

 

248

 

$

33.60

 

3/10/2021

3/23/2016

 

42,308

 

$

70.00

 

3/23/2021

5/7/2018

 

403,025

 

$

11.09

 

5/8/2023

11/26/2018

 

313,358

 

$

11.55

 

11/26/2023

 

The following table summarizes the warrant activity of the Company’s common stock warrants. There were no changes in the Company’s outstanding warrants during 2019:

 

 

 

 

 

    

Common Stock 

 

 

Warrants

Outstanding, December 31, 2019

 

1,290,103

Issued

 

1,428,571

Exercised

 

(1,489,497)

Exchanged

 

(470,238)

Outstanding, December 31, 2020

 

758,939

 

Equity Compensation Plans

2009 Stock Incentive Plan

In 2009, the Company adopted the Heat Biologics, Inc. 2009 Stock Option Plan (the “2009 Plan”), under which stock options to acquire 21,739 common shares could be granted to key employees, directors, and independent contractors. Under the 2009 Plan, both incentive and non-qualified stock options could be granted under terms and conditions established by the Board of Directors. The exercise price for incentive stock options was the fair market value of the related common stock on the date the stock option was granted. Stock options granted under the 2009 Plan generally have terms of 10 years and have various vesting schedules.

The Company amended the 2009 Stock Option Plan and all related addendum agreements in April 2011. This second amendment increased the number of shares available for issuance from 21,739 to 65,217. The Company amended the 2009 Plan to increase the number of shares available for issuance to 86,957. The 2009 Plan expired in September 2019, however all options outstanding at the time of expiration remained outstanding and exercisable by their term. As of December 31, 2020 and 2019, there were 6,378 and 6,752 stock options outstanding under the 2009 Plan, respectively.

2014 Stock Incentive Plan

In June 2014, the stockholders approved the Heat Biologics, Inc. 2014 Stock Option Plan (the “2014 Plan”), under which the Company is authorized to grant 50,000 awards in the form of both incentive and non-qualified stock options, restricted stock, stock appreciation rights and other stock-based awards with terms established by the Compensation Committee of the Board of Directors which has been appointed by the Board of Directors to administer the 2014 Plan. In 2015, the stockholders approved an amendment to the Plan to increase the number of shares by 60,000 and in 2016, the stockholders approved an amendment that allowed the Company to grant up to 300,000 awards in total. As of December 31, 2020 and 2019, there were 30,354 and 32,610 stock options outstanding under the 2014 Plan, respectively.

2017 Stock Incentive Plan

In June 2017, the stockholders approved the Heat Biologics, Inc. 2017 Stock Incentive Plan (the “2017 Plan”), under which the Company is authorized to grant 500,000 awards in the form of both incentive and non-qualified stock options, restricted stock, stock appreciation rights and other stock-based awards with terms established by the Compensation Committee of the Board of Directors which has been appointed by the Board of Directors to administer the 2017 Plan. As of December 31, 2020 and 2019 there were 42,932 and 49,340 stock options outstanding under the 2017 Plan, respectively.

2018 Stock Incentive Plan

In October 2018, the stockholders approved the Heat Biologics, Inc. 2018 Stock Incentive Plan (the “2018 Plan”), under which the Company is authorized to grant 4,000,000 awards in the form of both incentive and non-qualified stock options, restricted stock, stock appreciation rights and other stock-based awards with terms established by the Compensation Committee of the Board of Directors which has been appointed by the Board of Directors to administer the 2018 Plan. At our 2019 Annual Meeting of Stockholders, the stockholders approved an amendment to the 2018 Plan to increase the number of shares by 4,000,000. As of December 31, 2020 and 2019 there were 1,400,475 and 532,752 stock options outstanding under the 2018 plan, respectively.

 

There are 1,788,730 stock options remaining available for grant under the 2009 Plan, 2014 Plan, 2017 Plan and 2018 Plan (collectively, the “Plans”). The following table summarizes the components of the Company’s stock-based compensation included in net loss:

 

 

 

 

 

 

 

 

 

 

For the years ended 

 

 

December 31, 

 

    

2020

    

2019

Employee stock options

 

$

4,966,596

 

$

1,349,089

Non-employee stock options

 

 

158,963

 

 

351,812

Employee stock awards

 

 

1,072,506

 

 

1,243,526

Non-employee stock awards

 

 

179,792

 

 

325,521

 

 

$

6,377,857

 

$

3,269,948

 

Accounting for Stock-Based Compensation:

Stock Compensation Expense - For the years ended December 31, 2020, and 2019, we recorded $6,377,857, and $3,269,948 of stock-based compensation expense, respectively. No compensation expense of employees with stock awards was capitalized during the years ended December 31, 2020 and 2019.

Stock Options - Under the Plans, we have issued stock options. A stock option granted gives the holder the right, but not the obligation to purchase a certain number of shares at a predetermined price for a specific period of time. We typically issue options that vest over four years in equal installments beginning on the first anniversary of the date of grant. Under the terms of the Plans, the contractual life of the option grants may not exceed ten years. During the years ended December 31, 2020, and 2019, we issued options that expire ten years from the date of grant.

Fair Value Determination -  We have used the Black-Scholes-Merton option pricing model to determine fair value of our stock option awards on the date of grant. We will reconsider the use of the Black-Scholes-Merton model if additional information becomes available in the future that indicates another model would be more appropriate or if grants issued in future periods have characteristics that cannot be reasonably estimated under this model.

 

The following weighted-average assumptions were used for option grants during the years ended December 31, 2020 and 2019:

 

·

Volatility –  The Company used an average historical stock price volatility of its own data plus an analysis of reported data for a peer group of comparable companies that have issued stock options with substantially similar terms.

 

·

Expected life of optionsThe expected term represents the period that the Company’s stock option grants are expected to be outstanding. The Company elected to utilize the “simplified” method to estimate the expected term. Under this approach, the weighted-average expected life is presumed to be the average of the vesting term and the contractual term of the option.

 

·

Risk-free interest rateThe rate is based on U.S. Treasury interest rates at the time of the grant whose term is consistent with the expected life of the stock options. 

 

·

Dividend yieldThe expected dividend yield was considered to be 0% in the option pricing formula since the Company had not paid any dividends and had no plan to do so in the future.

 

·

ForfeituresAs required by ASC 718, the Company reviews recent forfeitures and stock compensation expense. We account for forfeitures as they occur.

The following table summarizes assumptions used in our calculations of fair value for the years ended December 31, 2020 and 2019:

 

 

 

 

 

 

 

 

 

    

2020

 

 

2019

 

Dividend yield

 

 —

%  

 

 —

%

Expected volatility

 

83.13-101.68

%  

 

89.59-91.03

%

Risk-free interest rate

 

0.26-1.69

%  

 

1.63-2.52

%

Expected lives (years)

 

5.0-6.3

years

 

5.4-6.3

years

 

Stock Option Activity -  The weighted-average grant date fair value of options granted during the years ended December 31, 2020 and 2019, as determined under the Black-Scholes valuation model, was $5.92 and $5.27, respectively.

 

The following table summarizes stock option activity for the years ended December 31, 2020 and 2019:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

Weighted

 

 

 

Weighted

 

 

 

 

Average

 

Aggregate

 

Average

 

 

 

 

Exercise

 

Intrinsic

 

Remaining

 

 

Shares

 

Price

 

Value

 

Contractual Life

Stock options outstanding at December 31, 2018

 

66,422

 

$

81.15

 

$

 —

 

 

 

Granted

 

417,120

 

 

7.21

 

 

 

 

 

 

Exercised

 

(285)

 

 

7.42

 

$

 —

 

 

 

Cancelled and expired

 

(45,654)

 

 

12.33

 

 

 

 

 

 

Stock options outstanding at December 31, 2019

 

437,603

 

$

17.90

 

$

44,196

 

 

 

Granted

 

1,167,749

 

 

7.90

 

 

 

 

 

 

Exercised

 

(7,140)

 

 

3.99

 

$

9,813

 

 

 

Forfeited/Expired

 

(118,073)

 

 

5.80

 

 

 

 

 

 

Stock options outstanding at December 31, 2020

 

1,480,139

 

$

11.05

 

$

403,744

 

8.6

Years

Stock options exercisable at December 31, 2020

 

871,721

 

$

14.74

 

$

120,993

 

8.1

Years

 

Unrecognized compensation expense related to unvested stock options was $2.4 million as of December 31, 2020, which is expected to be recognized over a weighted-average period of 1.75 years and will be adjusted for forfeitures as they occur.

 

Restricted Stock - Under the Plans,  the Company has issued restricted stock. A restricted stock award is an issuance of shares that cannot be sold or transferred by the recipient until the vesting period lapses. Restricted stock issued to members of our Board of Directors and Executives vest 50% on grant date, 30% on the first anniversary and 10% each anniversary thereafter. The grant date fair value of the restricted stock is equal to the closing market price of the Company’s common stock on the date of grant.

Restricted Stock Activity - The following table summarizes the restricted stock activity during the years ended December 31, 2020 and 2019:

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

Average

 

 

Shares

 

Fair Value

Restricted stock at December 31, 2018

 

 —

 

$

 —

Granted

 

354,165

 

 

5.97

Vested

 

(168,272)

 

 

5.90

Cancelled

 

(6,388)

 

 

7.42

Restricted stock at December 31, 2019

 

179,505

 

$

5.99

Granted

 

339,999

 

 

3.22

Vested

 

(275,115)

 

 

4.27

Cancelled

 

(4,461)

 

 

7.42

Restricted stock at December 31, 2020

 

239,928

 

$

4.02

 

RSUs - Under the Plans,  the Company has time-based RSUs. RSUs are not actual shares, but rather a right to receive shares in the future. The shares are not issued and the employee cannot sell or transfer shares prior to vesting and has no voting rights until the RSUs vest. The employees' time-based RSUs will result in the delivery of shares in one-fourth increments commencing on the award date. The grant date fair value of the RSUs is equal to the closing market price of the Company’s common stock on the grant date. The Company recognizes the grant date fair value of RSUs of shares it expects to issue as compensation expense ratably over the requisite service period.

 

The following table summarizes the RSU activity during the years ended December 31, 2020 and 2019:

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

Average

 

 

Shares

 

Fair Value

RSUs at December 31, 2018

 

8,073

 

$

33.78

Vested

 

(3,104)

 

 

37.37

Cancelled

 

(678)

 

 

39.44

RSUs at December 31, 2019

 

4,291

 

$

30.29

Vested

 

(2,342)

 

 

33.15

Cancelled

 

(49)

 

 

36.57

RSUs at December 31, 2020

 

1,900

 

$

26.60