UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2020 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________________ to _____________________ | --- | --- | |-------------------------------------------------------------------------|---------------------------------- ...

[Cover Page and Filer Information](index=1&type=section&id=Cover%20Page) This section identifies AquaBounty Technologies, Inc. as a non-accelerated filer and details its common stock outstanding - AquaBounty Technologies, Inc. is classified as a non-accelerated filer, a smaller reporting company, and an emerging growth company[3](index=3&type=chunk) - As of May 4, 2020, the registrant had **32,085,684 shares of common stock outstanding**[3](index=3&type=chunk) [Table of Contents](index=2&type=section&id=TABLE%20OF%20CONTENTS) This section provides an organized listing of all chapters and sections within the report [Cautionary Note Regarding Forward-Looking Statements](index=3&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This section outlines the inherent risks and uncertainties associated with future-oriented statements in the report - This report contains forward-looking statements concerning future financial and operational performance, business strategy, commercialization plans, regulatory approvals, production timelines, and the potential impact of the COVID-19 pandemic[6](index=6&type=chunk) - Key risks highlighted include the anticipated benefits of AquAdvantage Salmon, execution of the business plan, development of new farms, research projects, market entry, competitive position, operating results, cash position, ability to raise capital, the impact of COVID-19, intellectual property protection, regulatory changes, market acceptance, and personnel retention[6](index=6&type=chunk) [Part I. Financial Information](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This part presents the company's unaudited interim consolidated financial statements and related disclosures [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited interim consolidated financial statements, including balance sheets, statements of operations, equity changes, and cash flows, with explanatory notes [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's assets, liabilities, and equity at specific points in time Consolidated Balance Sheet Highlights | Metric | March 31, 2020 | December 31, 2019 | Change | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $14,749,746 | $2,798,744 | +$11,951,002 | | Total current assets | $17,031,276 | $4,477,153 | +$12,554,123 | | Total assets | $41,414,178 | $30,233,739 | +$11,180,439 | | Total current liabilities | $2,048,354 | $1,688,250 | +$360,104 | | Total liabilities | $6,418,095 | $6,473,110 | -$55,015 | | Total stockholders' equity | $34,996,083 | $23,760,629 | +$11,235,454 | [Consolidated Statements of Operations and Comprehensive Loss](index=6&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) This section details the company's revenues, expenses, and net loss over specific reporting periods Consolidated Statements of Operations and Comprehensive Loss Highlights | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | Change (YoY) | | :--- | :--- | :--- | :--- | | Product revenues | $6,753 | $97,885 | -$91,132 (-93%) | | Total costs and expenses | $3,098,174 | $2,853,578 | +$244,596 (+8.6%) | | Operating loss | $(3,091,421) | $(2,755,693) | -$(335,728) (-12.2%) | | Net loss | $(3,109,618) | $(2,763,931) | -$(345,687) (-12.5%) | | Comprehensive loss | $(3,491,603) | $(2,676,380) | -$(815,223) (-30.4%) | | Basic and diluted net loss per share | $(0.11) | $(0.18) | +$0.07 | | Weighted average common shares outstanding | 27,116,754 | 15,687,681 | +11,429,073 | [Consolidated Statements of Changes in Stockholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) This section tracks the changes in the company's equity components over the reporting period Changes in Stockholders' Equity Highlights | Metric | Balance at Dec 31, 2019 | Net Loss | Other Comprehensive Loss | Issuance of Common Stock, net | Share-based Compensation | Balance at Mar 31, 2020 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Common stock, par value | $21,635 | - | - | $10,350 | $101 | $32,086 | | Additional paid-in capital | $156,241,363 | - | - | $14,511,354 | $205,252 | $170,957,969 | | Accumulated other comprehensive loss | $(360,160) | - | $(381,985) | - | - | $(742,145) | | Accumulated deficit | $(132,142,209) | $(3,109,618) | - | - | - | $(135,251,827) | | Total stockholders' equity | $23,760,629 | $(3,109,618) | $(381,985) | $14,521,704 | $205,353 | $34,996,083 | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section summarizes the cash inflows and outflows from operating, investing, and financing activities Consolidated Statements of Cash Flows Highlights | Activity | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(2,934,710) | $(2,132,680) | | Net cash provided by (used in) investing activities | $419,350 | $(456,423) | | Net cash provided by financing activities | $14,482,313 | $7,226,577 | | Net change in cash and cash equivalents | $11,951,002 | $4,640,425 | | Cash and cash equivalents at end of period | $14,749,746 | $7,642,982 | [Notes to the Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20the%20consolidated%20financial%20statements) This section provides detailed explanations and additional information supporting the consolidated financial statements [Note 1. Nature of Business and Organization](index=9&type=section&id=1.%20Nature%20of%20business%20and%20organization) This note describes the company's founding, core business, key product approvals, and subsidiary operations - AquaBounty Technologies, Inc. was incorporated in 1991, focusing on research and development of antifreeze proteins, and later obtained exclusive licensing rights for a gene construct to create faster-growing AquAdvantage Salmon[17](index=17&type=chunk) - The company received FDA approval in 2015 for AquAdvantage Salmon in the US and Health Canada approval in 2016 for sale and consumption in Canada[17](index=17&type=chunk) - Key subsidiaries include AQUA Bounty Canada Inc., AquaBounty Farms, Inc., AquaBounty Farms Indiana LLC, and AquaBounty Brasil Participações Ltda., with operations in Panama ceasing in May 2019[17](index=17&type=chunk) [Note 2. Basis of Presentation](index=9&type=section&id=2.%20Basis%20of%20presentation) This note explains the accounting principles used for financial statement preparation and the company's going concern considerations - The unaudited interim consolidated financial statements are prepared in conformity with GAAP, including all wholly-owned subsidiaries, and reflect normal recurring adjustments[18](index=18&type=chunk) - The Company has experienced net losses and negative cash flows since inception, with cumulative losses of **$135 million** and a cash balance of **$14.7 million** as of March 31, 2020[19](index=19&type=chunk) - Management believes current cash resources will meet requirements for at least the next twelve months, but future funding may be needed through equity, debt, or strategic alliances, with the COVID-19 pandemic introducing uncertainty to funding sources[19](index=19&type=chunk) [Net Loss Per Share](index=10&type=section&id=Net%20loss%20per%20share) This note details the calculation of basic and diluted net loss per share - Basic and diluted net loss per share is calculated by dividing net loss by the weighted average number of common shares outstanding; all potential common shares are considered anti-dilutive due to net losses[20](index=20&type=chunk) [Accounting Pronouncements](index=10&type=section&id=Accounting%20Pronouncements) This note addresses the impact of recently issued accounting standards on the company's financial reporting - Management does not expect any recently issued, but not yet effective, accounting standards to have a material effect on its results of operations or financial condition[21](index=21&type=chunk) [Note 3. Risks and Uncertainties](index=10&type=section&id=3.%20Risks%20and%20uncertainties) This note discusses the risks and uncertainties, including the impact of the COVID-19 pandemic, on the company's operations - The COVID-19 pandemic introduces a novel and difficult-to-predict risk, though company operations have not been adversely affected to date, with biosecurity and farm site modifications implemented[22](index=22&type=chunk) - The Company continues to monitor potential impacts on commercial plans, including supply chain and transportation[22](index=22&type=chunk) [Concentration of Credit Risk](index=10&type=section&id=Concentration%20of%20credit%20risk) This note describes the company's exposure to credit risk and foreign currency exchange risk - Credit risk primarily stems from cash and cash equivalents, minimized by investing in short-term maturities from highly rated financial institutions[23](index=23&type=chunk) - Cash balances in Canadian bank accounts, totaling **$240 thousand** at March 31, 2020, are subject to foreign currency exchange risk, mitigated by limiting these balances[23](index=23&type=chunk) [Note 4. Inventory](index=10&type=section&id=4.%20Inventory) This note provides a detailed breakdown of the company's inventory categories and their values Inventory Breakdown | Category | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Feed | $250,459 | $251,778 | | Eggs | $52,920 | $55,887 | | Fish in process | $1,530,578 | $924,384 | | **Total inventory** | **$1,833,957** | **$1,232,049** | [Note 5. Property, Plant and Equipment](index=10&type=section&id=5.%20Property,%20plant%20and%20equipment) This note details the company's property, plant, and equipment, including construction in process and related transactions Property, Plant and Equipment, Net | Category | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Total property and equipment | $27,445,810 | $28,627,477 | | Less: accumulated depreciation and amortization | $(3,737,581) | $(3,561,641) | | **Property, plant and equipment, net** | **$23,708,229** | **$25,065,836** | - Construction in process includes **$1.7 million** for the Rollo Bay farm site, with an additional **$236 thousand** committed[26](index=26&type=chunk) - The Company sold reclassified feed mill equipment for **$98,000** and settled a legal claim for **$1.0 million**, reducing the carrying value of acquired equipment[26](index=26&type=chunk) [Note 6. Accounts Payable and Accrued Liabilities](index=11&type=section&id=6.%20Accounts%20payable%20and%20accrued%20liabilities) This note provides a breakdown of the company's accounts payable and various accrued liabilities Accounts Payable and Accrued Liabilities | Category | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Accounts payable | $1,233,052 | $809,444 | | Accrued payroll including vacation | $365,564 | $236,489 | | Accrued professional fees and contract services | $196,098 | $346,349 | | Accrued construction costs | $20,946 | $0 | | Accrued taxes and other | $19,025 | $70,527 | | **Total accounts payable and accrued liabilities** | **$1,834,685** | **$1,462,809** | [Note 7. Debt](index=11&type=section&id=7.%20Debt) This note details the company's outstanding debt obligations, including loan types, interest rates, and maturity dates Debt Outstanding | Loan Type | Interest Rate | Maturity Date | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | :--- | :--- | | ACOA AIF grant | 0% | - | $2,026,426 | $2,206,208 | | ACOA term loan (C$337,000) | 0% | June 2026 | $162,937 | $184,583 | | ACOA term loan (C$500,000) | 0% | Nov 2028 | $342,999 | $384,100 | | Kubota Canada Ltd. | 0% | Jan 2025 | $46,752 | $53,533 | | Finance PEI term loan | 4% | Nov 2023 | $1,604,360 | $1,766,783 | | **Total debt** | | | **$4,183,474** | **$4,595,207** | | Less: current portion | | | $(150,730) | $(163,155) | | **Long-term debt** | | | **$4,032,744** | **$4,432,052** | - Estimated principal payments on loan debt total **$4,183,474**, with a significant portion (**$2,026,426**) for the AIF grant due thereafter[29](index=29&type=chunk) - In response to COVID-19, the Atlantic Canada Opportunities Agency deferred all government payments for three months starting April 1, 2020[29](index=29&type=chunk) [Note 8. Leases](index=12&type=section&id=8.%20Leases) This note outlines the company's lease obligations, including remaining payments and lease liabilities Lease Obligations and Remaining Payments | Lease Type | End Date | Remaining Years | Remaining Payments (Mar 31, 2020) | Lease Liability (Mar 31, 2020) | | :--- | :--- | :--- | :--- | :--- | | Maynard Office Lease | Mar 2023 | 3.0 | $199,545 | $173,646 | | Indiana Auto Lease | Feb 2021 | 0.9 | $4,789 | $4,389 | | Indiana Well Lease | Dec 2048 | 28.8 | $698,458 | $221,901 | | **Total leases** | | | **$902,792** | **$399,936** | | Less: current portion | | | $(85,519) | $(62,939) | | **Long-term leases** | | | **$817,273** | **$336,997** | - Lease expense for the three months ended March 31, 2020, was **$20 thousand**, down from **$65 thousand** in 2019, with a weighted average remaining lease term of **22.9 years**[30](index=30&type=chunk) [Note 9. Stockholders' Equity](index=12&type=section&id=9.%20Stockholders'%20equity) This note details changes in stockholders' equity, including public offerings, warrants, restricted stock, and stock options - On February 12, 2020, the Company completed a public offering of **10,350,000 Common Shares**, generating net proceeds of **$14.5 million**[33](index=33&type=chunk) Outstanding Warrants | Metric | Number of warrant shares | Weighted average exercise price | | :--- | :--- | :--- | | Outstanding at Dec 31, 2019 | 1,662,304 | $3.25 | | Outstanding at Mar 31, 2020 | 1,662,304 | $3.25 | | Exercisable at Mar 31, 2020 | 1,662,304 | $3.25 | Restricted Stock Activity | Metric | Shares | Weighted average grant date fair value | | :--- | :--- | :--- | | Balance at Dec 31, 2019 | 39,900 | $3.51 | | Granted | 100,319 | $1.88 | | Vested | (40,626) | $2.01 | | Balance at Mar 31, 2020 | 99,593 | $2.00 | - Share-based compensation expense for restricted stock was **$84 thousand** for Q1 2020, with **$196 thousand** unearned compensation remaining[36](index=36&type=chunk) Stock Option Activity | Metric | Number of options | Weighted average exercise price | | :--- | :--- | :--- | | Outstanding at Dec 31, 2019 | 573,925 | $4.94 | | Issued | 98,458 | $1.97 | | Expired | (14,835) | $11.62 | | Outstanding at Mar 31, 2020 | 657,548 | $4.35 | | Exercisable at Mar 31, 2020 | 524,398 | $4.93 | - Total share-based compensation on stock options amounted to **$121 thousand** for the three months ended March 31, 2020, with **$204 thousand** of unearned share-based compensation remaining[39](index=39&type=chunk) [Note 10. Commitments and Contingencies](index=14&type=section&id=10.%20Commitments%20and%20contingencies) This note addresses the company's contingent liabilities and commitments, noting no material changes since the last annual report - The Company accrues contingent liabilities when probable and estimable, with no material changes to commitments and contingencies since the 2019 Annual Report on Form 10-K, aside from construction costs mentioned in Note 5[40](index=40&type=chunk)[41](index=41&type=chunk) [Note 11. Subsequent Events](index=15&type=section&id=11.%20Subsequent%20Events) This note reports significant events occurring after the balance sheet date, such as loan disbursements - On April 23, 2020, the Canadian Subsidiary received the final **C$300 thousand** (**$212 thousand**) from a **C$2.0 million** loan obtained from Finance PEI in 2018[42](index=42&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=16&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, highlighting key drivers, cash flow changes, and future capital requirements [Overview](index=16&type=section&id=Overview) This section introduces AquaBounty Technologies as a leader in land-based aquaculture with its FDA-approved AquAdvantage Salmon - AquaBounty Technologies is a leader in land-based aquaculture, with AquAdvantage Salmon as its FDA-approved lead bioengineered product for human consumption, and has commenced commercial activities in the US and Canada[45](index=45&type=chunk) [Recent Developments](index=16&type=section&id=Recent%20Developments) This section discusses the significant uncertainties introduced by the COVID-19 pandemic and management's response - The COVID-19 pandemic has introduced significant uncertainty, with potential material adverse impacts on business, financial condition, and operations, despite current preventative measures like segregating farm workers and remote work[46](index=46&type=chunk) - Management is focused on maintaining a strong balance sheet and liquidity while monitoring developments, expecting all operations to be impacted to some degree[46](index=46&type=chunk) [Revenue](index=16&type=section&id=Revenue) This section outlines the sources of product revenue and factors influencing future revenue growth - Product revenue is generated from AquAdvantage Salmon sales, conventional Atlantic salmon, salmon eggs, fry, and byproducts, with modest and infrequent sales expected until Indiana and Rollo Bay farms commence harvesting in June and December 2020, respectively[47](index=47&type=chunk) - Future revenue growth depends on regulatory approvals in new countries, grow-out farm capacity, and market acceptance[47](index=47&type=chunk) [Production Costs](index=16&type=section&id=Production%20Costs) This section describes the components of production costs and the company's employee count in production activities - Production costs include labor, feed, oxygen, other direct costs, and overhead for growing, processing, and shipping fish, with a portion absorbed into inventory[48](index=48&type=chunk) - As of March 31, 2020, the company had **thirty-seven employees** engaged in production activities[48](index=48&type=chunk) [Sales and Marketing Expenses](index=16&type=section&id=Sales%20and%20Marketing%20Expenses) This section details current sales and marketing expenses and anticipates future increases with fish sales - Current sales and marketing expenses are primarily consulting fees for market-related activities, with no dedicated employees as of March 31, 2020, but are expected to increase with the commencement of fish sales[49](index=49&type=chunk)[55](index=55&type=chunk) [Research and Development Expenses](index=17&type=section&id=Research%20and%20Development%20Expenses) This section outlines the components of R&D expenses and the number of personnel involved - R&D expenses primarily consist of salaries for personnel overseeing broodstock and research, fees for contract research organizations, laboratory supplies, and field trial operations[50](index=50&type=chunk)[51](index=51&type=chunk) - As of March 31, 2020, **eighteen scientists and technicians** were employed for R&D[50](index=50&type=chunk) [General and Administrative Expenses](index=17&type=section&id=General%20and%20Administrative%20Expenses) This section details G&A expenses, including salaries, corporate governance, and public company costs, along with employee count - G&A expenses include salaries for executive, corporate, and finance functions, corporate governance, public company costs, regulatory compliance, rent, utilities, insurance, and legal services[51](index=51&type=chunk) - The company had **thirteen employees** in its general and administrative group at March 31, 2020[51](index=51&type=chunk) [Other Income (Expense)](index=17&type=section&id=Other%20Income%20(Expense)) This section describes the components of other income and expense, such as interest and miscellaneous gains or losses - Other income (expense) comprises interest on outstanding loans, bank charges, fees, interest income, and miscellaneous gains or losses on asset disposals[52](index=52&type=chunk) [Results of Operations Summary](index=17&type=section&id=Results%20of%20Operations) This section provides a summary table of key financial results for the reporting period, comparing current and prior year performance Key Financial Results (Q1 2020 vs. Q1 2019) | Metric | 2020 (in thousands) | 2019 (in thousands) | Dollar Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Product revenue | $7 | $98 | $(91) | (93)% | | Production costs | $841 | $862 | $(21) | (2)% | | Sales and marketing | $51 | $72 | $(21) | (29)% | | Research and development | $569 | $664 | $(95) | (14)% | | General and administrative | $1,637 | $1,256 | $381 | 30% | | Operating loss | $(3,091) | $(2,756) | $(335) | 12% | | Total other (income) expense | $18 | $8 | $10 | 125% | | Net loss | $(3,109) | $(2,764) | $(345) | 12% | [Product Revenue Analysis](index=17&type=section&id=Product%20Revenue_MD%26A) This section analyzes product revenue sources and anticipated sales timelines for AquAdvantage Salmon - Product revenue for Q1 2020 primarily consisted of conventional Atlantic salmon fry, with sales of AquAdvantage Salmon from Indiana and Rollo Bay farms anticipated to begin in June and December 2020, respectively[54](index=54&type=chunk) [Production Costs Analysis](index=17&type=section&id=Production%20Costs_MD%26A) This section analyzes the year-over-year changes in production costs, attributing them to revenue-related costs and farm ramp-up - Production costs decreased year-over-year due to lower costs related to product revenue, partially offset by increased costs from growing fish biomass at the Indiana and Rollo Bay farms during their ramp-up[54](index=54&type=chunk) [Sales and Marketing Expenses Analysis](index=17&type=section&id=Sales%20and%20Marketing%20Expenses_MD%26A) This section analyzes the changes in sales and marketing expenses, noting reductions in personnel offset by increased marketing activities - Sales and marketing expenses decreased year-over-year due to a reduction in personnel, but this was partially offset by increased charges for commencing marketing activities for salmon, with further increases expected as sales begin[55](index=55&type=chunk) [Research and Development Expenses Analysis](index=17&type=section&id=Research%20and%20Development%20Expenses_MD%26A) This section analyzes R&D expense changes, attributing decreases to farm closure and increases to contract services and future expansion - R&D expenses decreased year-over-year primarily due to lower field trial costs from the closing of the Panama demonstration farm, though this was partially offset by an increase in outside contract service fees[56](index=56&type=chunk) - R&D expenses are expected to increase as the company expands broodstock capacity, commences new field trials, and pursues regulatory approval for additional products and markets[56](index=56&type=chunk) [General and Administrative Expenses Analysis](index=17&type=section&id=General%20and%20Administrative%20Expenses_MD%26A) This section analyzes the significant increase in G&A expenses due to higher personnel, compensation, consulting, and legal fees - General and administrative expenses significantly increased year-over-year due to higher personnel and associated compensation, stock compensation charges, outside consulting fees, and regulatory legal fees related to the FDA legal challenge[57](index=57&type=chunk) [Total Other (Income) Expense Analysis](index=18&type=section&id=Total%20Other%20(Income)%20Expense_MD%26A) This section analyzes the components of total other income and expense for the reporting periods - Total other (income) expense for Q1 2020 and Q1 2019 was primarily composed of interest on debt, bank charges, and interest income[58](index=58&type=chunk) [Cash Flows Analysis](index=18&type=section&id=Cash%20Flows_MD%26A) This section provides a summary of cash flows from operating, investing, and financing activities Cash Flow Summary (Q1 2020 vs. Q1 2019) | Activity | 2020 (in thousands) | 2019 (in thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | $(2,935) | $(2,133) | | Net cash provided by (used in) investing activities | $420 | $(456) | | Net cash provided by financing activities | $14,482 | $7,226 | | Net increase (decrease) in cash | $11,951 | $4,640 | [Cash Flows from Operating Activities](index=18&type=section&id=Cash%20Flows%20from%20Operating%20Activities) This section analyzes the changes in net cash used in operating activities, driven by net loss and working capital - Net cash used in operating activities increased to **$2.9 million** in Q1 2020 (from **$2.1 million** in Q1 2019), driven by a **$3.1 million** net loss, partially offset by non-cash depreciation and stock compensation, and increased working capital uses[58](index=58&type=chunk) - Increased spending on operations was due to personnel, legal, consulting fees, and production activities at Indiana and Rollo Bay farms, offset by decreases in field trials and Panama farm costs[58](index=58&type=chunk) [Cash Flows from Investing Activities](index=18&type=section&id=Cash%20Flows%20from%20Investing%20Activities) This section analyzes cash flows from investing activities, including equipment sales, legal settlements, and farm construction - In Q1 2020, investing activities provided **$419 thousand** cash, primarily from **$98 thousand** in equipment sale proceeds and **$1.0 million** from a legal settlement, offsetting **$691 thousand** used for farm renovations and construction[59](index=59&type=chunk) - In Q1 2019, **$456 thousand** was used for Indiana farm renovations and Rollo Bay construction[59](index=59&type=chunk) [Cash Flows from Financing Activities](index=18&type=section&id=Cash%20Flows%20from%20Financing%20Activities) This section analyzes cash flows from financing activities, including public offerings, stock issuance, and debt transactions - In Q1 2020, financing activities provided **$14.5 million**, mainly from a public offering of Common Shares, offset by **$39 thousand** in debt repayment[59](index=59&type=chunk) - In Q1 2019, financing activities provided **$7.2 million**, including **$6.6 million** from common stock issuance, **$250 thousand** from warrant exercise, and **$376 thousand** from new debt, offset by **$10 thousand** in debt repayment[59](index=59&type=chunk) [Future Capital Requirements](index=18&type=section&id=Future%20Capital%20Requirements) This section discusses the company's cumulative losses, current cash position, and potential future funding needs and sources - The Company has cumulative losses of **$135 million** and a cash balance of **$14.7 million** as of March 31, 2020, but management believes current cash resources will cover needs for at least the next twelve months[60](index=60&type=chunk) - Future funding may involve equity offerings (leading to dilution), debt financings (with restrictive covenants), or strategic alliances (potentially relinquishing rights), with the COVID-19 pandemic adding uncertainty to funding availability[60](index=60&type=chunk)[61](index=61&type=chunk) [Critical Accounting Policies and Estimates](index=20&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section explains that financial statements are prepared under GAAP, requiring management estimates and assumptions - The consolidated financial statements are prepared under GAAP, requiring management to make estimates and assumptions that affect reported asset/liability amounts and disclosures, which are evaluated on an ongoing basis[62](index=62&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=20&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details the company's exposure to market risks, specifically interest rate and foreign currency exchange risks [Interest Rate Risk](index=20&type=section&id=Interest%20Rate%20Risk) This section discusses the company's exposure to interest rate risk, primarily from fixed-rate debt financing - The primary market risk exposure is interest rate risk associated with debt financing, which is typically at fixed rates[64](index=64&type=chunk) - As of March 31, 2020, and December 31, 2019, the company had **$1.6 million** and **$1.8 million**, respectively, in interest-bearing debt instruments, all at fixed rates[64](index=64&type=chunk) [Foreign Currency Exchange Risk](index=20&type=section&id=Foreign%20Currency%20Exchange%20Risk) This section explains the company's exposure to foreign currency exchange risk and its accounting treatment - The Company's functional currency is the U.S. Dollar, while its Canadian subsidiary's functional currency is the Canadian Dollar[65](index=65&type=chunk) - Assets and liabilities of the Canadian Subsidiary are translated at balance sheet date exchange rates, equity at historical rates, and income statement accounts at average rates, with net translation gains or losses adjusted to other comprehensive loss[65](index=65&type=chunk) [Item 4. Controls and Procedures](index=20&type=section&id=Item%204.%20Controls%20and%20Procedures) This section outlines the company's assessment of its disclosure controls and procedures and reports on internal control changes [Disclosure Controls and Procedures](index=20&type=section&id=Disclosure%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and procedures as of March 31, 2020 - Management, with CEO and CFO participation, concluded that the Company's disclosure controls and procedures were effective as of March 31, 2020, for timely recording, processing, summarizing, and reporting required information[66](index=66&type=chunk) [Changes in Internal Control Over Financial Reporting](index=20&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) This section reports no material changes in internal control over financial reporting during the fiscal quarter - There were no changes in internal control over financial reporting during the fiscal quarter ended March 31, 2020, that materially affected or are reasonably likely to materially affect the Company's internal control over financial reporting[67](index=67&type=chunk) [Part II. Other Information](index=21&type=section&id=PART%20II.%20OTHER%20INFORMATION) This part includes disclosures on legal proceedings, risk factors, equity sales, defaults, and other relevant information [Item 1. Legal Proceedings](index=21&type=section&id=Item%201.%20Legal%20Proceedings) This section details a significant legal proceeding challenging the FDA's approval of AquAdvantage Salmon - A lawsuit was filed on March 30, 2016, against the FDA by a coalition of NGOs challenging the approval of AquAdvantage Salmon, claiming lack of statutory authority and failure to mitigate ecological, environmental, and socioeconomic risks[69](index=69&type=chunk) - The Company joined the case as an intervenor, and the discovery phase is complete, with the case proceeding to substantive briefing[69](index=69&type=chunk) [Item 1A. Risk Factors](index=21&type=section&id=Item%201A.%20Risk%20Factors) This section updates and highlights new or materially changed risk factors, including global health concerns and regulatory dependencies [Risks Relating to Our Business](index=21&type=section&id=Risks%20Relating%20to%20our%20Business) This section discusses business-related risks, including the impact of global health concerns and regulatory approval dependencies - Global health concerns, such as the COVID-19 pandemic, pose serious risks to production, sales, distribution, R&D, and expansion, potentially causing business disruptions, supply chain issues, and reduced consumer demand[71](index=71&type=chunk) - The company's ability to generate revenue is dependent on maintaining existing regulatory approvals for AquAdvantage Salmon and farm sites, and obtaining new approvals, which is uncertain and can be affected by government budget, policy changes, and agency disruptions (e.g., FDA inspections postponed due to COVID-19)[73](index=73&type=chunk) [Risks Relating to Our Common Stock](index=22&type=section&id=Risks%20Relating%20to%20our%20Common%20Stock) This section addresses risks associated with common stock ownership, particularly the influence of significant affiliates - Certain affiliates, including Randal J. Kirk and entities managed by Third Security, hold a significant share ownership position (approximately **44.4% combined**), allowing them to influence corporate matters[74](index=74&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=22&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section confirms no unregistered sales of equity securities or use of proceeds to report during the period - There were no unregistered sales of equity securities or use of proceeds to report during the period[75](index=75&type=chunk) [Item 3. Defaults Upon Senior Securities](index=22&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section indicates that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities during the period[75](index=75&type=chunk) [Item 4. Mine Safety Disclosures](index=22&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section states that mine safety disclosures are not applicable to the company's operations - Mine safety disclosures are not applicable to the Company[75](index=75&type=chunk) [Item 5. Other Information](index=23&type=section&id=Item%205.%20Other%20Information) This section indicates that there is no other information to report for the current period - There is no other information to report in this section[76](index=76&type=chunk) [Item 6. Exhibits](index=24&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the quarterly report, primarily Sarbanes-Oxley Act certifications - Exhibits include certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[78](index=78&type=chunk) [Signatures](index=25&type=section&id=Signatures) This section provides the official signatures and dates for the report's authorization - The report was signed on May 5, 2020, by Sylvia Wulf (President, CEO, and Director) and David A. Frank (CFO and Treasurer)[80](index=80&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________ to ________________ | --- | --- | |--------------------------------------------------------------------------------|-------------------------------------- ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2019 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________________ to _____________________ Commission File Number: 001-36426 AquaBounty Technologies, Inc. (Exact name of the registrant as specified in it ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2019 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________________ to _____________________ Commission File Number: 001-36426 AquaBounty Technologies, Inc. (Exact name of the registrant as specified in its cha ...

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents AquaBounty's unaudited interim consolidated financial statements and notes [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Consolidated Balance Sheets | --- | --- | --- | --- | --- | |-----------------------------------------------------|-------|----------------------|-------|-----------------------| | Assets | | March 31, \n2019 | | December 31, \n2018 | | Current assets: | | | | | | Cash and cash equivalents | $ | 7,630,376 | $ | 2,990,196 | | Certificate of deposit | | 12,606 | | 12,361 | | Other receivables | | 136,903 | | 115,982 | | Inventory | | 159,131 | | 76,109 | | Prepaid expenses and other current assets | | 261,176 | | 315,969 | | Total current assets | | 8,200,192 | | 3,510,617 | | | | | | | | Property, plant and equipment, net | | 23,934,625 | | 23,716,768 | | Right of use assets, net | | 454,890 | | — | | Definite-lived intangible assets, net | | 167,866 | | 171,292 | | Indefinite-lived intangible assets | | 191,800 | | 191,800 | | Other assets | | 80,583 | | 80,583 | | Total assets | $ | 33,029,956 | $ | 27,671,060 | | --- | --- | --- | --- | --- | | | | | | | | Liabilities and stockholders' equity | | | | | | Current liabilities: | | | | | | Accounts payable and accrued liabilities | $ | 958,058 | $ | 824,900 | | Other current liabilities | | 84,253 | | 20,423 | | Current debt | | 90,200 | | 71,613 | | Total current liabilities | | 1,132,511 | | 916,936 | | | | | | | | Long-term lease obligations | | 399,935 | | — | | Long-term debt | | 3,941,010 | | 3,519,821 | | Total liabilities | | 5,473,456 | | 4,436,757 | | | | | | | | Commitments and contingencies | | | | | | | | | | | | Stockholders' equity: | | | | | | Common stock, $0.001 par value, 50,000,000 shares authorized; | | | | | | 18,697,477 (2018: 15,098,837) shares outstanding | | 18,697 | | 15,099 | | Additional paid-in capital | | 149,702,936 | | 142,707,957 | | Accumulated other comprehensive loss | | (486,635) | | (574,186) | | Accumulated deficit | | (121,678,498) | | (118,914,567) | | Total stockholders' equity | | 27,556,500 | | 23,234,303 | | | | | | | | Total liabilities and stockholders' equity | $ | 33,029,956 | $ | 27,671,060 | [Consolidated Statements of Operations and Comprehensive Loss](index=5&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Consolidated Statements of Operations and Comprehensive Loss | --- | --- | --- | --- | --- | |--------------------------------------------------------|-------|----------------------|----------------|--------------| | | | Three March \n2019 | Months 31, | Ended \n2018 | | | | | | | | Revenues | | | | | | Product revenues | $ | 97,885 | $ | 19,097 | | | | | | | | Costs and expenses | | | | | | Product costs | | 81,613 | | 16,232 | | Sales and marketing | | 71,991 | | 81,647 | | Research and development | | 663,481 | | 977,817 | | General and administrative | | 2,036,493 | | 1,386,873 | | Total costs and expenses | | 2,853,578 | | 2,462,569 | | | | | | | | Operating loss | | (2,755,693) | | (2,443,472) | | | | | | | | | | | | | | Other income (expense) | | | | | | Gain on disposal of equipment | | — | | 1,160 | | | | | | | | Interest expense | | (13,338) | | (5,402) | | Other income (expense), net | | 5,100 | | (2,073) | | Total other income (expense) | | (8,238) | | (6,315) | | | | | | | | Net loss | $ | (2,763,931) | $ | (2,449,787) | | | | | | | | Other comprehensive income (loss): | | | | | | Foreign currency translation income (loss) | | 87,551 | | (112,118) | | Total other comprehensive income (loss) | | 87,551 | | (112,118) | | | | | | | | Comprehensive loss | $ | (2,676,380) | $ | (2,561,905) | | | | | | | | | | | | | | Basic and diluted net loss per share | $ | (0.18) | $ | (0.21) | | Weighted average number of common shares - | | | | | | basic and diluted | | 15,687,681 | | 11,940,874 | [Consolidated Statements of Changes in Stockholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) Consolidated Statements of Changes in Stockholders' Equity | --- | --- | --- | --- | --- | --- | --- | --- | --- | |-----------------------------------------------------|-------------|-------------|-------------------|-------|-----------|-------|---------------|----------------| | | outstanding | Par value | paid-in capital | | loss | | deficit | Total | | Balance at December 31, 2018 | 15,098,837 | $ 15,099 | $ 142,707,957 | $ | (574,186) | $ | (118,914,567) | $ 23,234,303 | | | | | | | | | | | | Net loss | | | | | | | (2,763,931) | (2,763,931) | | Other comprehensive loss | | | | | 87,551 | | | 87,551 | | Issuance of common stock, net of expenses | 3,345,282 | 3,345 | 6,606,310 | | | | | 6,609,655 | | Exercise of warrants for common stock | 76,797 | 77 | 250,347 | | | | | 250,424 | | Share based compensation | 176,561 | 176 | 138,322 | | | | | 138,498 | | Balance at March 31, 2019 | 18,697,477 | $ 18,697 | $ 149,702,936 | $ | (486,635) | $ | (121,678,498) | $ 27,556,500 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Balance at December 31, 2017 | Common stock issued and outstanding \n8,895,094 | Par \n$ | value \n8,895 | Additional paid-in capital \n$ 126,718,186 | $ | Accumulated other comprehensive loss \n(213,884) | Accumulated deficit \n$(108,532,508) | Total \n$ 17,980,689 | | Net loss | | | | | | | (2,449,787) | (2,449,787) | | Other comprehensive loss | | | | | (112,118) | | | (112,118) | | Issuance of common stock and warrants, net of expenses | 3,692,307 | | 3,692 | 10,612,356 | | | | 10,616,048 | | Exercise of warrants for common stock | 76,981 | | 77 | 250,111 | | | | 250,188 | | Share based compensation | 11,151 | | 12 | 48,534 | | | | 48,546 | | Balance at March 31, 2018 | 12,675,533 | $ | 12,676 | $ 137,629,187 | $ | (326,002) | $ (110,982,295) | $ 26,333,566 | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Consolidated Statements of Cash Flows | --- | --- | --- | --- | --- | |------------------------------------------------------------------------|-------|-------------|-------|-------------| | | | 2019 | | 2018 | | | | | | | | Operating activities | | | | | | Net loss | $ | (2,763,931) | $ | (2,449,787) | | Adjustment to reconcile net loss to net cash used in | | | | | | operating activities: | | | | | | Depreciation and amortization | | 285,308 | | 67,450 | | Share-based compensation | | 138,498 | | 48,546 | | Gain on disposal of equipment | | — | | (1,160) | | Changes in operating assets and liabilities: | | | | | | Other receivables | | (18,410) | | (39,371) | | Inventory | | (83,158) | | 46,047 | | Prepaid expenses and other assets | | 55,504 | | 369,621 | | Accounts payable and accrued liabilities | | 253,509 | | (508,423) | | Net cash used in operating activities | | (2,132,680) | | (2,467,077) | | Investing activities | | | | | | Purchase of property, plant and equipment | | (456,436) | | (2,034,048) | | Proceeds on sale of equipment | | — | | 1,173 | | Other investing activities | | 13 | | — | | Net cash used in investing activities | | (456,423) | | (2,032,875) | | --- | --- | --- | --- | --- | | | | | | | | Financing activities | | | | | | Proceeds from issuance of debt | | 376,117 | | — | | Repayment of term debt | | (9,619) | | (14,168) | | Proceeds from the issuance of common stock and warrants, net | | 6,609,655 | | 10,616,048 | | Proceeds from the exercise of stock options and warrants, net | | 250,424 | | 250,188 | | Net cash provided by financing activities | | 7,226,577 | | 10,852,068 | | | | | | | | Effect of exchange rate changes on cash and cash equivalents | | 2,706 | | (5,588) | | Net change in cash and cash equivalents | | 4,640,180 | | 6,346,528 | | Cash and cash equivalents at beginning of period | | 2,990,196 | | 492,861 | | Cash and cash equivalents at the end of period | $ | 7,630,376 | $ | 6,839,389 | | | | | | | | Supplemental disclosure of cash flow information and | | | | | | non-cash transactions: | | | | | | Interest paid in cash | $ | 13,338 | $ | 5,402 | | Property and equipment included in accounts payable and accrued liabilities | $ | 79,193 | $ | 976,208 | | Acquisition of equipment under debt arrangement | $ | — | $ | 75,911 | [Notes to the consolidated financial statements](index=8&type=section&id=Notes%20to%20the%20consolidated%20financial%20statements) These notes detail AquaBounty's business, accounting policies, liquidity, risks, and financial components [1. Nature of business and organization](index=8&type=section&id=1.%20Nature%20of%20business%20and%20organization) AquaBounty, incorporated in 1991, focuses on aquaculture biotechnology, with AquAdvantage Salmon approved in 2015/2016 - AquaBounty Technologies, Inc. was incorporated in December **1991** in Delaware, initially for research and development of antifreeze proteins[15](index=15&type=chunk) - In **1996**, the company obtained exclusive licensing rights for a gene construct to create farm-raised Atlantic salmon (AquAdvantage Salmon) with substantially faster growth rates[15](index=15&type=chunk) - AquAdvantage Salmon received FDA approval for production, sale, and consumption in the U.S. in **2015** and Health Canada approval in **2016**[15](index=15&type=chunk) [2. Basis of presentation](index=8&type=section&id=2.%20Basis%20of%20presentation) Interim financials conform to GAAP, include subsidiaries, confirm liquidity, and reflect ASU 2016-02 lease adoption - The unaudited interim consolidated financial statements are prepared in conformity with GAAP and include AquaBounty Technologies, Inc. and its wholly-owned direct subsidiaries[16](index=16&type=chunk) - Management has determined that current funds are sufficient to meet planned requirements for the next twelve months, based on cash resources of **$7.6 million** at March 31, 2019, and the ability to manage expenditures[17](index=17&type=chunk) - The company adopted ASU 2016-02, 'Leases,' on January 1, 2019, recognizing approximately **$455 thousand** in lease assets and **$474 thousand** in lease liabilities on the balance sheet at March 31, 2019[20](index=20&type=chunk) [3. Risks and uncertainties](index=9&type=section&id=3.%20Risks%20and%20uncertainties) AquaBounty faces biotechnology and aquaculture risks, including product development, regulatory, IP, and financial instrument risks - Key risks include product development and trial results, regulatory approval decisions, commercial acceptance, manufacturing and distribution capabilities, intellectual property protection, and outcomes of collaborations[21](index=21&type=chunk) - Financial instruments (cash, cash equivalents, certificates of deposit) are subject to credit risk, minimized by investing in financial instruments with short-term maturities issued by highly rated financial institutions[22](index=22&type=chunk) - Cash balances in Canadian bank accounts totaled **$180,735** at March 31, 2019, and are subject to foreign currency exchange risk, which is mitigated by limiting balances[22](index=22&type=chunk) [4. Inventory](index=9&type=section&id=4.%20Inventory) Inventory, comprising feed, eggs, packaging, and fish in process, increased to $159,131 at March 31, 2019 Inventory Classifications | --- | --- | --- | --- | --- | |---------------------|-------|-----------------|-------|---------------| | Feed | $ | 2019 \n44,236 | $ | 2018 \n24,288 | | Eggs | | 30,405 | | — | | Packaging | | 4,554 | | 8,913 | | Fish in process | | 79,936 | | 42,908 | | Total inventory | $ | 159,131 | $ | 76,109 | [5. Property, plant and equipment](index=10&type=section&id=5.%20Property%2C%20plant%20and%20equipment) Net property, plant, and equipment increased to $23.9 million, with significant investment in Rollo Bay renovations Property, Plant and Equipment, Net | --- | --- | --- | --- | --- | |--------------------------------------------------------|-------|----------------------------------|-------|---------------------------------| | Land | $ | March 31, \n2019 \n711,336 | $ | December 31, \n2018 \n704,567 | | Building and improvements | | 9,284,732 | | 9,244,737 | | Construction in process | | 6,545,566 | | 6,091,265 | | Equipment | | 9,743,545 | | 9,713,030 | | Office furniture and equipment | | 193,333 | | 192,606 | | Vehicles | | 27,391 | | 26,832 | | Total property and equipment | $ | 26,505,903 | $ | 25,973,037 | | Less accumulated depreciation and amortization | | (2,571,278) | | (2,256,269) | | Property, plant and equipment, net | $ | 23,934,625 | $ | 23,716,768 | - Included in construction in process is **$6.0 million** for renovation and new construction costs incurred at the Rollo Bay farm site, with an additional **$828 thousand** committed[24](index=24&type=chunk) [6. Accounts payable and accrued liabilities](index=10&type=section&id=6.%20Accounts%20payable%20and%20accrued%20liabilities) Accounts payable and accrued liabilities increased to $958,058, driven by higher professional fees and taxes Accounts Payable and Accrued Liabilities | --- | --- | --- | --- | --- | |--------------------------------------------------------|-------|--------------------------------|-------|-------------------------------| | Accounts payable | $ | March 31, 2019 \n279,471 | $ | December 31, 2018 \n366,917 | | Accrued payroll including vacation | | 195,922 | | 223,481 | | Accrued professional fees and research costs | | 344,635 | | 185,992 | | Accrued franchise and excise taxes | | 117,747 | | 23,678 | | Accrued construction costs | | 4,503 | | 13,716 | | Accrued other | | 15,780 | | 11,116 | | Accounts payable and accrued liabilities | $ | 958,058 | $ | 824,900 | [7. Debt](index=10&type=section&id=7.%20Debt) Total debt increased to $4.03 million, primarily due to a new ACOA loan for Rollo Bay renovations Debt Outstanding | --- | --- | --- | --- | --- | --- | --- | --- | |---------------------------------------------|-----------------|---------------------|-----------------|-------|------------|-------|-----------------------| | Original loan amount | Interest \nrate | Monthly \nrepayment | Maturity \ndate | March | 31, 2019 | | December 31, \n2018 | | ACOA AIF grant (C$2,871,919) | 0% | Royalties | - | $ | 2,150,780 | $ | 2,106,840 | | ACOA term loan (C$337,000) | 0% | C$3,120 | June 2026 | | 200,975 | | 203,735 | | ACOA term loan (C$500,000) | 0% | C$4,630 | November 2028 | | 374,450 | | — | | Kubota Canada Ltd. (C$95,961) | 0% | C$1,142 | January 2025 | | 59,887 | | 61,178 | | Finance PEI term loan (C$2,717,093) | 4% | C$4,333 | July 2021 | | 1,245,118 | | 1,219,681 | | Total debt | | | | $ | 4,031,210 | $ | 3,591,434 | | less: current portion | | | | | (90,200) | | (71,613) | | Long-term debt | | | | $ | 3,941,010 | $ | 3,519,821 | - On March 7, 2019, the Canadian Subsidiary received **C$500 thousand** under a zero-interest credit facility with the Atlantic Canada Opportunities Agency (ACOA) to partially finance renovations to the Rollo Bay site[27](index=27&type=chunk) - The company recognized interest expense of **$12,337** for the three months ended March 31, 2019, compared to **$5,331** for the same period in 2018, on its interest-bearing debt[27](index=27&type=chunk) [8. Leases](index=11&type=section&id=8.%20Leases) ASU 2016-02 adoption led to $532 thousand lease liability and $512 thousand right-of-use asset recognition - The company adopted FASB ASU 2016-02 for lease accounting on January 1, 2019, recognizing a lease liability of **$532 thousand** and a corresponding right-of-use asset of **$512 thousand**[28](index=28&type=chunk) - Lease expense for the three months ended March 31, 2019, amounted to **$65,153**, with lease payments included in operating cash flows totaling **$65,548**[28](index=28&type=chunk) Lease Obligations and Remaining Payments at March 31, 2019 | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |---------------------------|----------------------------|-------------------------|------------------------|-------|--------------------------------------|-----------|------------------------------------|-------|----------------------------------------|----------|----------------------------------| | Maynard Office Lease | Lease Type \nOperating | End Date \nMar 2023 | Remaining Years \n4.00 | $ | March \nRemaining Payments \n262,847 | 31, \n$ | 2019 \nLease Liability \n222,931 | $ | January \nRemaining Payments \n278,414 | 1, \n $ | 2019 \nLease Liability \n234,685 | | Panama Farm Lease | Operating | Apr 2019 | 0.08 | | 15,000 | | 14,901 | | 60,000 | | 59,013 | | Indiana Auto Lease | Operating | Feb 2021 | 1.92 | | 9,631 | | 8,838 | | 10,842 | | 9,897 | | Indiana Well Lease | Operating | Dec 2048 | 29.78 | | 713,650 | | 227,442 | | 717,420 | | 228,844 | | Total leases | | | | $ | 1,001,128 | $ | 474,112 | $ | 1,066,676 | $ | 532,439 | | Less: current portion | | | | | (98,338) | | (74,177) | | (142,780) | | (117,345) | | Long-term leases | | | | $ | 902,790 | $ | 399,935 | $ | 923,896 | $ | 415,094 | [9. Stockholders' equity](index=12&type=section&id=9.%20Stockholders%27%20equity) Stockholders' equity increased significantly from recent equity issuances, warrant exercises, and share-based compensation - On March 21, 2019, the Company completed a public offering of **3,345,282 Common Shares**, generating net proceeds of **$6.6 million** after deducting discounts, fees, and expenses[31](index=31&type=chunk) - During the quarter ended March 31, 2019, the Company issued **76,797 Common Shares** at **$3.25 per share** in conjunction with the exercise of warrants, with total proceeds of **$250 thousand**[32](index=32&type=chunk) Restricted Stock Activity | --- | --- | --- | |--------------------------------------|----------|-------------------------------------------| | | Shares | Weighted average grant date fair value | | Balance at December 31, 2018 | 8,867 | $3.51 | | Granted | 176,561 | 2.13 | | Vested | (40,623) | 2.21 | | Balance at March 31, 2019 | 144,805 | $2.19 | Stock Option Activity | --- | --- | --- | |------------------------------------------|---------------------|-----------------------------------| | | Number of options | Weighted average exercise price | | Outstanding at December 31, 2018 | 339,964 | $7.09 | | Issued | 7,500 | 2.11 | | Outstanding at March 31, 2019 | 347,464 | $6.98 | | Exercisable at March 31, 2019 | 326,382 | $6.77 | [10. Commitments and contingencies](index=13&type=section&id=10.%20Commitments%20and%20contingencies) Commitments and contingent liabilities are recognized, with no material changes since year-end 2018, except for construction costs - The Company recognizes and discloses commitments when it enters into executed contractual obligations with other parties[37](index=37&type=chunk) - The Company accrues contingent liabilities when it is probable that future expenditures will be made and such expenditures can be reasonably estimated[37](index=37&type=chunk) - There have been no other material changes to the commitments and contingencies disclosed in the annual report on Form 10‑K for the year ended December 31, 2018, other than those related to renovation and construction costs (Note 5)[37](index=37&type=chunk) [11. Related Party Collaboration Agreement](index=13&type=section&id=11.%20Related%20Party%20Collaboration%20Agreement) The ECC agreement with Intrexon for bioengineered finfish saw service costs decrease to $10,810 in Q1 2019 - In February 2013, the Company entered into an Exclusive Channel Collaboration (ECC) agreement with Intrexon to develop and commercialize additional bioengineered traits in finfish for human consumption[38](index=38&type=chunk) - Total Intrexon service costs incurred under the ECC amounted to **$10,810** for the three months ended March 31, 2019, a decrease from **$91,148** for the same period in 2018[38](index=38&type=chunk) [12. Subsequent Events](index=14&type=section&id=12.%20Subsequent%20Events) Post-quarter, AquaBounty completed two public offerings in April 2019, raising $5.2 million and $696 thousand - On April 5, 2019, the Company completed a public offering of **2,554,590 Common Shares**, with net proceeds of **$5.2 million** after deducting discounts, fees, and expenses[39](index=39&type=chunk) - On April 17, 2019, the Company issued **346,488 Common Shares** in conjunction with the overallotment exercise by the Company's investment banker, generating net proceeds of **$696 thousand**[39](index=39&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=15&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section reviews AquaBounty's Q1 2019 financial condition, operations, cash flows, capital needs, and accounting policies [Overview](index=15&type=section&id=Overview) AquaBounty leads aquaculture biotechnology with FDA-approved AquAdvantage Salmon, expecting modest sales until full production - AquaBounty Technologies, Inc. is a leader in the field of biotechnology tools for improving the productivity of aquaculture[42](index=42&type=chunk) - Its lead product, AquAdvantage Salmon, received FDA approval in **2015** as the first bioengineered animal available for sale for human consumption, and commercial activities have commenced in markets with regulatory approval[42](index=42&type=chunk) - The company expects sales to be modest and infrequent until its grow-out facilities in Indiana and Rollo Bay are in full production[43](index=43&type=chunk) [Revenue](index=15&type=section&id=Revenue) Product revenue comes from AquAdvantage Salmon and byproducts, with future growth tied to approvals and capacity - Product revenue is generated primarily through the sales of AquAdvantage Salmon, and potentially excess non-transgenic salmon eggs, fry, and byproducts[43](index=43&type=chunk) - Future revenue is expected to depend upon the number of countries with regulatory approval, the capacity of grow-out facilities, and market acceptance[43](index=43&type=chunk) [Cost of Products](index=15&type=section&id=Cost%20of%20Products) Product costs include labor, feed, oxygen, overhead, and expenses for processing and shipping fish products - Cost of products includes labor and related costs to grow out fish (feed, oxygen, other direct costs), an application of overhead, and the cost to process and ship products to customers[44](index=44&type=chunk) [Sales and Marketing Expenses](index=15&type=section&id=Sales%20and%20Marketing%20Expenses) Sales and marketing expenses cover personnel, travel, and consulting, expected to remain flat until production scales - Sales and marketing expenses currently include personnel costs, travel, and consulting fees for market-related activities[45](index=45&type=chunk) - As of March 31, 2019, the company had **one employee** dedicated to sales and marketing[45](index=45&type=chunk) [Research and Development Expenses](index=15&type=section&id=Research%20and%20Development%20Expenses) R&D expenses, including salaries and contract fees, are expected to rise with Rollo Bay development and new approvals - As of March 31, 2019, **twenty scientists and technicians** were employed at facilities on Prince Edward Island for R&D purposes[46](index=46&type=chunk) - R&D expenses consist primarily of salaries, fees paid to contract research organizations (including Intrexon) and consultants, costs related to laboratory supplies, field trials, and grow-out of fish at the Panama site[46](index=46&type=chunk) - R&D expenses are expected to increase as the Rollo Bay farm site is further developed and regulatory approval for additional products and markets is pursued[52](index=52&type=chunk) [General and Administrative Expenses](index=15&type=section&id=General%20and%20Administrative%20Expenses) G&A expenses cover executive, corporate, and finance salaries, governance, compliance, and facility pre-production costs - General and administrative expenses primarily consist of salaries and related costs for employees in executive, corporate, and finance functions (**23 employees** at March 31, 2019)[47](index=47&type=chunk) - Other significant G&A expenses include corporate governance, public market maintenance, regulatory compliance, rent and utilities, insurance, legal services, and pre-production and capacity utilization costs for the Rollo Bay and Indiana facilities[47](index=47&type=chunk) [Other Income (Expense)](index=15&type=section&id=Other%20Income%20%28Expense%29) Other income (expense) includes interest, bank charges, fees, and interest income, with a prior year gain on equipment disposal - Other income (expense) includes interest on outstanding loans, bank charges, fees, and interest income[48](index=48&type=chunk) - For the three months ended March 31, 2018, other income (expense) also included a gain on disposal of equipment[48](index=48&type=chunk) [Results of Operations](index=16&type=section&id=Results%20of%20Operations) Q1 2019 product revenue surged 416% to $98 thousand, but net loss rose 13% to $2.764 million due to G&A Summary of Results of Operations (Three Months Ended March 31) | --- | --- | --- | --- | --- | --- | --- | --- | |------------------------------------|-------|-------|-------|----------------------------|-------|-------|-----------------|------------| | | | 2019 | March | 31, \n2018 \n(unaudited) | | | Dollar \nChange | % \nChange | | Product revenue | $ | 98 | | $ | 19 | $ | 79 | 416 % | | | | | | | | | | | | Operating expenses: | | | | | | | | | | Product costs | | 82 | | | 16 | | 66 | 413 % | | Sales and marketing | | 72 | | | 82 | | (10) | (12)% | | Research and development | | 663 | | | 978 | | (315) | (32)% | | General and administrative | | 2,037 | | | 1,387 | | 650 | 47 % | | Operating loss | | 2,756 | | | 2,444 | | 312 | 13 % | | Total other (income) expense | | 8 | | | 6 | | 2 | 33 % | | Net loss | $ | 2,764 | | $ | 2,450 | $ | 314 | 13 % | - Product revenue for the three months ended March 31, 2019, increased by **416% to $98 thousand**, primarily from sales of AquAdvantage Salmon and non-transgenic Atlantic salmon eggs and byproducts[50](index=50&type=chunk) - Net loss increased by **13% to $2.764 million** for the three months ended March 31, 2019, compared to **$2.450 million** in the prior year[50](index=50&type=chunk) [Product Revenue and Product Cost](index=16&type=section&id=Product%20Revenue%20and%20Product%20Cost) Q1 2019 product revenue increased 416% to $98 thousand, with costs rising 413% to $82 thousand, awaiting full production - Product revenue for the three months ended March 31, 2019, was **$98 thousand**, a **416%** increase from **$19 thousand** in 2018[50](index=50&type=chunk) - Product costs increased by **413% to $82 thousand** in Q1 2019 from **$16 thousand** in Q1 2018[50](index=50&type=chunk) - The company expects sales to be modest and infrequent until its grow-out facilities in Indiana and Rollo Bay are at full production[50](index=50&type=chunk) [Sales and Marketing Expenses](index=16&type=section&id=Sales%20and%20Marketing%20Expenses_MD%26A) Sales and marketing expenses decreased 12% to $72 thousand in Q1 2019, expected to remain stable until production scales - Sales and marketing expenses for the three months ended March 31, 2019, were down from the corresponding period in 2018 due to lower personnel and travel costs[51](index=51&type=chunk) - Sales and marketing expenses decreased by **12% to $72 thousand** in Q1 2019 from **$82 thousand** in Q1 2018[50](index=50&type=chunk) - The company expects sales and marketing expenses to be relatively flat until production of AquAdvantage Salmon increases[51](index=51&type=chunk) [Research and Development Expenses](index=16&type=section&id=Research%20and%20Development%20Expenses_MD%26A) R&D expenses decreased 32% to $663 thousand in Q1 2019, but are expected to rise with Rollo Bay development - Research and development expenses for the three months ended March 31, 2019, were down from the corresponding period in 2018 due to lower personnel, outside contract service, and field trial costs[52](index=52&type=chunk) - R&D expenses decreased by **32% to $663 thousand** in Q1 2019 from **$978 thousand** in Q1 2018[50](index=50&type=chunk) - The company expects research and development expenses to increase as it further develops its Rollo Bay farm site and continues to pursue regulatory approval for additional products and markets[52](index=52&type=chunk) [General and Administrative Expenses](index=16&type=section&id=General%20and%20Administrative%20Expenses_MD%26A) G&A expenses increased 47% to $2.037 million in Q1 2019, driven by personnel, stock compensation, and Indiana facility costs - General and administrative expenses for the three months ended March 31, 2019, were up from the corresponding period in 2018 due to increases in personnel costs, stock compensation charges, legal and travel costs, and excess capacity charges at the Indiana facility as it continues its start-up[53](index=53&type=chunk) - G&A expenses increased by **47% to $2.037 million** in Q1 2019 from **$1.387 million** in Q1 2018[50](index=50&type=chunk) [Total Other (Income) Expense](index=16&type=section&id=Total%20Other%20%28Income%29%20Expense_MD%26A) Total other (income) expense increased 33% to $8 thousand in Q1 2019, including interest, bank charges, and income - Total other (income) expense increased by **33% to $8 thousand** in Q1 2019 from **$6 thousand** in Q1 2018[50](index=50&type=chunk) - Total other (income) expense for the three months ended March 31, 2019, comprised interest on debt, bank charges, and interest income[54](index=54&type=chunk) - For the three months ended March 31, 2018, it comprised interest on debt, bank charges, gain on disposal of equipment, and interest income[54](index=54&type=chunk) [Cash Flows](index=17&type=section&id=Cash%20Flows) Financing activities provided $7.226 million in Q1 2019, leading to a net cash increase of $4.640 million Summary of Cash Flows (Three Months Ended March 31) | --- | --- | --- | --- | --- | |-----------------------------------------------------|-------|----------------------|------------------------------|--------------| | | | Three March \n2019 | Months 31, \n(unaudited) | Ended \n2018 | | Net cash provided by (used in): | | | | | | Operating activities | $ | (2,133) | $ | (2,467) | | Investing activities | | (456) | | (2,033) | | Financing activities | | 7,226 | | 10,852 | | Effect of exchange rate changes on cash | | 3 | | (5) | | Net increase (decrease) in cash | $ | 4,640 | $ | 6,347 | [Cash Flows from Operating Activities](index=17&type=section&id=Cash%20Flows%20from%20Operating%20Activities) Net cash used in operating activities decreased to $2.133 million in Q1 2019, driven by net loss and working capital changes - Net cash used in operating activities during the three months ended March 31, 2019, was **$2.133 million**, compared to **$2.467 million** in the prior year[56](index=56&type=chunk)[57](index=57&type=chunk) - The Q1 2019 usage was primarily comprised of a **$2.8 million** net loss, offset by non-cash depreciation and stock compensation charges of **$424 thousand**, and decreased by working capital sources of **$207 thousand**[57](index=57&type=chunk) - The increase in cash provided by working capital in the current period was due primarily to an increase in accounts payable and accrued liabilities, offset by increases in inventory and receivables[57](index=57&type=chunk) [Cash Flows from Investing Activities](index=17&type=section&id=Cash%20Flows%20from%20Investing%20Activities) Net cash used in investing activities decreased to $456 thousand in Q1 2019 due to lower farm renovation spending - Net cash used in investing activities was **$456 thousand** during the three months ended March 31, 2019, compared to **$2.0 million** in the same period in 2018[56](index=56&type=chunk)[58](index=58&type=chunk) - Spending in Q1 2019 was for renovations to the Indiana farm site and for construction charges at the Rollo Bay site[58](index=58&type=chunk) [Cash Flows from Financing Activities](index=17&type=section&id=Cash%20Flows%20from%20Financing%20Activities) Net cash from financing was $7.226 million in Q1 2019, from share issuance, warrant exercises, and debt - Net cash provided by financing activities was **$7.226 million** during the three months ended March 31, 2019, compared to **$10.852 million** in the same period in 2018[56](index=56&type=chunk)[59](index=59&type=chunk) - In Q1 2019, the company received approximately **$6.6 million** in net proceeds from common share issuance, **$250 thousand** from warrant exercises, and **$376 thousand** from debt issuance, offset by **$10 thousand** in debt repayment[59](index=59&type=chunk) - In Q1 2018, the company received approximately **$10.6 million** in net proceeds from common share and warrant issuance and **$250 thousand** from warrant exercises, offset by **$14 thousand** in debt repayment[59](index=59&type=chunk) [Future Capital Requirements](index=17&type=section&id=Future%20Capital%20Requirements) AquaBounty raised $14.7 million for working capital, but needs more for future projects, dependent on approvals and costs - The company has received gross proceeds of **$14.7 million** from debt and equity sources since December 31, 2018, through public offerings and warrant exercises[60](index=60&type=chunk) - Current funds are sufficient for cash requirements for the next twelve months, but the company anticipates the need to raise additional capital for subsequent cash requirements and any additional projects[60](index=60&type=chunk) - Future capital requirements will depend on factors such as the timing of additional regulatory approvals, the cost to complete construction activities at the Rollo Bay site, the cost to raise fish at the Indiana and Rollo Bay sites, and the timing of costs related to the FDA legal challenge[60](index=60&type=chunk)[61](index=61&type=chunk) - Financing options include equity offerings (which could dilute ownership), debt financings (which may involve restrictive covenants), government or third-party funding, strategic alliances, and licensing arrangements (which may require relinquishing valuable rights)[62](index=62&type=chunk) [Critical Accounting Policies and Estimates](index=19&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Financial statements adhere to GAAP, relying on management estimates and assumptions that are continuously evaluated - The consolidated financial statements are prepared in accordance with GAAP, requiring management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities[63](index=63&type=chunk) - Estimates and judgments are evaluated on an ongoing basis, based on historical experience and other reasonable factors, with actual results potentially differing under different assumptions or conditions[63](index=63&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=19&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details AquaBounty's exposure to interest rate and foreign currency exchange risks [Interest Rate Risk](index=19&type=section&id=Interest%20Rate%20Risk) AquaBounty's primary market risk is interest rate risk, with all $1.2 million of its debt at fixed rates - The company's primary exposure to market risk is interest rate risk associated with debt financing, which is usually determined based on a fixed rate[65](index=65&type=chunk) - At March 31, 2019, and December 31, 2018, the company had **$1.2 million** in interest-bearing debt instruments on its consolidated balance sheet, all at fixed rates[65](index=65&type=chunk) [Foreign Currency Exchange Risk](index=19&type=section&id=Foreign%20Currency%20Exchange%20Risk) AquaBounty faces foreign currency exchange risk due to its Canadian subsidiary's use of the Canadian Dollar - The company's functional currency is the U.S. Dollar, while the functional currency of its Canadian subsidiary is the Canadian Dollar, exposing the company to foreign currency exchange risk[66](index=66&type=chunk) - For the Canadian Subsidiary, assets and liabilities are translated at exchange rates in effect at the balance sheet date, equity accounts at historical exchange rates, and income statement accounts at the average rate for each period[66](index=66&type=chunk) - Net translation gains or losses are adjusted directly to a separate component of other comprehensive loss within shareholders' equity (deficit)[66](index=66&type=chunk) [Item 4. Controls and Procedures](index=19&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of March 31, 2019, with no material changes to internal controls [Disclosure Controls and Procedures](index=19&type=section&id=Disclosure%20Controls%20and%20Procedures) Management, including CEO and CFO, deemed disclosure controls effective as of March 31, 2019 - Management, with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company's disclosure controls and procedures as of March 31, 2019[67](index=67&type=chunk) - It was concluded that the Company's disclosure controls and procedures are effective in recording, processing, summarizing, and reporting, on a timely basis, information required to be disclosed by the Company in reports filed or submitted under the Exchange Act[67](index=67&type=chunk) [Changes in Internal Control Over Financial Reporting](index=20&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) No material changes occurred in internal control over financial reporting during Q1 2019 - There were no changes in the company's internal control over financial reporting that occurred during the fiscal quarter covered by this report that have materially affected or are reasonably likely to materially affect its internal control over financial reporting[68](index=68&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=21&type=section&id=Item%201.%20Legal%20Proceedings) This section details an ongoing lawsuit against FDA's AquAdvantage Salmon approval, which AquaBounty believes lacks merit [Lawsuit Against the FDA Approval of NADA](index=21&type=section&id=Lawsuit%20Against%20the%20FDA%20Approval%20of%20NADA) NGOs sued FDA over AquAdvantage Salmon approval, alleging lack of authority and environmental risk failures - On March 30, 2016, a coalition of non-governmental organizations filed a complaint in the United States District Court for the Northern District of California against the FDA regarding the approval of AquAdvantage Salmon[70](index=70&type=chunk) - The coalition claims the FDA had no statutory authority to regulate bioengineered animals, and, if it did, that the agency failed to analyze and implement measures to mitigate ecological, environmental, and socioeconomic risks[70](index=70&type=chunk) - The discovery phase of litigation is now complete, and the case is moving forward on substantive briefing, though the company believes this legal action lacks merit[70](index=70&type=chunk)[74](index=74&type=chunk) [Item 1A. Risk Factors](index=21&type=section&id=Item%201A.%20Risk%20Factors) This section outlines new risk factors, including capital needs, potential lawsuits, regulatory scrutiny, and Intrexon's influence [Risks Relating to our Business](index=21&type=section&id=Risks%20Relating%20to%20our%20Business) Business risks include capital needs, lawsuits from anti-bioengineered groups, and increasing or changing regulations [We will need substantial additional capital in the future in order to fund our business.](index=21&type=section&id=We%20will%20need%20substantial%20additional%20capital%20in%20the%20future%20in%20order%20to%20fund%20our%20business.) AquaBounty needs substantial capital due to expected losses and delayed sales, with future needs dependent on approvals and costs - The company does not expect significant sales until **2020**, at the earliest, and expects to incur losses for the foreseeable future, anticipating a need to raise further funds[72](index=72&type=chunk) - Future capital requirements depend on factors such as the timing of additional regulatory approvals, the cost to complete construction activities at the Rollo Bay site, and the cost to raise fish at the Indiana and Rollo Bay sites[60](index=60&type=chunk)[61](index=61&type=chunk) - To the extent additional capital is raised through the sale of equity or convertible debt securities, the ownership interests of common stock holders will be diluted[62](index=62&type=chunk) [We or regulatory agencies approving of our products may be sued by non-governmental organizations and others who are opposed to the development or commercialization of bioengineered products.](index=22&type=section&id=We%20or%20regulatory%20agencies%20approving%20of%20our%20products%20may%20be%20sued%20by%20non-governmental%20organizations%20and%20others%20who%20are%20opposed%20to%20the%20development%20or%20commercialization%20of%20bioengineered%20products.) AquaBounty faces ongoing lawsuits from NGOs opposing bioengineered products, which can incur costs and restrict commercialization - Many organizations are fundamentally opposed to bioengineered products and have a history of bringing legal action against companies in the biotechnology market[73](index=73&type=chunk) - A coalition of NGOs filed a complaint on March 30, 2016, against the FDA regarding its approval of AquAdvantage Salmon, claiming lack of statutory authority and failure to mitigate ecological, environmental, and socioeconomic risks[73](index=73&type=chunk)[74](index=74&type=chunk) - Such actions, even if unsuccessful, may distract management from operational priorities and cause the company to incur significant costs, potentially restricting commercialization of its product[74](index=74&type=chunk) [We may become subject to increasing regulation, changes in existing regulations, and review of existing regulatory decisions.](index=23&type=section&id=We%20may%20become%20subject%20to%20increasing%20regulation%2C%20changes%20in%20existing%20regulations%2C%20and%20review%20of%20existing%20regulatory%20decisions.) Evolving bioengineered animal regulations could impose new restrictions, delays, or increased compliance costs - Regulations pertaining to bioengineered animals are still developing and could change, potentially requiring new regulatory frameworks, changes in existing regulation, or re-evaluation of prior regulatory decisions[76](index=76&type=chunk) - Despite the FDA's final determination, a provision in the **2016** Omnibus Appropriations Act required final guidance for labeling bioengineered foods, leading to an Import Alert for AquAdvantage Salmon until the USDA promulgated its final rule in March **2019**[76](index=76&type=chunk) - Legislatively imposed reviews of a completed regulatory process could result in new restrictions on, or delays in, commercialization of the product and require significant additional capital and operating expenditures[76](index=76&type=chunk) [Risks Relating to our Common Stock](index=23&type=section&id=Risks%20Relating%20to%20our%20Common%20Stock) Intrexon's significant ownership (38.1%) and Randal J. Kirk's control (42.0%) influence corporate matters [Intrexon's significant share ownership position allows it to influence corporate matters.](index=23&type=section&id=Intrexon%27s%20significant%20share%20ownership%20position%20allows%20it%20to%20influence%20corporate%20matters.) Intrexon's 38.1% ownership and Randal J. Kirk's 42.0% control allow significant influence over corporate and shareholder decisions - Intrexon owns **8,239,199 shares** of the company's common stock, representing approximately **38.1%** of outstanding shares as of October 29, 2018[78](index=78&type=chunk) - Randal J. Kirk, Intrexon's Chairman, Chief Executive Officer, and controlling shareholder, controls approximately **42.0%** of the company's outstanding shares[78](index=78&type=chunk) - Intrexon's significant interest allows it to influence Board of Directors appointments and the outcome of matters submitted to shareholders for approval, potentially discouraging third parties from seeking to acquire control[78](index=78&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=23&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds were reported for the period - There were no unregistered sales of equity securities and use of proceeds to report[79](index=79&type=chunk) [Item 3. Defaults Upon Senior Securities](index=23&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported for the period - There were no defaults upon senior securities to report[79](index=79&type=chunk) [Item 4. Mine Safety Disclosures](index=23&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Mine safety disclosures are not applicable to AquaBounty - Mine safety disclosures are not applicable[79](index=79&type=chunk) [Item 5. Other Information](index=24&type=section&id=Item%205.%20Other%20Information) No other information is reported for the period - There is no other information to report[80](index=80&type=chunk) [Item 6. Exhibits](index=25&type=section&id=Item%206.%20Exhibits) This section lists Form 10-Q exhibits, including CEO and CFO certifications under Sarbanes-Oxley Sections 302 and 906 - Exhibits include Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to Section **302** of the Sarbanes-Oxley Act of **2002**[82](index=82&type=chunk) - Exhibits also include Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to Section **906** of the Sarbanes-Oxley Act of **2002**[82](index=82&type=chunk) [Signatures](index=26&type=section&id=Signatures) This section contains the signatures of Sylvia Wulf (CEO) and David A. Frank (CFO), certifying the report on May 2, 2019 - The report is signed by Sylvia Wulf, President, Chief Executive Officer, and Director, and David A. Frank, Chief Financial Officer and Treasurer[84](index=84&type=chunk) - The report was signed on May 2, 2019[84](index=84&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2018 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________ to ________________ | --- | --- | |---------------------------------------------------------------------------------------------------------|------------- ...