AquaBounty Technologies, Inc. — FY 2019 Form 10-K
Reporting period: Year ended December 31, 2019. The filing was signed March 10, 2020. Financial figures below are in U.S. dollars unless otherwise noted.
Business context
AquaBounty is developing land-based recirculating aquaculture systems (RAS) and commercializing AquAdvantage Salmon, a bioengineered Atlantic salmon approved for production and sale in the United States and Canada. The company had two operating farms: a 1,200-metric-ton-per-year facility in Indiana and a 250-metric-ton-per-year facility at Rollo Bay, Prince Edward Island. Revenue remained at an early, small-scale stage as the farms ramped up.
Financial performance and liquidity
| Metric | FY 2019 | FY 2018 |
|---|---|---|
| Product revenue | $187,000 | $85,000 |
| Operating loss | $13.18 million | $10.37 million |
| Net loss | $13.23 million | $10.38 million |
| Basic and diluted loss per share | $0.66 | $0.94 |
| Cash used in operating activities | $11.25 million | $9.82 million |
| Cash used in investing activities | $2.46 million | $4.08 million |
| Cash provided by financing activities | $13.48 million | $16.45 million |
| Cash and cash equivalents at year-end | $2.80 million | $3.00 million |
| Total assets | $30.23 million | $27.67 million |
| Total debt | $4.60 million | $3.59 million |
| Stockholders’ equity | $23.76 million | $23.23 million |
Revenue more than doubled but remained immaterial relative to costs. The filing does not provide a clear gross margin figure; the company reported operating and net losses. Current assets were $4.48 million and current liabilities were $1.69 million at year-end. The reported total debt includes a $2.21 million grant repayable through royalties on certain future products; the company stated AquAdvantage Salmon sales are not subject to that royalty. Separately, interest-bearing debt was approximately $1.8 million and carried fixed rates.
Changes versus the prior year
- Revenue increased by $102,000, or 120%, from a low base.
- Operating loss widened 27%, as production costs rose 36% with farm start-up and increasing fish biomass, and general and administrative expense rose 65%, including higher personnel and stock-based compensation costs.
- Research and development expense declined 32%, mainly due to lower costs following closure of the Panama demonstration farm. Sales and marketing expense increased 138% as marketing activities began.
- Operating cash use increased by $1.43 million. Investing cash use declined as facility renovation and construction spending slowed from 2018.
- Inventory increased to $1.23 million from $76,000, primarily reflecting fish in process and production ramp-up.
Outlook, risks and unusual items
- Management expected conventional salmon harvests from Indiana in Q2 2020 and AquAdvantage Salmon harvests in Q4 2020. The filing also refers to initial Rollo Bay harvests during 2020; the timing is not stated consistently throughout the text.
- The company expected more significant revenue after harvests began, but gave no quantified revenue or profitability guidance. It targeted at least 50,000 metric tons of annual production by 2027 and planned four to five additional North American farms, each estimated to cost $75 million to $100 million.
- Management estimated the February 2020 equity offering would fund cash requirements for at least twelve months from the filing date. The offering generated approximately $14.5 million net proceeds; a March 2, 2020 settlement of a legal claim generated $1.2 million gross proceeds. The company remains dependent on external financing while operating cash flow is negative.
- AquaBounty reported cumulative losses of approximately $132 million since inception and said it expected continued losses. Commercial-scale production, market acceptance, regulatory approvals for additional sites and countries, and additional capital availability remain uncertain.
- A 2016 NGO lawsuit challenging the FDA’s approval of AquAdvantage Salmon remained ongoing; discovery was complete and substantive briefing was next. The company said it believed the claims lacked merit.
- U.S. labeling requirements changed: the company planned to comply with the USDA bioengineered disclosure standard and was working with regulators on a 2020 appropriations provision requiring “genetically engineered” before the acceptable market name. The FDA lifted its import alert in March 2019.
- Reported unusual charges included a $150,000 write-down on feed-mill equipment classified as held for sale and a $103,000 impairment charge. The company also recognized $134,000 of share-based compensation related to accelerated vesting and a change in option terms for its former CEO.
- The company’s estimated facility economics—such as higher output, contribution margin, EBITDA, and shorter payback for AquAdvantage Salmon versus conventional salmon—are management estimates, not reported results or guaranteed outcomes.
Important facts for investors to verify
- Whether Indiana and Rollo Bay achieved the expected harvest dates, volumes, yields, and sale prices, and whether production can scale profitably.
- Current cash runway, actual cash burn, financing needs, and dilution following the February 2020 share offering.
- Regulatory status and permitting for each production site, compliance with labeling requirements, and the outcome and potential business impact of the FDA lawsuit.
- Customer and distributor demand for bioengineered salmon, including any effects of retailer policies and consumer response to required disclosures.
- The assumptions behind planned farm construction costs, projected facility economics, and the 2027 production target.
- The terms and repayment triggers for debt, leases, and royalty-based obligations, and any material developments after the filing date.