AquaBounty Technologies, Inc. — Q2 2023 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2023. AquaBounty develops and sells land-raised Atlantic salmon, including genetically engineered (GE) AquAdvantage salmon. It began commercial sales in 2021 and operates farms in Indiana and Prince Edward Island; the planned Ohio farm is under construction but currently paused.
Financial performance and position
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $0.79 million | $1.07 million | $1.19 million | $2.03 million |
| Product costs | $3.79 million | $3.25 million | $7.35 million | $6.53 million |
| Operating loss | $6.44 million | $5.57 million | $12.93 million | $10.67 million |
| Net loss | $6.51 million | $5.54 million | $12.99 million | $10.65 million |
| Basic and diluted loss per share | $0.09 | $0.08 | $0.18 | $0.15 |
| Operating cash used | Not provided separately | Not provided separately | $12.25 million | $11.26 million |
| Capital spending and other investing cash used | Not provided separately | Not provided separately | $46.59 million | Investing cash provided: $41.97 million |
Product costs exceeded revenue by approximately $3.00 million in Q2 and $6.16 million for the first half, before sales, research and development, and administrative expenses. The filing does not present a gross-margin percentage.
- Liquidity: At June 30, cash and cash equivalents were $42.84 million, with another $1.00 million in restricted cash. Total current assets were $48.57 million versus current liabilities of $24.23 million.
- Debt: Total debt was $8.89 million, including $2.41 million current debt and $6.44 million long-term debt, net of issuance costs. The company reported compliance with the Indiana subsidiary’s loan covenants.
- Balance sheet: Total assets were $210.22 million; stockholders’ equity was $179.34 million. Construction in progress was $133.08 million, including $127.2 million for Ohio. Contractual commitments for the farm projects totaled $26.1 million at quarter-end.
Changes versus comparable periods
- Q2 revenue declined 26% year over year, despite GE salmon harvest volume rising 23% to 159 metric tons. Management attributed the revenue decline mainly to lower Atlantic salmon market prices and product mix; conventional egg and fry shipments were also lower due to timing.
- First-half revenue fell 42%. GE salmon harvest volume declined 14% to 225 metric tons, reflecting repairs to the Indiana processing building and Rollo Bay’s transition from grow-out production to broodstock maintenance. Lower conventional egg and fry shipments also contributed.
- Operating loss increased 16% in Q2 and 21% for the first half. Product costs rose 17% and 13%, respectively, while general and administrative expenses rose 8% and 17%.
- Cash and restricted cash decreased by $58.80 million in the first half, primarily reflecting $46.59 million of investing outflows and $12.25 million of operating outflows. The prior-year investing cash inflow included substantial marketable-security maturities and sales.
Outlook, risks, and notable items
- Going concern: Management says substantial doubt exists about the company’s ability to continue as a going concern within one year after issuance of the financial statements. It expects continued operating losses and negative operating cash flows and depends on raising additional capital; availability and terms are uncertain.
- Ohio project: The company says the total Ohio project cost will significantly exceed its prior estimate of $375–$395 million, but provides no clear updated total. Construction has been put on pause while the company evaluates the completion-cost estimate and financing strategy. The company says it cannot fully finance the project with current resources.
- Operations and costs: Management expects inflation to continue to pressure farming supplies, transportation, wages, and construction costs in the near term. Revenue for the rest of 2023 is expected to be affected by seasonal demand and fluctuating market prices; no numeric revenue or earnings guidance is provided.
- Financing and execution risks: Potential equity or debt financing may be unavailable or costly and could dilute shareholders or impose restrictive terms. Farm construction is exposed to cost overruns, delays, permitting and regulatory requirements, and financing constraints; permits and FDA approval will be needed for planned facilities.
- Other disclosures: The company reported $206 million of cumulative net losses since inception. Customer A accounted for 45% of Q2 revenue and 48% of first-half revenue. Management reported disclosure controls were effective and no material change in internal control over financial reporting.
Key facts for investors to verify
- Current cash needs, expected cash runway, and whether additional financing has been secured on acceptable terms.
- The revised Ohio farm completion-cost estimate, financing plan, construction restart conditions, and project timeline.
- Whether Indiana processing repairs and the Rollo Bay production transition affect subsequent harvest volumes and sales.
- Whether salmon pricing, product mix, production costs, and customer concentration allow revenue growth and improved unit economics.
- Progress on required permits, FDA approval for planned facilities, and continued compliance with debt covenants and Nasdaq listing requirements.