What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2024-04-01 compared with 2023-03-07 · 201 added, 217 removed, 599 unchanged (41% of the section changed)

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Evaluation of Disclosure Controls and Procedures

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, 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).

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 Exchange Act 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, 2023 (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 Exchange Act).

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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Our management is responsible for establishing and maintaining adequate internal control over financial reporting for our Company.

Internal control over financial reporting is defined in Rules 13a-15(f) and 15(d)-15(f) promulgated under the Securities Exchange Act of 1934, as amended, as a process designed by, or under the supervision of, our Chief Executive and Chief Financial Officers and effected by our board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

Internal control over financial reporting is defined in Rules 13a-15(f) and 15(d)-15(f) promulgated under the Exchange Act, as a process designed by, or under the supervision of, our Chief Executive and Chief Financial Officers and effected by our Board of Directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

 pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and disposition of our assets;

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 provide re asonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

Because of inherent limitations, internal controls over financial reporting may not prevent or detect misstatements.

Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

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In conducting this evaluation, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013).

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 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.

Based upon this evaluation and those criteria, management believes that, as of December 31, 2023, our internal control over financial reporting were effective.

This Annual Report on Form 10‑K does not include an auditor’s attestation of management’s assessment of internal control over financial reporting as of December 31, 2023, as we are not an “accelerated filer” under SEC rules.

Changes in Internal Control

There have been no changes in our internal control over financial reporting for the quarter ended December 31, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There have been no changes in our internal control over financial reporting for the three months ended December 31, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Other Information

During the three months ended December 31, 2023, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “ non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

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The information required by this Item is set forth in our 2024 Proxy Statement to be filed with the SEC within 120 days of December 31, 2023, and is incorporated by reference into this Annual Report on Form 10‑K.

Principal Accounting Fees and Services

Principal Accountant Fees and Services

The information required by this Item is set forth in our 2024 Proxy Statement to be filed with the SEC within 120 days of December 31, 2023 and is incorporated by reference into this Annual Report on Form 10‑K, for Deloitte & Touche LLP (PCAOB ID No.

Exhibits and Financial Statement Schedules

Exhibit and Financial Statement Schedules

List of Documents Filed as Part of this Report

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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).

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 October 13, 2023).

Amended and Restated Bylaws of AquaBounty Technologies, Inc.

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and Third Security And its affiliates dated July 30, 2021 (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q, filed on November 4, 2021).

Letter from Wolf & Company, P.C.

dated July 6, 2021 (incorporated by reference to Exhibit 16.1 to the Registrant’s Current Report on Form 8-K, filed July 7, 2021).

Agreement For Architectural/Engineering Services between AquaBounty Farms Ohio LLC and Clark, Richardson and Biskup Consulting Engineers, Inc.

(incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed on March 3, 2023).

Amended and Restated Employment Agreement, by and between David Frank and AquaBounty Technologies, Inc., dated March 29, 2023 (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q, filed on May 4, 2023).

Employment Agreement, by and between Angela Olsen and AquaBounty Technologies, Inc., dated November 1, 2019 (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q, filed on May 4, 2023).

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

2016 Equity Incentive Plan (incorporated by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q, filed on May 4, 2023).

Amendment No.

3 to AquaBounty Technologies, Inc.

2016 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed on May 26, 2023).

Agreement For Construction Management Services Between AquaBounty Farms Ohio LLC and Gilbane Building Company (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed on June 30, 2023).

List of Subsidiaries of AquaBounty Technologies, Inc.

Consent of Deloitte & Touche LLP

Consent of Wolf & Company, P.C.

Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Compensation Recovery Policy, Adopted November 1, 2023

Inline XBRL instance document-the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.

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†Management contract or compensatory plan or arrangement.

^Certain schedules and exhibits to this agreement have been omitted pursuant to Item 601(a)(5) of Regulation S-K.

A copy of any omitted schedule and/or exhibit will be furnished supplementally to the Securities and Exchange Commission upon request.

**The certification furnished in Exhibit 32.1 is deemed to be furnished and will not be deemed “filed” for purposes of Section 18 of the Exchange Act.

Such certification will not be deemed to be incorporated by reference into any filings under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Registrant specifically incorporates it by reference.

The registrant hereby undertakes to file with the Securities and Exchange Commission, upon request, copies of any constituent instruments defining the rights of holders of long-term debt of the registrant or its subsidiaries that have not been filed herewith because the amounts represented thereby are less than 10% of the total assets of the registrant and its subsidiaries on a consolidated basis.

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/s/ Sylvia A.

Chief Executive Officer, President, and Director

Chief Executive Officer and Board Chair

Power of Attorney

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Frank and Angela M.

Olsen, as his or her attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign any amendment to this Annual Report on Form 10‑K, and to file the same, with exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.

Olsen, as his or her attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign any amendment to this Annual Report on Form 10‑K, and to file the same, with exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated below.

/s/ Sylvia A.

President, Chief Executive Officer and Director (Principal Executive Officer)

March 7, 2023

Chief Executive Officer and Board Chair (Principal Executive Officer)

April 1, 2024

Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer)

March 7, 2023

/s/ Richard J.

Chairman of the Board, Director

March 7, 2023

April 1, 2024

/s/ Ricardo Alvarez

March 7, 2023

Lead Independent Director

April 1, 2024

Ricardo Alvarez

/s/ Erin Sharp

March 7, 2023

April 1, 2024

/s/ Gail Sharps Myers

March 7, 2023

April 1, 2024

Gail Sharps Myers

/s/ Christine St.Clare

March 7, 2023

April 1, 2024

Christine St.Clare

/s/ Rick Sterling

March 7, 2023

April 1, 2024

Rick Sterling

/s/ Michael Stern

March 7, 2023

April 1, 2024

Michael Stern

Report of Independent Registered Public Accounting Firm

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

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

Opinion on the Financial Statements

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").

and subsidiaries (the "Company") as of December 31, 2023 and 2022, 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, 2023 and 2022, 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.

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the financial statements, the Company has incurred cumulative operating losses and negative cash flows from operations that raise substantial doubt about its ability to continue as a going concern.

Management's plans in regard to these matters are also described in Note 1.

The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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 audits.

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 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.

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

Critical Audit Matter

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.

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.

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 4 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.

Fish in process inventory is measured at the lower of cost or net realizable value, where net realizable value is defined as the estimated market price, less the estimated cost of processing, packaging and transportation.

The Company’s determination of net realizable value of fish in process inventory requires management to make various estimates and assumptions related to the estimated biomass of fish,

as well as the expected harvest yields, market price of biomass and 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.

Given the determination of net realizable value requires management to make significant estimates and assumptions relating to expected harvest yields, market price 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.

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

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

 We observed and tested the Company’s physical inventory inspection, fish counting and fish weighing processes.

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

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.

o Market price 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 a physical observation date to December 31, 2023.

/s/ Deloitte & Touche LLP

Baltimore, Maryland

March 7, 2023

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

April 1, 2024

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

AquaBounty Technologies, Inc.

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Cash and cash equivalents

Marketable securities

Prepaid expenses and other current assets

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Restricted cash

Liabilities and stockholders'

Liabilities and stockholders' equity

Current liabilities:

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Commitments and contingencies

Stockholders'

Stockholders' equity:

Common stock, $ 0.001 par value, 75,000,000 and 150,000,000 shares authorized at

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( 193,021,977 )

Total stockholders'

Total liabilities and stockholders'

Total stockholders' equity

Total liabilities and stockholders' equity

See accompanying notes to the consolidated financial statements.

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( 22,323,538 )

Other income (expense)

Other (expense) income

Interest expense

Other income (expense), net

Total other income (expense)

Other income, net

Total other (expense) income

( 27,557,901 )

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Other comprehensive income (loss):

Foreign currency

Unrealized gains (losses) on marketable securities

Total other comprehensive income

Foreign currency gain (loss)

Unrealized gains on marketable securities

Total other comprehensive income (loss)

Comprehensive loss

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Accumulated deficit

Balance as of December 31, 2020

Balance at December 31, 2021

( 170,864,782 )

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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

Share-based compensation

Balance as of December 31, 2021

Balance at December 31, 2022

( 193,021,977 )

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( 27,557,901 )

Other comprehensive (loss)

Exercise of options for common stock

Other comprehensive income

Share-based compensation

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Consolidated Statements of Cash Flows

Years Ended December 31,

‎ December 31,

Operating activities

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Prepaid expenses and other assets

( 1,138,691 )

Accounts payable and accrued liabilities

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( 47,621,291 )

( 188,302,153 )

Other investing activities

Net cash provided by (used in) investing activities

Net cash (used in) provided by investing activities

( 68,892,803 )

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Repayment of term debt

Proceeds from the issuance of common stock, net

Proceeds from the exercise of stock options and warrants

Net cash (used in) provided by financing activities

Net cash used in financing activities

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

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In 2015, the Parent obtained regulatory approval from the U.S.

Food and Drug Administration for the production and sale of its genetically engineered AquAdvantage salmon product (“GE Atlantic salmon”) in the United States and in 2016, the Parent obtained regulatory approval from Health Canada for the production and sale of its GE Atlantic salmon product in Canada.

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

Food and Drug Administration for the production and sale of its genetically engineered AquAdvantage salmon product (“GE Atlantic salmon”) in the United States, and in 2016, the Parent obtained regulatory approval from Health Canada for the production and sale of its GE Atlantic salmon in Canada.

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

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

Basis of presentation

The consolidated financial statements include the accounts of AquaBounty Technologies, Inc.

and its wholly owned subsidiaries.

The consolidated financial statements include the accounts of the Parent and its wholly owned subsidiaries.

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 $ 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.

On October 12, 2023, the stockholders of the Company approved a reverse stock split of the Company’s common stock, and the Board of Directors approved a split ratio of 1-for-20 .

The reverse stock split was implemented on October 16, 2023.

In conjunction with the reverse stock split, the number of shares of common stock authorized for issuance was reduced from 150 million to 75 million.

All share and per share information, as well as other related information on equity instruments in the consolidated financial statements and accompanying notes, have been adjusted to reflect this change.

Going Concern Uncertainty

Since inception, the Company has incurred cumulative net losses and negative cash flows from operations and expects that this will continue for the foreseeable future.

As of December 31, 2023, the Company has $ 9.2 million in cash and cash equivalents, and restricted cash.

The Company’s ability to continue as a going concern is dependent upon its ability to raise additional capital, and there can be no assurance that such capital will be available in sufficient amounts, on a timely basis, or on terms acceptable to the Company, or at all.

This raises substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the accompanying consolidated financial statements are issued.

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business and do not include any adjustments that might result from the outcome of this uncertainty.

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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Other comprehensive income (loss) includes foreign currency translation adjustments and unrealized gains (losses) on the Company’s marketable securities.

AquaBounty Technologies, Inc.

Notes to the Consolidated Financial Statements

for the years ended December 31, 2023 and 2022

Foreign currency translation

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

AquaBounty Technologies, Inc.

Notes to the Consolidated Financial Statements

for the years ended December 31, 2022 and 2021

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%.

Fair Value of Financial instruments

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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.

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

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.

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

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

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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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License fees are capitalized and expensed over the term of the licensing agreement.

Indefinite lived intangible assets include trademark costs, which are capitalized with no amortization as they have an indefinite life.

Property, plant and equipment

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shorter of asset life or lease term

AquaBounty Technologies, Inc.

Notes to the Consolidated Financial Statements

for the years ended December 31, 2023 and 2022

The Company commences depreciation on an asset when it is placed into service.

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An impairment loss, if any, is recognized in the amount of the difference between the carrying amount and the fair value of such assets.

Indefinite lived intangible assets are subject to impairment testing annually or more frequently if impairment indicators arise.

The Company’s impairment testing utilizes a discounted cash flow analysis that requires significant management judgment with respect to revenue and expense growth rates, changes in working capital and the selection and use of the appropriate discount rate.

An impairment loss is recognized in the amount of the difference between the carrying amount and fair value.

The Company leases certain facilities, property, and equipment under noncancelable operating leases.

A determination is made if an arrangement is a lease at its inception, and leases with an initial term of twelve months or less are not recorded on the balance sheet.

A determination is made if an arrangement is a lease at its inception, and leases with an initial term of 12 months or less are not recorded on the balance sheet.

Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

For operating leases, expense is recognized on a straight-line basis over the lease term.

The Company has agreements with lease (e.g., minimum rent payments) and non-lease components (e.g., maintenance), which are generally accounted for separately.

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

Revenue recognition

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Total Revenue

AquaBounty Technologies, Inc.

Notes to the Consolidated Financial Statements

for the years ended December 31, 2022 and 2021

Year Ended December 31, 2023

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During the years ended December 31, 2023 and 2022, the Company had the following customer concentration of revenue:

Year Ended December 31,

Years Ended December 31,

Total of all customers

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

Under this method, deferred tax assets and liabilities are recorded for the expected future tax consequences of temporary differences between the financial reporting and income tax bases of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the differences reverse.

AquaBounty Technologies, Inc.

Notes to the Consolidated Financial Statements

for the years ended December 31, 2023 and 2022

A valuation allowance is established to reduce net deferred tax assets to the amount expected to be realized.

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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,

Years Ended December 31,

Weighted Average Outstanding

Stock options

Unvested restricted shares

Unvested stock awards

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

AquaBounty Technologies, Inc.

Notes to the Consolidated Financial Statements

for the years ended December 31, 2022 and 2021

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 .

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

Non - employee share - 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

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Financial instruments that potentially subject the Company to credit risk consist principally of cash, cash equivalents, and marketable securities.

This risk is mitigated by the Company’s policy of maintaining all balances with highly rated financial institutions, investing cash equivalents with maturities of less than 90 days, and investing marketable securities with maturities of less than 180 days.

This risk is mitigated by the Company’s policy of maintaining all balances with highly rated financial institutions, investing in cash equivalents with maturities of less than 90 days, and investing in marketable securities with maturities of less than 180 days.

The Company’s cash balances may at times exceed insurance limitations.

The Company holds cash balances in bank accounts located in Canada to fund its local operations.

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.

These amounts are subject to foreign currency exchange risk, which is minimized by the

AquaBounty Technologies, Inc.

Notes to the Consolidated Financial Statements

for the years ended December 31, 2023 and 2022

Company’s policy to limit the balances held in these accounts.

Balances in Canadian bank accounts at December 31, 2023 and 2022 totaled $ 227 thousand and $ 518 thousand, respectively.

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

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

Marketable Securities

Marketable securities are classified as available-for-sale.

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

Government bonds

Corporate bonds

Commercial paper

Marketable securities

Major classifications of inventory are summarized as follows for December 31, 2023 and 2022:

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Fish for sale

AquaBounty Technologies, Inc.

Notes to the Consolidated Financial Statements

for the years ended December 31, 2022 and 2021

Prepaid and other current assets

Major classifications of prepaid and current assets are summarized as follows for December 31, 2023 and 2022:

December 31, 2023

December 31, 2022

Prepaid insurance

Prepaid supplies

Prepaid professional services

Deposits and other

Total prepaid expenses and other current assets

Certain prepaid professional services, consisting of $ 2.1 million in legal expenditures and fees related to a bond financing transaction for the Ohio farm site were expensed during the year ended December 31, 2023, as the transaction was postponed for an undetermined amount of time.

Property, plant and equipment

11 unchanged sentences

Depreciation and amortization expense for 2023 and 2022 on property, plant and equipment was $ 2.1 million and $ 2.0 million, respectively.

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.

As of December 31, 2023, construction in process included $ 141.8 million, $ 4.3 million and $ 1.6 million for construction related to the Ohio, Rollo Bay and Indiana farm sites, respectively.

An additional $ 16.7 million has been contractually committed for these farm sites as of December 31, 2023.

AquaBounty Technologies, Inc.

Notes to the Consolidated Financial Statements

for the years ended December 31, 2023 and 2022

The current terms and conditions of long-term debt outstanding as of December 31, 2023 and 2022, are as follows:

14 unchanged sentences

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”)

12 unchanged sentences

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

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 ).

All funds received are to be repaid over a 36 -month term commencing January 2023 at a zero percent interest rate.

In January 2018, the Canadian Subsidiary financed the purchase of equipment through a loan with Kubota.

AquaBounty Technologies, Inc.

Notes to the Consolidated Financial Statements

for the years ended December 31, 2023 and 2022

received C$ 250,000 ($ 200,075 ).

All funds received are being repaid over a 36 -month term commencing January 2023 at a zero percent interest rate.

In January 2018, the Canadian Subsidiary financed the purchase of equipment through a loan with Kubota Canada Ltd.

The total amount is being repaid in monthly installments.

The loan is secured by the underlying equipment.

Department of Fisheries and Oceans (“DFO”)

DFO is a department of the government of Canada responsible for safeguarding its waters and managing its fisheries, oceans and freshwater resources.

DFO supports economic growth in the marine and fisheries sectors, and innovation in areas such as aquaculture and biotechnology .

In September 2020, the Canadian Subsidiary entered into a Contribution Agreement with DFO's Atlantic Fisheries Fund, whereby it is eligible to receive up to C$ 1.9 million ($ 1.4 million) to finance new equipment for its Rollo Bay farm (the “DFO Term Loan”).

As of December 31, 2022, the Canadian Subsidiary had borrowed C$ 1.2 million ($ 883 thousand) on the facility, and during 2023, the Canadian Subsidiary borrowed an additional C$ 572 thousand ($ 418 thousand) 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 $ 304 thousand and $ 291 thousand for the years ended December 31, 2023 and 2022, respectively , on its interest-bearing debt.

Finance PEI (“FPEI”)

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In 2018, the Canadian Subsidiary obtained a new loan from FPEI, which incorporated the existing loan and provided C$ 2.0 million ($ 1.5 million) of additional funds.

All funds have been dispersed and the loan is being repaid over an 87 -month term ending in November 2023.

All funds have been dispersed and the loan is being repaid over a 147 -month term ending with a balloon payment, which was extended for five additional years to December 2028.

The loan has an interest rate of 6.5 % 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.

6 unchanged sentences

The note required interest only payments for the first 13 months, followed by monthly principal and interest payments of approximately $ 57 thousand through maturity.

Proceeds from the loan may be used for the purpose of performing equipment upgrades, purchasing equipment and other improvements to the Indiana farm.

The Company must comply with certain financial and non-financial covenants and provide certification of compliance quarterly.

At December 31, 2022, the Company was in compliance with such covenants.

The loan is also subject to certain prepayment penalties and is secured by the assets of the Indiana subsidiary and a guarantee by the Parent.

The loan agreement requires the Company to maintain a minimum cash balance with the bank throughout the loan term.

During 2022, FFBT removed two of the loan’s negative covenants and the Company increased its required restrictive cash balance amount from $ 500 thousand to $ 1.0 million.

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

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”)

DFO is a department of the government of Canada responsible for safeguarding its waters and managing its fisheries, oceans and freshwater resources.

DFO supports economic growth in the marine and fisheries sectors, and innovation in areas such as aquaculture and biotechnology .

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.

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.

At December 31, 2023, the Company was in compliance with its loan covenants.

The loan is also subject to certain prepayment penalties and is secured by the assets of the Indiana subsidiary and a guarantee by the Parent.

Stockholders’ equity

The Company’s shareholders have authorized 155 million shares of stock, of which 5 million are authorized as preferred stock and 150 million as common stock.

As of December 31, 2022 and 2021, the Company had zero shares of preferred stock and 71,110,713 shares and 71,025,738 shares of common stock, issued and outstanding, respectively.

The Company’s stockholders have authorized 80 million shares of stock, of which 5 million are authorized as preferred stock and 75 million as common stock.

The holders of the common stock are entitled to one vote for each share held at all meetings of stockholders.

Dividends and distribution of assets of the Company in the event of liquidation are subject to the preferential rights of any outstanding preferred shares.

Recent issuances

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

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 .

AquaBounty Technologies, Inc.

Notes to the Consolidated Financial Statements

for the years ended December 31, 2023 and 2022

All outstanding warrants as of December 31, 2022 expired unexercised during the year ended December 31, 2023.

Share-based compensation

In 2006, the Company established the 2006 Equity Incentive Plan (the “2006 Plan”).

In 2006, the Company established the 2006 Equity Incentive Plan (as amended, the “2006 Plan”).

The 2006 Plan provided for the issuance of incentive stock options to employees of the Company and non-qualified stock options and awards of restricted stock to directors, officers, employees, and consultants of the Company.

2 unchanged sentences

In March 2016, the Company’s Board of Directors adopted the AquaBounty Technologies, Inc.

2016 Equity Incentive Plan (the “2016 Plan”) to replace the 2006 Plan.

2016 Equity Incentive Plan (as amended, the “2016 Plan”) to replace the 2006 Plan.

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 are 215,000 , of which 68,280 shares are reserved for future issuance as of December 31, 2023.

AquaBounty Technologies, Inc.

Notes to the Consolidated Financial Statements

for the years ended December 31, 2022 and 2021

Restricted stock

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Exercisable at December 31, 2023

Options issued to employees, members of the Board of Directors, and non-employees generally vest over a period of one year to three years and are exercisable for a term of ten years from the date of issuance.

Options issued to employees, members of the Board of Directors, and non-employees generally vest over a period of one year to three years and are exercisable for a term of 10 years from the date of issuance.

The weighted average fair value of stock options granted during 2023 was $ 5.02 (2022:

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

There were no options exercised in 2023 (2022:

The total intrinsic value of options exercised in 2022 was $ 142 .

$ 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).

As of December 31, 2023 and 2022, the total intrinsic value of exercisable and outstanding options was $ 0 .

AquaBounty Technologies, Inc.

Notes to the Consolidated Financial Statements

for the years ended December 31, 2023 and 2022

The following table summarizes information about options outstanding and exercisable as of December 31, 2023:

8 unchanged sentences

$ 200.00 - $ 500.00

$ 14.20 - $ 23.40

AquaBounty Technologies, Inc.

Notes to the Consolidated Financial Statements

for the years ended December 31, 2022 and 2021

The fair values of stock option grants to employees and members of the Board of Directors during 2023 and 2022 were measured on the date of grant using Black-Scholes, with the following weighted average assumptions:

25 unchanged sentences

( 22,157,195 )

AquaBounty Technologies, Inc.

Notes to the Consolidated Financial Statements

for the years ended December 31, 2023 and 2022

We have made no provision for foreign or domestic income taxes on the cumulative unremitted earnings of our foreign subsidiaries.

4 unchanged sentences

( 4,653,011 )

State and provincial income tax, net of federal benefit

State and provincial income tax

( 2,074,037 )

4 unchanged sentences

( 8,593,895 )

( 5,327,063 )

Change in valuation allowance

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.

As of December 31, 2022, the Company has domestic net operating loss carryforwards of approximately $ 69 million, which can be carried forward indefinitely.

As of December 31, 2023, the Company had domestic net operating loss carryforwards of approximately $ 122 million, after consideration of limitations pursuant to section 382, to offset future federal taxable income, which begin to expire in 2033.

Of this amount, the Company had domestic net operating loss carryforwards of approximately $ 93 million, which can be carried forward indefinitely.

The future utilization of certain historic net operating loss and tax credit carryforwards, however, is subject to annual use limitations based on the change in stock ownership rules of Internal Revenue Code Sections 382 and 383.

The Company experienced a change in ownership under these rules during 2012 and revised its calculation of net operating loss carryforwards based on annual limitation rules.

The Company also has foreign research and development loss carryforwards totaling approximately $ 12 million and foreign research and development expense tax credits of approximately $ 2 million as of December 31, 2022, which expire at various times commencing in 2023.

The Company also had foreign research and development loss carryforwards totaling approximately $ 18 million and foreign research and development expense tax credits of approximately $ 3 million as of December 31, 2023, which expire at various times commencing in 2024.

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.

The IRS released guidance which modified 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 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 defers the tax benefit of R&E expenditures.

AquaBounty Technologies, Inc.

Notes to the Consolidated Financial Statements

for the years ended December 31, 2023 and 2022

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

2 unchanged sentences

Foreign research and development tax credit carryforwards

Property and equipment

Intangibles and other

Total deferred tax assets

3 unchanged sentences

Net deferred tax assets

Deferred tax liabilities:

Property and equipment

( 1,197,261 )

Total deferred tax liabilities

( 1,197,261 )

Net deferred tax liabilities

Commitments and contingencies

4 unchanged sentences

Lease commitments

Lease expense for the years ended December 31, 2022 and 2021, amounted to $ 86 thousand and $ 84 thousand, respectively.

As of December 31, 2022, the weighted average remaining lease term of the Company’s operating leases was 26 years.

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

The table below summarizes the Company’s lease obligations as of December 31, 2023 and 2022:

Lease Liability at December 31,

current portion

Long-term leases

The Company used a weighted average discount rate of 8 % in calculating the net present value of the future lease payments.

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

December 31, 2023

December 31, 2022

Operating lease right-of-use assets, net

Right-of-use assets obtained for new lease liabilities

Other current liabilities

Operating lease liabilities

Total operating lease liabilities

December 31, 2023

December 31, 2022

Operating lease expense

Short-term lease expense

Lease payments included in operating cash flows

Weighted average remaining lease term

Weighted average discount rate

AquaBounty Technologies, Inc.

12 unchanged sentences

Company contributions made and expensed in operations in connection with the plan during the years ended December 31, 2023 and 2022, amounted to $ 45 thousand and $ 44 thousand, respectively.

Related Party Agreement

Letter Agreement with Third Security

On July 30, 2021, the Company entered into an agreement with TS Aquaculture LLC and certain of its affiliates (“TS Aquaculture”) that required the Company to file a registration statement to register the Company’s shares held by TS Aquaculture.

The registration statement was filed on August 5, 2021 and TS Aquaculture completed a transaction to sell 12,880,000 shares of common stock of the Company on November 23, 2021.

TS Aquaculture ceased being a related party after completing the sale.

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.

Subsequent events

On February 14, 2024, the Company announced that it had made the decision to sell its Indiana farm as part of its strategy to increase liquidity.

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