What changed in this filing

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Item 9A. Controls and Procedures

2023-03-07 compared with 2022-03-10 · 196 added, 202 removed, 620 unchanged (39% of the section changed)

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We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities and Exchange Act of 1934 is (1) recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (2) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

As of December 31, 2021 (the “Evaluation Date”), our management, with the participation of our Chief Executive Officer

and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934).

As of December 31, 2022 (the “Evaluation Date”), our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934).

Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

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Based upon this evaluation and those criteria, management believes that, as of December 31, 2022, our internal controls over financial reporting were effective.

This Annual Report on Form 10‑K does not include an attestation report of the Company’s independent registered accounting firm as we are an emerging growth company, as defined under the JOBS Act, and are subject to reduced public company reporting requirements.

The JOBS Act provides that an emerging growth company is not required to have the effectiveness of the Company’s internal control over financial reporting audited by its external auditors for as long as the Company is deemed to be an emerging growth company.

This Annual Report on Form 10‑K does not include an auditor’s attestation of management’s assessment of internal controls over financial reporting as of December 31, 2022, as we are not an “accelerated filer” under SEC rules.

Changes in Internal Control

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Directors, Executive Officers and Corporate Governance

The information required by this Item is set forth in our 2022 Proxy Statement to be filed with the SEC within 120 days of December 31, 2021, and is incorporated by reference into this Annual Report on Form 10‑K by reference.

The information required by this Item is set forth in our 2023 Proxy Statement to be filed with the SEC within 120 days of December 31, 2022, and is incorporated by reference into this Annual Report on Form 10‑K.

Executive Compensation

We are an emerging growth company, as defined under the JOBS Act, and are therefore not required to provide certain disclosures regarding executive compensation required of larger public companies or hold a nonbinding advisory vote on executive compensation or obtain stockholder approval of any golden parachute payments not previously approved.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Certain Relationships and Related Transactions, and Director Independence

Principal Accounting Fees and Services

The information required by this Item is set forth in our 2023 Proxy Statement to be filed with the SEC within 120 days of December 31, 2022 and is incorporated by reference into this Annual Report on Form 10‑K, for Deloitte & Touche LLP (PCAOB ID No.

34 ) and Wolf & Company P.C.

(PCAOB ID No.

Exhibits and Financial Statement Schedules

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The following consolidated financial statements are filed herewith in accordance with Item 8 of Part II above:

(i) Reports of Independent Registered Public Accounting Firm s

(i) Report of Independent Registered Public Accounting Firm

(ii) Consolidated Balance Sheets

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(incorporated by reference to Exhibit 3.1 to the Registrant’s Registration Statement on Form 10, filed on November 7, 2016).

Certificate of Amendment of Third Amended and Restated Bylaws of AquaBounty Technologies, Inc.

Certificate of Amendment of Third Amended and Restated Certificate of Incorporation of AquaBounty Technologies, Inc.

(incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed on January 6, 2017).

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(incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed on November 19, 2020).

Certificate of Amendment of Third Amended and Restated Certificate of Incorporation of AquaBounty Technologies, Inc.

(incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed on May 27, 2022).

Certificate of Validation dated October 18, 2022 relating to Certificate of Amendment to the Third Amended and Restated Certificate of Incorporation of AquaBounty Technologies, Inc.

dated May 27, 2022 (incorporated by reference to Exhibit 3.5 to the Registrant’s Quarterly Report on Form 10-Q, filed on November 8, 2022).

Amended and Restated Bylaws of AquaBounty Technologies, Inc.

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2016 Equity Incentive Plan (incorporated by reference to Exhibit 10.22 to the Registrant’s Registration Statement on Form 10, filed on December 12, 2016).

Form of Restricted Stock Agreement pursuant to AquaBounty Technologies, Inc.

Form of Restricted Stock Purchase Agreement pursuant to AquaBounty Technologies, Inc.

2016 Equity Incentive Plan (incorporated by reference to Exhibit 10.21 to the Registrant’s Registration Statement on Form 10, filed on December 12, 2016).

Relationship Agreement, by and between AquaBounty Technologies, Inc.

and Intrexon Corporation, dated December 5, 2012 (incorporated by reference to Exhibit 10.7 to the Registrant’s Registration Statement on Form 10, filed on November 7, 2016).

Subscription Agreement, by and between AquaBounty Technologies, Inc.

and the investors listed therein, dated February 14, 2013 (incorporated by reference to Exhibit 10.9 to the Registrant’s Registration Statement on Form 10, filed on November 7, 2016).

Subscription Agreement, by and between AquaBounty Technologies, Inc.

and Intrexon Corporation, dated March 5, 2014 (incorporated by reference to Exhibit 10.10 to the Registrant’s Registration Statement on Form 10, filed on November 7, 2016).

Subscription Agreement, by and between AquaBounty Technologies, Inc.

and Intrexon Corporation, dated June 24, 2015 (incorporated by reference to Exhibit 10.11 to the Registrant’s Registration Statement on Form 10, filed on November 7, 2016).

Promissory Note Purchase Agreement, by and between AquaBounty Technologies, Inc.

and Intrexon Corporation, dated February 22, 2016 (incorporated by reference to Exhibit 10.12 to the Registrant’s Registration Statement on Form 10, filed on November 7, 2016).

Form of Warrant Exercise Agreement, by and between AquaBounty Technologies, Inc.

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(incorporated by reference to Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q, filed on November 2, 2018).

Employment Agreement, by and between Sylvia Wulf and AquaBounty Technologies, Inc., dated November 27.

2018 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed on November 28, 2018).

Executive Employment Agreement, by and between Sylvia Wulf and AquaBounty Technologies, Inc., dated November 27, 2018 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed on November 28, 2018).

Employment Agreement, by and between David Frank and AquaBounty Technologies, Inc., dated October 1, 2007 (incorporated by reference to Exhibit 10.16 to the Registrant’s Registration Statement on Form 10, filed on November 7, 2016).

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March 7, 2023

/s/ Ricardo Alvarez

March 7, 2023

Ricardo Alvarez

/s/ Erin Sharp

March 7, 2023

/s/ Gail Sharps Myers

March 7, 2023

Gail Sharps Myers

/s/ Christine St.Clare

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Rick Sterling

March 10, 2022

/s/ Theodore J.

March 10, 2022

/s/ Ricardo Alvarez

March 10, 2022

Ricardo Alvarez

/s/ Gail Sharps Myers

/s/ Michael Stern

March 7, 2023

Gail Sharps Myers

Michael Stern

Report of Independent Registered Public Accounting Firm

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of AquaBounty Technologies, Inc.

and subsidiaries (the "Company") as of December 31, 2021, the related consolidated statements of operations and comprehensive loss, changes in stockholders'

equity, and cash flows, for the year ended December 31, 2021, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and the results of its operations and its cash flows for the year ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance sheets of AquaBounty Technologies, Inc.

and subsidiaries (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive loss, changes in stockholders'

equity, and cash flows, for the years then ended, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audit.

Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter, in any way, our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

in any way, our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Inventory – Fish in Process – Refer to Notes 2 and 5 to the financial statements

Critical Audit Matter Description

Fish in process inventory is measured at the lower of cost or net realizable value.

The Company’s determination of net realizable value of fish in process inventory requires management to make various estimates and assumptions related to the calculation of the biomass, including expected yield, market value of biomass and estimated costs of processing, packaging and transportation.

Changes in these assumptions could have a significant impact on the net realizable value of fish in process inventory.

Given the determination of net realizable value requires management to make significant estimates and assumptions relating to yield, market value and future costs, performing audit procedures to evaluate the reasonableness of such estimates and assumptions required a high degree of auditor judgment and an increased extent of effort.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to fish in process inventory included the following, among others:

 We tested the design and implementation of the Company's inventory controls, including the review of the net realizable value estimate and assumptions.

 We evaluated management's process for determining the net realizable value of fish in process inventory.

 We observed and tested the Company’s physical inventory inspection and fish weighing processes near December 31, 2022.

 We tested the completeness and accuracy of management's estimates and assumptions within the net realizable value calculation by comparing expected:

o Sales amounts to historical revenue.

o Processing, packaging and transportation costs to historical amounts.

o Market value to historical sales prices and market benchmarks.

o Yield to the Company's historical results and industry peer data.

 We tested the changes in fish in process biomass from our physical observation date to December 31, 2022.

/s/ Deloitte & Touche LLP

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We have served as the Company's auditor since 2021.

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of AquaBounty Technologies, Inc .

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of AquaBounty Technologies, Inc.

(the “Company”) as of December 31, 2020, the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for the year ended December 31, 2020 and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of its operations and its cash flows for the year ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provide a reasonable basis for our opinion.

/s/ Wolf & Company, P.C.

Boston, Massachusetts

March 9, 2021

We served as the Company’s auditor from 2011 to 2020.

AquaBounty Technologies, Inc.

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Marketable securities

Inventory, net

Prepaid expenses and other current assets

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Total liabilities

Commitments and contingencies (Note 10)

Commitments and contingencies

Stockholders'

Common stock, $ 0.001 par value, 80,000,000 shares authorized at December 31, 2021 and

71,025,738 and 55,497,133 shares outstanding at December 31, 2021 and 2020, respectively

Common stock, $ 0.001 par value, 150,000,000 and 80,000,000 shares authorized at

December 31, 2022 and 2021, respectively;

71,110,713 and 71,025,738 shares

outstanding at December 31, 2022 and 2021, respectively

Additional paid-in capital

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Foreign currency

Unrealized losses on marketable securities

Unrealized gains (losses) on marketable securities

Total other comprehensive income

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Other comprehensive income

Issuance of common stock for service

Cashless exercise of options for common stock

Issuance of common stock, net of expenses

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( 22,157,195 )

Other comprehensive income

Cashless exercise of options for common stock

Issuance of common stock, net of expenses

Exercise of warrants for common stock

Other comprehensive (loss)

Exercise of options for common stock

Share based compensation

Balance as of December 31, 2021

Balance at December 31, 2022

( 193,021,977 )

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Consolidated Statements of Cash Flows

‎ December 31,

Years Ended December 31,

Operating activities

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Changes in operating assets and liabilities:

( 1,027,650 )

Prepaid expenses and other assets

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Investing activities

Purchases of property, plant and equipment

Purchases of and deposits on property, plant and equipment

( 67,476,327 )

( 5,713,807 )

Deposits on equipment purchases

Proceeds from sale equipment

Purchases of marketable securities, net

Maturities of marketable securities

Purchases of marketable securities

( 47,621,291 )

Proceeds from legal settlement, net

Other investing activities

Net cash used in investing activities

( 188,302,153 )

Other investing activities

Net cash provided by (used in) investing activities

( 107,538,699 )

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Proceeds from issuance of debt

Payment of debt issuance costs

Repayment of term debt

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Proceeds from the exercise of stock options and warrants

Net cash provided by financing activities

Net cash (used in) provided by financing activities

Effect of exchange rate changes on cash, cash equivalents and restricted cash

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Total cash, cash equivalents and restricted cash

Supplemental disclosure of cash flow information and

non-cash transactions:

Supplemental disclosure of cash flow information and non-cash transactions:

Interest paid in cash

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In 2021, the Parent obtained regulatory approval from the National Biosafety Technical Commission for the sale of its GE Atlantic salmon product in Brazil.

In 2021, the Company began harvesting and selling its GE Atlantic salmon in the United States and Canada.

Basis of presentation

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The entities are collectively referred to herein as the “Company.” All inter-company transactions and balances have been eliminated upon consolidation.

The Company completed an equity raise in 2021with net proceeds of $ 119.1 million and has $ 191.2 million in cash and cash equivalents, marketable securities and restricted cash as of December 31, 2021.

While the Company has experienced net losses and negative cash flows from operations since inception, management believes that it has sufficient cash to meet the Company's requirements beyond the next twelve months from the filing date of these consolidated financial statements.

However, until such time as the Company reaches profitability, it may require additional financing to fund its operations and execute its business plan.

The Company completed an equity raise in 2021with net proceeds of $ 119.1 million and has $ 102.6 million in cash and cash equivalents, and restricted cash as of December 31, 2022.

The Company’s plans include the continued construction of a 10,000 metric ton salmon farm in Ohio at a total project cost that is estimated to be between $ 375 million and $ 395 million.

The Company plans to use cash-on-hand and debt financing to fund the remaining construction.

While the Company has committed a significant amount of its current cash to fund a portion of the project, if necessary, management can utilize that cash for working capital purposes and therefore, management believes that it has sufficient cash to meet the Company's requirements beyond the next twelve months from the filing date of these consolidated financial statements.

However, until such time as the Company reaches profitability, it will require additional financing to fund its operations and execute its business plan.

Summary of significant accounting policies

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Cash equivalents consist primarily of business savings accounts, certificates of deposit and money market accounts.

Marketable securities

Marketable securities include government bonds, corporate bonds and commercial paper.

The Company's investment policy requires investments to be explicitly rated by two of Standard & Poor's, Moody's or Fitch and to have a minimum rating of A1, P1 or F-1,

AquaBounty Technologies, Inc.

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for the years ended December 31, 2022 and 2021

respectively, from those agencies.

Marketable securities

Marketable securities include government bonds, corporate bonds and commercial paper.

The Company's investment policy requires investments to be explicitly rated by two of Standard & Poor's, Moody's or Fitch and to have a minimum rating of A1, P1 or F-1, respectively, from those agencies.

In addition, the investment policy limits individual maturities to 12 months, the dollar-weighted average maturity to 180 days and the amount of credit exposure to any one issuer to 5%.

Inventories are mainly comprised of feed, eggs and fish in process.

Fish in process inventory is measured based on the estimated biomass of fish on hand.

Fair Value of Financial instruments

The Company groups its financial instruments measured at fair value, if any, in three levels based on the markets in which the instruments are traded and the reliability of the assumptions used to determine fair value.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Financial instruments with readily available quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgement used in measuring fair value.

The three levels of the fair value hierarchy are as follows:

Inputs to the valuation methodology are quoted prices, unadjusted, for identical assets or liabilities in active markets.

Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets;

quoted prices for identical or similar assets or liabilities in markets that are not active;

or inputs derived principally from, or that can be corroborated by, observable market data by correlation or other means.

Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Level 3 assets and liabilities include financial instruments whose value is determined using discounted cash flow methodologies, as well as instruments for which the determination of fair value requires significant management judgement or estimation.

The carrying amounts reported in the consolidated balance sheets for receivables, prepaid expenses and other current assets, and accounts payable approximate fair value based on the short-term maturity of these instruments.

The carrying value of term debt includes market terms and interest rates.

All of the Company’s interest-bearing debt is at fixed rates, except for the loan with First Farmer’s Bank and Trust, which has a rate reset in July 2025.

The following tables present the placement in the fair value hierarchy of financial assets that are measured at fair value on a recurring basis as of December 31, 2022 and 2021:

Quoted Prices in

Significant Other

Active Markets

Observable Inputs

Unobservable Inputs

December 31, 2021

Marketable securities

Long term equity investment

December 31, 2022

Marketable securities

Long term equity investment

Inventories are mainly comprised of feed, eggs, fry, fish in process and fish for sale.

Fish in process inventory is a biological asset that is measured based on the estimated biomass of fish on hand.

The Company has established a standard procedure to estimate the biomass of fish on hand using counting and sampling techniques.

The Company measures inventory at the lower of cost or net realizable value (NRV).

The NRV calculation contains various estimates and assumptions in regard to the calculation of the biomass, including expected yield, the market value of the biomass and estimated costs of completion and transportation.

The Company measures inventory at the lower of cost or net realizable value (NRV), where NRV is defined as the estimated market price, less the estimated costs of processing, packaging and transportation.

The Company considers fish that has been harvested and transported from its farm to be fish for sale.

AquaBounty Technologies, Inc.

Notes to the Consolidated Financial Statements

for the years ended December 31, 2022 and 2021

Intangible assets

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Property, plant and equipment

Property, plant and equipment are carried at cost.

Property, plant and equipment are recorded at cost.

The Company depreciates all asset classes over their estimated useful lives, as follows:

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The Company has not elected the practical expedient to account for lease and non-lease components as one lease component.

AquaBounty Technologies, Inc.

Notes to the Consolidated Financial Statements

for the years ended December 31, 2021 and 2020

The Company adopted Financial Accounting Standards Board's (FASB) Accounting Standards Update (ASU) 2016-02 Leases on January 1, 2019 and recognized a lease liability of $ 532 thousand and a corresponding right-of-use asset of $ 512 thousand.

Management calculated the lease liability based on the net present value of the remaining lease payments on the date of adoption using a weighted average discount rate of 8 %.

As most of the Company’s leases did not provide an implicit interest rate, management used an estimated incremental borrowing rate.

The adoption did not result in any cumulative-effect adjustment to beginning retained earnings.

Revenue recognition

The Company generates revenue from the sale of its products.

The Company is comprised of one reporting segment and generates revenue from the sale of its products.

Revenue is recognized when the customer takes physical control of the goods, in an amount that reflects the transaction price consideration that the Company expects to receive in exchange for the goods.

Revenue excludes any sales tax collected and includes any estimate of future credits.

During 2021, the Company recognized $ 747 thousand and $ 428 thousand in revenue from product sales from its Canada and U.S.

subsidiaries, respectively.

During the years ended December 31, 2022 and 2021, the Company recognized the following product revenue:

Year Ended December 31, 2021

GE Atlantic salmon

Non-GE Atlantic salmon eggs

Non-GE Atlantic salmon fry

Other revenue

Total Revenue

AquaBounty Technologies, Inc.

Notes to the Consolidated Financial Statements

for the years ended December 31, 2022 and 2021

Year Ended December 31, 2022

GE Atlantic salmon

Non-GE Atlantic salmon eggs

Non-GE Atlantic salmon fry

Other revenue

Total Revenue

During the years ended December 31, 2022 and 2021, the Company had the following customer concentration of revenue:

Year Ended December 31,

Total of all customers

The Company uses the liability method of accounting for income taxes.

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Basic net loss per share is based solely on the number of common shares outstanding during the year.

Fully diluted net loss per share includes the number of shares of common stock issuable upon the exercise of warrants and options with an exercise price less than the fair value of the common stock unless the impact of the warrant or option is anti-dilutive to the calculation.

Fully diluted net loss per share includes the number of shares of common stock issuable upon the exercise of warrants and options with an exercise price less than the fair value of the common stock.

Since the Company is reporting a net loss for all periods presented, all potential common shares are considered anti - dilutive and are excluded from the calculation of diluted net loss per share.

As of December 31, 2021, the Company had 1,081,866 potentially dilutive securities outstanding, consisting of 418,441 warrants and 663,425 stock options.

As of December 31, 2020, the Company had 2,236,229 potentially dilutive securities outstanding, consisting of 1,662,304 warrants and 573,925 stock options.

The following potentially dilutive securities have been excluded from the calculation of diluted net loss per share, as their effect is anti-dilutive:

Year Ended December 31,

Weighted Average Outstanding

Stock options

Unvested restricted shares

Share-based compensation

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The value of the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service period in the Company’s consolidated statement of operations.

The Company uses the Black - Scholes option pricing model (“Black - Scholes”) as its method of valuation.

Non - employee stock - based compensation is accounted for using Black - Scholes to determine the fair value of warrants or options awarded to non - employees with the fair value of such issuances expensed over the period of service .

Recently Issued Accounting Standards

The Company is an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and may take advantage of reduced reporting requirements that are otherwise applicable to public companies.

Section 107 of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with those standards.

The Company has elected to use the extended transition period for complying with new or revised accounting standards unless otherwise state.

The Company will remain an “emerging growth company” until the earliest of (i) December 31, 2023, (ii) the last day of the fiscal year in which it has total annual gross revenues of $1.07 billion or more, (iii) the date on which it has issued more than $1.0 billion in

The Company uses the

AquaBounty Technologies, Inc.

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for the years ended December 31, 2022 and 2021

nonconvertible debt during the previous three years or (iv) the date on which it is deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission (“SEC”), which generally is when it has more than $700 million in market value of its stock held by non-affiliates, has been a public company for at least 12 months and have filed one annual report on Form 10-K.

Black - Scholes option pricing model (“Black - Scholes”) as its method of valuation.

Recently Issued Accounting Standards

Management does not expect any recently issued, but not yet effective, accounting standards to have a material effect on its results of operations or financial condition .

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and (v) the outcome of any collaborations or alliances entered into by the Company.

Although the COVID-19 pandemic has diminished in the United States and other parts of the world as vaccines have become more readily available, several variants of the virus continue to spread.

Local governmental authorities in the United States and Canada have issued, and continue to update, directives aimed at minimizing the spread of the virus and the Company continues to monitor its status.

The ultimate impact of the evolving COVID-19 pandemic on the Company’s operations will depend on future developments, which cannot be predicted with confidence, and the Company cannot predict the extent or impact of the extended period of continued business interruption and reduced operations caused by the COVID-19 pandemic or any additional preventative or protective measures taken in response.

In connection with the COVID-19 pandemic, management made modifications to biosecurity procedures at the farm sites in early 2020 to adapt to local requirements and to provide a safe work environment.

The Company’s current preventative and protective measures include, but are not limited to, segregating farm workers to specific locations, rotating shifts, and monitoring worker temperatures upon arrival at the Company’s facilities.

To the extent possible, work-from-home is utilized for employees that do not have fish care responsibilities.

Concentration of credit risk

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These amounts are subject to foreign currency exchange risk, which is minimized by the Company’s policy to limit the balances held in these accounts.

Balances in Canadian bank accounts totaled $ 224 thousand at December 31, 2021.

Balances in Canadian bank accounts at December 31, 2022 and 2021 totaled $ 518 thousand and $ 224 thousand, respectively.

The Company also holds cash equivalent investments in a highly liquid investment account at a major financial institution.

As of December 31, 2021 and 2020 the cash equivalent investment balance was $ 73.3 million and $ 0 , respectively.

Financial instruments

The carrying value of term debt approximates its fair value since it provides for market terms and interest rates.

All of the Company’s interest-bearing debt is at fixed rates, except for the loan with First Farmer’s Bank and Trust, which has a rate reset in July 2025.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The three levels of the fair value hierarchy are as follows:

Inputs to the valuation methodology are quoted prices, unadjusted, for identical assets or liabilities in active markets.

AquaBounty Technologies, Inc.

Notes to the Consolidated Financial Statements

for the years ended December 31, 2021 and 2020

Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets;

quoted prices for identical or similar assets or liabilities in markets that are not active;

or inputs derived principally from, or that can be corroborated by, observable market data by correlation or other means.

Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

As of December 31, 2022 and 2021 the cash equivalent investment balance was $ 10.6 million and $ 73.3 million, respectively.

Marketable Securities

1 unchanged sentence

The following table summarizes the amortized cost, gross unrealized gains and losses, and the fair value as of December 31, 2021.

The Company had no marketable securities as of December 31, 2022 The balance of unrealized losses at December 31, 2021 were recognized during 2022.

December 31, 2021

3 unchanged sentences

Marketable securities

There were no marketable securities as of December 31, 2020.

Major classifications of inventory are summarized as follows for December 31, 2022 and 2021:

1 unchanged sentence

December 31, 2021

Fish in process, net

Inventory, net

In December 2020, the Company reserved $ 1.53 million against the value of its fish-in-process inventory, representing the total carrying amount of its conventional salmon biomass.

The Company donated substantially all of its conventional salmon to local food charities in 2021.

Fish in process

Fish for sale

AquaBounty Technologies, Inc.

Notes to the Consolidated Financial Statements

for the years ended December 31, 2022 and 2021

Property, plant and equipment

11 unchanged sentences

Depreciation and amortization expense for 2022 and 2021 on property, plant and equipment was $ 2.0 million and $ 1.8 million, respectively.

AquaBounty Technologies, Inc.

Notes to the Consolidated Financial Statements

for the years ended December 31, 2021 and 2020

In March 2020, the Company settled an outstanding legal claim against a third party resulting in net proceeds of $ 1.0 million.

The proceeds received reduced the carrying value of the acquired equipment.

Depreciation on these items has been recalculated prospectively over their remaining useful lives.

As of December 31, 2022, construction in process included $ 75.5 million, $ 2.7 million and $ 590 thousand for construction related to the Ohio, Rollo Bay and Indiana farm sites, respectively.

An additional $ 12.2 million has been contractually committed for these farm sites, though if a contract were terminated, a portion of this total would be refundable based on the amount of work completed as of the date of contract termination.

An additional $ 29.2 million has been contractually committed for these farm sites as of December 31, 2022.

The current terms and conditions of long-term debt outstanding as of December 31, 2022 and 2021, are as follows:

6 unchanged sentences

Kubota Canada Ltd

PEI Finance term loan

DFO term loan

Finance PEI term loan

First Farmers Bank & Trust term loan

1 unchanged sentence

current portion

( 2,387,231 )

Long-term debt, net

Principal payments due on the long-term debt are as follows:

AquaBounty Technologies, Inc.

Notes to the Consolidated Financial Statements

for the years ended December 31, 2022 and 2021

Atlantic Canada Opportunities Agency (“ACOA”)

9 unchanged sentences

The loan is being repaid over a 108 -month term at a zero percent interest rate.

AquaBounty Technologies, Inc.

Notes to the Consolidated Financial Statements

for the years ended December 31, 2021 and 2020

In November 2018, the Canadian Subsidiary executed a second agreement with ACOA to partially finance the renovations to the Rollo Bay site.

1 unchanged sentence

The loan is being repaid over a 108 -month term with a zero percent interest rate.

In response to the COVID-19 pandemic, the Company was informed by ACOA during 2020, that all loan payments to the Canadian government would be deferred for nine months and resume on January 1, 2021.

In July 2021, the Canadian Subsidiary entered into a contribution agreement with ACOA under its REGI-Business Scale-up and Productivity program to provide funding assistance for the Rollo Bay farm site, and on August 20, 2021, the Canadian Subsidiary received C$ 250,000 ($ 200,075 ).

9 unchanged sentences

The loan has an interest rate of 4 % and is collateralized by a mortgage executed by the Canadian Subsidiary, which conveys a first security interest in all of its current and acquired assets.

A balloon payment for the loan is due in November 2023.

The loan is guaranteed by the Parent.

On March 24, 2020, the Company was informed by FPEI that all payments would be deferred for three months due to the COVID-19 pandemic.

Payments on the loan resumed on August 1, 2020.

First Farmers Bank & Trust (“FFBT”)

11 unchanged sentences

This amount is reflected as restricted cash on the balance sheet.

On October 12, 2021, the Company and First Farmers Bank & Trust agreed to a modification to the terms of its outstanding loan.

The new terms delay the start date of certain of the loan’s negative covenants to the quarter commencing on October 1, 2022 and raises the required restricted cash balance amount from $ 500 thousand to $ 1.0 million.

On October 12, 2021, the Company and FFBT agreed to a modification to the terms of its outstanding loan.

The new terms delay the start date of certain of the loan’s negative covenants to the quarter commencing on October 1, 2022 and raises the required restricted

AquaBounty Technologies, Inc.

Notes to the Consolidated Financial Statements

for the years ended December 31, 2022 and 2021

cash balance amount from $ 500 thousand to $ 1.0 million.

On December 13, 2022, FFBT removed two of the loan’s negative covenants.

Department of Fisheries and Oceans (“DFO”)

3 unchanged sentences

On February 25, 2021, the Canadian Subsidiary borrowed C$ 238,400 ($ 187,120 ) and on April 27, 2021 the Canadian Subsidiary borrowed C$ 276,840 ($ 219,258 ) under the DFO Term Loan.

Borrowings are interest free and monthly repayments commence in March 2023 , with maturity in August 2032 .

All funding requests must be submitted by August 22, 2022.

On April 7, 2022, the Canadian Subsidiary borrowed C$ 53,456 ($ 42,338 ) and on December 1, 2022 the Canadian Subsidiary borrowed C$ 589,684 ($ 433,890 ) under the DFO Term Loan.

Borrowings are interest free and monthly repayments commence in August 2024 , with maturity in January 2034 .

The Company recognized interest expense of $ 291 thousand and $ 316 thousand for the years ended December 31, 2022 and 2021, respectively , on its interest-bearing debt.

AquaBounty Technologies, Inc.

Notes to the Consolidated Financial Statements

for the years ended December 31, 2021 and 2020

Stockholders’ equity

4 unchanged sentences

Recent issuances

During 2020, the Company completed a series of public offerings, resulting in the aggregate issuance of 33,028,000 shares of common stock for net proceeds of approximately $ 104.6 million.

During 2021, the Company completed a public offering of 14,950,000 shares of common stock for net proceeds of approximately $ 119.1 million.

The following table summarizes information about outstanding warrants as of December 31, 2021:

‎ exercise price

Outstanding at December 31, 2020

Outstanding at December 31, 2021

Exercisable at December 31, 2021

All remaining warrants have an expiration date of January 17, 2023 .

As of December 31, 2022 and 2021, 418,441 warrants to purchase common stock were outstanding.

All outstanding warrants had an expiration date of January 17, 2023 .

Share-based compensation

6 unchanged sentences

The 2016 Plan provides for the issuance of incentive stock options, non-qualified stock options, and awards of restricted and direct stock purchases to Directors, officers, employees, and consultants of the Company.

Total common shares authorized under the 2016 Plan were 1,900,000 , of which 916,516 shares are reserved for future issuance as of December 31, 2021.

Total common shares authorized under the 2016 Plan are 1,900,000 , of which 452,620 shares are reserved for future issuance as of December 31, 2022.

AquaBounty Technologies, Inc.

5 unchanged sentences

‎ date fair value

Balance at December 31, 2020

Balance at December 31, 2021

Unvested at December 31, 2021

Unvested at December 31, 2022

During 2022 and 2021, the Company expensed $ 358 thousand and $ 240 thousand, respectively related to restricted stock awards.

10 unchanged sentences

There were 1,012 options exercised in 2022 (2021:

The total intrinsic value of options exercised in 2021 was $ 41 thousand (2020:

As of December 31, 2021, the total intrinsic value of all options outstanding was $ 18 thousand (2020:

$ 3.6 million) and the total intrinsic value of exercisable options was $ 11 thousand (2020:

$ 3.2 million).

The total intrinsic value of options exercised in 2022 was $ 142 (2021:

$ 41 thousand).

As of December 31, 2022, the total intrinsic value of all options outstanding was $ 0 (2021:

$ 18 thousand) and the total intrinsic value of exercisable options was $ 0 (2021:

$ 11 thousand).

The following table summarizes information about options outstanding and exercisable as of December 31, 2022:

28 unchanged sentences

The following table summarizes share-based compensation costs recognized in the Company’s Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2022 and 2021:

Research and development

Sales and marketing

General and administrative

4 unchanged sentences

( 1,483,340 )

( 1,217,523 )

Loss before income taxes

3 unchanged sentences

We intend to permanently reinvest all foreign earnings and have no intention to repatriate foreign earnings for the foreseeable future.

AquaBounty Technologies, Inc.

Notes to the Consolidated Financial Statements

for the years ended December 31, 2021 and 2020

Income taxes computed using the federal statutory income tax rate differs from the Company’s effective tax rate for the years ended December 31, 2022 and 2021 primarily due to the following:

4 unchanged sentences

( 1,031,963 )

( 1,157,840 )

Permanent differences

4 unchanged sentences

Total income tax

AquaBounty Technologies, Inc.

Notes to the Consolidated Financial Statements

for the years ended December 31, 2022 and 2021

As of December 31, 2022, the Company has domestic net operating loss carryforwards of approximately $ 97 million, after consideration of limitations pursuant to section 382, to offset future federal taxable income, which begin to expire in 2033.

4 unchanged sentences

Since the Company has incurred only losses from inception and there is uncertainty related to the ultimate use of the loss carryforwards and tax credits, a valuation allowance has been recognized to offset the Company’s deferred tax assets, and no benefit for income taxes has been recorded.

The IRS recently released guidance which modifies the procedures for taxpayers that incur specified research or experimental (R&E) expenditures to change their method of accounting to comply with the new capitalization and amortization rules provided in Section 174, as revised by the Tax Cuts and Jobs Act.

The new Section 174 rules require taxpayers to capitalize and amortize specified R&E expenditures over a period of five years (for domestic research) or 15 years (for foreign research), beginning with the midpoint of the taxable year in which the expenses are paid or incurred.

The impact will be to defer the tax benefit of R&E expenditures.

Significant components of the Company’s deferred tax assets and liabilities are as follows:

18 unchanged sentences

Lease payments included in operating cash flows totaled $ 84 thousand and $ 84 thousand for the years ended December 31, 2022 and 2021, respectively.

AquaBounty Technologies, Inc.

Notes to the Consolidated Financial Statements

for the years ended December 31, 2021 and 2020

The table below summarizes the Company’s lease obligations as of December 31, 2022 and 2021:

December 31, 2021

December 31, 2020

Lease Liability

Lease Liability at December 31,

current portion

2 unchanged sentences

The current portion of the lease liability is included as a component of other current liabilities in the consolidated balance sheets.

AquaBounty Technologies, Inc.

Notes to the Consolidated Financial Statements

for the years ended December 31, 2022 and 2021

Remaining payments under leases are as follows as of December 31, 2022:

1 unchanged sentence

imputed interest

Total operating lease liabilities

Total operational lease liabilities

Retirement plan

11 unchanged sentences

TS Aquaculture agreed to pay all expenses incurred in connection with these transactions, which totaled $ 418 thousand and is included in prepaid and other current assets in the consolidated financial statements as of December 31, 2021.

The receivable balance was received in full from TS Aquaculture in 2022.

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 9A. Controls and Procedures