AquaBounty Technologies, Inc. — 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. Although the request refers to 2022 Q4, the filing reports full-year results; it does not provide a clear standalone fourth-quarter income statement or cash-flow summary. Amounts below are in U.S. dollars unless stated otherwise.
Business context
AquaBounty develops and farms genetically engineered Atlantic salmon in land-based recirculating aquaculture systems. It operates a 1,200-metric-ton grow-out farm in Indiana and hatchery and broodstock facilities on Prince Edward Island, Canada. The company began commercial harvesting and sales in 2021. Its principal expansion project is a planned 10,000-metric-ton farm in Pioneer, Ohio.
Financial and operating highlights
| Metric | 2022 | 2021 |
|---|---|---|
| Product revenue | $3.14 million | $1.17 million |
| Product costs | $13.63 million | $10.79 million |
| Operating loss | $22.32 million | $22.12 million |
| Net loss | $22.16 million | $22.32 million |
| Net loss per share | $0.31 | $0.32 |
| Net cash used in operating activities | $21.01 million | $20.47 million |
| Cash, cash equivalents and restricted cash at year-end | $102.64 million | $89.45 million |
| Total debt, before debt issuance costs | $8.73 million | $9.22 million |
- Revenue increased 167%; GE Atlantic salmon harvest volume rose 78% to 512,274 kg of live weight. GE salmon generated approximately $2.91 million of 2022 revenue.
- Product costs substantially exceeded revenue: the difference was approximately $10.49 million, before sales and marketing, research and development, and general and administrative expenses. The company remained loss-making and reported an accumulated deficit of $193.02 million.
- Gross margin is not presented as a reported measure. Based on product revenue less product costs, the implied margin was approximately negative 334%.
- Year-end current assets were $106.05 million and current liabilities were $15.43 million. Cash and cash equivalents were $101.64 million; restricted cash was $1.00 million. No marketable securities remained at year-end.
- Investing cash flow was positive $34.35 million, principally reflecting net maturities of marketable securities, despite $67.48 million of purchases and deposits for property, plant and equipment. Year-end property, plant and equipment, net, was $106.29 million.
- Debt included $2.39 million classified as current and $6.29 million of long-term debt, net. Most interest-bearing debt was fixed-rate; the First Farmers Bank and Trust loan is scheduled for a rate reset in July 2025.
Material changes versus 2021
- Higher GE salmon harvests drove revenue growth, while the Canadian grow-out operation completed its final GE salmon harvests and transitioned toward egg production.
- Product costs increased 26%, reflecting higher production, labor, feed, processing and transportation costs. The operating loss widened slightly, while the net loss decreased modestly, partly reflecting higher interest income from investments.
- Research and development expense fell 58%, mainly because broodstock husbandry costs shifted to production operations. General and administrative expense rose 8%.
- Operating cash use increased to $21.01 million. Cash and restricted cash rose year over year, while marketable securities fell from $101.77 million to zero.
- Construction in progress increased substantially, including $75.5 million for the Ohio project. The company reported $29.2 million of additional contractual commitments for farm sites at year-end.
Outlook, risks and unusual items
- Management expected modest revenue growth in 2023 and anticipated continued operating cash outflows until the Ohio farm is operating. The filing says cash resources were sufficient for at least the next 12 months, while the financial-statement liquidity note says beyond the next 12 months; the filing therefore gives inconsistent runway wording.
- The Ohio project’s estimated total cost rose to $375 million–$395 million, affected in part by inflation and higher bids. The company planned to fund construction with cash and debt, but stated it lacked the resources to finance the project fully. Municipal bonds of up to $425 million had been approved for issuance, with closing targeted for mid-2023; financing was not reported as closed in this filing.
- The first batch of eggs for the Ohio farm was targeted for the end of 2024, subject to FDA facility approval. The company also reported that repairs to an Indiana farm building were expected to continue into Q2 2023 and would constrain harvests; no fish were reported affected by the incident.
- Principal risks include the need for substantial additional capital, construction-cost and schedule overruns, higher interest rates, regulatory approvals and permitting, consumer acceptance and labeling of genetically engineered food, salmon prices and customer demand, fish mortality or disease, and dependence on reliable water, power, oxygen, eggs and third-party processing and distribution.
- A legal challenge to FDA’s approval resulted in the environmental assessment being remanded to the FDA for further work on NEPA and Endangered Species Act assessments. The filing states that this had no current business impact on existing operations or sales.
- On October 31, 2022, Nasdaq notified the company that its share price had been below the $1 minimum bid price for 30 consecutive business days. The compliance period ran through May 1, 2023; the filing gives no assurance that compliance would be regained.
- The auditor issued an unqualified opinion on the financial statements. Management concluded that disclosure controls and internal control over financial reporting were effective; an auditor attestation on internal controls was not included because the company was a non-accelerated filer.
Important facts for investors to verify
- Whether Ohio bond and other financing closed on acceptable terms, and whether the project’s cost estimate, commitments and schedule have changed.
- Current cash runway and funding needs, including clarification of the filing’s conflicting statements about liquidity beyond the next 12 months.
- Progress on Ohio FDA and local approvals, construction, and the targeted egg-stocking timeline.
- Whether Indiana building repairs were completed and how they affected subsequent harvest volumes and sales.
- Commercial-scale production economics, including yield, processing and transportation costs, inventory valuation assumptions, and the path toward positive margins.
- Customer concentration: the three largest customers accounted for 68% of 2022 revenue.
- Nasdaq minimum-bid-price compliance and any resulting financing or dilution needs.