AquaBounty Technologies, Inc. — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. AquaBounty develops and sells land-raised Atlantic salmon, including genetically engineered (GE) salmon, and is developing a large-scale farm in Ohio. Commercial sales began in 2021.
Financial performance and position
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $653,000 | $455,000 | $2.686 million | $757,000 |
| Operating loss | $5.537 million | $6.815 million | $16.211 million | $16.079 million |
| Net loss | $5.440 million | $6.865 million | $16.088 million | $16.254 million |
| Net loss per share | $0.08 | $0.10 | $0.23 | $0.24 |
- Nine-month revenue rose 255%, principally from higher GE salmon sales; GE salmon revenue was $2.535 million. Q3 revenue increased 44% year over year.
- Product costs were $3.518 million in Q3 and $10.044 million for nine months, exceeding revenue in both periods. Costs include inventory valuation charges of $2.2 million for Q3 and $6.3 million for nine months, compared with $3.6 million and $6.8 million, respectively, in 2021.
- Cash used in operations was $17.953 million for nine months, versus $15.111 million a year earlier. Capital spending and deposits on property and equipment were $44.883 million.
- Net cash from investing was $56.943 million, primarily reflecting maturity and reinvestment activity in marketable securities; it included $149.435 million of maturities and $47.621 million of purchases. Financing activities used $435,000, compared with $121.331 million provided in 2021, when the company raised equity.
- At September 30, cash and cash equivalents were $127.009 million, restricted cash was $1.0 million, and marketable securities were zero after all remaining investments matured. Current assets were $133.154 million and current liabilities $17.055 million.
- Total debt was $8.383 million, including $709,597 current debt; long-term debt, net of issuance costs, was $7.617 million. Stockholders’ equity was $197.808 million.
Changes, outlook, and risks
- Revenue growth reflected higher GE salmon harvest and sales, improved yields, and higher market prices. Management expects 2022 revenue to grow modestly or slowly, with seasonal demand and market-price fluctuations affecting results.
- Management raised the Ohio farm construction estimate to $375–$395 million from an earlier estimate exceeding $320 million, citing inflation and higher contractor bids. More than $60 million had been invested; the company plans to use cash and debt financing and is exploring ways to reduce the project cost. The filing does not give a clear completion date or committed financing sufficient to fund the project.
- Management said available uncommitted cash and the ability to manage construction timing should cover requirements beyond the next 12 months from the filing date. It also cautioned that additional financing will be needed to fund operations and execute its business plan before reaching positive operating cash flow.
- Inflation has increased supply, transport, wage, and construction costs. COVID-related and other labor, vendor, equipment, and supply-chain disruptions may further delay construction or limit production. Farm permitting, regulatory approvals, customer acceptance, financing availability, interest rates, and construction overruns are additional risks.
- On October 31, 2022, Nasdaq notified the company that its share price had been below the $1 minimum bid for 30 consecutive business days. It had until May 1, 2023, to regain compliance; delisting was not immediate, and the company could not assure compliance would be regained.
- The company reported no legal proceedings expected to have a material adverse effect and no material changes to previously disclosed commitments and contingencies. It was in compliance with its Indiana subsidiary’s loan covenants at quarter-end.
Important facts for investors to verify
- Funding plan, updated total cost, timing, and required permits for the Ohio farm, including whether financing can be obtained on acceptable terms.
- Whether production yields and selling prices can improve enough to reduce inventory valuation charges and narrow the gap between product costs and revenue.
- Cash burn and liquidity runway, given operating cash outflows and planned farm investment; distinguish cash balances from funding committed to construction.
- Progress toward Nasdaq’s minimum-bid-price compliance deadline and any resulting effect on trading or financing access.
- Customer concentration: three customers accounted for 69% of nine-month revenue (37%, 18%, and 14%).