What changed in this filing

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Item 1A. Risk Factors

2022-03-10 compared with 2021-03-09 · 132 added, 114 removed, 310 unchanged (44% of the section changed)

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We have constructed a 250 metric ton annual capacity production facility in Rollo Bay and in 2017 we acquired a facility in Indiana, which has undergone renovations to increase its annual capacity to 1,200 metric tons.

We expect revenues to be modest and infrequent for at least the first half of 2021 until the U.S.

economy begins to recover from the COVID-19 pandemic and food service operations begin to return to normal capacity.

We expect revenues to grow modestly in 2022 as we increase our weekly harvesting capability at our Indiana farm.

However, our ability to realize revenues and the timing thereof are not certain, and achieving revenues does not assure that we will become profitable.

We may need substantial additional capital in the future in order to fund our business plans.

To date we have not generated any profit and expect to incur losses for the foreseeable future and may never become profitable.

Therefore, based on our current business plan, we may need to raise further funds.

Any issuance of shares of our common stock could have an effect of depressing the market price of shares of our common stock through dilution of earnings per share or otherwise.

The amount and timing of the expenditures needed to achieve our commercialization plans, including the construction of four to five new, land-based RAS farms at a cost of $140 million to $175 million each, will depend on numerous factors, some of which are outside our control.

Changes in our plans could also result in the need for additional funds.

Our business plans include the need for substantial additional capital and without it we may not be able to implement our strategy as planned or at all.

Our strategy depends on our ability to develop and construct additional farms, including our planned Ohio farm.

We have not yet begun construction of this farm and its construction, and others in the future, is contingent on a number of significant uncertainties, including those described below.

As a result, we may be unable to construct such facilities as planned or at all.

We may not be able to obtain the financing necessary to commence construction of our proposed facilities.

We estimate that the construction cost for the Ohio farm will range between $290 million and $320 million, although this figure is likely to change as we finalize the design and proceed with construction.

We do not have the financial resources required to fully finance the construction of the Ohio farm.

We will seek to raise part of these necessary funds through debt financing.

We may also need further funding if there are delays in construction or increased construction costs at our proposed construction site in Ohio.

We may finance unanticipated construction costs by issuing equity securities or debt.

The delay or failure of regulatory bodies to approve our construction plans, disruption and volatility in the financial markets, tighter credit markets and a downturn in the seafood market may negatively impact our ability to obtain financing.

We may not have access to the required funding, or funding may not be available to us on acceptable terms.

While we are currently completing the remaining contingencies for the acquisition of the site in Ohio for this farm, if we are unable to secure this location or others for future farms that satisfy our requirements, our business and results of operations would be materially and adversely impacted.

We may not be able to obtain the approvals and permits that will be necessary in order to construct our facilities as planned.

We will need to obtain a number of required permits in connection with the hydrology, construction and operation of our farms, which is often a time-consuming process.

If we experience delays in obtaining the required approvals and permits for our farms, our expected construction start date, commercial stocking and first sale of our GE Atlantic salmon may be delayed.

If we are unable to obtain the required approvals and permits for our farms, we will not be able to construct the farms.

In addition, federal, state and local governmental requirements could substantially increase our costs, which could materially harm our results of operations and financial condition.

We have encountered cost increases in the expected construction cost of the Ohio farm, and may encounter further unanticipated difficulties and cost overruns in constructing this farm and other future farms.

Preparing cost and timing estimates for complex RAS farms is inherently difficult and subject to change based on a number of factors, including site availability and characteristics, design changes, fluctuating costs of materials, labor shortages, the impact of the COVID-19 pandemic, construction delays, dependence on contractors, financing costs, customer requirements and other unexpected complications.

result, we may encounter unanticipated difficulties and the construction and development of our proposed farms may be more costly or time-consuming than we anticipate.

Delays and defects may cause our costs to increase to a level that would make one or more of our farms too expensive to construct or unprofitable.

We may suffer significant delays or cost overruns at our farms that could prevent us from commencing operations as expected as a result of various factors.

These factors include shortages of workers or materials, construction and equipment cost escalation, transportation constraints, adverse weather, unforeseen difficulties or labor issues, or changes in political administrations at the federal, state or local levels that result in policy change towards genetically engineered foods in general or our products and farms in particular.

Defects in materials or workmanship could also delay the commencement of operations of our planned farms, increase production costs or negatively affect the quality of our products.

Due to these or other unforeseen factors, we may not be able to proceed with the construction or operation of our farms in a timely manner or at all.

Ethical, legal, and social concerns about genetically engineered products could limit or prevent the use of our products and limit our revenues.

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These concerns could also result in increased expenses, regulatory scrutiny, delays, or other impediments to implementation of our business plan.

For example, in January 2021, Representative Don Young of Alaska introduced legislation (HR-273), which was referred to the House Natural Resources Committee.

The legislation, if passed, would prohibit our business unless we obtain an exemption from the Department of Commerce's National Oceanic and Atmospheric Administration, who in consultation with the Fish and Wildlife Service, would need to conduct additional environmental assessments to show “no significant impact.” In July 2021, Congressman Young testified before the House Natural Resources Committee’s sub-committee on Water, Oceans and Wildlife with respect to the legislation but there has not been additional support for the legislation and no further movement on the bill, to date.

The subject of genetically engineered products has received negative publicity, which has aroused public debate.

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There is an active and vocal group of opponents to genetically engineered products who wish to ban or restrict the technology and who, at a minimum, hope to sway consumer perceptions and acceptance of this technology.

Their efforts include regulatory legal challenges and labeling campaigns for genetically engineered products, as well as application of pressure to consumer retail outlets seeking a commitment not to carry genetically engineered Atlantic salmon.

Consumer acceptance could also be adversely affected if AquAdvantage salmon were believed to grow to a larger final size than conventional Atlantic salmon.

Their efforts include regulatory legal challenges and labeling campaigns for genetically engineered products, as well as application of pressure to multiple channels of distribution including, but not limited to distributors, food service operators, and consumer retail outlets seeking a commitment not to carry genetically engineered Atlantic salmon.

Consumer acceptance could also be adversely affected if our GE Atlantic salmon were believed to grow to a larger final size than conventional Atlantic salmon.

We may not be able to overcome the negative consumer perceptions that these organizations have instilled against our products.

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A number of factors can negatively affect the quality of the salmon that we sell, including the quality of our broodstock, water conditions in our farms, the food and additives consumed by our fish, population levels in the tanks, and the amount of time that it takes to bring a fish to harvest, including transportation and processing.

We have experience operating RAS facilities and raising salmon, and while we actively monitor these factors, we cannot always ensure optimal growing conditions.

We have experience operating RAS facilities and raising salmon, and while we actively monitor these factors using rigorous standard operating procedures, we cannot always ensure optimal growing conditions.

Although fish grown in RAS production systems are not subject to the disease and parasite issues that can affect salmon grown in ocean pens, there is the potential for organisms that are ubiquitous to freshwater environments to become pathogenic if the fish are subjected to stressful conditions or there is an issue with biomass management.

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Sub-optimal conditions could lead to smaller harvests and or lower quality fish.

Conversely, if we experience better than expected growth rates, we may not be able to process and bring our fish to market in a timely manner, which may result in overcrowding that can cause negative health impacts and/or require culling our fish population.

Conversely, if we experience better than expected growth rates, we may not be able

to process and bring our fish to market in a timely manner, which may result in overcrowding that can cause negative health impacts and/or require culling our fish population.

Further, if our salmon is perceived by the market to be of lower quality than other available sources of salmon or other fish, we may experience reduced demand for our product and may not be able to sell our products at the prices that we expect or at all.

For example, we concluded 2020 with a conventional Atlantic salmon harvest that met our high standards for nutrition, taste and texture.

However, unlike our AquAdvantage salmon, the conventional salmon did not achieve the same high level of color consistency, due in part to the maturity of the male population and the quality of the color additive in the feed.

We identified and successfully addressed the source of the color inconsistency in the conventional salmon, and our production plans call for only raising our all-female AquAdvantage salmon moving forward.

However, we reduced the net realizable value of our conventional salmon to $0 as of December 31, 2020 as we anticipate donation of the entire conventional salmon biomass in the first quarter of 2021.

However, unlike our GE Atlantic salmon, the conventional salmon did not achieve the same high level of color consistency, due in part to the maturity of the male population and the quality of the ingredients in the feed.

We identified and successfully addressed the source of the color inconsistency in the conventional salmon, and our production plans call for only raising our all-female GE Atlantic salmon moving forward.

However, we reduced the net realizable value of our conventional salmon to $0 as of December 31, 2020 as we decided to donate the entire conventional salmon biomass during the first and second quarters of 2021.

As we continue to expand our operations and build new farms, we potentially may face additional challenges with maintaining the quality of our products.

We cannot guarantee that we will not face quality issues again in the future, any of which could cause damage to our reputation, and a loss of consumer confidence in our products, which could have a material adverse effect on our business results and the value of our brands.

In addition, we may be required to recall some of our products if they spoil, become contaminated, are tampered with or are mislabeled.

A widespread product recall could result in significant losses due to the costs of a recall, the destruction of product inventory and lost sales due to the unavailability of product for a period of time.

Such a product recall also could result in adverse publicity, damage to our reputation, and a loss of consumer confidence in our products, which could have a material adverse effect on our business results and the value of our brands.

We may experience a significant fish mortality event in our broodstock or our production facilities that could impact the price of our common stock.

In recent periods, other companies in the land-based aquaculture industry have experienced fish mortality events that resulted in a decline in their share price.

It is possible that our operations could experience a significant fish mortality event due to, among other causes, disease, pathogens, human error, intentional malfeasance, a weather event, loss of access to electricity or water, or damage to our farms, or other factors beyond our control.

If we were to have a significant fish mortality event, this could lead to a reduction in production harvests, loss of broodstock, loss of revenue, increased production costs, and public relations damage, the result of which could impact the price of our common stock.

A shutdown, damage to any of our farms, or lack of availability of power, fuel, oxygen, eggs, water, or other key components needed for our operations, could result in our prematurely harvesting fish, a loss of a material percentage of our fish in production, a delay in our commercialization plans, and a material adverse effect on our operations, business results, reputation, and the value of our brands.

At present, we only have farms in Albany, Indiana, and Prince Edward Island, Canada.

As an interruption in the power, fuel, oxygen supply, water quality systems, or other critical infrastructure of an aquaculture facility for more than a short period of time can lead to the loss of a large number of fish, any shutdown of or damage to either of our farms—for example, due to natural disaster, shortages of key components to our operations due to a pandemic, reduction in water supply, contamination of our aquifers, interruption in services beyond our backup capacity, or human interference—could require us to prematurely harvest some or all of the fish at that farm or could result in a loss of a material percentage of our fish in production.

As an interruption in the power, fuel, oxygen supply, water quality systems, or other critical infrastructure of an aquaculture facility for more than a short period of time can lead to the loss of a large number of fish, any shutdown of or damage to either of our farms—for example, due to weather or other natural disaster, shortages of key components to our operations due to a pandemic, reduction in water supply, contamination of our aquifers, interruption in services beyond our backup capacity, or human interference—could require us to prematurely harvest some or all of the fish at that farm or could result in a loss of a material percentage of our fish in production.

We also are dependent on egg availability and being able to ship genetically engineered Atlantic salmon eggs from Canada to the United States for production.

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The security of our network and the storage and maintenance of sensitive information is critical to our operations.

Despite our security measures, our information technology and infrastructure may be vulnerable to cyber-attacks by hackers or breached due to employee error or malfeasance.

A breach of our

security could compromise our networks and the information stored on our servers could be accessed, manipulated, publicly disclosed, lost, or stolen, and our farm operations could be interrupted.

Despite our security measures, our information technology and

infrastructure may be vulnerable to cyber-attacks by hackers or breached due to employee error or malfeasance.

A breach of our security could compromise our networks and the information stored on our servers could be accessed, manipulated, publicly disclosed, lost, or stolen.

Any such access, manipulation, disclosure, or loss of information could result in errors in our records, fraudulent use of our financial information or theft of assets, legal claims or proceedings, liability under laws that protect the privacy of personal information, theft of our intellectual property, or damage to our reputation.

In addition, our systems could be the subject of denial of service or other interference, which could disrupt our operations and commercial transactions.

In addition, with the continued automation of our farm operations, there is the possibility of exposure to critical assets or sensitive information loss stemming from a cyber-attack on communication interfaces with outside vendors, which could adversely impact our farm operations.

Any of the foregoing could adversely affect our business, revenues, and competitive position.

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We may be required to write-down the value of our inventory if its net realizable value is less than its accumulated cost at the end of a reporting period.

Our fish-in-process inventory is a biological asset and is stated on our balance sheet at the lower of cost or net realizable value, where the net realizable value is calculated as the estimated market price less the estimated costs of processing, packaging and transportation.

Our fish-in-process inventory is a biological asset and is stated on our balance sheet at the lower of cost or net realizable value, where net realizable value is calculated as the estimated market price less the estimated costs of processing, packaging and transportation.

Any adjustments to the carrying value of inventory are reported as a component of production costs on our income statement.

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Until such time as our net realizable value is consistently in excess of inventory costs, our inventory may be subject to significant market value risk.

During the third quarter of 2021, we recognized a $1.5 million charge to reduce the value of our inventory to its net realizable value, based on our current quarter production yields and transportation costs which were higher than our expectations as of the end of the second quarter of 2021.

If our products become contaminated, we may be subject to product liability claims and product recalls, which could adversely affect our financial results and damage our reputation.

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Our products may be subject to contamination by foreign materials or disease-producing organisms or pathogens, such as Listeria monocytogenes, Salmonella and E.

These organisms and pathogens are found generally in the environment and there is a risk that

one or more, as a result of food processing, could be present in our products.

These organisms and pathogens are found generally in the environment and there is a risk that one or more, as a result of food processing, could be present in our products.

These organisms and pathogens also can be introduced to our products as a result of improper handling at the further-processing, foodservice or consumer level.

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The loss of AquAdvantage salmon broodstock could result in the loss of our commercial technology.

AquAdvantage salmon, or more specifically the breeding population of live fish, or broodstock, themselves, is a product of our combined intellectual property, which includes our trade secrets related to creating and maintaining the broodstock.

Destruction of AquAdvantage salmon broodstock by whatever means would result in a significant delay to our operations while the broodstock was replenished.

The loss of our GE Atlantic salmon broodstock could result in the loss of our commercial technology.

Our GE Atlantic salmon, or more specifically the breeding population of live fish, or broodstock, themselves, is a product of our combined intellectual property, which includes our trade secrets related to creating and maintaining the broodstock.

Destruction of our salmon broodstock by whatever means would result in a significant delay to our operations while the broodstock was replenished.

Live animals are subject to disease that may, in some cases, prevent or cause delay in the export of fish or eggs to customers.

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It has also disrupted the normal operations of many businesses, including ours.

Global health concerns like the coronavirus pandemic could in themselves result in social, economic, and labor instability in the countries in which we or the third parties with whom we engage operate.

Global health concerns like the COVID-19 pandemic could in themselves result in social, economic, and labor instability in the countries in which we or the third parties with whom we engage operate.

The COVID-19 pandemic and government measures taken in response have also had a significant impact, both direct and indirect, on businesses and commerce, as worker shortages have occurred.

These impacts include the shortage of packaging workers and transportation suppliers that we have experienced, leading to slower and more expensive harvests;

supply chains have been disrupted;

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We have also implemented policies and procedures at our farms to react to any outbreak of the virus.

As a result of the COVID-19 pandemic, we have and may continue to experience disruptions that could severely impact our business, including disruptions or restrictions on our ability to travel, obtain regulatory approvals from the FDA and other regulators, pursue partnerships and other business transactions, conduct production activities, and make shipments, as well as be impacted by the temporary closure of the facilities of suppliers.

While we have taken steps to address the impact of the coronavirus on our operations, and we believe that our suppliers and potential customers continue to operate in the ordinary course in all material respects, we cannot presently predict the scope and severity of any additional business shutdowns or disruptions or the future impact on consumer demand.

partnerships and other business transactions, conduct production activities, and make shipments, as well as be impacted by the temporary closure of the facilities of suppliers.

While we have taken steps to address the impact of the coronavirus on our operations, we and our service providers have experienced labor and transportation shortages that have slowed the pace and increased the expense of commercial harvests of our products.

In addition, labor shortages are creating additional challenges to our efforts to meet the annual harvest expectations at our existing facilities, which has necessitated increased culling to rebalance the biomass of our fish and lower our stocking densities.

Though we believe this action will position us to achieve an annual harvest volume of 1,200 metric tons at the farm, we do not expect to reach this level during the next twelve months.

We also cannot presently predict the scope and severity of any additional business shutdowns or disruptions or the future impact on consumer demand.

For example, we have been primarily impacted by a reduction in the market price and demand for Atlantic salmon due to the pandemic’s impact on the food service sector.

This had and continues to have a negative impact on our revenue and inventory value.

If we or any of the third parties with whom we engage, including suppliers, distributors, service providers, regulators, and overseas business partners, experience additional or continued shutdowns or other disruptions, or consumer demand remains materially reduced, our ability to conduct our business in the manner and on the timelines presently planned could be materially and negatively

impacted, our anticipated revenues could decrease, and our costs and expenses could rise as a result of our efforts to address such disruptions.

In addition, the trading prices for our common stock and the stock of other biotechnology and food companies have been highly volatile as a result of the COVID-19 pandemic.

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The construction and potential benefits of our new facilities are subject to risks and uncertainties.

For any new facility that we build, our ability to complete construction on a timely basis and within budget is subject to a number of risks and uncertainties described below.

In addition, when a new facility becomes operational, it may not generate the benefits we expect if demand for the products to be produced by the facility is different from what we had expected or if we do not operate the facility efficiently.

For any new facility that we build, our ability to complete construction on a timely basis and within budget is subject to a number of risks and uncertainties.

In order to complete construction of a new facility, we need to take a significant number of steps and obtain a number of approvals and permits, none of which is assured of attainment.

If we are unable to complete construction on schedule, run the facility efficiently, or otherwise achieve the expected benefits of our new facilities, our business could be negatively affected.

If we are unable to obtain the required permits, complete construction on schedule, run the facility efficiently, or otherwise achieve the expected benefits of our new facilities, our business could be negatively affected.

Industry volatility can affect our earnings, especially due to fluctuations in commodity prices of salmon.

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Conversely, given the long grow-out cycle for raising salmon, disruptions in production can depress market supply and result in price increases.

Atlantic salmon farming is restricted in certain states.

Concerns regarding the possible environmental impact from AquAdvantage salmon have led several states to impose legislative and regulatory restrictions or bans on its farming.

In addition, some states, such as Alaska, have enacted restrictions on Atlantic salmon farming generally.

While we currently believe that many states offer excellent potential sites for AquAdvantage salmon production farms, if additional states adopt similar restrictions, or otherwise prohibit the rearing of AquAdvantage salmon in those states, the number of potential sites available to us for production farms in the United States could be reduced.

Atlantic salmon farming is subject to disease outbreaks, which can increase the cost of production and/or reduce production harvests.

Salmon farming systems, particularly conventional, open sea-cage systems, are vulnerable to disease introduction and transmission, primarily from the marine environment or adjacent culture systems.

The economic impact of disease to these production systems can be significant, as farmers must incur the cost of preventative measures, such as vaccines and antibiotics, and then, if the fish become infected, the cost of lost or reduced harvests.

Although we will produce and grow our AquAdvantage salmon in land-based, closed containment facilities, we will still be at risk for potential disease outbreaks.

We have implemented biosecurity measures in our facilities intended to prevent or mitigate disease impact, but there can be no assurance that any measures will be 100% effective.

If we lose key personnel, including key management personnel, or are unable to attract and retain additional personnel, it could delay our commercialization plans or harm our research and development efforts, and we may be unable to sell or develop our own products.

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The loss of any key members of our management, or the failure to attract or retain other key employees who possess the requisite expertise for the conduct of our business, could prevent us from developing and commercializing our products and executing on our business strategy.

We may not be able to attract or retain qualified employees in the future due to the intense competition for qualified personnel among aquaculture,

biotechnology, and other technology-based businesses, or due to the unavailability of personnel with the particular qualifications or experience necessary for our business.

We may not be able to attract or retain qualified employees in the future due to the intense competition for qualified personnel among aquaculture, biotechnology, and other technology-based businesses, or due to the unavailability of personnel with the particular qualifications or experience necessary for our business.

For production positions, effective training will be needed for new hires due to the overall lack of industry experience in land-based aquaculture in North America.

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Competition for experienced production staff, scientists, and other technical personnel from numerous companies and academic and other research institutions may limit our ability to attract and retain such personnel on acceptable terms.

Atlantic salmon farming is restricted in certain states.

Concerns regarding the possible environmental impact from our GE Atlantic salmon have led several states to impose legislative and regulatory restrictions or bans on its farming.

In addition, some states, such as Alaska, have enacted restrictions on Atlantic salmon farming generally.

While we currently believe that many states offer excellent potential sites for our salmon production farms, if additional states adopt similar restrictions, or otherwise prohibit the rearing of our GE Atlantic salmon in those states, the number of potential sites available to us for production farms in the United States could be reduced.

Atlantic salmon farming is subject to disease outbreaks, which can increase the cost of production and/or reduce production harvests.

Salmon farming systems, particularly conventional, open sea-cage systems, are vulnerable to disease introduction and transmission, primarily from the marine environment or adjacent culture systems.

Although we will produce and grow our GE Atlantic salmon in land-based, closed containment facilities, we will still be at risk for potential disease outbreaks.

We have implemented biosecurity measures in our facilities intended to prevent or mitigate disease impact, but there can be no assurance that any measures will be 100% effective.

Restrictive covenants in our term loan agreement may restrict our ability to pursue our business strategies.

Our term loan agreement with First Farmers Bank and Trust in the amount of $4 million contains certain customary restrictive covenants that limit our ability, including without limitation, to incur additional indebtedness and liens, merge with other companies or consummate certain changes of control, acquire other companies, engage in new lines of business and make certain investments, as well as financial covenants requiring us to maintain certain ratios with respect to our operations.

Our ability to comply with these covenants may be affected by events beyond our control, and we may not be able to meet those covenants.

A breach of any of these covenants could result in a default under the term loan agreement, which could cause all of the outstanding indebtedness under our term loan to become immediately due and payable.

In that event, we would be required to disclose the default in our public filings, which could have an adverse effect on the price of our shares of common stock.

These covenants could also limit our ability to seek capital through the incurrence of new indebtedness or, if we are unable to meet our obligations, require us to repay any outstanding amounts with sources of capital we may otherwise use to fund our business, operations and strategy.

We may encounter difficulties managing our growth, which could adversely affect our business.

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A total of C$2.9 million was made available under the grant, and we received the entire amount through December 31, 2015.

Once we begin to generate revenue from any of the products from the research program, we must commence repayment of the outstanding loan in the form of a

Once we begin to generate revenue from any of the products from the research program, we must commence repayment of the outstanding loan in the form of a 10% royalty.

These payments could negatively impact our ability to support our operations.

Revenues from sales of our AquAdvantage salmon are not subject to the royalty.

Revenues from sales of our GE Atlantic salmon are not subject to the royalty.

Our financial condition or results of operations may be adversely affected by international business risks, including exchange rate fluctuation.

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We have received government research grants and loans in the past, but such grants and loans may not be available in the future.

We have in the past received government assistance in the form of research grants and loans to partially fund various research projects, including projects involving our AquAdvantage salmon.

We have in the past received government assistance in the form of research grants and loans to partially fund various research projects, including projects involving our GE Atlantic salmon.

There can be no assurance that additional government assistance will be available in the future to help offset the cost of our research activities, in which case we would need to fund our research projects entirely from our available cash resources, which may be limited.

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For these purposes, an ownership change generally occurs where the aggregate stock ownership of one or more stockholders or groups of stockholders who owns at least 5% of a corporation’s stock increases its ownership by more than 50 percentage points over its lowest ownership percentage within a specified testing period.

In addition to limitations imposed by the 2017 Tax Cuts and Jobs Act, a portion of our NOLs are subject to substantial limitations arising from previous ownership changes, and, if we undergo another ownership change, our ability to utilize NOLs could be further limited by Sections 382 and 383 of the Code.

In addition to limitations imposed by the 2017 Tax Cuts and Jobs Act, a portion of our NOLs are subject to substantial limitations arising from previous ownership

changes, and, if we undergo another ownership change, our ability to utilize NOLs could be further limited by Sections 382 and 383 of the Code.

In addition, future changes in our stock ownership, many of which are outside of our control, could result in an ownership change under Sections 382 and 383 of the Code.

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Risks Relating to Regulated Products

Our ability to generate revenue to support our operations depends on maintaining regulatory approvals for AquAdvantage salmon and our farm sites and obtaining new approvals for farm sites and the sale of our products in other markets, the receipt of which is uncertain.

As a genetically engineered animal for human consumption, AquAdvantage salmon required approval from the FDA in the United States and the Ministers of Health and Environment in Canada before it could be produced, sold, or consumed in those countries.

Our ability to generate revenue to support our operations depends on maintaining regulatory approvals for our GE Atlantic salmon and our farm sites and obtaining new approvals for farm sites and the sale of our products in other markets, the receipt of which is uncertain.

As a genetically engineered animal for human consumption, our GE Atlantic salmon required approval from the FDA in the United States and the Ministers of Health and Environment in Canada before it could be produced, sold, or consumed in those countries.

Our FDA approval covers the production of our eggs in our hatchery in Canada and the grow-out of our eggs in our facilities in Indiana and Rollo Bay.

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The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels and statutory, regulatory, and policy changes.

Average review times at the agency have fluctuated in recent years as a

Average review times at the agency have fluctuated in recent years as a result.

In addition, government funding of other agencies on which our operations may rely is subject to the political process, which is inherently fluid and unpredictable.

Disruptions at the FDA and other agencies may also slow the time necessary for new applications to be reviewed and/or approved by necessary government agencies, which would adversely affect our business.

For example, on March 10, 2020, the FDA announced its intention to postpone most inspections of foreign manufacturing facilities and products through April 2020.

On March 18, 2020, the FDA announced its intention to temporarily postpone routine surveillance inspections of domestic manufacturing facilities.

Regulatory authorities outside the United States may adopt similar restrictions or other policy measures in response to the COVID-19 pandemic.

If a prolonged disruption occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

Future disruptions could also affect other government agencies, such as the SEC, which may also impact our business by delaying review of our public filings, to the extent such review is necessary, and our ability to access the public markets.

For example, in May 2021, the FDA released its Resiliency Roadmap for FDA Inspectional Oversight, which described the prioritization process for FDA inspections and oversight.

We believe that our GE Atlantic salmon would be treated as a “tier 2 - higher priority” product, but not a “tier 1 - mission critical” product.

This designation could potentially impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

We will be required to continue to comply with FDA and foreign regulations.

Even with the approval of our NADA and other regulatory applications for AquAdvantage salmon, we must continue to comply with FDA and other regulatory requirements not only for manufacturing, but also for labeling, advertising, record keeping, and reporting to the FDA and other regulators of adverse events and other information.

Even with the approval of our NADA and other regulatory applications for our GE Atlantic salmon, we must continue to comply with FDA and other regulatory requirements not only for manufacturing, but also for labeling, advertising, record keeping, and reporting to the FDA and other regulators of adverse events and other information.

Failure to comply with these requirements could subject us to administrative or judicial enforcement actions, including but not limited to product seizures, injunctions, civil penalties, criminal prosecution, refusals to approve new products, or withdrawal of existing approvals, as well as increased product liability exposure, any of which could have a material adverse effect on our business, financial condition, or results of operations.

The markets in which we intend to sell our products are subject to significant regulations.

In addition to our FDA approval for the sale and consumption of AquAdvantage salmon in the United States, we also will be subject to state and local regulations and permitting requirements, which could impact or delay the commercialization and commencement of revenue generation from the sale of AquAdvantage salmon.

In addition to our FDA approval for the sale and consumption of our GE Atlantic salmon in the United States, we are also subject to state and local regulations and permitting requirements, which could impact or delay the commercialization and commencement of revenue generation from the sale of our salmon.

International sales also are subject to rules and regulations promulgated by regulatory bodies within foreign jurisdictions.

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We have incurred, and will continue to incur, capital and operating expenditures and other costs in the ordinary course of our business in complying with these laws and regulations.

Additional laws and regulations could be adopted in the future further regulating our business.

We may become subject to increasing regulation, changes in existing regulations, and review of existing regulatory decisions.

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In addition, new legislation could require new regulatory frameworks, changes in existing regulation, or re-evaluation of prior regulatory decisions.

For example, despite the FDA’s final determination that AquAdvantage salmon may be sold without being labeled as a genetically engineered product, a provision added to the 2016 Omnibus Appropriations Act required the FDA to issue final guidance for such labeling.

The FDA was therefore obligated to maintain an Import Alert starting in January 2016 that prohibited import of AquAdvantage salmon until such guidance was finalized or the provision was no longer effective.

On March 8, 2019, several months after the USDA promulgated its final rule establishing the Disclosure Standard, which included disclosure requirements for bioengineered foods, including AquAdvantage salmon, the FDA lifted the Import Alert.

Similarly, in July 2017, a bill was introduced in the United States Senate that could have, had it become law, required labeling unique to, as well as re-examination of the environmental assessments used by the FDA in its 2015 approval of the NADA for, AquAdvantage salmon.

For example, despite the FDA’s final determination that our GE Atlantic salmon may be sold without being labeled as a genetically engineered product, a provision added to the 2016 Omnibus Appropriations Act required the FDA to issue final guidance for such labeling.

The FDA was therefore obligated to maintain an Import Alert starting in January 2016 that prohibited import of our GE Atlantic salmon until such guidance was finalized or the provision was no longer effective.

On March 8, 2019, several months after the USDA promulgated its final rule establishing the Disclosure Standard, which included disclosure requirements for bioengineered foods, including our GE Atlantic salmon, the FDA lifted the Import Alert.

While this bill was reintroduced in January 2019 without the requirement for re-examination of those environmental assessments, any such legislatively imposed review of a completed regulatory process could result in new restrictions on, or delays in, commercialization of our product in the United States.

We could be subject to increasing or more onerous regulatory hurdles as we attempt to commercialize our product, which could require us to incur significant additional capital and operating expenditures and other costs in complying with these laws and regulations.

Our regulatory burdens could also increase if AquAdvantage salmon are found, or believed, to grow to a larger final size than conventional Atlantic salmon.

Our regulatory burdens could also increase if our GE Atlantic salmon are found, or believed, to grow to a larger final size than conventional Atlantic salmon.

In addition, the 2020 Appropriations Act, which was signed into law in December 2019, contained an amendment that requires that any bioengineered animal approved by FDA prior to the effective date of the Disclosure Standard shall include the words ‘‘genetically engineered’’ prior to the existing acceptable market name.

While the Company believes that this labeling requirement is unnecessary and redundant to the requirement of the Disclosure Standard, it will comply with all applicable laws.

Further, in January 2021, the U.S.

House of Representatives introduced HR 273, which would place significant restrictions and regulatory requirements on our business.

This act is currently under review by the House of Representatives’ natural resources committee.

Additional regulatory and lawmaking activity within the United States and abroad could increase our costs and/or delay or prevent the production and sales of our GE Atlantic salmon.

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 genetically engineered products.

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These groups have a history of bringing legal action against companies attempting to bring new biotechnology products to market.

On December 23, 2013, an application was filed by two NGOs with the Canadian Federal Court seeking judicial review to declare invalid the decision by the Canadian Minister of the Environment to publish in the Canadian Gazette a Significant New Activity Notice (“SNAN”) with respect to AquAdvantage salmon.

Though the Canadian Federal Court dismissed this challenge, the petitioners filed an appeal of the ruling, which was subsequently dismissed by the Canadian Federal Court of Appeal on October 21, 2016.

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, the United States Fish and Wildlife Service, and related individuals for their roles in the approval of AquAdvantage salmon.

Subsequently, the Fish and Wildlife Service was dismissed from the case, and AquaBounty joined the case as an intervenor to protect AquaBounty’s interests.

The coalition, including the Center for Food Safety and Friends of the Earth, claims that the FDA had no statutory authority to regulate genetically engineered animals, and, if it did, that the agency failed to analyze and implement measures to mitigate ecological, environmental, and socioeconomic risks that could impact wild salmon and the environment, including the risk that AquAdvantage salmon could escape and threaten endangered wild salmon stocks.

The coalition, including the Center for Food Safety and Friends of the Earth, claims that the FDA had no statutory authority to regulate genetically engineered animals, and, if it did, that the agency failed to analyze and implement measures to mitigate ecological, environmental, and socioeconomic risks that could impact wild salmon and the environment, including the risk that our GE Atlantic salmon could escape and threaten endangered wild salmon stocks.

In December 2019 the court found that FDA had authority/jurisdiction over genetically engineered animals and in November 2020, the judge remanded the Environmental Assessment (the approval) to FDA on National Environmental Protection Act (NEPA) and Endangered Species Act (ESA) grounds.

The decision does not have a current business impact on AquaBounty’s egg production on Prince Edward Island or AquaBounty’s salmon production in Indiana.

In December 2020, the plaintiffs filed a motion to alter or amend the judgment.

In February 2021, the judge denied that motion.

Though we believe this legal action lacked merit, it is possible that similar legal actions may be filed by plaintiffs and they may seek to have importation or sale of AquAdvantage salmon in the United States put on hold until such resolution.

We may be subject to future litigation brought by one or more of these organizations in their attempt to block the development or sale of our product.

In addition, animal rights groups and various other organizations and individuals have attempted to stop genetically engineering activities by pressing for legislation and additional regulation in these areas.

To the extent the actions of these organizations are successful, commercialization of our product may be restricted, and our business may be adversely affected.

Such actions, even if unsuccessful, may distract management from its operational priorities and may cause us to incur significant costs.

The term “genetically engineered” will need to be included as part of the acceptable market name for AquAdvantage salmon, and bioengineering disclosures will need to be provided at the retail level, in accordance with USDA regulations.

In April 2021, FDA/US Department of Justice filed a notice of appeal relating to several claims in that case, and subsequently withdrew the appeal, and the date to file appeals in the case has expired.

The court decision from the Northern District of California does not have a current business impact on AquaBounty’s egg production in Prince Edward Island, Canada, AquaBounty’s salmon production in Albany, Indiana, or AquaBounty’s sales of its fish.

The term “genetically engineered” will need to be included as part of the acceptable market name for our GE Atlantic salmon, and bioengineering disclosures will need to be provided at the retail level, in accordance with USDA regulations.

These disclosures could negatively impact consumer acceptance.

Until the passage of the National Bioengineered Food Disclosure Law in July 2016, which contained the requirement to establish the Disclosure Standard, our AquAdvantage salmon did not need to be labeled as containing a bioengineered product, because it had been deemed to be “substantially equivalent” to the conventional product.

Until the passage of the National Bioengineered Food Disclosure Law in July 2016, which contained the requirement to establish the Disclosure Standard, our GE Atlantic salmon did not need to be labeled as containing a bioengineered product, because it had been deemed to be “substantially equivalent” to the conventional product.

However, because several states either passed or considered new laws specifying varying requirements for labeling products sold at the retail level that contain bioengineered ingredients, the United States Congress passed the National Bioengineered Food Disclosure Law in July 2016, requiring USDA to establish a mandatory standard for disclosing foods that are or may be bioengineered.

USDA issued the National Bioengineered Food Disclosure Standard in December 2018.

AquaBounty plans to include the bioengineered logo on its AquAdvantage salmon packaging, in accordance with the Disclosure Standard.

AquaBounty includes the bioengineered logo on its GE Atlantic salmon packaging, in accordance with the Disclosure Standard.

In addition, the 2020 Appropriations Act, which was signed into law in December 2019, which was reintroduced and passed in 2021, contained an amendment that requires that any bioengineered animal approved by FDA prior to the effective date of the Disclosure Standard shall include the words ‘‘genetically engineered’’ prior to the existing acceptable market name.

While the Company believes that this labeling requirement is unnecessary and redundant to the requirement of the Disclosure Standard, it will comply with all applicable laws.

Labeling requirements could cause consumers to view the label as either a warning or as an indication that AquAdvantage salmon is inferior to conventional Atlantic salmon, which could negatively impact consumer acceptance of our product.

While the Company believes that this labeling requirement is unnecessary and redundant to the requirement of the Disclosure Standard, it complies with all applicable laws.

Labeling requirements could cause consumers to view the label as either a warning or as an indication that GE Atlantic salmon is inferior to conventional Atlantic salmon, which could negatively impact consumer acceptance of our product.

Risks Relating to Intellectual Property

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However, the market for Atlantic salmon is dominated by a group of large, multinational corporations with entrenched distribution channels.

Our ability to compete successfully will depend on our ability to demonstrate that AquAdvantage salmon is superior to and/or less expensive than other products available in the market.

Our ability to compete successfully will depend on our ability to demonstrate that our GE Atlantic salmon is superior to and/or less expensive than other products available in the market.

Certain of our competitors may benefit from government support and other incentives that are not available to us.

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We have adopted a strategy of seeking patent protection in the United States and abroad with respect to certain of the technologies used in or relating to our products;

however, the patent to the technology covering AquAdvantage salmon, which we license under a global, perpetual, royalty-free, non-exclusive license from Genesis Group, Inc., an affiliate of Memorial University of Newfoundland, and an affiliate of the Hospital for Sick Children of Toronto, expired in August 2013.

We expect to protect our proprietary technology in regards to AquAdvantage salmon through a combination of in-house know-how and the deterrence of the regulatory process that would need to be completed for a competing product to be commercialized, which we believe provides us with a competitive advantage.

however, the patent to the technology covering our salmon, which we license under a global, perpetual, royalty-free, non-exclusive license from Genesis Group, Inc., an affiliate of Memorial University of Newfoundland, and an affiliate of the Hospital for Sick Children of Toronto, expired in August 2013.

We expect to protect our proprietary technology in regard to our GE Atlantic salmon through a combination of in-house know-how and the deterrence of the regulatory process that would need to be completed for a competing product to be commercialized, which we believe provides us with a competitive advantage.

There can be no guarantee that this strategy will be successful.

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Such a loss of patent protection could have a material adverse impact on our business.

Even if our patent rights are found to be valid and enforceable, patent claims that survive litigation may not cover commercially

valuable products or prevent competitors from importing or marketing products similar to our own, or using manufacturing processes or manufacturing components similar to those used to produce the products using our technologies.

Even if our patent rights are found to be valid and enforceable, patent claims that survive litigation may not cover commercially valuable products or prevent competitors from importing or marketing products similar to our own, or using manufacturing processes or manufacturing components similar to those used to produce the products using our technologies.

Although we believe that we have obtained assignments of patent rights from all inventors, if an inventor did not adequately assign their patent rights to us, a third party could obtain a license to the patent from such inventor.

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Risks Relating to our Common Stock

The significant share ownership position of Randal J.

Kirk and his affiliates allows him to influence corporate matters

Based solely on a Schedule 13D/A filed December 21, 2020, by Randal J.

Kirk”), Third Security, LLC (“Third Security”), TS AquaCulture LLC (“TS AquaCulture”), and TS Biotechnology Holdings, LLC (“TS Biotechnology”), as of March 5, 2021:

TS AquaCulture owns 8,239,199 shares of our common stock, or approximately 11.6% of our outstanding shares, and TS Biotechnology Holdings, LLC owns 9,175,000 shares of our common stock, or approximately 12.9% of our outstanding shares.

In addition, Mr.

Kirk and entities controlled by him, including Third Security and its affiliates other than TS AquaCulture and TS Biotechnology, currently hold 805,625 shares of our common stock, or approximately 1.1% of our outstanding shares.

TS AquaCulture and TS Biotechnology are managed by Third Security, and TS AquaCulture is successor-in-interest to Precigen, Inc.

(“Precigen”) under the Relationship Agreement entered into by AquaBounty and Precigen dated as of December 5, 2012 (the “Relationship Agreement”), which among other things, allows for representation on our Board proportional to its shareholding.

The Relationship Agreement will remain in effect until Third Security’s ownership percentage is reduced to 10%.

Further, Alana Kirk, a member of the Company’s Board of Directors, is married to Randal J.

Kirk and has reported that she owns 3,754 shares of our common stock, which includes 1,595 shares of common stock underlying outstanding stock options that are or will be immediately exercisable within 60 days of December 31, 2020, in her own name, which is less than one percent of our outstanding shares.

Based on these holdings, Mr.

Kirk, Third Security’s Chairman and Senior Managing Director, and Mrs.

Kirk have each reported control over approximately 25.7% of our outstanding shares.

Kirk each disclaim beneficial ownership of the shares owned directly by the other, and Mrs.

Kirk disclaims beneficial ownership of the shares deemed beneficially owned by Mr.

Kirk, other than those that she owns directly.

The price of our shares of common stock is likely to be volatile.

The share price of publicly traded emerging companies can be highly volatile and subject to wide fluctuations.

The prices at which our common stock is quoted and the prices which investors may realize will be influenced by a large number of factors, some specific to our company and operations and some that may affect the quoted biotechnology sector, or quoted companies generally.

The prices at which our common stock is quoted and the prices which investors may realize will be influenced by a large number of factors, some specific to our company and operations and some that may affect the quoted land-based fish farming industry, the biotechnology sector, or quoted companies generally.

These factors could include variations in our operating results, publicity regarding the process of obtaining regulatory approval to commercialize our products, divergence in financial results from analysts’ expectations, changes in earnings estimates by stock market analysts, overall market or sector sentiment, legislative changes in our sector, the performance of our research and development programs, large purchases or sales of our common stock, currency fluctuations, legislative changes in the bioengineering environment, future sales of our common stock or the perception that such sales could occur and general economic conditions.

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Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could cause us to fail to meet our reporting obligations.

In addition, any testing by us conducted in connection with Section 404 of the Sarbanes-Oxley Act, or any subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemed to be

material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement.

In addition, any testing by us conducted in connection with Section 404 of the Sarbanes-Oxley Act, may reveal deficiencies in our internal controls

over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement.

Ineffective internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock.

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If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our shares of common stock could decrease, and we could lose visibility in the financial markets, which could cause our share price and trading volume to decline.

Our share price and our ability to raise additional funds may depend on our success in growing, or our perceived ability to grow, our AquAdvantage salmon successfully and profitably at commercial scale.

We have not yet demonstrated that we can grow our AquAdvantage salmon successfully or profitably at commercial scale.

If we are unsuccessful in growing our salmon to harvest size, achieving our quality standards and selling the fish in the market at a profit from our commercial-scale facilities, or are perceived as being unable to do so prior to commercial-scale harvest and sale, we may lose credibility with the investor community and other funding sources, which may negatively impact our share price and our ability to raise additional funds.

Our share price and our ability to raise additional funds may depend on our success in growing, or our perceived ability to grow, our GE Atlantic salmon successfully and profitably at commercial scale.

We have not yet demonstrated that we can grow our GE Atlantic salmon successfully or profitably at commercial scale.

If we are unsuccessful in growing our salmon to harvest size, achieving our quality standards and selling the fish in the market at a profit from our commercial-scale facilities, or are perceived as being unable to do so prior to commercial-scale harvest and sale, we may lose credibility with the investor community and other funding sources, which could negatively impact the price of our common stock and our ability to raise additional funds.

There can be no assurance that additional funds will be available on a timely basis, on favorable terms, or at all, or that such funds, if raised, would be sufficient to enable us to continue to implement our business strategy.

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Our failure to meet the continuing listing requirements may result in our common stock being delisted from the Nasdaq Capital Market.

We are an “emerging growth company,” and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our shares of common stock less attractive to investors.

We are an “emerging growth company,” as well as a “smaller reporting company,” and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our shares of common stock less attractive to investors.

We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act.

For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including the auditor attestation requirements in the assessment of our internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act, compliance with any new requirements adopted by the PCAOB, disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and the requirements of holding advisory “say-on-pay” votes on executive compensation and shareholder advisory votes on golden parachute compensation not previously approved.

Certain of these reduced reporting requirements and exemptions were also

available to us due to the fact that we qualify as a “smaller reporting company” under SEC rules.

For instance, smaller reporting companies are not required to obtain an auditor attestation and report regarding management’s assessment of internal control over financial reporting, are not required to provide a compensation discussion and analysis, are not required to provide a pay-for-performance graph or CEO pay ratio disclosure and may present only two years of audited financial statements and related MD&A disclosure.

the requirements of holding advisory “say-on-pay” votes on executive compensation and shareholder advisory votes on golden parachute compensation not previously approved.

Certain of these reduced reporting requirements and exemptions were also available to us due to the fact that we qualify as a “smaller reporting company” under SEC rules.

For instance, smaller reporting companies are not required to report regarding management’s assessment of internal control over financial reporting, are not required to provide a compensation discussion and analysis, are not required to provide a pay-for-performance graph or CEO pay ratio disclosure and may present only two years of audited financial statements and related MD&A disclosure.

Under the JOBS Act, we will remain an emerging growth company until the earliest of (1) the last day of the fiscal year in which we have more than $1.07 billion in annual revenue;

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and (4) December 31, 2023, which is the last day of the fiscal year following the fifth anniversary of the date of the first sale of our common stock pursuant to an effective registration statement filed under the Securities Act.

Under current SEC rules, however, we will continue to qualify as a “smaller reporting company” for so long as we have a public float (i.e., the market value of common equity held by non-affiliates) of less than $250 million as of the last business day of our most recently completed second fiscal quarter.

Under current SEC rules, however, we will continue to qualify as a “smaller reporting company” for so long as (i) we have a public float (i.e., the market value of common equity held by non-affiliates) of less than $250 million or (ii) our annual revenue is less than $100 million during the most recently completed fiscal year and the market value of our common stock held by non-affiliates is less than $700 million.

We cannot predict if investors will find our shares of common stock to be less attractive because we may rely on these exemptions.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors