AquaBounty Technologies, Inc. — Q1 2017 Form 10-Q
Reporting period: Three months ended March 31, 2017. AquaBounty is developing biotechnology for aquaculture; its lead product, AquAdvantage Salmon, had received U.S. FDA approval in 2015 and Canadian sale and consumption approval in 2016. The filing reports no revenue for the quarter.
Financial results
| Metric | Q1 2017 | Q1 2016 |
|---|---|---|
| Revenue | Not reported | Not reported |
| Operating expenses | $2.049 million | $1.796 million |
| Operating loss | $2.049 million | $1.796 million |
| Net loss | $2.056 million | $1.819 million |
| Comprehensive loss | $2.070 million | $1.916 million |
| Basic and diluted loss per share | $0.24 | $0.35 |
| Net cash used in operating activities | $2.504 million | $1.955 million |
Sales and marketing expense was $208,000, research and development $720,000, and general and administrative expense $1.121 million. Operating and profit margins are not meaningful because the filing reports no revenue.
Cash and cash equivalents were $25.473 million at quarter-end, compared with $3.325 million at December 31, 2016. Total current assets were $25.941 million and current liabilities $803,000. Total debt was $2.805 million, including $18,000 current debt; $527,000 was interest-bearing debt, at fixed rates. Stockholders’ equity was $24.959 million.
Changes and cash flows
- Net loss increased 13% year over year; operating expenses rose 14%. G&A increased 44%, principally due to compensation, legal fees and taxes, including costs associated with the company’s NASDAQ listing. R&D fell 12%, reflecting spending timing and capitalization of Panama inventory costs.
- Operating cash use increased to $2.504 million. Investing cash use was $457,000, primarily for Rollo Bay farm construction and renovation, versus $13,000 in the prior-year quarter.
- Financing provided $25.110 million, chiefly from a January private placement of 2,421,073 shares to majority shareholder Intrexon for approximately $25 million net. The placement drove the increase in cash.
- The company adopted inventory accounting guidance and recorded $101,000 of inventory, comprising livestock and feed, after identifying a market for certain Panama livestock. It also implemented a 1-for-30 reverse share split in January; presented share figures reflect the split.
Outlook, risks and contingencies
Management said available cash and borrowing capacity should fund operations, planned capital expenditures and working capital through at least the next 12 months; the notes specify adequate funding through at least May 2018. Management also anticipates needing additional funds to complete commercialization. Potential funding sources include equity or debt, government or third-party funding, alliances and licensing, each of which could involve dilution, restrictions or relinquishment of rights.
The company was evaluating routes to commercialization, including Panama production, acquiring an existing North American facility, or building one. It said modest revenue could begin as early as Q4 2017 from Panama, depending on the chosen path, with more significant revenue expected after a new facility reaches full production. These are forward-looking expectations, not reported results. Plans include a proposed broodstock and 250-metric-ton RAS facility at Rollo Bay; the company had submitted an application to provincial authorities and had a further $900,000 committed to site renovations.
Key uncertainties include regulatory approvals and permits, commercial and consumer acceptance, production and facility execution, funding needs, intellectual-property protection and collaborations. A lawsuit challenging FDA approval of AquAdvantage Salmon was in discovery. The filing reported no material changes to previously disclosed commitments and contingencies or risk factors.
Investor verification points
- Whether any revenue began as anticipated and the status of the Panama pilot operation and North American facility plans.
- Actual cash burn, capital spending and financing needs relative to management’s stated runway.
- Progress and approvals for the Rollo Bay facilities, including the stated renovation commitment.
- Developments in the FDA-approval litigation and any further regulatory or market-access changes.
- Changes in spending, inventory valuation and debt or royalty repayment obligations as commercialization advances.