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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________

Form 10-Q

x  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________________ to _____________________

Commission File Number: 001-36426

____________

AquaBounty Technologies, Inc.

(Exact name of registrant as specified in its charter)

Delaware

04-3156167

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

233 Ayer Road, Suite 4

Harvard, Massachusetts 01451

(978) 648-6000

(Address and telephone number of the registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

AQB

The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  x    No  o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 (§232.405 of this chapter) of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes  x    No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

o

Accelerated filer

o

Non-accelerated filer

x

Smaller reporting company

x

Emerging growth company

o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  ¨    No x 

At May 13, 2024, the registrant had 3,857,444 shares of common stock, par value $0.001 per share (“Common Shares”) outstanding.

 

 

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. All statements other than present and historical facts and conditions contained in the Quarterly Report on Form 10-Q are forward-looking statements, including statements regarding our future results of operations and financial position, business strategy, plans, and our objectives for future operations, are forward-looking statements. We sometimes use the words “anticipate,” “believe,” “can,” “could,” “estimate,” “expect,” “intend,” “is designed to,” “may,” “might,” “plan,” “potential,” “predict,” “objective,” “should,” or the negative of these and similar expressions to identify forward-looking statements.

We have based these forward-looking statements on our current expectations, assumptions, estimates, and projections. While we believe these expectations, assumptions, estimates, and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks, uncertainties, and other factors, many of which are outside of our control, which could cause our actual results, performance, or achievements to differ materially from any results, performance, or achievements expressed or implied by such forward-looking statements. Among the important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are: our history of net losses and the likelihood of future net losses; our ability to continue as a going concern; our ability to raise substantial additional capital on acceptable terms, or at all, which is required to implement our business strategy as planned, or at all; our ability to raise additional funds in sufficient amounts on a timely basis, on acceptable terms, or at all; our ability to attract and retain key personnel, including key management personnel; our ability to retain and reengage key vendors and engage additional vendors, as needed; our ability to obtain approvals and permits to construct and operate our farms without delay; increases in interest rates; delays and defects that may prevent the commencement of farm operations; rising inflation rates; our ability to finance our Ohio farm through the placement of municipal bonds, which may require restrictive debt covenants that could limit our control over the farm’s operation and restrict our ability to utilize any cash that the farm generates; our ability to manage our growth, which could adversely affect our business; risks related to potential strategic acquisitions, investments or mergers; high customer concentration, which exposes us to various risks faced by our major customers; ethical, legal, and social concerns about genetically engineered products; our ability to gain consumer acceptance of our genetically engineered Atlantic salmon (“GE Atlantic salmon” or “AquAdvantage salmon”) product; the quality and quantity of the salmon that we harvest; a significant fish mortality event in our broodstock or our production facilities; the loss of our GE Atlantic salmon broodstock; disease outbreaks, which can increase the cost of production and/or reduce production harvests; a shutdown, material damage to any of our farms, or lack of availability of power, fuel, oxygen, eggs, water, or other key components needed for our operations; our ability to efficiently and cost-effectively produce and sell salmon at large commercial scale; any contamination of our products, which could subject us to product liability claims and product recalls; security breaches, cyber-attacks and other disruptions could compromise our information, expose us to fraud or liability, or interrupt our operations; our dependence on third parties for the processing, distribution, and sale of our products; any write-downs of the value of our inventory; business, political, or economic disruptions or global health concerns; adverse developments affecting the financial services industry; industry volatility, including fluctuations in commodity prices of salmon; restrictions on Atlantic salmon farming in certain states; agreements that require us to pay a significant portion of our future revenue to third parties; our ability to receive additional government research grants and loans; international business risks, including exchange rate fluctuations; our ability to use net operating losses and other tax attributes, which may be subject to certain limitations; our ability to maintain regulatory approvals for our GE Atlantic salmon and our farm sites and obtain new approvals for farm sites and the sale of our products in other markets; our ability to continue to comply with U.S. Food and Drug Administration regulations and foreign regulations; significant regulations in the markets in which we intend to sell our products; significant costs complying with environmental, health, and safety laws and regulations, and any failure to comply with these laws and regulations; increasing regulation, changes in existing regulations, and review of existing regulatory decisions; lawsuits by non-governmental organizations and others who are opposed to the development or commercialization of genetically engineered products; risks related to the use of the term “genetically engineered,” which will need to be included as part of the acceptable market name for our GE Atlantic salmon, and bioengineering disclosures provided in accordance with U.S. Department of Agriculture regulations; competitors and potential competitors may develop products and technologies that make ours obsolete or garner greater market share than ours; any theft, misappropriation, or reverse engineering of our products could result in competing technologies or products; our ability to protect our proprietary technologies and intellectual property rights; our ability to enforce our intellectual property rights; volatility in the price of our shares of common stock; our ability to maintain our listing on the Nasdaq Stock Market LLC (“Nasdaq”); our success in growing, or our perceived ability to grow, our GE Atlantic salmon successfully and profitably at commercial scale; an active trading market for our common stock may not be sustained; our status as a “smaller reporting company” and a “non-accelerated filer” may cause our shares of common stock to be less attractive to investors; any issuance of preferred stock with terms that could dilute the voting power or reduce the value of our common stock; provisions in our corporate documents and Delaware law could have the effect of delaying, deferring, or preventing a change in control of us; our expectation of not paying cash dividends in the foreseeable future and other risks identified in our public filings with the Securities and Exchange Commission (“SEC”), including the section titled “Risk Factors” in this Quarterly Report on Form 10-Q, our most recently filed Annual Report on Form 10-K and our Current Reports on Form 8-K, as updated by our subsequent filings with the SEC. New risks emerge from time to time, and it is not possible for us to predict all such risks. Given these risks and uncertainties, may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you are cautioned not to place undue reliance on such forward-looking statements.

These forward-looking statements are made only as of the date of this Quarterly Report on Form 10-Q. We do not undertake and specifically decline any obligation to update any such statements or to publicly announce the results of any revisions to any such statements to reflect future events or developments unless required by federal securities law.

Reverse Stock Split

On October 12, 2023, the stockholders of the Company approved a reverse stock split of the Company’s common stock, and the Board of Directors approved a split ratio of 1-for-20. The reverse stock split was implemented on October 16, 2023. In conjunction with the reverse stock split, the number of shares of common stock authorized for issuance was reduced from 150 million to 75 million. All share and per share information, as well as other related information on equity instruments in this Quarterly Report on Form 10-Q have been adjusted to reflect this change.

PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements

 

AquaBounty Technologies, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

as of

March 31, 2024

December 31, 2023

Assets

Current assets:

Cash and cash equivalents

$

2,592,467

$

8,203,869

Inventory

472,087

1,733,603

Prepaid expenses and other current assets

1,262,582

1,700,273

Total current assets

4,327,136

11,637,745

Property, plant and equipment, net

170,336,285

174,381,382

Right of use assets, net

273,575

281,104

Intangible assets, net

201,010

204,436

Restricted cash

1,000,000

1,000,000

Other assets

46,051

46,761

Total assets

$

176,184,057

$

187,551,428

Liabilities and stockholders' equity

Current liabilities:

Accounts payable and accrued liabilities

$

13,106,204

$

12,991,819

Accrued employee compensation

556,963

754,621

Current debt

3,024,575

795,300

Other current liabilities

106,112

30,863

Total current liabilities

16,793,854

14,572,603

Long-term lease obligations

242,236

250,241

Long-term debt, net

5,300,649

7,711,866

Total liabilities

22,336,739

22,534,710

Commitments and contingencies

 

 

Stockholders' equity:

Common stock, $0.001 par value, 75,000,000 shares authorized;

3,857,444 and 3,847,022 shares outstanding at March 31, 2024 and

December 31, 2023, respectively

3,857

3,847

Additional paid-in capital

386,103,358

385,998,213

Accumulated other comprehensive loss

(521,771)

(405,464)

Accumulated deficit

(231,738,126)

(220,579,878)

Total stockholders' equity

153,847,318

165,016,718

Total liabilities and stockholders' equity

$

176,184,057

$

187,551,428

See accompanying notes to these condensed consolidated financial statements.

 

AquaBounty Technologies, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

Three Months Ended
March 31,

2024

2023

Revenues

Product revenues

$

477,268

$

397,846

Costs and expenses

Product costs

4,476,297

3,559,240

Sales and marketing

63,963

198,285

Research and development

119,789

122,917

General and administrative

2,500,557

3,000,482

Long-lived asset impairment

4,265,000

Total costs and expenses

11,425,606

6,880,924

Operating loss

(10,948,338)

(6,483,078)

Other expense

Interest expense

(208,563)

(66,274)

Other (expense) income, net

(1,347)

63,284

Total other expense

(209,910)

(2,990)

Net loss

$

(11,158,248)

$

(6,486,068)

Other comprehensive (loss) income:

Foreign currency translation (loss) gain

(116,307)

4,427

Total other comprehensive (loss) income

(116,307)

4,427

Comprehensive loss

$

(11,274,555)

$

(6,481,641)

Basic and diluted net loss per share

$

(2.90)

$

(1.69)

Weighted average number of Common Shares -

basic and diluted

3,849,248

3,837,272

See accompanying notes to these condensed consolidated financial statements.

 

AquaBounty Technologies, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)

Common stock issued and outstanding

Par value

Additional paid-in capital

Accumulated other comprehensive loss

Accumulated deficit

Total

Balance at December 31, 2022

3,834,383

$

3,834

$

385,455,961

$

(516,775)

$

(193,021,977)

$

191,921,043

Net loss

(6,486,068)

(6,486,068)

Other comprehensive income

4,427

4,427

Share-based compensation

11,423

12

196,629

196,641

Balance at March 31, 2023

3,845,806

$

3,846

$

385,652,590

$

(512,348)

$

(199,508,045)

$

185,636,043

Common stock issued and outstanding

Par value

Additional paid-in capital

Accumulated other comprehensive loss

Accumulated deficit

Total

Balance at December 31, 2023

3,847,022

$

3,847

$

385,998,213

$

(405,464)

$

(220,579,878)

$

165,016,718

Net loss

(11,158,248)

(11,158,248)

Other comprehensive loss

(116,307)

(116,307)

Share-based compensation

10,422

10

105,145

105,155

Balance at March 31, 2024

3,857,444

$

3,857

$

386,103,358

$

(521,771)

$

(231,738,126)

$

153,847,318

See accompanying notes to these condensed consolidated financial statements.


AquaBounty Technologies, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Three Months Ended
March 31,

2024

2023

Operating activities

Net loss

$

(11,158,248)

$

(6,486,068)

Adjustment to reconcile net loss to net cash used in

operating activities:

Depreciation and amortization

575,544

531,726

Share-based compensation

105,155

196,641

Long-lived asset impairment

4,265,000

Other non-cash charge

3,390

3,834

Changes in operating assets and liabilities:

Inventory

1,257,290

(99,936)

Prepaid expenses and other assets

441,015

(155,167)

Accounts payable and accrued liabilities

335,835

184,232

Accrued employee compensation

(197,658)

(316,815)

Net cash used in operating activities

(4,372,677)

(6,141,553)

Investing activities

Purchases of and deposits on property, plant and equipment

(1,169,203)

(22,931,293)

Other investing activities

(3,959)

Net cash used in investing activities

(1,169,203)

(22,935,252)

Financing activities

Proceeds from issuance of debt

117,292

394,156

Repayment of term debt

(184,019)

(179,392)

Net cash (used in) provided by financing activities

(66,727)

214,764

Effect of exchange rate changes on cash, cash equivalents and restricted cash

(2,795)

27

Net change in cash, cash equivalents and restricted cash

(5,611,402)

(28,862,014)

Cash, cash equivalents and restricted cash at beginning of period

9,203,869

102,638,557

Cash, cash equivalents and restricted cash at end of period

$

3,592,467

$

73,776,543

Reconciliation of cash, cash equivalents and restricted cash reported

in the consolidated balance sheet:

Cash and cash equivalents

$

2,592,467

$

72,776,543

Restricted cash

1,000,000

1,000,000

Total cash, cash equivalents and restricted cash

$

3,592,467

$

73,776,543

Supplemental disclosure of cash flow information and non-cash transactions:

Interest paid in cash

$

205,173

$

62,439

Property and equipment included in accounts payable and accrued liabilities

$

11,464,684

$

9,216,027

See accompanying notes to these condensed consolidated financial statements.

 

AquaBounty Technologies, Inc.

Notes to the condensed consolidated financial statements

(unaudited)

 

1. Nature of business and organization

AquaBounty Technologies, Inc. (the “Parent” and, together with its wholly owned subsidiaries, the “Company”) was incorporated in December 1991 in the State of Delaware for the purpose of conducting research and development of the commercial viability of a group of proteins commonly known as antifreeze proteins. In 1996, the Parent obtained the exclusive licensing rights for a gene construct (transgene) used to create a breed of farm-raised Atlantic salmon that exhibit growth rates that are substantially faster than conventional Atlantic salmon. In 2015, the Parent obtained regulatory approval from the U.S. Food and Drug Administration (“FDA”) for the production and sale of its genetically engineered AquAdvantage salmon product (“GE Atlantic salmon”) in the United States, and in 2016, the Parent obtained regulatory approval from Health Canada for the production and sale of its GE Atlantic salmon product in Canada. In 2021, the Parent obtained regulatory approval from the National Biosafety Technical Commission for the sale of its GE Atlantic salmon product in Brazil. In 2021, the Company began harvesting and selling its GE Atlantic salmon in the United States and Canada.

In February 2024, the Company commenced a process to identify a potential buyer for its Indiana farm. This decision resulted in a $4.3 million non-cash impairment of long-lived assets and a $1.0 million net realizable value adjustment of inventory at the Indiana farm. As of March 31, 2024, the Indiana farm was not available for immediate sale in its present condition, as the Company needs to complete additional system shut down processes. Therefore, the related long-lived assets continued to be classified as held in use.

2. Going Concern Uncertainty

Since inception, the Company has incurred cumulative net losses and negative cash flows from operations and expects that this will continue for the foreseeable future. As of March 31, 2024, the Company has $3.6 million in cash and cash equivalents, and restricted cash.

The Company’s ability to continue as a going concern is dependent upon its ability to raise additional capital, and there can be no assurance that such capital will be available in sufficient amounts, on a timely basis, or on terms acceptable to the Company, or at all. This raises substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the accompanying condensed consolidated financial statements are issued. The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business and do not include any adjustments that might result from the outcome of this uncertainty. Until such time as the Company reaches profitability, it will require additional financing to fund its operations and execute its business plan.

3. Basis of presentation

The unaudited interim condensed consolidated financial statements include the accounts of AquaBounty Technologies, Inc. and its wholly owned direct subsidiaries. All intercompany transactions and balances have been eliminated upon consolidation.

The unaudited interim condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States (“GAAP”) consistent with those applied in, and should be read in conjunction with, the Company’s audited financial statements and related notes for the year ended December 31, 2023. The unaudited interim condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the Company’s financial position as of March 31, 2024, results of operations and cash flows for the interim periods presented, and are not necessarily indicative of results for subsequent interim periods or for the full year. The unaudited interim condensed consolidated financial statements do not include all of the information and notes required by GAAP for complete financial statements, as allowed by the relevant SEC rules and regulations; however, the Company believes that its disclosures are adequate to ensure that the information presented is not misleading.

On October 12, 2023, the stockholders of the Company approved a reverse stock split of the Company’s common stock, and the Board of Directors approved a split ratio of 1-for-20. The reverse stock split was implemented on October 16, 2023. In conjunction with the reverse stock split, the number of shares of common stock authorized for issuance was reduced from 150 million to 75 million. All share and per share information, as well as other related information on equity instruments in the unaudited condensed consolidated financial statements and accompanying notes have been adjusted to reflect this change.

Revenue recognition

The Company is comprised of one reporting segment and generates revenue from the sale of its products. Revenue is recognized when the customer takes physical control of the goods, in an amount that reflects the transaction price consideration that the Company expects to receive in exchange for the goods. Revenue excludes any sales tax collected and includes any estimate of future credits.

During the three months ended March 31, 2024, the Company recognized the following product revenue:

Three Months Ended March 31, 2024

U.S.

Canada

Total

GE Atlantic salmon

$

395,157

$

-

$

395,157

Non-GE Atlantic salmon and fry

29,789

29,789

Non-GE Atlantic salmon eggs

50,402

50,402

Other revenue

1,920

1,920

Total Revenue

$

395,157

$

82,111

$

477,268

During the three months ended March 31, 2023, the Company recognized the following product revenue:

Three Months Ended March 31, 2023

U.S.

Canada

Total

GE Atlantic salmon

$

392,428

$

-

$

392,428

Non-GE Atlantic salmon and fry

730

730

Non-GE Atlantic salmon eggs

-

730

730

Other revenue

-

3,958

3,958

Total Revenue

$

392,428

$

5,418

$

397,846

During the three months ended March 31, 2024 and 2023, the Company had the following customer concentration of revenue:

Three Months Ended March 31,

2024

2023

Customer A

29%

54%

Customer B

28%

24%

Customer C

10%

15%

All other

33%

7%

Total of all customers

100%

100%

Net loss per share

Basic and diluted net loss per share available to common stockholders has been calculated by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Basic net loss per share is based solely on the number of shares of common stock outstanding during the period. Fully diluted net loss per share includes the number of shares of common stock issuable upon the exercise of warrants or options with an exercise price less than the fair value of the common stock. Since the Company is reporting a net loss for all periods presented, all potential shares of common stock are considered anti-dilutive and are excluded from the calculation of diluted net loss per share.

The following potentially dilutive securities have been excluded from the calculation of diluted net loss per share, as their effect is anti-dilutive: