Item 1. Business
Item 1. Business
Overview
Company Update
AquaBounty has historically pursued a growth strategy that included the construction of large-scale recirculating aquaculture system (“RAS”) farms for producing our genetically engineered Atlantic salmon (the “GE Atlantic salmon”). We had commenced construction of a 10,000 metric ton farm in Pioneer, Ohio (the “Ohio Farm Project”), but paused the construction in June 2023, as the cost estimate to complete the farm continued to substantially increase due to inflation and other factors. Further, these cost increases impaired our ability to pursue municipal bond financing, which was a necessary component of our funding strategy. We subsequently engaged an investment bank to pursue a range of funding and strategic alternatives, and to assist management in the prioritization of our core assets. These efforts resulted in the sale of our grow-out farm in Indiana (“Indiana Farm”) in July 2024, recurring sales throughout the year of selected equipment originally intended for the Ohio Farm Project (“Ohio Equipment Assets”), and the sale of our Canadian subsidiary, including the broodstock farms owned by the Canadian subsidiary in Prince Edward Island, Canada (“Canadian Farms”), and our intellectual property for the GE Atlantic salmon, along with trademarks and patents (“Corporate IP”) in March 2025. During 2024, we also focused on cost containment to preserve and extend our available cash. After completion of these transactions, our primary remaining asset is our investment in the Ohio Farm Project, consisting of the remaining Ohio Equipment Assets and the land and construction in process (the “Ohio Farm Site”). We continue to work with our investment bank to identify the optimal path forward for realizing the potential of this asset, either through new investment, partnership or other strategic options.
Discontinued Operations
As noted above, we sold our Indiana Farm in July 2024 and our Canadian Farms in March 2025. These farms have been designated as discontinued operations in our consolidated financial statements for the years ended December 31, 2024 and 2023 in this Form 10-K (see Note 4 to our consolidated financial statements for additional information).
Impairment Charges
During the second quarter of 2024, we began to market our Indiana Farm for sale. The sale was completed in July and included certain Ohio Equipment Assets that had been purchased for the Ohio Farm Project. Based on the net sale price, we recorded an impairment charge against the Indiana Farm of $22.5 million. We then conducted an impairment analysis of the remaining Ohio Equipment Assets, resulting in an impairment charge of $26.3 million. At that time, we made the decision to continue to sell certain of our Ohio Equipment Assets in order to generate cash for liquidity, and therefore we reclassified our Ohio Equipment Assets as Assets Held for Sale on our consolidated balance sheet.
We continued to sell Ohio Equipment Assets during the remainder of the year, and based on these additional transactions, we conducted an impairment analysis at year-end on the remaining Ohio Equipment Assets that were held for sale, along with the Ohio Farm Site. As a result of this analysis, we recorded impairment charges of $18.2 million and $57.3 million against the Ohio Equipment Assets and the Ohio Farm Site, respectively.
In December of 2024, we entered into a Letter of Intent with a buyer to purchase the Canadian Farms. The transaction closed in March 2025 and included all of our Corporate IP. Based on the net sale price, we recorded impairment charges of $5.4 million and $0.2 million against the Canadian Farms and Corporate IP, respectively. The table below depicts the impairments charges recorded during 2024 by asset group totaling $129.8 million.
1
Table of Contents
Corporate History
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.
We have striven to be a leader in the field of land-based aquaculture and the use of technology for improving its productivity and sustainability, and our objective has been 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. Our strategy has been based on our four core competencies: our proprietary GE Atlantic salmon, our experience operating land-based farms, our vertical integration, and our expertise in biotechnology.
We do not currently operate any salmon farms, as we have sold our Indiana Farm and our Canadian Farms. We have also sold the intellectual property for our GE Atlantic salmon, included in our Corporate IP. Our primary asset is our Ohio Farm Site, which consists of the land and the construction in process for a commercial scale recirculating aquaculture production facility, for which we have engaged an investment banker to advise us on a range of strategic alternatives.
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.
Aquaculture Industry
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 $296 billion industry in 2022, with salmon farming accounting for $22 billion.
Market Drivers
Population Growth Drives Demand for Food Protein
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. 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 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 91 million metric tons recorded in 2022, the last year for which data is available from FAO. In contrast, over the same period, aquaculture fish production has grown from 14 million metric tons to a level of 94 million metric tons
in 2022 and now accounts for 51% of global fish production. Feeding the growing population and meeting the demand for fish protein will require aquaculture production to nearly double by 2050.
Salmon Farming
Atlantic salmon farming is a major industry in the cold-water countries of the northern and southern hemispheres. 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.
2
Table of Contents
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 is a universally accepted fact in human and animal health. Such disease agents in these uncontrolled water currents can result in infection that spreads 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 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 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 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.
Land-Based RAS Production
Closed, contained, land-based production systems using RAS technology can be used for the grow-out of fish and are less susceptible to 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 allows 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.
In addition to biosecurity measures to optimize fish health, RAS farms feature multiple layers of containment designed to prevent escapes. The multiple layers of containment provide a much-needed solution to raising fresh, healthy seafood in a manner that prevents harming native fish populations. This method of land-based fish farming has been promoted by many environmental non-governmental organizations (“NGOs”), and it does not pose a threat to wild salmon populations.
U.S. Market
According to Kontali, in 2022, the supply of Atlantic salmon to the U.S. market reached a record 1.44 million pounds (652 thousand metric tons) with an aggregate market value of over $5.4 billion. 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 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.
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 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.
3
Table of Contents
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
share of total volume and an increasing share of salmon being sold directly by large fish-farming companies and large wild salmon processors to major retail and food service chains.
As a commodity food item, the price of Atlantic salmon is variable based on the supply and demand for product weekly. Urner Barry publishes an index that 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, 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.
Ohio Farm Project
Current Status
We commenced construction on the Ohio Farm Site and began ordering Ohio Equipment Assets (together, the “Ohio Farm Project”) in the first quarter of 2022 and spent roughly $145 million on the project before construction was halted in June 2023, due to increases in costs from inflation and other factors. At the time of the construction stoppage, roughly 30 percent of the facility had been completed.
Source: AquaBounty
Cost to Complete
Preparing cost and timing estimates for complex RAS farms is inherently difficult and subject to change based on a number of factors, including design changes, elevated inflationary pressure on costs of materials and labor, the impact of health epidemics, construction delays, dependence on contractors, the impact of increasing interest rates on financing costs, customer requirements and unexpected complications. At the time that we halted construction on the Ohio Farm Site, our estimate for the total cost for the Ohio Farm Project, including construction, land, equipment, insurance and ancillary costs was in the range of $485 million to $495 million, substantially above our previous estimates, and significantly higher than what we could finance.
4
Table of Contents
Plan for Completion
We have been working with our investment bank on strategic alternatives for the Ohio Farm Site, including new investment to allow for the completion of the Ohio Farm Project construction. Alternatives include new equity funding, partnerships or joint ventures. We believe that funding of roughly $400 million will be required to complete the construction and replace the Ohio Equipment Assets that have been sold. This figure, however, is based on the current design and expected use of the facility as a salmon grow-out farm. Depending on the strategic alternative that we follow, the design (smaller or larger production volume) and use of the farm (salmon or other species) could be changed, which could result in a different cost of completion number.
The picture below shows a design rendering of the inside of the Ohio Farm Project once completed.
Source: AquaBounty
Human Capital Resources
As of March 24, 2025, our total headcount was four, all of whom have corporate roles.
5
Table of Contents