Item 1. Business
Item 1. Business
Overview
Feed a growing world by developing and deploying new aquaculture technologies.
At AquaBounty, we believe we are a leader in the field of land-based aquaculture and the use of technology for improving its productivity and sustainability. Our objective is to ensure the availability of high-quality seafood to meet growing global consumer demand, while addressing critical production constraints in one of the most popular farmed species. We are committed to feeding the world efficiently, sustainably and profitably.
Aquaculture is the farming of aquatic organisms such as fish, shellfish, crustaceans, and aquatic plants. It involves cultivating freshwater or saltwater species under controlled conditions, as an alternative to the commercial harvesting of wild species of aquatic organisms. According to the Food and Agriculture Organization of the United Nations (“FAO”), aquaculture was a $250 billion industry in 2018, and we are targeting the $17 billion salmon farming segment of that industry.
Our GE Atlantic salmon is based upon proprietary salmon genetics and grows to harvest size faster than conventional Atlantic salmon. Our salmon was approved for production, sale, and consumption in the United States on November 19, 2015 by the U.S. Food and Drug Administration (“FDA”). This was followed by an approval from Health Canada for the production, sale, and consumption of our salmon in Canada on May 19, 2016 and an approval from the National Biosafety Technical Commission for the sale and consumption of our salmon in Brazil on May 12, 2021. Consequently, we have received approvals for our product from what we believe are three of the most respected and rigorous regulatory agencies in the world.
We farm our GE Atlantic salmon in land-based, recirculating aquaculture systems (“RAS”), which allow inland fish farms to be established close to major demand centers in a profitable and environmentally sustainable manner. We believe that our 25 years of experience growing salmon in land-based farms, coupled with the unique genetics of our faster-growing GE Atlantic salmon, provides us with a competitive advantage and an opportunity to establish multiple salmon farms throughout North America and the world.
We currently have two salmon farms in production – a 1,200 metric ton facility in Indiana and a 250 metric ton demonstration facility on Prince Edward Island, Canada. Our plans include the construction of a new 10,000 metric ton farm in Pioneer, Ohio during the next twenty-four months and an additional three to four new 10,000 metric ton farms in North America at sites close to consumer consumption over the next seven-to-ten years. We are also pursuing regulatory approval for our GE Atlantic salmon in Israel and China, with the goal of entering those markets with local partners in the form of joint ventures or licensing arrangements. Additionally, we plan to utilize our expertise in biotechnology and RAS operations to enter complimentary areas of the aquaculture industry.
Our strategy is to continually strengthen our core capabilities, scale our business and pursue growth opportunities.
Market Drivers
Population Growth Drives Demand for Food Protein
According to FAO, the global population is projected to exceed 9 billion people by 2050, or roughly 26% growth over the next 28 years. Along with this increase is a growing middle class with more disposable income, which is driving increased demand for protein food sources. And according to FAO, global fish consumption has been growing faster than all other animal protein foods.
Traditional Fisheries Cannot Meet the Demand
The increased demand for fish protein cannot be satisfied from traditional capture fisheries. FAO states that over 90% of the world's fisheries are fully fished or overfished. Total production from global capture fisheries has been relatively stable since the late-1980s, with catches generally fluctuating between 86 million metric tons and 93 million metric tons per year, reaching 96 million metric tons in 2018. In contrast, over the same period, aquaculture fish production has grown from 14 million metric tons to a level of 82 million metric tons in 2018 and now accounts for 46% of global fish production. Feeding the growing population and meeting the demand for fish protein will require aquaculture production to almost double by 2050.
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The chart below depicts the projected gap between supply and demand over the next 28 years.
Source: FAO - The State of World Fisheries and Aquaculture 2020 for actual data
through 2018. Company estimates based on FAO data for projections through 2050.
Salmon Farming
Atlantic salmon farming is a major industry in the cold-water countries of the northern and southern hemispheres. According to FAO, global tonnage of Atlantic salmon aquaculture production grew by approximately 2% annually between 2015 and 2019, reaching 2.6 million metric tons with a value of over $17 billion. We believe that the aquaculture industry – and in particular salmon farming – is poised for significant growth in the coming years, as the global population expands and consumers seek out high-quality proteins. However, the near-term outlook will continue to be influenced by the COVID-19 pandemic and its impact on both production and demand.
Below is a break-down by major producing country for the time period 2015 through 2019, which is the last year for which data is readily available from FAO.
Worldwide Atlantic Salmon Production by Country (in metric tons)
Country
2015
2016
2017
2018
2019
Norway
1,303,346
1,233,619
1,236,353
1,282,003
1,364,042
Chile
608,546
532,225
614,180
661,138
701,984
United Kingdom
172,146
163,135
189,707
156,025
190,500
Canada
121,926
123,522
120,553
123,184
118,630
Faroe Islands
80,600
83,300
86,800
78,900
95,000
Australia
48,331
56,115
52,580
61,227
56,989
Ireland
13,116
16,300
18,342
11,984
11,333
United States
18,719
16,185
14,685
16,107
16,491
All other
14,549
22,592
25,163
35,205
60,993
Volume-Worldwide (mt)
2,381,279
2,246,993
2,358,363
2,425,773
2,615,962
Source: FAO - Fisheries and Aquaculture Information and Statistics Service - 2/9/2022
Limitations of Conventional Sea-Cage Salmon Farming
Conventional salmon aquaculture takes place in large cages (sea cages) in coastal waterways exposed to currents, which can bring a variety of pathogens in contact with the farmed salmon. The presence of pathogens in an uncontrolled environment such as this is a universally accepted fact in human and animal health. Such disease agents in these uncontrolled water currents can result in infection and spread of infection within the captive population. The risks and outcomes of conventional, open sea-cage systems are well established, including the susceptibility to extreme weather conditions, and are often evidenced by outbreaks of a variety of bacterial
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and viral diseases as well as water fouling and contamination due to algal blooms and similar events. This risk of disease has led to the widespread use of antibiotics, vaccines, and other pharmacological agents.
The most prevalent disease and health management issues are infectious salmon anemia (“ISA”) and sea lice. ISA is a viral disease in Atlantic salmon, and outbreaks have occurred in virtually every major salmon farming geography since 1984, including a major event in Chile in 2008 that impacted the country’s production for three years. There is currently no effective treatment for the disease, and the salmon farming industry relies on health management practices to mitigate its impact.
Sea lice are marine parasites that occur naturally and attach to the skin of Atlantic salmon. Even a few sea lice can increase the likelihood of secondary infections and mortality, and the presence of significant numbers are likely to have adverse effects on fish health and aesthetic appearance. The cost of managing sea lice in sea-cage farming environments can be significant.
Another limitation of the conventional salmon production system is that the farms are not located near the ultimate consumers and thus an additional carbon footprint is created in transporting the fish from its production to its consumption location.
We believe we offer a better, more sustainable alternative to conventional salmon production.
AquaBounty Solution
Land-Based RAS Production
The closed, contained, land-based production systems using RAS technology that we use for the grow-out of our fish are less susceptible to the disease-related pressures of conventional salmon farming, because this type of culture system is isolated from the environment. RAS facilities employ sophisticated water treatment technology including the use of ozone, salt treatment and ultraviolet radiation to kill potential bacterial, fungal, or viral pathogens which might enter the system. In addition, incoming water is similarly filtered and treated prior to entering the system, and water quality is regularly measured as part of the standard procedures. The fish in RAS facilities are generally not vaccinated against typical fish diseases, and no antibiotics, pesticides, or pharmacological agents are typically required. RAS facilities employ effective biosecurity to prevent disease by reducing or eliminating the introduction of pathogens and continuously treating the water to assure optimal fish health. RAS production will allow our fish to be raised in optimized conditions with total control of the water coming in and going out of the system, while recirculating greater than 95% of the water used. Further, stocking our RAS farms with disease-free eggs from our own hatchery results in a much higher degree of biosecurity and protection from disease.
In addition to biosecurity measures to optimize fish health, our farms feature multiple layers of containment designed to prevent escapes. We have been growing fish in RAS facilities for decades and we have never experienced an escape. The multiple layers of containment redundancy, coupled with the fact that our salmon are sterile female fish, pose a much-needed solution to raising fresh, healthy seafood in a manner that prevents harming native fish populations. The method of land-based fish farming that we employ has been promoted by many environmental NGOs and it does not pose a threat to wild salmon populations.
We have significant experience in operating land-based RAS facilities. Our operating practices and procedures have been developed and honed over several decades and are geared towards meeting stringent regulatory requirements. Our experience operating land-based RAS salmon farms enables us to protect both the fish and the environment.
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Our GE Atlantic Salmon
Our GE Atlantic salmon program (“AquAdvantage”) began over 30 years ago and is based upon a single, specific molecular modification in our salmon that results in more rapid growth during early development. The result is a genetically engineered Atlantic salmon that can grow to market size faster than a conventional farmed Atlantic salmon.
The original research on the Atlantic salmon was conducted at Memorial University in Newfoundland, Canada, by a team seeking to protect the fish from the effects of the cold waters of the North Atlantic Ocean. They discovered that the single genetic change made by placing a second copy of the salmon growth hormone gene under the control of an alternative genetic promoter (gene switch) from the ocean pout resulted in more consistent levels of growth hormone being released, which accelerated the early stages of the salmon’s development, a time period when the salmon are more susceptible to disease and mortality. The accelerated growth allows these fish to reach a marketable size sooner. This can reduce farming time in a RAS facility from roughly 26 to 28 months for conventional Atlantic salmon to roughly 18 to 20 months for our salmon.
This accelerated growth has economic and environmental advantages. The faster life cycle from birth to harvesting of our salmon, as compared to conventional salmon, allows it to be produced more economically in contained, land-based RAS farms. Although RAS farms require greater capital investment than the sea cage approach, we believe that the higher costs are offset by more efficient growth and a shorter transportation distance to market. Compared to conventional salmon grown in a RAS farm with a similar capital investment, we can produce approximately 70% more of our GE Atlantic salmon each year. Our fish are also 25% more efficient at converting their feed to biomass, which represents a significant cost advantage as feed is the largest variable cost of growing salmon.
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Source: AquaBounty - Management estimates based on current assumptions. EBITDA is defined as farm operation
net income (loss), plus depreciation expense, other income/expense, including interest expense and interest income,
and the provision for income taxes.
Further, with our plan to locate our farms nearer to the major food markets, we expect savings on transportation of the harvested stock, a reduced carbon footprint, and an improved ability to get fresh product to market faster.
Intellectual Property
Our GE Atlantic salmon is based upon a single, specific molecular modification in the fish that results in more rapid growth in early development. The patent for the underlying technology, which had been issued in certain salmon producing countries, expired in August 2013 and we currently hold a global, perpetual, royalty-free, fully paid, sub-licensable, assignable, non-exclusive right to the technology covering genetically engineered salmonid fish that express endogenous growth hormone under the control of a protein gene promoter from an edible fish. Despite the expiration of the patent for the licensed technology, we believe that the degree of know-how in the molecular modification process and the regulatory timescales associated with approval of genetically engineered fish present significant barriers to entry and a competitive advantage.
We rely on a combination of patent, trademark, and trade secret laws in the United States and applicable foreign jurisdictions, as well as confidentiality procedures and contractual provisions, to protect our proprietary technology, processes, and brand. In December 2015, we were granted a U.S. patent for our molecular sterility system, which renders sterile the progeny of any female fish carrying a defined maternal sterility gene. Subsequently, the maternal sterility patent has been issued in Australia, Brazil, Canada, Chile, Japan, and the Republic of Korea. While the technology described in the sterility system patent is not required under any of our current regulatory approvals, the technology may be desirable in the future to obtain or maintain regulatory approvals.
Regulatory Aspects of Genetically Engineered Fish
The genetic engineering of food using the tools of modern biotechnology is regulated in the United States by two government organizations, the U.S Department of Agriculture (“USDA”) for genetically engineered plants and the FDA for genetically engineered animals.
The regulatory process for genetically engineered food and animal feed is based upon the Coordinated Framework, issued by the Office of Science and Technology Policy in 1986, but the enabling legislation is the Federal Food, Drug, and Cosmetic Act (“FFDCA”). The FDA is also required to determine the environmental impact of a proposed application under the National Environmental Policy Act (“NEPA”). In the case of animals intended for food or materials for feed, the FDA process is a pre-approval review followed by an approval if the application is acceptable under the relevant legislation, with ongoing oversight following approval.
We opened an Investigational New Animal Drug file for AquAdvantage salmon with the FDA in 1995. At that time, there was no defined regulatory framework for the regulation of bioengineered animals. There were, however, certain studies that were generally
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acknowledged to be necessary for an eventual approval process. We commenced work on those studies and began a phased submission of studies to the FDA that ultimately was responsive to each technical section of the New Animal Drug Application (“NADA”). These technical sections require submission of studies relating to molecular characterization of the construct; molecular characterization of AquAdvantage salmon lineage; phenotypic characterization of AquAdvantage salmon; a genotypic and phenotypic durability plan; support for environmental, food, and feed safety; and claim validation. The FDA’s phased review process, which included a cycle of study conduct, submission, review, and acceptance, continued over the period from 1995 to 2010. Following this process, the FDA concluded that AquAdvantage salmon “is as safe as food from conventional salmon, and that there is a reasonable certainty of no harm from consumption of food” from AquAdvantage salmon. On November 19, 2015, the FDA issued an approval letter for the NADA for AquAdvantage salmon, along with a final Environmental Assessment (“EA”) and a finding of No Significant Impact on the EA under NEPA.
Regulatory Legal Challenge
On March 30, 2016, a coalition of non-governmental organizations (“NGOs”) filed a complaint in the United States District Court for the Northern District of California against the FDA, the United States Fish and Wildlife Service, and related individuals for their roles in the approval of AquAdvantage salmon. Subsequently, AquaBounty joined the case as an intervenor to protect our interests. Shortly thereafter, the Fish and Wildlife Service was dismissed from the case. The NGOs, including the Center for Food Safety and Friends of the Earth, claimed that the FDA had no statutory authority to regulate genetically engineered animals, and, if it did, that the agency failed to adequately analyze and implement measures to mitigate ecological, environmental, and socioeconomic risks that could impact wild salmon and the environment, including the risk that AquAdvantage salmon could escape and threaten endangered wild salmon stocks. In December 2019 the court found that the FDA did have authority/jurisdiction over genetically engineered animals under the FFDCA, and in November 2020, the court remanded the EA to the FDA for further work on its NEPA and Endangered Species Act (“ESA”) assessments. In December 2020, the plaintiffs filed a motion to alter or amend the judgment. In February 2021, the judge denied that motion. The court’s decisions do not have a current business impact on AquaBounty’s egg production on Prince Edward Island, Canada or AquaBounty’s salmon production in Albany, Indiana. AquaBounty is working with the FDA on the NEPA and ESA regulatory matters.
On-going Regulatory Requirements
In addition to the FDA approval of the NADA for AquAdvantage salmon, our operating sites in the United States and on Prince Edward Island, as well as those we plan to operate in the future, must be registered with, and periodically inspected by, the FDA as drug manufacturing establishments. Drug manufacturing establishments that supply FDA-regulated products for use in the United States must comply with the product’s conditions for approval, whether located in the United States or in a foreign country. Each of our operating sites in Indiana and on Prince Edward Island, is currently registered with the FDA, and the FDA has performed inspections and site visits at each of those facilities.
Going forward, we must continue to comply with FDA requirements not only for manufacturing, but also for labeling, advertising, record keeping, and reporting to the FDA of adverse events and other information. We also need to comply with USDA disclosure requirements pertaining to bioengineered foods under the National Bioengineered Food Disclosure Law. Failure to comply with these requirements could subject us to administrative or judicial enforcement actions, including but not limited to product seizures, injunctions, civil penalties, criminal prosecution, refusals to approve new products, or withdrawal of existing approvals, as well as increased product liability exposure.
Production of AquAdvantage salmon in the United States also requires compliance with environmental regulations and local site permitting statutes. In addition, every production site for AquAdvantage salmon in the United States requires approval by the FDA of both a Supplemental NADA and satisfaction of corresponding obligations under NEPA, as well as compliance with local permitting requirements for construction of grow-out facilities. We expect that we may incur significant costs to comply with these environmental and regulatory requirements, which could be a multi-year process to complete for each production site, though conducted in parallel with our construction timelines.
Labeling and Disclosure Standard
There have been surveys cited by various NGOs that indicate that consumers are reluctant to purchase genetically engineered food and that they would like to see labeling in order to avoid it. Many states reacted to this by enacting genetically engineered food labeling laws. Consequently, in response to the potential for state-by-state labeling laws, Congress passed the National Bioengineered Food Disclosure Law (“Disclosure Standard”) in 2016, which directed USDA to establish a national mandatory standard for disclosing foods that are or may be bioengineered. The Disclosure Standard requires food manufacturers, importers, and certain retailers to ensure bioengineered foods are appropriately disclosed. The Disclosure Standard came into effect on January 1, 2022, but we began complying in 2021 on a voluntary basis when our salmon began to be harvested and sold.
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In conjunction with the bioengineered disclosure, we also have begun to educate consumers on the benefits of our GE Atlantic salmon versus conventional Atlantic salmon, including its 25% improved feed conversion (meaning less feed is needed to produce the same harvest), a lower carbon footprint due to local production, reduced impact on the environment, reduced exposure of the fish to environmental toxins due to use of land-based aquaculture systems, and reduced reliance on vaccines or antibiotics due to improved biosecurity.
In December 2019, the 2020 Appropriations Act was signed into law, which was reintroduced and passed in 2021, which contained an amendment that requires that any genetically engineered animal approved by FDA prior to the effective date of the Disclosure Standard shall include the words ‘‘genetically engineered’’ prior to the existing acceptable market name. While we believe that this labeling requirement is unnecessary and redundant to the requirement of the Disclosure Standard, we have and will continue to comply with all applicable laws.
Our compliance with these laws and regulations may be onerous and could increase our cost of doing business, impact our competitive position relative to our peers or otherwise have an adverse impact on our business, reputation, financial condition and operating results. For more information about government regulations applicable to our business, refer to “ Risk Factors ” in Item 1A.
U.S. Market
According to the U.S. Department of Commerce (“DOC”), in 2019 the United States imported a record 886 million pounds (402 thousand metric tons) of Atlantic salmon with an aggregate market value of approximately $4.0 billion, or $4.49 per pound. The vast majority of the imported Atlantic salmon originated from Chile, Canada, and Norway. The Atlantic salmon farming industry in the United States contracted significantly beginning in the 1990s in the face of environmental concerns and lower costs of production from foreign sources, notably Chile. According to FAO, a total of only 36 million pounds (16.5 thousand metric tons) of farmed Atlantic salmon was produced in the United States in 2019, representing only 4.0% of the total farmed Atlantic salmon supplied to the country.
Despite intensive public consumer education campaigns promoting its health benefits, seafood consumption in the United States still lags behind other protein sources and trails consumption in overseas markets. According to the USDA, during the period from 2013 to 2018, annual seafood consumption in the United States ranged between 14 and 16 pounds per capita, significantly behind consumption of poultry (70 to 78 pounds), beef (51 to 55 pounds), and pork (43 to 47 pounds). In comparison, according to FAO, average seafood consumption worldwide was 45 pounds per capita in 2018.
Consumer Sentiment Regarding Genetically Engineered Fish
Though Atlantic salmon is the second most consumed seafood in the United States, activist groups opposing genetically engineered foods have pressured a number of retail food outlets and grocery chains to publicly state that they will not carry genetically engineered salmon.
However, currently we do not expect that this will have a significant impact on overall consumer demand and product placement in the marketplace generally, and in particular the wholesale marketplace. To date, large wholesalers have not followed the example of these retailers, and we have sold our GE Atlantic salmon from both our Indiana and Prince Edward Island farms since commencing harvesting in May 2021. We believe that there will be sufficient demand from smaller retailers, wholesalers, and institutional seafood buyers to absorb our projected production. We believe that the FDA approval reinforces the message that our salmon is a safe and nutritious seafood product that is identical to conventional farmed Atlantic salmon.
We believe that consumer sentiment towards genetically engineered foods is evolving. Based on market research that we commissioned, the top attributes for consumer selection of farm-raised salmon are availability, affordability, freshness, safety, and taste. According to the poll conducted, 53% of respondents had a first impression of genetically engineered food that was neutral to very positive; 60% were neutral to very likely to purchase genetically engineered products they buy regularly if labeled as such; 70% were neutral to very likely to purchase genetically engineered products they buy regularly if labeled with the USDA Bioengineered Disclosure Symbol; 81% were neutral to very positive to the AquaBounty and our GE Atlantic salmon story and product benefits; and 70% were likely to purchase and try our salmon at least once.
Sales Plan
The salmon distribution system in the United States is complex and varied. Participants include fishermen, fish farmers, processors, importers, secondary processors, broadline distributors, specialty seafood distributors, brokers, traders, and many different kinds of retail and food service companies. Salmon distribution channels are evolving, with fewer and larger distributors handling an increasing
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share of total volume and an increasing share of salmon being sold directly by large fish-farming companies and large wild salmon processors to large retail and food service chains. Our GE Atlantic salmon is currently being sold into this distribution network with an initial focus on seafood distributors and wholesalers. This is due to our limited supply of fish, which necessitates our being selective in bringing on new customers. We expect that once our Ohio farm is in commercial operation, we will be able to expand our customer depth and breadth and increase our channel coverage.
As a commodity food item, the price of Atlantic salmon is variable based on the supply and demand for product weekly. We base our pricing on a published index by Urner Barry, which provides comprehensive market coverage across all major center-of-the-plate food proteins, taking into account differences for fish size and quality.
Competition
The global Atlantic salmon farming industry includes several very large companies with operations in each of the major producing countries. Consolidation has been evident in the past few years as producers attempt to gain competitive cost advantages while overcoming the regulatory challenges associated with developing new marine farm sites. Major market producers include the following companies: Mowi, Aquachile, Cermaq, Leroy Seafood Group, SalMar, Cooke Aquaculture, and Bakkafrost. According to Kontali, these seven companies accounted for approximately 47% of the Atlantic salmon produced in 2019. Since salmon is primarily sold as a commodity in the United States, we will compete against these well-established, sea-cage production companies.
In addition, new entrants to salmon production have emerged that plan to use land-based RAS facilities. A number of projects are either planned, under construction or in operation. Atlantic Sapphire is operating a ten thousand metric ton facility in Florida, with stated plans to increase production to over 220 thousand metric tons. Other entrants include Nordic Aquafarms, with plans for facilities in Maine and California, and Whole Oceans and Aquabanq, both with plans for farms in Maine.
Operations
Current Production
We currently have two salmon farms in production – a refurbished 1,200 metric ton facility in Indiana and a 250 metric ton demonstration facility on Prince Edward Island. Our first harvests of conventional salmon in Indiana commenced in June 2020 and our first harvests of our GE Atlantic salmon commenced in June 2021 at both of our farms. At December 31, 2021, we had a total farm biomass of 469 metric tons.
Impact of COVID-19
Although COVID-19 vaccines have become more readily available in the United States and other parts of the world, 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 our operations will depend on future developments, which cannot be predicted with confidence, and we 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, we made modifications to our biosecurity procedures at our farm sites in early 2020 to adapt to local requirements and to provide a safe work environment. Our 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 our facilities. In certain circumstances, we utilized, and continue to utilize, work-from-home arrangements for employees that do not have fish care responsibilities.
As a result of the COVID-19 pandemic, we have experienced delays and cost increases in capital projects, additional challenges in our efforts to meet the capacity expectations at our existing facilities and we continue to experience extended lead times on equipment purchases. We may continue to experience delays and cost increases on farm construction, purchases of capital equipment and supplies and other materials required in our operations due to vendor shortages and labor shortages. We also expect to continue to be impacted by transportation or other supply chain disruptions to our partners or customers. In addition, we are carefully managing and monitoring the impact of labor shortages on our ability to meet the annual capacity expectations at our existing facilities.
We were initially impacted by a reduction in the market price and demand for Atlantic salmon due to the pandemic’s impact on the food service sector. This had a negative impact on revenue and inventory value, as we were not yet an established vendor and customers appeared reluctant to add a new supplier during a period of depressed demand.
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During the second half of 2021, we were impacted by a shortage of labor at our Indiana farm and increased costs for third-party processing and transportation. This had a negative effect on revenue and inventory values and resulted in higher than expected sales costs for the period. This is expected to continue for the foreseeable future.
We remain focused on maintaining a strong balance sheet, liquidity, and financial flexibility and we continue to monitor developments as we deal with the disruptions and uncertainties from a business and financial perspective related to the evolving COVID-19 pandemic.
North America Plan
Our longer-term business plan contemplates that we will construct and operate four to five new, land-based RAS farms in North America at locations close to consumer consumption. Our target is to achieve an annual production output of at least 50,000 metric tons within the next seven to ten years.
During 2021, we selected Pioneer, Ohio as the site location for our first 10,000 metric ton farm. Based on the engineering design that has been completed, we have estimated that the roughly 479,000 square foot facility will cost between $290 million and $320 million to construct. We have commenced site construction activities and our targeted timeline for the introduction of our first batch of GE Atlantic salmon eggs is the end of 2023, pending the required facility approval by the FDA. Our plan to finance the construction of the farm includes both equity and debt components. In October 2021, the Board of Directors of the Toledo-Lucas County Port Authority approved the issuance of up to $300 million in municipal bonds for our project. We are currently proceeding with the bond financing and expect to close the transaction in the second quarter of 2022.
The work that we have done to date on the design of the Ohio farm will serve as a template for future farm projects, though we will continue to incorporate the learnings from our current farm operations and our philosophy of continual improvement. The picture below shows a design rendering of the inside of the farm.
Source: AquaBounty
Egg Production
We have scaled-up our egg production capability at our Fortune and Rollo Bay hatcheries on Prince Edward Island and we can now produce over 10 million eyed eggs annually, which is more than our current internal demand. As there is a shortage of supply of salmon eggs in the market, we have begun to sell our excess conventional salmon eggs and fry to other salmon farmers. We have also made the decision to increase our egg production capacity over the next several years to 30 million eyed eggs annually, which would be sufficient to stock six 10,000 metric ton farms.
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International Plans
While our primary focus is on North America, we also plan to expand internationally, targeting those markets that are net salmon importers, unable to supply their domestic needs and where we believe we will have success in gaining further regulatory approvals and consumer acceptance. Once approved in these locations, we plan to commercialize through a combination of partnerships, joint ventures, and licensing arrangements. Consequently, we have targeted Brazil, Israel and China as potential markets. In Brazil, we have received approval for the sale and consumption of our fish, and we are now seeking to identify a local partner. In Israel, we have selected a partner and we are preparing our regulatory application. In China, we have received approval from regulators to conduct field trials and have reviewed the commercial landscape. Once field trials are underway, we will commence a search for a local partner.
Growth Strategy
Optimizing Technology and Innovating for the Future
We are exploring the potential development of a range of additional products, including a second generation of our GE Atlantic salmon to help ensure 100% sterility, molecular sterility systems to provide an improved means of sterility for farmed fish, and improved methods for generating genetically engineered fish.
Our primary research and development operations are located in our owned hatcheries on Prince Edward Island. As of December 31, 2021, we employed 34 scientists and technicians to oversee our broodstock, as well as the lines of fish we maintain for research and development purposes. In addition, we contract some research activities to third parties. In the future, we may enter into other partnerships and collaboration agreements to advance our research and development efforts.
Vertical and horizontal integration
We may have multiple opportunities to vertically integrate and strategically increase our value-added capabilities within the seafood industry. These capabilities can be obtained by building and developing in-house, forming partnerships, direct investment or through acquisition.
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We could also seek to expand our production capabilities in adjacent markets, including:
Di versify into additional high value species such as shrimp, trout, or tuna.
Evaluate markets for inputs and by-products such as animal feed, fish meal and fish oil.
Acquire new production technologies such as cellular aquaculture in the rapidly growing bio-engineered food market.
Human Capital Resources
We believe in the positive impact that a team-based management structure delivers. We empower our people by placing decision making power at the team level; driven by those closest to the work. We provide training opportunities to our teams to continually improve their decision-making skills. Our recent development initiatives included introduction to lean and continuous improvement, leadership coaching skills, and goal setting and coaching performance. We believe such initiatives ensure our team’s alignment with our company’s expectations, and when coupled with our confidence in our people’s abilities, our team is positioned to succeed.
As of December 31, 2021, we had 95 team members, 72 of which were in our farm operations and 11 in research and technical support functions. As of December 31, 2021, we had 12 corporate team members who provided support to all of our operations and were responsible for the execution of all corporate functions, including executive, operational, finance, information technology, legal, and corporate communications. None of our team members are represented by a labor union, and we consider our employee relations to be good.
We structure our compensation packages to compete for the best talent. Our compensation packages include a competitive base salary and health and wellness benefits, along with a 401(k) retirement plan that includes a Company match.
We made modifications to our biosecurity procedures at our farm sites in response to the COVID-19 pandemic, including segregating farm workers to specific locations, rotating shifts, and monitoring worker temperatures upon arrival at our facilities. In certain circumstances, we utilized, and continue to utilize, work from home arrangements for team members that did not have fish care responsibilities.
Recent Events
During 2020, we 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 and we issued 713,449 shares of common stock through the conversion of outstanding warrants for total proceeds of $2.3 million.
During 2021, we completed a public offering of 14,950,000 shares of common stock for net proceeds of approximately $119.2 million.
As of December 31, 2021, we had a balance of $191.2 million in cash and cash equivalents, marketable securities and restricted cash.
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