AquaBounty Technologies(AQB) - 2022 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1. Financial Statements The company's unaudited statements show increased revenue and costs, leading to a larger net loss and significant capital investment Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $118,888,889 | $88,454,988 | | Marketable securities | $29,354,888 | $101,773,781 | | Total current assets | $154,609,571 | $193,025,163 | | Property, plant and equipment, net | $63,978,895 | $33,815,119 | | Total assets | $220,139,761 | $228,435,992 | | Liabilities & Equity | | | | Total current liabilities | $8,407,224 | $5,885,838 | | Total liabilities | $16,727,586 | $14,633,229 | | Total stockholders' equity | $203,412,175 | $213,802,763 | Condensed Consolidated Statements of Operations Highlights (Unaudited) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Product revenues | $1,069,706 | $227,393 | $2,032,587 | $301,765 | | Total costs and expenses | $6,640,245 | $5,406,808 | $12,706,932 | $9,566,228 | | Operating loss | ($5,570,539) | ($5,179,415) | ($10,674,345) | ($9,264,463) | | Net loss | ($5,536,042) | ($5,230,737) | ($10,647,768) | ($9,389,628) | | Basic and diluted net loss per share | ($0.08) | ($0.07) | ($0.15) | ($0.14) | Condensed Consolidated Statements of Cash Flows Highlights (Unaudited) | Cash Flow Activity | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($11,256,408) | ($10,457,833) | | Net cash provided by (used in) investing activities | $41,966,420 | ($74,151,566) | | Net cash (used in) provided by financing activities | ($274,724) | $121,171,061 | | Net change in cash, cash equivalents and restricted cash | $30,433,901 | $36,594,191 | - The company began selling its GE Atlantic salmon in the United States, Canada, and Brazil after receiving regulatory approvals[26] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses higher revenue from salmon sales offset by rising costs, and the significant capital needed for the new Ohio farm Results of Operations Revenue grew significantly due to higher harvest volumes, but increased production costs and inventory charges widened net losses Q2 2022 vs Q2 2021 Performance | Metric | Q2 2022 | Q2 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Product Revenue | $1.07M | $0.23M | +$0.84M | +371% | | GE Salmon Harvest (mt) | 129 | 69 | +60 | +87% | | Product Costs | $3.25M | $1.85M | +$1.40M | +76% | | Net Loss | ($5.54M) | ($5.23M) | +$0.31M | +6% | H1 2022 vs H1 2021 Performance | Metric | H1 2022 | H1 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Product Revenue | $2.03M | $0.30M | +$1.73M | +573% | | GE Salmon Harvest (mt) | 262 | 69 | +193 | +280% | | Product Costs | $6.53M | $3.40M | +$3.13M | +92% | | Net Loss | ($10.65M) | ($9.39M) | +$1.26M | +13% | - Production costs were higher than the net realizable value of the salmon produced, resulting in inventory value charges of $2.0 million for Q2 2022 and $4.1 million for H1 2022[83][90] Liquidity and Capital Resources The company has sufficient liquidity for the next year but requires substantial additional financing for its Ohio farm construction - The company's plans include the construction of a 10,000 metric ton salmon farm in Ohio, with a current estimated cost exceeding $320 million[103] - Management believes its cash position of $149.2 million is sufficient for more than twelve months but requires additional financing to execute its business plan[29][103] - Cash from investing activities was $42.0 million in H1 2022, primarily from the net sale of marketable securities to fund construction and equipment purchases[97][99] - Financing activities in H1 2021 provided $121.2 million from a public stock offering, whereas H1 2022 financing activities used $0.3 million[97][101] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks involve interest rates on debt and foreign currency fluctuations from its Canadian operations - The company's primary market risk exposures are interest rate risk on debt and foreign currency exchange risk from its Canadian operations[115] - Most of the company's existing interest-bearing debt is at fixed rates, mitigating immediate risk from rate changes[116] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective with no material changes to internal controls - Management concluded that as of June 30, 2022, the company's disclosure controls and procedures were effective[118] - No changes occurred during the fiscal quarter that materially affected the company's internal control over financial reporting[120] PART II OTHER INFORMATION Item 1. Legal Proceedings The company is not involved in any legal proceedings that would materially impact its business or financial condition - The company is not party to any material legal proceedings[122] Item 1A. Risk Factors Key risks include the need for substantial capital for the Ohio farm, compounded by rising inflation and interest rates - The company's business plan requires substantial additional capital, particularly for the Ohio farm, which is estimated to cost over $320 million[124][125] - The company does not have the financial resources to fully fund the Ohio farm and will need to raise funds through debt financing[126] - Due to inflationary pressures, the company has slowed its planned timeline for pursuing debt financing to re-estimate construction costs[125] - Rising inflation poses a risk to profitability if cost increases cannot be passed on to customers or if consumer spending declines[133][134] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities occurred during the reporting period - None[136] Item 3. Defaults Upon Senior Securities No defaults upon senior securities occurred during the reporting period - None[137] Item 4. Mine Safety Disclosures This section is not applicable as the company is not engaged in mining operations - Not applicable[137] Item 5. Other Information No other material information was required to be reported during the period - None[137] Item 6. Exhibits This section lists filed exhibits, including required CEO and CFO certifications under the Sarbanes-Oxley Act - The report includes certifications from the Chief Executive Officer and Chief Financial Officer pursuant to the Sarbanes-Oxley Act of 2002[140]