What changed in this filing

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Item 1A. Risk Factors

2023-03-07 compared with 2022-03-10 · 94 added, 101 removed, 341 unchanged (36% of the section changed)

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These losses reflect our personnel, research and development, production and marketing costs.

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 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 expect revenues to grow modestly in 2023, however, our ability to realize revenues and the timing thereof are not certain, and achieving revenues does not assure that we will become profitable.

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.

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

We estimate that the total project cost for the Ohio farm, including construction, land, insurance and ancillary costs will range between $375 million and $395 million, although this figure is likely to continue to change as we finalize the design, finalize bids from contractors and continue with construction.

For example, at least partially due to recent inflationary pressures, subcontractors for certain goods and services at our Ohio farm have submitted bids above the levels that we expected.

As a result of these increases, and increased interest rates, we have raised our estimate for the total cost for the project and we increased the amount of proposed debt financing.

However, there can be no guarantee that our attempts will be successful, and macro-economic conditions could worsen, which could result in further cost increases and further financing and construction-related delays.

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.

Recent increases to interest rates have increased the borrowing costs for this financing, and any further increases before the financing is complete could further increase such costs.

Volatility and/or declines in equity markets in general, and for our securities, may cause equity financing to be unavailable on acceptable terms or at all.

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

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

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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.

We will also need to obtain FDA approval to grow our GE Atlantic salmon in the facility.

If we experience delays in obtaining the required approvals and permits for our farms, our expected construction completion 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.

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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.

Preparing cost and timing estimates for complex RAS farms is inherently difficult and subject to change based on a number of factors that we have experienced to date and may

experience in the future, including design changes, increasing inflationary pressure on costs of materials and labor, the impact of health epidemics such as COVID-19, construction delays, dependence on contractors, the impact of increasing interest rates on financing costs, customer requirements and unexpected complications.

As a 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.

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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.

Recent increases in interest rates have increased our expected borrowing costs for the construction of our planned farm in Pioneer, Ohio, and may also affect our ability to obtain working capital through borrowings such as bank credit lines and public or private sales of debt securities, which may result in lower liquidity, increased expense and difficulty in financing our expansion plans, reduced working capital and other adverse impacts on our business.

All of our currently outstanding interest-bearing debt is financed at fixed rates, except for our loan with First Farmers Bank and Trust, which has a rate reset in July 2025.

We will seek to raise part of the funds necessary for construction of our planned farm in Pioneer, Ohio, and other future farms, through debt financing.

Continued increases in interest rates has already, and will further increase the cost of new indebtedness and, after the rate reset, servicing our outstanding indebtedness with First Farmers Bank and Trust, and could materially and adversely affect our expansion plans, results of operations, financial condition, liquidity and cash flows.

Rising inflation rates could negatively impact our revenues and profitability if increases in the prices of our products or a decrease in consumer spending results in lower sales.

In addition, if our costs increase and we are not able to pass along these price increases to our customers, our net income would be adversely affected, and the adverse impact may be material.

Inflation rates, particularly in the United States, have increased recently to levels not seen in years.

Increased inflation has and may continue to result in increased construction costs for new farms, increased operating costs (including our labor costs), reduced liquidity, and limitations on our ability to access credit or otherwise raise debt and equity capital.

In addition, the United States Federal Reserve has raised, and may again raise, interest rates in response to concerns about inflation.

Increases in interest rates, especially if coupled with reduced government spending and volatility in financial markets, may have the effect of further increasing economic uncertainty and heightening these risks.

In an inflationary environment, we may be unable to raise the sales prices of our products and services at or above the rate at which our costs increase, which would reduce our profit margins and have a material adverse effect on our financial results.

We also may experience lower than expected sales and potential adverse impacts on our competitive position if there is a decrease in consumer spending.

A reduction in our revenue would be detrimental to our financial condition and could also have an adverse impact on our future growth.

The financing of our Ohio farm through the placement of municipal bonds may require restrictive debt covenants that could limit our control over the farm’s operation and restrict our ability to utilize a portion of any cash that the farm generates.

We anticipate using both cash on hand and debt to finance the construction and initial working capital for our Ohio farm.

Debt financing will likely contain certain customary restrictive covenants that require us to maintain certain operating ratios and may restrict our use of any cash that is generated by the farm.

The amount of debt used to finance the project may be significant and may require the use of a trustee to oversee the project funds and to monitor the project’s performance and adherence to any restrictive covenants.

Failure to meet the restrictive covenants over a period of time could result in more oversight by the trustee and a loss of some of our control over the operation, or in the extreme by the trustee stepping in to manage the farm’s operation.

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.

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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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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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.

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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.

We cannot guarantee that we will not face quality issues 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.

Such a product recall also could result in adverse publicity, damage to our reputation, and a loss of consumer or customer 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.

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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.

A shutdown, material 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 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 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.

In addition, any transportation-related or other accidents that may result in a spill of hazardous materials near our farms, which may contaminate the land and/or groundwater, may result in a loss of a material percentage of our fish and other material adverse effects on our operations.

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.

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.

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Any of these could decrease process efficiency, create delays, and increase our costs.

We are also subject to volatility in market demand and prices, such as the disruption to the salmon market and the resulting reduction in market prices for salmon caused by the COVID-19 pandemic.

We are also subject to volatility in market demand and prices, such as the disruption to the salmon market and the resulting reduction in market prices for salmon that occurred during the COVID-19 pandemic.

In addition, competitive pressures, customer volatility and the possible inability to secure established and ongoing customer partnerships and contracts, may result in a lack of buyers for our fish.

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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.

For example, 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 production yields and transportation costs which were higher than our expectations.

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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We have little, if any, control over handling procedures once our products have been shipped for distribution.

Even an inadvertent shipment of contaminated products may be a violation of law and may lead to increased risk of exposure to product liability claims, increased scrutiny and penalties, including but not limited to, injunctive relief and plant closings, by federal and state regulatory agencies, and adverse publicity, which could exacerbate the associated negative consumer reaction.

publicity, which could exacerbate the associated negative consumer reaction.

Any of these occurrences may have an adverse effect on our financial results and the value of our brands.

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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.

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

Disease organisms may be present undetected and transferred inadvertently.

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Broad-based business or economic disruptions, political instability, or global health concerns could adversely affect our current or planned production, sale, distribution, research and development, and expansion.

For example, the COVID-19 pandemic has continued to spread, and the related adverse public health developments, including orders to shelter-in-place, travel restrictions, and mandated business closures, have adversely affected workforces, organizations, customers, economies, and financial markets globally, leading to an economic downturn and increased market volatility.

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

For example, the COVID-19 pandemic and its related adverse public health developments, including orders to shelter-in-place, travel restrictions, and mandated business closures adversely affected workforces, organizations, customers, economies, and financial markets globally, leading to an economic downturn and increased market volatility.

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

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;

facilities and production have been suspended;

and demand for certain goods and services, such as medical services and supplies, has spiked, while demand for other goods and services, including salmon in the institutional sales chain that includes restaurants, has fallen, with a resulting drop in the prices for those goods and services.

We have been impacted by the reduction in food service demand for salmon due to the pandemic in the form of significantly lower than expected sales and a reduction in the value of our inventory.

In response to the COVID-19 pandemic, we have provided our administrative employees with the option to work remotely, and we have limited the number of staff in any given area of our farm sites.

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, 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 continue to 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.

As a result, we may face difficulties raising capital through sales of our common stock or such sales may be on unfavorable terms.

The COVID-19 pandemic continues to rapidly evolve, and the extent to which it may impact our business and planned programs will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease;

the duration of the pandemic;

travel restrictions and other actions to contain the pandemic or address its impact, such as social distancing and quarantines or lock-downs in the United States, Canada, and other countries;

business closures or business disruptions;

and the effectiveness of actions taken in the United States, Canada, and other countries to contain and address the disease.

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.

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 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.

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.

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

These impacts included the shortage of packaging workers and transportation suppliers that we experienced, leading to slower and more expensive harvests and increased culling activity;

supply chain disruptions;

facility and production suspensions;

and demand for certain goods and services, such as medical services and supplies spiked, while demand for other goods and services, including salmon in the institutional sales chain that includes restaurants fell, with a resulting drop in the prices for those goods and services.

We were impacted by the reduction in food service demand for salmon due to the pandemic in the form of significantly lower than expected sales and a reduction in the value of our inventory.

We cannot predict the scope and severity of business, political or economic disruptions or global health concerns.

If we or any of the third parties with whom we engage, including suppliers, distributors, service providers, regulators, and overseas business partners, experience shutdowns or other disruptions again in the future, 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 continue to rise as a result of our efforts to address such disruptions.

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

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Our success depends substantially on the efforts and abilities or our officers and other key employees.

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.

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.

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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.

Concerns regarding the possible environmental impact from our GE Atlantic salmon have led some 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.

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

Although we produce and grow our GE Atlantic salmon in land-based, closed containment facilities, we are still 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 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.

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

We could face a period of rapid growth following commercial availability of our products, which may place significant pressure on our management, sales, operational, and financial resources.

We could face a period of rapid growth following expansion of our production capability, which may place significant pressure on our management, sales, operational, and financial resources.

The execution of our business plan and our future success will depend, in part, on our ability to manage current and planned expansion and on our ability to continue to implement and improve our operational management.

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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 10% royalty.

If 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.

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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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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 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.

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.

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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.

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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.

However, because some 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 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.

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 and 2022, 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 complies with all applicable laws.

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

Competitors may be able to reduce the grow-out times for their conventional sea-cage and RAS farming operations, thus lowering our competitive advantages and reducing their costs.

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.

As a result, our competitors may be able to develop competing and/or superior products and compete more aggressively and sustain that competition over a longer period of time than we can.

Certain of our competitors may be better funded than we are and/or benefit from government support and other incentives that are not available to us.

At least in part due to these financial advantages, our competitors may be able to develop competing and/or superior products and compete more aggressively and sustain that competition over a longer period of time than we can.

As more companies develop new intellectual property in our markets, a competitor could acquire patent or other rights that may limit our ability to successfully market our product.

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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 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.

however, the patent to the technology covering our GE Atlantic 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.

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Stock markets have from time to time experienced severe price and volume fluctuations, which, if recurring, could adversely affect the market prices for our common stock.

NASDAQ may delist our securities from quotation on its exchange which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions .

Our Common Stock is traded on the Nasdaq Stock Market LLC (“Nasdaq”), a national securities exchange.

On October 31, 2022, we received a letter (the “Notice”) from Nasdaq notifying us that, because the closing bid price for our common stock, par value $0.001 per share (the “Common Stock”), had been below $1.00 per share for the previous 30 consecutive business days, it no longer complied with the minimum bid price requirement for continued listing on the Nasdaq Capital Market.

The Notice had no immediate effect on our listing on the Nasdaq Capital Market or on the trading of our Common Stock.

The Notice provided us with a compliance period of 180 calendar days, or until May 1, 2023, to regain compliance.

If at any time during this 180-day compliance period the closing bid price of our Common Stock is at least $1.00 per share for a minimum of 10 consecutive business days, then Nasdaq may provide us with written confirmation of compliance and the matter will be closed.

We intend to monitor the closing bid price of the Common Stock and may, if appropriate, evaluate

various courses of action to regain compliance.

There can be no assurance that we will regain compliance or otherwise maintain compliance with the other listing requirements.

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud.

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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, 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.

An active trading market for our common stock may not develop or be sustained.

An active trading market for our common stock may not be sustained.

Although our common stock is currently traded on The Nasdaq Capital Market, an active trading market for our common stock may not be maintained.

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or other collaborations, strategic alliances, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs, or product candidates or to grant licenses on terms that may not be favorable to us.

There can be no assurance that we will be able to comply with the continued listing standards of the Nasdaq Capital Market.

Even though our common stock has been listed on the Nasdaq Capital Market, we cannot assure you that we will be able to comply with standards necessary to maintain a listing of our common stock on the Nasdaq Capital Market.

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,” 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 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;

(2) the date we qualify as a “large accelerated filer,” with at least $700.0 million of equity securities held by non-affiliates;

(3) the issuance, in any three-year period, by our company of more than $1.0 billion in non-convertible debt securities;

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 (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 are a “smaller reporting company” and a “non-accelerated filer” and we cannot be certain if applicable scaled disclosure requirements will make our shares of common stock less attractive to investors.

As a “smaller reporting company,” we may elect to comply with scaled disclosure requirements relative to companies that are not smaller reporting companies, including but not limited to, reduced disclosure obligations regarding executive compensation in our filings with the SEC.

Under current SEC rules, we will continue to qualify as a “smaller reporting company” for so long as (i) we

have a public float (i.e., the aggregate 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 aggregate market value of our common stock held by non-affiliates is less than $700 million.

In addition, under current SEC rules, we are not an “accelerated filer” and so not required to include an auditor attestation of the effectiveness of our internal control over financial reporting in this Annual Report on Form 10-K.

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

If some investors find our shares of common stock less attractive as a result, there may be a less active trading market for our shares of common stock, and our share price may be more volatile.

Under the JOBS Act, emerging growth companies also can delay adopting new or revised accounting standards until such time as those standards apply to private companies.

We have irrevocably elected to avail ourselves of this exemption from new or revised accounting standards and, therefore, will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

We may issue preferred stock with terms that could dilute the voting power or reduce the value of our common stock.

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Our management and other personnel devote a substantial amount of time to ensure that we comply with all of these requirements.

Moreover, despite reforms made possible by the JOBS Act, the reporting requirements, rules, and regulations make some activities more time-consuming and costly.

Any changes that we make to comply with these obligations may not be sufficient to allow us to satisfy our obligations as a public company on a timely basis, or at all.

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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