What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2024-04-01 compared with 2023-03-07 · 90 added, 154 removed, 281 unchanged (46% of the section changed)

Company Update

AquaBounty has been pursuing a growth strategy that includes the construction of large-scale recirculating aquaculture system farms for producing our GE Atlantic salmon.

Our farm in Pioneer, Ohio is under construction and roughly 30% complete, but construction activities have been paused.

To fund the construction cost, we were using cash on hand, which would be supplemented by a municipal bond financing.

However, during the initial two years of construction, the cost estimate for the farm increased substantially and eventually exceeded our ability to complete the proposed financing.

Consequently, the Company requires new financing to provide liquidity for working capital and to fund the construction of our farm in Pioneer, Ohio.

To meet this need, we have engaged an investment bank to pursue a range of funding and strategic alternatives, including the recently announced sale process for our Indiana farm, potential debt financing secured by our unencumbered assets, and potential joint venture partnerships or other strategic transactions.

Feed a growing world by developing and deploying new aquaculture technologies.

AquaBounty was incorporated in December 1991 in the State of Delaware for the purpose of conducting research and development of the commercial viability of a group of proteins commonly known as antifreeze proteins.

In 1996, we obtained the exclusive licensing rights for a gene construct (transgene) used to create a breed of farm-raised Atlantic salmon that exhibits growth rates that are substantially faster than conventional salmon.

At AquaBounty, our Purpose is to “Feed a growing world by transforming aquaculture through the use of technology, creating a safe, secure and sustainable future.” We demonstrate our care for our people, our environment and our fish through our EPIC Values which include:

“Excellence, Passion, Innovation and Collaboration”.

We believe we are a leader in the field of land-based aquaculture and the use of technology for improving its productivity and sustainability.

“Excellence, Passion, Innovation and Collaboration.” 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.

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We believe that AquaBounty has four core competencies that provide us with a competitive advantage over other land-based salmon farmers:

our proprietary genetically engineered (“GE”) Atlantic salmon, our experience operating land-based farms, our vertical integration, and our expertise in biotechnology.

our proprietary genetically engineered Atlantic salmon (“GE Atlantic salmon” or “AquAdvantage salmon”), our experience operating land-based farms, our vertical integration, and our expertise in biotechnology.

Our GE Atlantic salmon is based upon proprietary salmon genetics and grows to harvest size faster, while consuming less feed, than conventional Atlantic salmon.

With our salmon, we can produce more output at a lower cost in a land-based farm than with conventional salmon.

Our GE Atlantic 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”).

Our GE Atlantic salmon was approved for production, sale, and consumption in the United States on November 19, 2015 by the 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.

Consequently, we have received approvals for our GE Atlantic salmon 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 land-based fish farms to be established close to major demand centers in a profitable and environmentally sustainable manner.

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We currently operate two salmon farms:

a 1,200 metric ton production grow-out farm in Indiana and a broodstock farm on Prince Edward Island, Canada.

Our plans include completing the construction of a new 10,000 metric ton production grow-out farm in Pioneer, Ohio and building additional production farms in North America at sites close to consumer consumption.

a refurbished production grow-out farm in Indiana and a broodstock farm on Prince Edward Island, Canada.

Our plans include completing the construction of a 10,000 metric ton production grow-out farm in Pioneer, Ohio and expanding our egg production and sales.

In February 2024, we announced our plan to sell our Indiana farm operations to provide needed liquidity, while focusing on financing alternatives necessary to resume construction on the Ohio farm.

We are also pursuing regulatory approval for our GE Atlantic salmon in Israel, with the goal of entering that market with a local partner in the form of a joint venture or licensing arrangement.

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Our strategy is to continually strengthen our core capabilities, scale our business and pursue growth opportunities.

Reverse Stock Split

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 in this Annual Report on Form 10-K have been adjusted to reflect this change.

Market Drivers

Population Growth Drives Demand for Food Protein

According to FAO, the global population is projected to approach 9 billion people by 2050, or roughly 15% growth over the next 27 years.

According to FAO, global population is projected to reach 9.7 billion people by 2050, or roughly 20% growth over the next 26 years.

In addition to the increased demand for food from the rising population, increased incomes and urbanization from a growing middle class will drive increased demand for protein food sources.

And according to FAO, global fish consumption has been growing faster than all other animal protein foods.

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.

FAO research indicates that 25% of all major marine fisheries are subjected to severe overfishing, while an additional 52% are fully exploited.

Total production from global capture fisheries has been relatively stable since the late-1980s, with catches generally fluctuating between 86 million metric tons and 96 million metric tons per year, with 90 million metric tons recorded in 2020, the last year for which data is available from FAO.

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Feeding the growing population and meeting the demand for fish protein will require aquaculture production to nearly double by 2050.

The chart below depicts the projected gap between supply and demand over the next 27 years.

The chart below depicts the projected gap between supply and demand over the projected period.

FAO – The State of World Fisheries and Aquaculture 2022 for actual data

through 2020.

Company estimates based on FAO data for projections through 2050.

Company estimates based on FAO growth projections.

Salmon Farming

Atlantic salmon farming is a major industry in the cold-water countries of the northern and southern hemispheres.

According to Kontali, global tonnage of Atlantic salmon aquaculture production grew by approximately 6% annually between 2017 and 2021, reaching 2.6 million metric tons with a value of over $18 billion.

According to Kontali, global Atlantic salmon aquaculture harvests grew by approximately 5% annually between 2017 and 2022, reaching 2.9

million metric tons with a value of $22 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 continues to expand and consumers seek out high-quality proteins.

Below is a break-down by major producing country for the time period 2017 through 2021, with estimated data for 2022 from Kontali.

Global Supply of Atlantic Salmon (in thousands of metric tons GWE)

Below is a break-down by major producing country for the time period 2017 through 2022 from Kontali.

Worldwide Harvest of Atlantic Salmon in thousands of metric tons (whole fish equivalent)

United Kingdom

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Volume-Worldwide

Kontali, Salmon World 2023

Limitations of Conventional Sea-Cage Salmon Farming

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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.

Even a few sea lice can increase the likelihood of secondary infections and mortality, and the presence of significant numbers is 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.

Other viral diseases such as Salmonis Piscirickettsia (“SRS”) continue to present significant challenges in Chile while new emerging diseases caused by viruses including heart and skeletal muscle inflammation (“HSMI”), and cardio myopathy syndrome (“CMS”) are on the rise in Norway.

Other viral diseases, such as salmonid rickettsial septicemia (“SRS”), continue to present significant challenges, while new emerging diseases caused by viruses, including heart and skeletal muscle inflammation (“HSMI”) and cardio myopathy syndrome (“CMS”), are on the rise.

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.

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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 been growing fish in RAS facilities for over two 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 non-governmental organizations (“NGOs”), and it does not pose a threat to wild salmon populations.

We have significant experience in operating land-based RAS facilities.

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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.

Further, locating our farms nearer to major food markets allows us to realize savings on transportation of the harvested stock, while maintaining a reduced carbon footprint, and an improved ability to get fresh product to market faster.

Further, locating our farms closer to major food markets allows us to realize savings on transportation of the harvested stock, while maintaining a reduced carbon footprint, and an improved ability to get fresh product to market faster.

Intellectual Property

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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 genetic engineering of food using the tools of modern biotechnology is regulated in the United States by two government organizations, the 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”).

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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.

On March 30, 2016, a coalition of 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.

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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.

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.

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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.

There have been surveys cited by various NGOs that indicate consumers are reluctant to purchase genetically engineered food and 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.

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 the 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.

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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 and 2022, 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.

In December 2019, the 2020 Appropriations Act was signed into law, which was reintroduced and passed in 2021, 2022 and 2023, which contained an amendment that requires 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.

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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 Kontali, a total of only 20 thousand pounds (9 thousand metric tons) of farmed Atlantic salmon was produced in the United States in 2020, representing less than 2.0% of the total farmed Atlantic salmon supplied to the country.

According to Kontali, a net of only 8 thousand pounds (4 thousand metric tons) of farmed Atlantic salmon was available in the United States in 2022, representing less than 1.0% of the total farmed Atlantic salmon supplied to the country.

Supply of Atlantic salmon to U.S.

market in thousands of metric tons (wfe)

market in thousands of metric tons (whole fish equivalent)

Faroe Islands

United Kingdom

USA - own production

– own production, net

Other countries

Kontali, Salmon World 2023

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.

According to the USDA, during the period from 2010 to 2020, the latest period of data available, annual seafood consumption in the United States ranged between 17 and 19 pounds per capita, significantly behind consumption of poultry (62 to 68 pounds), beef (51 to 55 pounds), and pork (43 to 47 pounds).

In comparison, according to FAO, seafood consumption worldwide averaged 45 pounds per capita in the period from 2018 to 2020.

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 distributors, food service operations, 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 distributors, food service operations and 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.

However, 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 distributor and wholesale marketplace.

To date, we have seen large distributors and wholesalers not follow the pressure from activist groups, and we have sold our GE Atlantic salmon from our farms since commencing harvesting in May 2021.

We believe that there will be sufficient demand from smaller retailers, distributors, 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.

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Major market producers include the following companies:

Mowi, Aquachile, Leroy Seafood Group, Mitsubishi/Cermaq, SalMar, Cooke Aquaculture, Multiexport and Bakkafrost.

Mowi, SalMar, Aquachile, Leroy Seafood Group, Cermaq Group, Cooke Aquaculture, Bakkafrost and Australis Mar Seafood.

It is estimated that these eight companies accounted for approximately 53% of the Atlantic salmon produced in 2022.

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In addition, new entrants to salmon production have emerged that use, or plan to use, land-based RAS facilities.

Atlantic Sapphire is operating a ten thousand metric ton facility in Florida, with stated plans to increase production to over 220 thousand metric tons.

Atlantic Sapphire is operating a 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 with plans for a farm in Maine.

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We currently operate two salmon farms:

a refurbished 1,200 metric ton production grow-out farm in Indiana and a broodstock farm on Prince Edward Island, Canada.

a refurbished production grow-out farm in Indiana and a broodstock farm on Prince Edward Island, Canada.

However, as noted above, in February 2024, we announced our plan to sell our Indiana farm operations.

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 U.S.

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At December 31, 2023, we had a total grow-out production biomass of 412 metric tons.

Impact of COVID-19 and Supply Chain, Labor Market and Transportation Challenges

Although the COVID-19 pandemic has diminished in the United States and other parts of the world as vaccines have become more readily available, 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 their status.

At least in part due to the 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 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 expect to continue to be impacted by transportation or supply chain disruptions to our partners or customers and we are carefully managing and monitoring the impact of labor shortages on our ability to meet the annual capacity expectations at our existing facilities.

Impact of Inflation

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North America Plan

Our longer-term business plan contemplates that we will construct and operate several new, land-based RAS farms in North America at locations close to consumer consumption.

Our target is to achieve an annual production output of 50,000 metric tons within the next ten years.

During 2021, we selected Pioneer, Ohio as the site location for our first 10,000 metric ton farm.

Our business plan contemplates that we will complete the construction of a 10,000 metric ton production grow-out farm in Pioneer, Ohio.

During 2021, we selected Pioneer, Ohio as the site location for our first large-scale commercial farm.

Based on the engineering design that has been completed, we have estimated that the project, which includes a roughly 479,000 square foot facility, land, insurance and other ancillary items will cost between $485 million and $495 million.

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 2024, 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 2022, the Board of Directors of the Toledo-Lucas County Port Authority approved the issuance of up to $425 million in municipal bonds for our project.

We are currently proceeding with the bond financing and targeting to close the transaction in mid-2023.

Site construction activities are currently paused, as we pursue additional financing, which is expected to include both equity and debt components.

In October 2022, the Board of Directors of the Toledo-Lucas County Port Authority approved the issuance of up to $425 million in municipal bonds for our project, and they continue to support our efforts for the transaction.

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.

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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 (“non-transgenic”) salmon eggs and fry to other salmon farmers.

We also made the decision to transition the grow-out operation at our Canada farm to egg production in order to increase our egg production capacity over the next four years to 30 million eyed eggs annually, which would be sufficient to stock six 10,000 metric ton farms.

As there is a shortage of supply of salmon eggs in the market, we have begun to sell our excess conventional (“non-GE”) salmon eggs and fry to other salmon farmers.

We also made the decision to transition the grow-out operation at our Canada farm to egg production in order to increase our egg production capacity over the next three to four years to 30 million eyed eggs annually, which would be sufficient to stock six 10,000 metric ton farms.

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 paused our efforts to conduct field trials until we have greater certainty of both the regulatory and political landscape.

While our primary focus is on North America, we are also considering international expansion, 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 may decide to commercialize through a combination of partnerships, joint ventures, and licensing arrangements.

Growth Strategy

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As of December 31, 2023, we had 104 team members, 82 of which were in our farm operations and 6 in research and technical support functions.

As of December 31, 2022, we had 18 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.

As of December 31, 2023, we had 16 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, sales and corporate communications.

None of our team members are represented by a labor union, and we consider our employee relations to be good.

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ESG Leadership

We view the focus on Environmental, Social and Governance (“ESG”) concerns as foundational to a well-run business and fundamental to our Purpose and Values, as well as a critical aspect of how we operate our business, deliver results and drive continuous improvement.

We embraced ESG early in the development of our business practices, as we see it as a critical component to building our culture and as a strategic imperative for identifying increased efficiencies and effectiveness as we grow.

The ESG reporting requirements will continue to evolve and we will continue to monitor those changes.

We believe taking ESG considerations into account in our decision-making process ensures a disciplined approach to risk management.

Our ESG Committee, comprised of our executive management team with oversight by our Board of Directors, has worked cross functionally to develop our strategy, structure, processes and the roadmap for the standards that are relevant to our business.

In 2021, we took an important step in our corporate governance evolution by committing to deeper understanding of material non-financial matters of our business across environmental, social, and governance aspects.

We deployed a rigorous process where we identified and interviewed external advisors/consulting groups that would provide expertise to assist in developing and implementing our ESG initiatives and selected a qualified strategic counsel and partner.

We also identified and implemented a digital system platform to track data inputs used for reporting calculations and to ensure we are collecting data and other ESG inputs on a consistent and ongoing basis.

Following a thorough review of the various ESG reporting standards, we selected the SASB Framework as our primary standard, as the accounting metrics for the Food Sector contain topics that are more specific and pertinent to our business model and operations during the current reporting period.

Additionally, our program and reporting incorporates alignment with several applicable GRI metrics and the United Nations Sustainable Development Goals (“UNSDGs”).

In our initial ESG materiality assessment we chose to focus on the following aspects:

We continue to believe Environmental, Social and Governance (“ESG”) concerns are fundamental to our Purpose and Values and serve as a critical foundation as to how we operate our business.

Our focus on ESG has been important in driving continuous improvement, building our culture and has resulted in delivering increased efficiencies and effectiveness throughout our operations.

We believe taking ESG considerations into account in our decision-making process contributes to a disciplined approach to risk management.

Our ESG Committee, comprised of our executive management team with oversight by our Board of Directors, has worked cross functionally to develop our strategy, structure, process and the roadmap for the standards that are relevant to our business.

Environmental

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Our current operating farms utilize energy from the grid, but we are acutely aware of the need to diversify into green energy sources for existing facilities, as well as incorporate alternative energy sources for future farming operations.

We are evaluating various alternative energy sources, from constructing our own green energy facilities to purchasing green energy through purchase power agreements (PPA).

Onsite renewable options being considered include photovoltaic (PV) solar technology, wind turbine generator (WTG) technology (large/small), and battery energy storage system (BESS) technology.

We are evaluating various alternative energy sources.

Greenhouse Gas Emissions

We are currently collecting, monitoring, and managing data on a monthly basis that supports our Scope 1 and Scope 2 (both defined below) emission inventory.

Our carbon footprint for the year ended December 31, 2022 is as follows:

 Our Total Scope 1 and Location-Based Scope 2 emissions amounted to 7,698 metric tons of CO2e.

We did not have any eligible offsets.

 GHG Emissions:

Scope 1 emissions – 2,986 metric tons of CO2e

We define Scope 1 emissions in accordance with The Greenhouse Gas Protocol:

A Corporate Accounting and Reporting Standard (GHG Protocol), Revised Edition, March 2004, published by the World Resources Institute and the World Business Council on Sustainable Development (WRI/WBCSD).

The scope of GHG emissions includes the seven GHGs covered under the Kyoto Protocol—carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulfur hexafluoride (SF6), and nitrogen trifluoride (NF3).

GHGs are reported here on a gross basis, i.e., not accounting for offsets, credits, or other similar mechanisms that have reduced or compensated for our emissions.

Our Scope 1 emissions comprise approximately 39% of our total Scope 1 and 2 emissions, with natural gas for furnace and heating equipment contributing approximately 2,177 metric tons of CO2e or 72.9% of the total Scope 1 emissions.

The rest of the Scope I is attributable to furnace oil (7%), refrigerants (16%), diesel (2%), and other de minimis inputs.

Our mobile combustion and fugitive emissions are responsible for approximately 17% of Scope 1 and 7% of total Scope 1 & 2 emissions, respectively.

 GHG Emissions:

Scope 2 emissions – 4,712 metric tons of CO2e, which equates with SASB reporting requirements to 38,559, Gigajoules (GJ).

Purchased electricity is responsible for 61% of the total Scope 1 and 2 emissions generated by our company.

The scope of energy consumption includes energy purchased from various sources and directly consumed by our operations during the calendar year 2022, such as energy purchased from energy companies in the U.S.

fuel, electricity, heating, and cooling.

We do not have self-generated or green-sourced energy at this time.

In calculating energy consumption from various fuels, we used conversion factors from the EPA and higher heating values (HHV) from the U.S.

Department of Energy (DOE) and the U.S.

Energy Information Administration (EIA).

We calculate our Scope 2 emissions based on a location-based method utilizing eGRID Subregion RFCW (RFC West) factor for Indiana and AKMS (ACSS Miscellaneous) for Canada.

The factor for our Indiana location is approximately 1.07 lb.

CO2/kWh and for our Canada location is approximately 0.55 lb.

These figures were last updated by EPA in January 2022 (file with most recent U.S.

grid factors for CO2 and other derivate emissions can be found at https://www.epa.gov/climateleadership/simplified-ghg-emissions-calculator.)

We are collecting, monitoring, and managing data on a monthly basis that supports our Scope 1 and Scope 2 emission inventory.

Water Management

Fresh water provides critical support for our farming operations.

Access to the required quantity and quality of water is essential for protecting our salmon and ensuring they thrive from hatch to harvest.

We draw all the water supply for our farms from aquifers, via the underground wells located at or in the immediate proximity of our Indiana and Prince Edward Island facilities.

We understand that our business is water-intensive and that we share this resource with other members of surrounding communities – other corporate businesses, other farming operations, and residents.

Access to required levels of clean water is also critical for these stakeholders.

We understand that our business is water-intensive and that we share this resource with other members of surrounding communities.

Ensuring ample supply and quality of fresh water in order to comfortably operate our business without disadvantaging local communities is one of the most important factors we use in determining locations for our commercial operations.

We also locate our operations in regions that are not prone to significant base water stress in order to avoid exacerbating drought and further depleting regional resources.

 We do not have any permit limitations on the amount of water our Indiana and Canada farms withdraw from the aquifers.

The majority of our water resources are used in farming operations at our Indiana facilities, where we grow our GE Atlantic salmon from hatch to harvest.

We abide by the requirements of the Indiana Department of Environmental Management (IDEM) and National Pollutant Discharge Elimination System (NPDES) to measure water resources leveraged in our operations at the place of the discharge.

Water discharged by our Indiana farm during the year is approximately 1,513 thousand cubic meters (m³), which includes water used in farming (RAS operations and fish production) and also in corporate operations

 Percentage of water withdrawn from High or Extremely High Base Water Stress (HEHBWS):

 Percentage of water consumed from High or Extremely High Base Water Stress (HEHBWS):

Waste Management

Our facilities feature Recirculating Aquaculture System (“RAS”) technology, which utilizes fresh, clean water to grow our salmon from hatch to harvest.

Our facilities feature RAS technology, which utilizes fresh, clean water to grow our salmon from hatch to harvest.

Water in the system is continuously recirculated and filtered, at a rate of 95+% per hour, meaning that less than 5% of each cycle is safely discharged back to the environment.

The RAS system features biological filters to remove waste and return fresh water to maintain an optimal growing environment for our salmon.

The resulting wastewater is cleaned before being

moved to settling ponds.

The resulting wastewater is cleaned before being moved to settling ponds.

Solid waste is separated and removed from the system through the filtering process, and often recycled as fertilizer for local agricultural farmers.

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We have developed and implemented Standard Operating Procedures (“SOPs”) that govern the physical containment and every significant fish husbandry activity on our farms.

The scope of our antibiotic administration includes animals, including Broodstock, across all of our operations and facilities:

0% of our animals received important antibiotics;

0% of our animals received non-important antibiotics.

Human Capital Management

Recruiting, developing, engaging, and protecting our workforce is critical to executing our strategy and achieving business success.

The efficient production of high-quality products and successful execution of our strategy requires a talented, skilled, and engaged team of employees.

We work to equip our employees with critical skills and expand their contributions over time by providing a range of training and career development opportunities, including hands-on experiences via challenging work assignments and job rotations, coaching and mentoring opportunities, and training programs.

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We set specific safety standards to identify and manage critical risks.

We use global safety management systems and employee training to ensure consistent implementation of safety protocols and accurate measurement and tracking of incidents.

We use global safety management systems and employee trainings to ensure consistent implementation of safety protocols and accurate measurement and tracking of incidents.

To provide a safe and secure working environment for our employees, we prohibit workplace discrimination, and we do not tolerate abusive conduct or harassment.

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Governance and Business Ethics

Our ESG strategy, risk management and reporting is overseen by an internal working committee and external experts.

The Committee is chaired by our Chief Commercial Officer and includes all members of our Executive Leadership Team, including our:

President & CEO;

Our ESG strategy, risk management and reporting is overseen by our ESG Committee, with advice from external experts.

The Committee is chaired by our President and includes all members of our Executive Leadership Team, including our:

Chief Scientific Officer;

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Diversity and Inclusion

We are making gender, cultural, and racial diversity one of our key priorities for the next 10 years as we grow to become a major player in sustainable seafood production.

Starting in 2019, we added the subject of Board Diversity to our corporate agenda.

We currently have eight Board members representing different races and ethnicity, and of the eight Board members, four are women.

We are making gender, cultural, and racial diversity one of our key priorities for the next 10 years both at the Board of Directors level and within our workforce.

We are focused on adding diverse, creative, talented, and seasoned personnel to our mid and upper management, as well as young, driven, collaborative and environmentally responsible team members to our entry-level positions.

As of December 31, 2022, 37% of our team members identified themselves as women and 63% as men.

Ethical Innovation in Our Supply Chain

To ensure we receive the best equipment, feed, and other key inputs into our production process, our global supplier and vendor network spans across many states in the U.S.

With a goal of receiving the best equipment, feed, and other key inputs into our production process, our global supplier and vendor network spans across many states in the U.S.

and several countries, such as Chile, Norway, Brazil, and Canada.

The main suppliers that directly support our production and distribution include RAS equipment vendors, suppliers of parts and maintenance services, ice and oxygen suppliers, refrigeration equipment vendors, feed suppliers, packaging and logistics services and fish processing facilities.

In selecting suppliers, we perform due diligence including review of sustainability and environmental impact information.

Especially important is the review of the nutritional composition of feed from a vendor.

One of the advantages of our land-based farms is that we can locate them close to market consumption, which minimizes transportation costs and therefore, our carbon footprint.

This allows us to minimize our transportation requirement to fulfill local and regional distribution.

In contrast, salmon imported into the U.S.

(i.e., from the largest exporter – Chile) requires well boat transportation to and from the coastal farm, motor transportation from the dock/processing facility to an international airport, airfreight (primarily from Norway or Chile) to a major U.S.

international airport, a transportation into the interior of the U.S.

by motor transport or airfreight and finally, local and regional distribution transportation.

This allows us to minimize our transportation requirement to fulfill local and regional distribution as compared to farmed salmon that is imported into the U.S.

by some of the largest farmed salmon producers (i.e., Chile, Norway, and Canada).

Animal Welfare

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We utilize technology and skilled human oversight to continually monitor and manage water quality and fish health.

Our focus and targets are based on veterinary expertise and counsel;

Industry standards;

and customer expectations for quality.

Our focus and targets are based on veterinary expertise and counsel, industry standards, and customer expectations for quality.

We use industry-leading technology to help ensure fish are harvested humanely and with the least possible stress.

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At this time, we are not growing our own feed stock or manufacturing feed for our GE salmon.

We purchase all of our feed for the Indiana and Canada operations from third parties.

We routinely conduct analysis of global salmon feed suppliers, focusing on their sustainability practices, components of the feed that contains wild-caught fish, as well as non-marine ingredients.

We purchase all of our feed, which is BAP or GlobalGAP certified, for our operations from third parties.

Feed is a critical input to growing healthy salmon.

We evaluate suppliers that have high product safety and ethical standards, consistent with what we set for ourselves.

For the year ending December 31, 2022, we partnered with a sole feed supplier who is a global leader in fish feed supplies that supports the entire spectrum of our fish growth – from fry to harvest size fish.

All of the feed we source from this supplier to raise our salmon is either BAP or GlobalGAP certified.

These globally recognized non-governmental organizations, which follow their respective internal standards, award their independent third-party certifications to aquaculture sector members that have been deemed by these organizations or their authorized representatives, to produce safe, responsibly and ethically farmed seafood.

By partnering with this supplier, we help ensure that our salmon are being raised on high quality feed that will eventually carry a high nutritional value to the table of an end-consumer.

Also, due to their sustainability profile that covers responsible sourcing and climate change, we have reasonable comfort knowing that by consuming this feed, our salmon are not harming our forests and our oceans, all while creating jobs and supporting small fisheries around the world.

We believe in the rejuvenation of rural America and other local communities and strive to utilize local businesses when possible.

Only when economically viable local options of similar quality are not reasonably available do we move to non-local vendors for the sourcing of equipment, feed, and other inputs.

At our Indiana farm, we purchase oxygen and ice from local vendors and utilize local service providers.

Whenever feasible, we contract with local small and medium family businesses to help build up communities and local economies.

We also strive to create jobs in local communities that rely on farming operations and communities relying on economic development.

We strive to build an experienced, well-compensated and diverse work force.

We provide training and learning opportunities to our teams, so they have the required skills and tools to continually improve and make a positive impact on our business.

We believe in supporting local communities in which we operate.

We strive to create jobs and contribute to the economic development of these communities.

Whenever feasible, we contract with local businesses for the sources of inputs utilized in our farm operations.

United Nations Sustainable Development Goals

Our corporate Purpose and operations are aligned with a number of the UN’s goals.

We are committed to end hunger, achieve food security and improve nutrition, while also promoting sustainable land-based aquaculture to provide a resilient and domestic supply of fresh salmon.

Our corporate Purpose and operations are aligned with a number of the United Nations Sustainable Development Goals (“UNSDGs”).

We are committed to pursuing solutions to help end hunger, achieve food security and improve nutrition, while also promoting sustainable land-based aquaculture to provide a resilient and domestic supply of fresh salmon.

We continually transform the aquaculture segment through our research, innovation and genetics-based technology.

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

What changed 10-K

Item 1. Business