AquaBounty Technologies Announces \$5 Million Series A Convertible Preferred Stock Offering and Exchange of Senior Notes

AquaBounty Technologies, Inc. (“AquaBounty” or “the Company”), listed on NASDAQ under ticker “AQB”, has filed a Form 8-K to announce a significant corporate development involving a new capital raise and material changes to the rights of its security holders.

Key Points of the Announcement

• Offering of Series A Convertible Preferred Stock: The Company is conducting a private offering of up to \$5 million in Series A Convertible Preferred Stock (“Series A Preferred”), designated specifically for this transaction. This Series A Preferred ranks senior to common stock and all other junior equity securities with respect to dividends and distributions upon liquidation, dissolution, or winding up.
• Exchange of Senior Notes: As part of the transaction, certain investors holding the Company’s Senior Notes issued under the Note Purchase Agreement dated October 28, 2025, will exchange these notes, including all accrued interest, for shares of Series A Preferred. The Senior Notes will be deemed paid in full and cancelled, and will not be re-issued, assigned, or resold.
• Pricing Mechanism: The exchange ratio for the amount of Series A Preferred shares issued to investors is determined by reference to the closing sale price of AquaBounty’s common stock on Nasdaq for the trading day immediately preceding the closing date.

Material Terms of the Series A Preferred Stock

• Dividend Rate: Series A Preferred accrues cumulative dividends at a robust rate of 18% per annum (calculated on Liquidation Value of \$18.2580 per share), payable bi-annually on the last day of October and April. Dividends may accumulate if not declared and paid, and will be paid in cash when declared and funds are available.
• Partial Dividend Payments: If the Company pays less than the full amount of accrued dividends, payments are distributed pro rata among holders.
• Conversion Rights: Series A Preferred is convertible into common stock according to specified terms. The conversion price and number of shares issuable are subject to anti-dilution adjustments to prevent dilution from stock splits, dividends, recapitalizations, or similar events.
• Voting Rights: Holders of Series A Preferred vote together with common shareholders as a single class, except as otherwise provided by law or the certificate of designations.
• Liquidation Preference: In the event of liquidation, Series A Preferred holders are entitled to receive the liquidation value before any payment to holders of junior securities.
• Redemption and Breach Remedies: Certain breaches, including failure to pay dividends, failure to make redemption or liquidation payments, breach of protective provisions, or bankruptcy/insolvency events, constitute a “Series A Preferred Stock Breach.” During a continuing breach, the dividend rate increases by 3% per annum. In case of bankruptcy or insolvency, all outstanding shares become subject to automatic redemption for the Series A redemption price.
• Anti-Dilution Protection: Conversion price and conversion shares are subject to adjustment for dividends, subdivisions, or combinations of common stock.
• No Reissuance: Any Series A Preferred shares redeemed, converted, or otherwise acquired are cancelled and not reissued.

Regulatory and Compliance Notes

• Exemption from Registration: The shares of Series A Preferred, as well as the common stock issuable upon conversion, are being issued in reliance on an exemption from registration under Section 4(a)(2) of the Securities Act of 1933 and/or Regulation D. The sale involved no general solicitation or advertising, and recipients are accredited investors acquiring for investment purposes.
• Nasdaq Listing Rule 5635(d): Any dividends settled in common stock must comply with Nasdaq’s listing rules concerning shareholder approval for equity issuances.
• Protective Provisions: The certificate of designations for Series A Preferred prevents the Company from increasing or decreasing the number of authorized shares of any series of Preferred Stock or issuing shares that rank superior to Series A without consent. The Company also cannot redeem or repurchase other capital stock except Series A or non-superior Preferred Stock.

Potential Price-Sensitive Information for Shareholders

• Material Modification of Security Holder Rights: The creation and issuance of Series A Preferred introduces new senior equity with substantial dividend and liquidation preferences, which could affect common shareholders by subordinating their claims and potentially diluting their voting power and economic interests.
• High Dividend Rate: The 18% dividend rate (plus potential breach increments) is significantly higher than typical rates, indicating both risk and reward, and may impact future earnings and cash flow available to common shareholders.
• Redemption on Breach or Bankruptcy: Automatic redemption and enhanced dividend rates during breaches or bankruptcy could trigger significant financial obligations for the Company.
• Conversion Mechanics and Anti-Dilution: The conversion features and anti-dilution provisions could result in substantial issuance of common stock, affecting the share count and possibly the market price, especially if conversion occurs at depressed prices.
• Exchange of Senior Notes: The cancellation of existing debt and its replacement with preferred equity alters the Company’s capital structure, which could impact leverage, risk profile, and creditworthiness.

Investor Takeaways

• The offering and note exchange represent a significant recapitalization, replacing debt with high-yield preferred equity.
• Preferred shareholders gain seniority, strong dividend rights, and protections, while common shareholders may face dilution and subordinated claims.
• The Company’s ability to service 18% annual dividends (plus 3% penalty for breaches) depends on its future profitability and liquidity.
• Any failure to comply with protective provisions or pay dividends could trigger severe consequences, including mandatory redemption and increased financial obligations.

Shareholders and investors should carefully monitor developments related to this offering, as the changes in capital structure, dividend obligations, and security holder rights are material and could significantly impact AquaBounty’s share price and investor returns.

Disclaimer: This article is for informational purposes only and does not constitute investment advice or a solicitation to buy or sell any securities. The information is based on AquaBounty Technologies’ public filings and may be subject to change. Investors should consult their own advisers and review all official documents before making investment decisions.

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