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What changed in AQUABOUNTY TECHNOLOGIES INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of AQUABOUNTY TECHNOLOGIES INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+288 added−312 removedSource: 10-K (2024-04-01) vs 10-K (2023-03-07)

Top changes in AQUABOUNTY TECHNOLOGIES INC's 2023 10-K

288 paragraphs added · 312 removed · 215 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

78 edited+15 added−44 removed65 unchanged
Biggest changeSupply of Atlantic salmon to U.S. market in thousands of metric tons (wfe) Area 2014 2015 2016 2017 2018 2019 2020E Canada 55 93 101 92 91 92 93 Chile 215 224 217 220 267 284 325 Faroe Islands 17 15 17 15 13 19 14 Norway 40 51 56 68 67 68 68 United Kingdom 20 16 13 18 16 20 12 USA - own production 16 14 8 13 7 8 9 Other countries 11 15 16 20 23 30 42 Total 374 428 428 446 484 521 563 Source: Kontali 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.
Biggest changeAccording 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. ‎ 6 Table of Contents Supply of Atlantic salmon to U.S. market in thousands of metric tons (whole fish equivalent) Area 2016 2017 2018 2019 2020 2021 2022 Canada 101 92 94 94 93 104 89 Chile 217 220 267 284 325 350 362 Faroe Islands 17 15 13 19 14 21 23 Norway 56 68 67 68 69 83 99 United Kingdom 13 18 16 20 12 17 9 U.S. – own production, net 8 13 7 8 9 6 4 Other countries 16 19 22 29 41 54 65 Total 427 446 487 523 562 635 652 Source: 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.
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.
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.
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.
Labeling and Disclosure Standard 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. The Disclosure Standard requires food manufacturers, importers, and certain retailers to ensure bioengineered foods are appropriately disclosed.
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.
Water in the system is continuously recirculated and filtered, at a rate of 95.5% 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.
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.
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 land-based fish farms to be established close to major demand centers in a profitable and environmentally sustainable manner.
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.
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.
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.
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.
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.
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 Committee is chaired by our Chief Commercial Officer and includes all members of our Executive Leadership Team, including our: President & CEO; Chief Scientific Officer; Chief Operating Officer; General Counsel; Chief People Officer; Vice President Facilities & Continuous Improvement; and Chief Financial Officer. Our Board of Directors have oversight over our ESG Committee and initiatives.
The Committee is chaired by our President and includes all members of our Executive Leadership Team, including our: CEO; Chief Scientific Officer; Chief Operating Officer; General Counsel; Chief People Officer; Vice President Facilities & Continuous Improvement; and Chief Financial Officer. Our Board of Directors have oversight over our ESG Committee and initiatives.
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.
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.
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 over two decades, and we have never experienced an escape.
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.
The picture below shows a design rendering of the inside of the farm. ‎ 8 Table of Contents 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.
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 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. 7 Table of Contents As a commodity food item, the price of Atlantic salmon is variable based on the supply and demand for product weekly.
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.
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 5 Table of Contents requirements pertaining to bioengineered foods under the National Bioengineered Food Disclosure Law.
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.
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.
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.
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 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. We continually transform the aquaculture segment through our research, innovation and genetics-based technology.
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.
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.
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 2022 from Kontali.
It is estimated that these eight companies accounted for approximately 49% of the Atlantic salmon produced in 2020. Since salmon is primarily sold as a commodity in the United States, we compete against these well-established, sea-cage production companies. In addition, new entrants to salmon production have emerged that use, or plan to use, land-based RAS facilities.
It is estimated that these eight companies accounted for approximately 53% of the Atlantic salmon produced in 2022. Since salmon is primarily sold as a commodity in the United States, we compete against these well-established, sea-cage production companies. In addition, new entrants to salmon production have emerged that use, or plan to use, land-based RAS facilities.
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, Leroy Seafood Group, Mitsubishi/Cermaq, SalMar, Cooke Aquaculture, Multiexport and Bakkafrost.
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.
Our experience operating land-based RAS salmon farms enables us to protect both the fish and the environment. 3 Table of Contents Source: Innovasea Our GE Atlantic Salmon Our GE Atlantic salmon program 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.
Our experience operating land-based RAS salmon farms enables us to protect both the fish and the environment. Source: Innovasea Our GE Atlantic Salmon Our GE Atlantic salmon program 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 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 multiple layers of containment redundancy, coupled with the fact that our salmon are sterile female fish, pose a much-needed solution to raising 3 Table of Contents fresh, healthy seafood in a manner that prevents harming native fish populations.
We are vertically integrated and maintain our own broodstock hatchery, which produces the eggs that we grow-out to harvest size in our production farms. This hatchery also produces non-GE eggs for external sales. We have our own research and development team with expertise in biology, chemistry and RAS operations.
We are vertically integrated and maintain our own broodstock hatchery, which produces the eggs that we grow-out to harvest size in our production farms. This hatchery also produces non-GE eggs for external sales. 1 Table of Contents We have our own research and development team with expertise in biology, chemistry and RAS operations.
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 two decades and are geared towards meeting stringent regulatory requirements.
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. Our operating practices and procedures have been developed and honed over two decades and are geared towards meeting stringent regulatory requirements.
Our primary research and development operations are located in our owned hatcheries on Prince Edward Island. As of December 31, 2022, we employed 36 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.
Our primary research and development operations are located in our owned hatcheries on Prince Edward Island. As of December 31, 2023, we employed 37 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.
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. None of our team members are represented by a labor union, and we consider our employee relations to be good.
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.
Our plans are to bring our technology and expertise to other countries, including developing regions. ‎ 15 Table of Contents
Our plans are to bring our technology and expertise to other countries, including developing regions. ‎ 13 Table of Contents
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.
International Plans 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.
The resulting wastewater is cleaned before being 12 Table of Contents 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.
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.
This allows us to continuously focus on improving the breeding, genetics and health of our fish and improving the efficiency of our farm operations. 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.
This allows us to continuously focus on improving the breeding, genetics and health of our fish and improving the efficiency of our farm operations. We currently operate two salmon farms: a refurbished production grow-out farm in Indiana and a broodstock farm on Prince Edward Island, Canada.
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.
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 Atlantic salmon (“GE Atlantic salmon” or “AquAdvantage salmon”), our experience operating land-based farms, our vertical integration, and our expertise in biotechnology.
U.S. Market According to Kontali, in 2020 the supply of Atlantic salmon to the U.S. market reached a record 1.24 million pounds (563 thousand metric tons) with an aggregate market value of over $4.5 billion. The vast majority of the imported Atlantic salmon originated from Chile, Canada, and Norway.
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 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.
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.
We are a 100% vertically integrated entity, with our own Broodstock and egg production that are used in our farms from hatch to harvest. 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 are a 100% vertically integrated entity, with our own Broodstock and egg production that are used in our farms from hatch to harvest. At this time, we are not growing our own feed stock or manufacturing feed for our GE salmon. We purchase all of our feed, which is BAP or GlobalGAP certified, for our operations from third parties.
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, 2022, we had 100 team members, 70 of which were in our farm operations and 12 in research and technical support functions.
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, 2023, we had 104 team members, 82 of which were in our farm operations and 6 in research and technical support functions.
We use global safety management systems and employee training 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.
We set specific safety standards to identify and manage critical risks. 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.
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. and several countries, such as Chile, Norway, Brazil, and Canada.
Ethical Innovation in Our Supply Chain 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.
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.
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.
To foster employee engagement and commitment, we follow a robust process to listen to employees, take action, and measure our progress with on-going employee conversations, transparent communications, and employee engagement surveys. Employee Health, Safety and Advancement We are committed to maintaining a safe and secure workplace for our employees. We set specific safety standards to identify and manage critical risks.
To foster employee engagement and commitment, we follow a robust process to listen to employees, take action, and measure our progress with on-going employee conversations, transparent communications, and employee engagement surveys. 11 Table of Contents Employee Health, Safety and Advancement We are committed to maintaining a safe and secure workplace for our employees.
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”.
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.
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.
In our initial ESG materiality assessment we chose to focus on the following aspects: Environmental Energy Management 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 .
Environmental Energy Management 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.
Governance and Business Ethics Governance Our ESG strategy, risk management and reporting is overseen by an internal working committee and external experts.
Governance and Business Ethics Governance Our ESG strategy, risk management and reporting is overseen by our ESG Committee, with advice from external experts.
We currently have eight Board members representing different races and ethnicity, and of the eight Board members, four are women. 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.
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.
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.
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. Waste Management Our facilities feature RAS technology, which utilizes fresh, clean water to grow our salmon from hatch to harvest.
Our compensation packages include a competitive base salary and health and wellness benefits, along with a retirement plan that includes a Company match. 10 Table of Contents 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.
Our compensation packages include a competitive base salary and health and wellness benefits, along with a retirement plan that includes a Company match. 10 Table of Contents ESG Leadership 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.
We are currently proceeding with the bond financing and targeting to close the transaction in mid-2023. 8 Table of Contents 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 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.
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.
Regulatory Legal Challenge 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.
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.
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.
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. 5 Table of Contents Production of AquAdvantage salmon in the United States also requires compliance with environmental regulations and local site permitting statutes.
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.
In comparison, according to FAO, average seafood consumption worldwide was 45 pounds per capita in 2018.
In comparison, according to FAO, seafood consumption worldwide averaged 45 pounds per capita in the period from 2018 to 2020.
We are experiencing higher costs for farming supplies, transportation costs, wage rates, and other direct operating expenses. Additionally, inflation has impacted the total project cost estimate for our Ohio farm, which has increased to a range of $375 million to $395 million. We expect inflation to continue to negatively impact our results of operations for at least the near-term.
Additionally, inflation has impacted the total project cost estimate for our Ohio farm, which has increased to a range of $485 million to $495 million. We expect inflation to continue to negatively impact our results of operations for at least the near-term.
Animal Welfare We raise salmon in natural, safe, and humane ways at every stage of life, from egg to harvest. 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.
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.
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 6 Table of Contents of poultry (70 to 78 pounds), beef (51 to 55 pounds), and pork (43 to 47 pounds).
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).
The chart below depicts the projected gap between supply and demand over the next 27 years. Source: FAO - The State of World Fisheries and Aquaculture 2022 for actual data through 2020. Company estimates based on FAO data for projections through 2050.
The chart below depicts the projected gap between supply and demand over the projected period. Source: FAO – The State of World Fisheries and Aquaculture 2022 for actual data through 2020. 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.
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.
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. 4 Table of Contents 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.
According to the Food and Agriculture Organization of the United Nations (“FAO”), aquaculture was a $265 billion industry in 2020, and we are targeting the $18 billion salmon farming segment of that industry.
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 $265 billion industry in 2020, and we are targeting the $22 billion salmon farming segment of that industry.
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.
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.
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. Aquaculture is the farming of aquatic organisms such as fish, shellfish, crustaceans, and aquatic plants.
Our strategy is to continually strengthen our core capabilities, scale our business and pursue growth opportunities. 1 Table of Contents 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.
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.
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 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.
Subsequently, AquaBounty joined the case as an intervenor to protect our interests. Shortly thereafter, the Fish and Wildlife Service was dismissed from the case.
Shortly thereafter, the Fish and Wildlife Service was dismissed from the case.
Based on market research that we commissioned, the top attributes for consumer selection of farm-raised salmon are availability, affordability, freshness, safety, and taste.
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. 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.
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 project, which includes a roughly 479,000 square foot facility, land, insurance and other ancillary items will cost between $375 million and $395 million.
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. Site construction activities are currently paused, as we pursue additional financing, which is expected to include both equity and debt components.
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 selecting suppliers, we perform due diligence including review of sustainability and environmental impact information. 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.
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 2 Table of Contents million metric tons with a value of $22 billion.
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. 4 Table of Contents 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.
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 USDA for genetically engineered plants and the FDA for genetically engineered animals.
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.
Diversity and Inclusion 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.
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.
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.
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. 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.
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. 12 Table of Contents Communities We believe in supporting local communities in which we operate. We strive to create jobs and contribute to the economic development of these communities.
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.
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.
Other entrants include Nordic Aquafarms, with plans for facilities in Maine and California, and Whole Oceans with plans for a farm in Maine. 7 Table of Contents Operations Current Production 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.
Operations Current Production We currently operate two salmon farms: 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.
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.
Once approved in these locations, we may decide to commercialize through a combination of partnerships, joint ventures, and licensing arrangements.
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.
Greenhouse Gas Emissions 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.
Global Supply of Atlantic Salmon (in thousands of metric tons GWE) , Area 2017 2018 2019 2020 2021 2022 (Est) Norway 1,087 1,128 1,200 1,232 1,379 1,360 Chile 508 594 621 701 646 644 United Kingdom 159 138 171 160 179 172 North America 143 149 142 141 145 139 Faroe Islands 72 65 78 73 95 91 Other areas 93 92 107 133 161 163 Volume-Worldwide 2,062 2,166 2,319 2,440 2,605 2,569 2 Table of Contents Source: Kontali 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.
Worldwide Harvest of Atlantic Salmon in thousands of metric tons (whole fish equivalent) , Area 2017 2018 2019 2020 2021 2022 Norway 1,208 1,253 1,333 1,370 1,534 1,517 Chile 564 660 690 779 718 753 United Kingdom 177 152 191 178 199 165 North America 159 165 159 157 161 152 Faroe Islands 80 72 87 81 106 100 Other areas 105 101 118 148 178 180 Volume-Worldwide 2,293 2,403 2,578 2,713 2,896 2,867 Source: Kontali, Salmon World 2023 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.
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.
We have developed and implemented Standard Operating Procedures (“SOPs”) that govern the physical containment and every significant fish husbandry activity on our farms. Human Capital Management Recruiting, developing, engaging, and protecting our workforce is critical to executing our strategy and achieving business success.
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.
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.
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Item 1. Business Overview Feed a growing world by developing and deploying new aquaculture technologies.
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Item 1. Business Overview 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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe will also need to obtain FDA approval to grow our GE Atlantic salmon in the facility. If we experience delays in obtaining the required approvals and permits for our farms, our expected construction completion date, commercial stocking and first sale of our GE Atlantic salmon may be delayed.
Biggest changeDelays or conditions imposed in obtaining the required approvals and permits for our farms, have delayed and may further delay our expected construction completion, commercial stocking and first sale dates and/or lead to further cost increases. If we are unable to obtain the required approvals and permits for our farms, we will not be able to construct the farms.
Rising inflation rates could negatively impact our revenues and profitability if increases in the prices of our products or a decrease in consumer spending results in lower sales.
Rising inflation rates could negatively impact our revenues and profitability. Rising inflation rates could negatively impact our revenues and profitability if increases in the prices of our products or a decrease in consumer spending results in lower sales.
We or regulatory agencies approving of our products may be sued by non-governmental organizations and others who are opposed to the development or commercialization of genetically engineered products. There are many organizations in the United States and elsewhere that are fundamentally opposed to the development of genetically engineered products.
We or regulatory agencies approving our products may be sued by non-governmental organizations and others who are opposed to the development or commercialization of genetically engineered products. There are many organizations in the United States and elsewhere that are fundamentally opposed to the development of genetically engineered products.
In April 2021, FDA/US Department of Justice filed a notice of appeal relating to several claims in that case, and subsequently withdrew the appeal, and the date to file appeals in the case has expired.
In April 2021, the FDA/US Department of Justice filed a notice of appeal relating to several claims in that case, and subsequently withdrew the appeal, and the date to file appeals in the case has expired.
However, because some states either passed or considered new laws specifying varying requirements for labeling products sold at the retail level that contain bioengineered ingredients, the United States Congress passed the National Bioengineered Food Disclosure Law in July 2016, requiring USDA to establish a mandatory standard for disclosing foods that are or may be bioengineered.
However, because some states either passed or considered new laws specifying varying requirements for labeling products sold at the retail level that contain bioengineered ingredients, the United States Congress passed the National Bioengineered Food Disclosure Law in July 2016, requiring the USDA to establish a mandatory standard for disclosing foods that are or may be bioengineered.
Although we believe that we have obtained assignments of patent rights from all inventors, if an inventor did not adequately assign their patent rights to us, a third party could obtain a license to the patent from such inventor. This could preclude us from enforcing the patent against such third party.
Although we believe that we have obtained assignments of patent rights from all inventors, if an inventor did not adequately assign their patent rights to us, a third party could obtain a license to the patent from such inventor. This could preclude us from enforcing the patent against such a third party.
In addition, the 2020 Appropriations Act, which was signed into law in December 2019, which was reintroduced and passed in 2021 and 2022, contained an amendment that requires that any bioengineered 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 addition, the 2020 Appropriations Act, which was signed into law in December 2019, and reintroduced and passed in 2021, 2022 and 2023, contained an amendment that requires that any bioengineered 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.
If we lose key personnel, including key management personnel, or are unable to attract and retain additional personnel, it could delay our commercialization plans or harm our research and development efforts, and we may be unable to sell or develop our own products. Our success depends substantially on the efforts and abilities or our officers and other key employees.
If we lose key personnel, including key management personnel, or are unable to attract and retain additional personnel, it could delay our commercialization plans or harm our research and development efforts, and we may be unable to sell or develop our own products. Our success depends substantially on the efforts and abilities of our officers and other key employees.
In addition, if our costs increase and we are not able to pass along these price increases to our customers, our net income would be adversely affected, and the adverse impact may be material. Inflation rates, particularly in the United States, have increased recently to levels not seen in years.
In addition, if our costs increase and we are not able to pass along these price increases to our customers, our net income would be adversely affected, and the adverse impact may be material. Inflation rates, particularly in the United States, have increased to levels not seen in years.
Further, if our salmon is perceived by the market to be of lower quality than other available sources of salmon or other fish, we may experience reduced demand for our product and may not be able to sell our products at the prices that we expect or at all.
Further, if our salmon is perceived by the market to be of lower quality than other available sources of salmon or other fish, we may experience reduced demand for our products and may not be able to sell our products at the prices that we expect or at all.
While we have no specific plan to issue preferred stock, our certificate of incorporation authorizes us to issue, without the approval of our shareholders, one or more series of preferred stock having such designation, relative powers, preferences (including preferences over our common stock respecting dividends and distributions), voting rights, terms of conversion or redemption, and other relative, participating, optional, or other special rights, if any, of the shares of each such series of preferred stock and any qualifications, limitations, or restrictions thereof, as our Board of Directors may determine.
While we have no specific plan to issue preferred stock, our certificate of incorporation authorizes us to issue, without the approval of our stockholders, one or more series of preferred stock having such designation, relative powers, preferences (including preferences over our common stock respecting dividends and distributions), voting rights, terms of conversion or redemption, and other relative, participating, optional, or other special rights, if any, of the shares of each such series of preferred stock and any qualifications, limitations, or restrictions thereof, as our Board of Directors may determine.
Any provision of our certificate of incorporation or our bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our shareholders to receive a premium for their shares of our common stock and affect the price that some investors are willing to pay for our common stock.
Any provision of our certificate of incorporation or our bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and affect the price that some investors are willing to pay for our common stock.
Preparing cost and timing estimates for complex RAS farms is inherently difficult and subject to change based on a number of factors that we have experienced to date and may 16 Table of Contents experience in the future, including design changes, increasing inflationary pressure on costs of materials and labor, the impact of health epidemics such as COVID-19, construction delays, dependence on contractors, the impact of increasing interest rates on financing costs, customer requirements and unexpected complications.
Preparing cost and timing estimates for complex RAS farms is inherently difficult and subject to change based on a number of factors that we have experienced to date and may experience in the future, including design changes, increasing inflationary pressure on costs of materials and labor, the impact of health epidemics, such as COVID-19, construction delays, dependence on contractors, the impact of increasing interest rates on financing costs, customer requirements and unexpected complications.
Our financial condition or results of operations may be adversely affected by international business risks, including exchange rate fluctuation. The majority of our employees, including our research personnel, are currently located outside of the United States. As a consequence of the international nature of our business, we are exposed to risks associated with international operations.
Our financial condition or results of operations may be adversely affected by international business risks, including exchange rate fluctuations. The majority of our employees, including our research personnel, are currently located outside of the United States. As a consequence of the international nature of our business, we are exposed to risks associated with international operations.
As more companies develop new intellectual property in our markets, a competitor could acquire patent or other rights that may limit our ability to successfully market our product. If our technologies or products are stolen, misappropriated, or reverse engineered, others could use the technologies to produce competing technologies or products.
As more companies develop new intellectual property in our markets, a competitor could acquire patents or other rights that may limit our ability to successfully market our product. If our technologies or products are stolen, misappropriated, or reverse engineered, others could use the technologies to produce competing technologies or products.
These impacts included the shortage of packaging workers and transportation suppliers that we experienced, leading to slower and more expensive harvests and increased culling activity; supply chain disruptions; facility and production suspensions; and demand for certain goods and services, such as medical services and supplies spiked, while demand for other goods and services, including salmon in the institutional sales chain that includes restaurants fell, with a resulting drop in the prices for those goods and services.
These impacts included the shortage of packaging workers and transportation suppliers that we experienced, leading to slower and more expensive harvests and increased culling activity; supply chain disruptions; facility and production suspensions; and demand for certain goods 21 Table of Contents and services, such as medical services and supplies spiked, while demand for other goods and services, including salmon in the institutional sales chain that includes restaurants fell, with a resulting drop in the prices for those goods and services.
Under current SEC rules, we will continue to qualify as a “smaller reporting company” for so long as (i) we 28 Table of Contents have a public float (i.e., the aggregate market value of common equity held by non-affiliates) of less than $250 million or (ii) our annual revenue is less than $100 million during the most recently completed fiscal year and the aggregate market value of our common stock held by non-affiliates is less than $700 million.
Under current SEC rules, we will continue to qualify as a “smaller reporting company” for so long as (i) we have a public float (i.e., the aggregate market value of common equity held by non-affiliates) of less than $250 million or (ii) our annual revenue is less than $100 million during the most recently completed fiscal year and the aggregate market value of our common stock held by non-affiliates is less than $700 million.
In addition, under current SEC rules, we are not an “accelerated filer” and so not required to include an auditor attestation of the effectiveness of our internal control over financial reporting in this Annual Report on Form 10-K.
In addition, under current SEC rules, we are not an “accelerated filer” and, therefore, are not required to include an auditor attestation of the effectiveness of our internal control over financial reporting in this Annual Report on Form 10-K.
The coalition, including the Center for Food Safety and Friends of the Earth, claims that the FDA had no statutory authority to regulate genetically engineered animals, and, if it did, that the agency failed to analyze and implement measures to mitigate ecological, environmental, and socioeconomic risks that could impact wild salmon and the environment, including the risk that our GE Atlantic salmon could escape and threaten endangered wild salmon stocks.
The coalition, 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, 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 our GE Atlantic salmon could escape and threaten endangered wild salmon stocks.
There can be no assurance that additional funds will be available on a timely basis, on favorable terms, or at all, or that such funds, if raised, would be sufficient to enable us to continue to implement our business strategy.
There can be no assurance that additional funds will be available on a timely basis, on acceptable terms, or at all, or that such funds, if raised, would be sufficient to enable us to continue to implement our business strategy.
Even an inadvertent shipment of contaminated products may be a violation of law and may lead to increased risk of exposure to product liability claims, increased scrutiny and penalties, including but not limited to, injunctive relief and plant closings, by federal and state regulatory agencies, and adverse 20 Table of Contents publicity, which could exacerbate the associated negative consumer reaction.
Even an inadvertent shipment of contaminated products may be a violation of law and may lead to increased risk of exposure to product liability claims, increased scrutiny and penalties, including but not limited to, injunctive relief and plant closings, by federal and state regulatory agencies, and adverse publicity, which could exacerbate the associated negative consumer reaction.
Acquisitions also may require us to record goodwill and non-amortizable intangible assets that will be subject to impairment testing on a regular basis and potential periodic impairment charges, incur amortization expenses related to certain intangible assets, and incur large and immediate write-offs and restructuring and other related expenses, all of which could harm our operating results and financial condition.
Certain transactions may require us to record goodwill and non-amortizable intangible assets that will be subject to impairment testing on a regular basis and potential periodic impairment charges, incur amortization expenses related to certain intangible assets, and incur large and immediate write-offs and restructuring and other related expenses, all of which could harm our operating results and financial condition.
Provisions in our corporate documents and Delaware law could have the effect of delaying, deferring, or preventing a change in control of us, even if that change may be considered beneficial by some of our shareholders.
Provisions in our corporate documents and Delaware law could have the effect of delaying, deferring, or preventing a change in control of us, even if that change may be considered beneficial by some of our stockholders.
The existence of some provisions of our certificate of incorporation or our bylaws or Delaware law could have the effect of delaying, deferring, or preventing a change in control of us that a shareholder may consider favorable.
The existence of some provisions of our certificate of incorporation or our bylaws or Delaware law could have the effect of delaying, deferring, or preventing a change in control of us that a stockholder may consider favorable.
We anticipate using both cash on hand and debt to finance the construction and initial working capital for our Ohio farm. Debt financing will likely contain certain customary restrictive covenants that require us to maintain certain operating ratios and may restrict our use of any cash that is generated by the farm.
We anticipate using both equity and debt to finance the construction and initial working capital for our Ohio farm. Debt financing will likely contain certain customary restrictive covenants that require us to maintain certain operating ratios and may restrict our use of any cash that is generated by the farm.
Section 203 prevents some shareholders holding more than 15% of our voting stock from engaging in certain business combinations unless the business combination or the transaction that resulted in the shareholder becoming an interested shareholder was approved in advance by our Board of Directors, results in the shareholder holding more than 85% of our voting stock (subject to certain restrictions), or is approved at an annual or special meeting of shareholders by the holders of at least 66 2/3% of our voting stock not held by the shareholder engaging in the transaction.
Section 203 prevents some stockholders holding more than 15% of our voting stock from engaging in certain business combinations unless the business combination or the transaction that resulted in the stockholder becoming an interested stockholder was approved in advance by our Board of Directors, results in the stockholder holding more than 85% of our voting stock (subject to certain restrictions), or is approved at an annual or special meeting of stockholders by the holders of at least 66 2/3% of our voting stock not held by the stockholder engaging in the transaction.
If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would not be able to exclude others from practicing the inventions claimed therein. Such a loss of patent protection could have a material adverse impact on our business.
If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would not be able to exclude others from 26 Table of Contents practicing the inventions claimed therein. Such a loss of patent protection could have a material adverse impact on our business.
In addition, any transportation-related or other accidents that may result in a spill of hazardous materials near our farms, which may contaminate the land and/or groundwater, may result in a loss of a material percentage of our fish and other material adverse effects on our operations.
In addition, any transportation-related or 19 Table of Contents other accidents that may result in a spill of hazardous materials near our farms, which may contaminate the land and/or groundwater, may result in a loss of a material percentage of our fish and other material adverse effects on our operations.
The loss of any key members of our management, or the failure to attract or retain other key employees who possess the requisite expertise for the conduct of our 21 Table of Contents business, could prevent us from developing and commercializing our products and executing on our business strategy.
The loss of any key members of our management, or the failure to attract or retain other key employees who possess the requisite expertise for the conduct of our business, could prevent us from developing and commercializing our products and executing on our business strategy.
As a “smaller reporting company,” we may elect to comply with scaled disclosure requirements relative to companies that are not smaller reporting companies, including but not limited to, reduced disclosure obligations regarding executive compensation in our filings with the SEC.
As a “smaller reporting company,” we elected to comply with scaled disclosure requirements relative to companies that are not smaller reporting companies, including but not limited to, reduced disclosure obligations regarding executive compensation in our filings with the SEC.
Third parties, including our collaborators, contractors, and others involved in our business often have access to, and may require that we grant interests in, our technologies.
Third parties, including our collaborators, contractors, and others involved in our business often have access to, and may require that we grant interest in, our technologies.
The Notice had no immediate effect on our listing on the Nasdaq Capital Market or on the trading of our Common Stock. The Notice provided us with a compliance period of 180 calendar days, or until May 1, 2023, to regain compliance.
The Notice had no immediate effect on our listing or on the trading of our common stock. The Notice provided us with a compliance period of 180 calendar days, or until May 1, 2023, to regain compliance.
There is also no guarantee that any approvals granted will not be subject to onerous obligations in relation to matters such as production or labeling, or that any regulator will not require additional data prior to approval, which may be costly and time-consuming to acquire.
There is 23 Table of Contents also no guarantee that any approvals granted will not be subject to onerous obligations in relation to matters such as production or labeling, or that any regulator will not require additional data prior to approval, which may be costly and time-consuming to acquire.
For example, despite the FDA’s final determination that our GE Atlantic salmon may be sold without being labeled as a 24 Table of Contents genetically engineered product, a provision added to the 2016 Omnibus Appropriations Act required the FDA to issue final guidance for such labeling.
For example, despite the FDA’s final determination that our GE Atlantic salmon may be sold without being labeled as a genetically engineered product, a provision added to the 2016 Omnibus Appropriations Act required the FDA to issue final guidance for such labeling.
We could be subject to increasing or more onerous regulatory hurdles as we attempt to commercialize our product, which could require us to incur significant additional capital and operating expenditures and other costs in complying with these laws and regulations.
We could be subject to increasing or more onerous regulatory hurdles as we attempt to commercialize our product, which could require us to incur significant additional capital and operating expenditures and 24 Table of Contents other costs in complying with these laws and regulations.
Enforcing our intellectual property rights can be expensive and time consuming, and the outcome of such efforts can be unpredictable.
Enforcing our intellectual property rights may be difficult and unpredictable. Enforcing our intellectual property rights can be expensive and time consuming, and the outcome of such efforts can be unpredictable.
These provisions include: providin g that the number of members of our board is limited to a range fixed by our by-laws; establishing advance notice requirements for nominations of candidates for election to our Board of Directors or for proposing matters that can be acted on by shareholders at shareholder meetings; and authorizing the issuance of “blank check” preferred stock, which could be issued by our Board of Directors to issue securities with voting rights and thwart a takeover attempt.
These provisions include: providin g that the number of members of our Board of Directors is limited to a range fixed by our by-laws; 28 Table of Contents establishing advance notice requirements for nominations of candidates for election to our Board of Directors or for proposing matters that can be acted on by stockholders at stockholder meetings; and authorizing the issuance of “blank check” preferred stock, which could be issued by our Board of Directors to issue securities with voting rights and thwart a takeover attempt.
In the ordinary course of our business, we use our servers and networks to store sensitive data, including our proprietary business and financial information; general business information regarding our customers, suppliers, and business partners; and personally identifiable information of our employees; and to operate our farm equipment.
In the ordinary course of our business, we use third-party, cloud-based servers and networks to store sensitive data, including our proprietary business and financial information; general business information regarding our customers, suppliers, and business partners; and personally identifiable information of our employees; and to operate our farm equipment.
For example, the COVID-19 pandemic impacted market demand for salmon, which resulted in market prices falling by up to 40% for certain product presentations. Conversely, given the long grow-out cycle for raising salmon, disruptions in production can depress market supply and result in price increases.
For example, the COVID-19 pandemic impacted market demand for salmon, which resulted in market prices falling by up to 40% for certain product presentations. Conversely, given the long grow-out cycle for raising salmon, disruptions in production can depress market supply and result in price increases. Atlantic salmon farming is restricted in certain states.
Risks Relating to our Business and Operations We have a history of net losses and will likely incur future losses and may not achieve or maintain profitability. In the period from incorporation to December 31, 2022, we have incurred cumulative net losses of approximately $193 million. These losses reflect our personnel, research and development, production and marketing costs.
Risks Relating to our Business and Future Plans We have a history of net losses and will likely incur future losses and may not achieve or maintain profitability. In the period from incorporation to December 31, 2023, we have incurred cumulative net losses of approximately $221 million. These losses reflect our personnel, research and development, production and marketing costs.
We may pursue strategic acquisitions and investments that could have an adverse impact on our business if they are unsuccessful. If appropriate opportunities become available, we may acquire businesses, assets, technologies, or products to enhance our business in the future.
We may pursue strategic acquisitions, investments or mergers that could have an adverse impact on our business if they are unsuccessful. If appropriate opportunities become available, we may acquire, invest in or merge with businesses, assets, technologies, or products to enhance our business in the future.
In addition, the 2020 Appropriations Act, which was signed into law in December 2019, contained an amendment that requires that any bioengineered 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 addition, the 2020 Appropriations Act, which was signed into law in December 2019, which was reintroduced and passed in 2021, 2022 and 2023, contained an amendment that requires that any bioengineered 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 addition, we may acquire companies that have insufficient internal financial controls, which could impair our ability to integrate the acquired company and adversely impact our financial reporting.
In addition, we may acquire companies that 17 Table of Contents have insufficient internal financial controls, which could impair our ability to integrate the acquired company and adversely impact our financial reporting.
These covenants could also limit our ability to seek capital through the incurrence of new indebtedness or, if we are unable to meet our obligations, require us to repay any outstanding amounts with sources of capital we may otherwise use to fund our business, operations and strategy.
These covenants could also limit our ability to seek capital through the incurrence of new indebtedness or, if we are unable to meet our obligations, require us to repay any outstanding amounts with sources of capital we may otherwise use to fund our business, operations and strategy. We may encounter difficulties managing our growth, which could adversely affect our business.
USDA issued the National Bioengineered Food Disclosure Standard in December 2018. AquaBounty includes the bioengineered logo on its GE Atlantic salmon packaging, in accordance with the 25 Table of Contents Disclosure Standard.
USDA issued the National Bioengineered Food Disclosure Standard in December 2018. AquaBounty includes the bioengineered logo on its GE Atlantic salmon packaging, in accordance with the Disclosure Standard.
On October 31, 2022, we received a letter (the “Notice”) from Nasdaq notifying us that, because the closing bid price for our common stock, par value $0.001 per share (the “Common Stock”), had been below $1.00 per share for the previous 30 consecutive business days, it no longer complied with the minimum bid price requirement for continued listing on the Nasdaq Capital Market.
On October 31, 2022, we received a letter (the “Notice”) from Nasdaq notifying us that, because the closing bid price for our common stock had been below $1.00 per share for the previous 30 consecutive business days, it no longer complied with the minimum bid price requirement for continued listing on Nasdaq.
While we require our employees, academic collaborators, consultants, and other contractors to enter into confidentiality agreements with us, if we cannot maintain the confidentiality of our proprietary and licensed technologies and other confidential information, our ability and that of our licensor to receive patent protection, and our ability to protect valuable information owned or licensed by us may be imperiled. 26 Table of Contents Enforcing our intellectual property rights may be difficult and unpredictable.
While we require our employees, academic collaborators, consultants, and other contractors to enter into confidentiality agreements with us, if we cannot maintain the confidentiality of our proprietary and licensed technologies and other confidential information, our ability and that of our licensor to receive patent protection, and our ability to protect valuable information owned or licensed by us may be imperiled.
We may encounter difficulties managing our growth, which could adversely affect our business. We could face a period of rapid growth following expansion of our production capability, which may place significant pressure on our management, sales, operational, and financial resources.
We could face a period of rapid growth following expansion of our production capability, which may place significant pressure on our management, sales, operational, and financial resources.
Conversely, if we experience better than expected growth rates, we may not be able to process and bring our fish to market in a timely manner, which may result in overcrowding that can cause negative health impacts and/or require culling our fish population.
Sub-optimal conditions could lead to smaller harvests and or lower quality fish. Conversely, if we experience better than expected growth rates, we may not be able to process and bring our fish to market in a timely manner, which may result in overcrowding that can cause negative health impacts and/or require culling our fish population.
A breach of our security could compromise our networks and the information stored on our servers could be accessed, manipulated, publicly disclosed, lost, or stolen.
A breach of our or our third-parties’ security could compromise our and/or their networks, and the information stored could be accessed, manipulated, publicly disclosed, lost, or stolen.
Although our common stock is currently traded on The Nasdaq Capital Market, an active trading market for our common stock may not be maintained. If an active market for our common stock is not maintained, it may be difficult for shareholders to sell shares of our common stock.
An active trading market for our common stock may not be sustained. Although our common stock is currently listed and traded on Nasdaq, an active trading market for our common stock may not be maintained. If an active market for our common stock is not maintained, it may be difficult for stockholders to sell shares of our common stock.
We have limited experience constructing, ramping up, and managing such large, commercial-scale facilities, and we may not have anticipated all of the factors or costs that could affect our production, harvest, sale, and delivery of salmon at such a scale.
Our business plans depend on our ability to increase our production capacity through the development of larger farms. We have limited experience constructing, ramping up, and managing such large, commercial-scale facilities, and we may not have anticipated all of the factors or costs that could affect our production, harvest, sale, and delivery of salmon at such a scale.
In connection with any future acquisitions, we could: issue additional equity securities, which would dilute our current shareholders; incur substantial debt to fund the acquisitions; or assume significant liabilities.
In connection with any future acquisitions, investments or mergers, we could: issue additional equity securities, which would dilute the ownership interest and voting power of our current stockholders; incur substantial debt to fund the acquisitions; or assume significant liabilities.
In addition, with the continued automation of our farm operations, there is the possibility of exposure to critical assets or sensitive information loss stemming from a cyber-attack on communication interfaces with outside vendors, which could adversely impact our farm operations.
In addition, with the continued automation of our farm operations, there is the possibility of exposure to critical assets or sensitive information loss stemming from a cyber-attack on communication interfaces with third-party providers, which could adversely impact our farm operations. Any of the foregoing could adversely affect our business, revenues, and competitive position.
The delay or failure of regulatory bodies to approve our construction plans, disruption and volatility in the financial markets, tighter credit markets and a downturn in the seafood market may negatively impact our ability to obtain financing. We may not have access to the required funding, or funding may not be available to us on acceptable terms.
The delay or failure of regulatory bodies to approve our construction plans, disruption and volatility in the financial markets, tighter credit markets and a downturn in the seafood market may negatively impact our ability to obtain financing.
While we currently believe that many states offer excellent potential sites for our salmon production farms, if additional states adopt similar restrictions, or otherwise prohibit the rearing of our GE Atlantic salmon in those states, the number of potential sites available to us for production farms in the United States could be reduced.
While we currently believe that many states offer excellent potential sites for our salmon production farms, if additional states adopt similar restrictions, or otherwise prohibit the rearing of our GE Atlantic salmon in those states, the number of potential sites available to us for production farms in the United States could be reduced. 22 Table of Contents We have entered into agreements that require us to pay a significant portion of our future revenue to third parties.
Our GE Atlantic salmon, or more specifically the breeding population of live fish, or broodstock, themselves, is a product of our combined intellectual property, which includes our trade secrets related to creating and maintaining the broodstock. Destruction of our salmon broodstock by whatever means would result in a significant delay to our operations while the broodstock was replenished.
The loss of our GE Atlantic salmon broodstock could result in the loss of our commercial technology. Our GE Atlantic salmon, or more specifically the breeding population of live fish, or broodstock, themselves, is a product of our combined intellectual property, which includes our trade secrets related to creating and maintaining the broodstock.
Any such access, manipulation, disclosure, or loss of information could result in errors in our records, fraudulent use of our financial information or theft of assets, legal claims or proceedings, liability under laws that protect the privacy of personal information, theft of our intellectual property, or damage to our reputation.
Any such access, manipulation, disclosure, or loss of information could result in errors in our records, fraudulent use of our financial information or theft of assets, legal claims or proceedings (such as class actions), regulatory investigations and enforcement actions, liability under laws that protect the privacy of personal information (including fines and penalties), theft of our intellectual property, damage to our reputation and/or significant system restoration or remediation and future compliance costs.
Furthermore, our ability to utilize our NOLs is conditioned upon our attaining profitability and generating U.S. federal and state taxable income. 23 Table of Contents Risks Relating to Regulated Products Our ability to generate revenue to support our operations depends on maintaining regulatory approvals for our GE Atlantic salmon and our farm sites and obtaining new approvals for farm sites and the sale of our products in other markets, the receipt of which is uncertain.
Risks Relating to Regulated Products Our ability to generate revenue to support our operations depends on maintaining regulatory approvals for our GE Atlantic salmon and our farm sites and obtaining new approvals for farm sites and the sale of our products in other markets, the receipt of which is uncertain.
Ethical, legal, and social concerns about genetically engineered products could limit or prevent the use of our products and limit our revenues. Our technologies include the use of genetic engineering. Public perception about the safety and environmental hazards of, and ethical concerns over, genetically engineered products could influence public acceptance of our technologies and products.
Public perception about the safety and environmental hazards of, and ethical concerns over, genetically engineered products could influence public acceptance of our technologies and products.
Increased inflation has and may continue to result in increased construction costs for new farms, increased operating costs (including our labor costs), reduced liquidity, and limitations on our ability to access credit or otherwise raise debt and equity capital. In addition, the United States Federal Reserve has raised, and may again raise, interest rates in response to concerns about inflation.
Increased inflation may result in increased construction costs for new farms, increased operating costs (including our labor costs), reduced liquidity, and limitations on our ability to access credit or otherwise raise debt and equity capital.
Atlantic salmon farming is subject to disease outbreaks, which can increase the cost of production and/or reduce production harvests. Salmon farming systems, particularly conventional, open sea-cage systems, are vulnerable to disease introduction and transmission, primarily from the marine environment or adjacent culture systems.
Salmon farming systems, particularly conventional, open sea-cage systems, are vulnerable to disease introduction and transmission, primarily from the marine environment or adjacent culture systems.
We cannot guarantee that we will not face quality issues in the future, any of which could cause damage to our reputation, and a loss of consumer confidence in our products, which could have a material adverse effect on our business results and the value of our brands. 18 Table of Contents In addition, we may be required to recall some of our products if they spoil, become contaminated, are tampered with or are mislabeled.
We cannot guarantee that we will not face quality issues in the future, any of which could cause damage to our reputation, and a loss of consumer confidence in our products, which could have a material adverse effect on our business results and the value of our brands.
Although we have over two decades of experience in successfully raising Atlantic salmon in land-based systems, we have only begun to produce them at commercial scale. Our business plans depend on our ability to increase our production capacity through the development of larger farms.
The successful development of our business depends on our ability to efficiently and cost-effectively produce and sell salmon at large commercial scale. Although we have over two decades of experience in successfully raising Atlantic salmon in land-based systems, we have only begun to produce them at commercial scale.
Live animals are subject to disease that may, in some cases, prevent or cause delay in the export of eggs to our farms. Disease organisms may be present undetected and transferred inadvertently.
Destruction of our salmon broodstock by whatever means could result in a significant delay to our operations while the broodstock was replenished. Live animals are subject to disease that may, in some cases, prevent or cause delay in the export of eggs to our farms. Disease organisms may be present but undetected and transferred inadvertently.
We may also need further funding if there are delays in construction or increased construction costs at our construction site in Ohio. We may finance unanticipated construction costs by issuing equity securities or debt.
Volatility and/or declines in equity markets in general, and for our securities, may cause equity financing to be unavailable on acceptable terms or at all. We may also need further funding if there are delays in construction or increased construction costs at our construction site in Ohio. We may finance unanticipated construction costs by issuing equity securities or debt.
We may suffer significant delays or cost overruns at our farms that could prevent us from commencing operations as expected as a result of various factors.
Delays and defects may cause our costs to increase to a level that would make one or more of our farms too expensive to construct or unprofitable. We may suffer significant delays or cost overruns at our farms that could prevent us from commencing operations as expected as a result of various factors.
Acquisitions involve numerous risks, including: difficulti es integrating the purchased operations, technologies, or products; unanticipated costs and other liabilities; diversion of management’s attention from our core business; adverse effects on existing business relationships with current and/or prospective customers and/or suppliers; risks associated with entering markets in which we have no or limited prior experience; and potential loss of k ey employees. 22 Table of Contents We do not have extensive experience in managing the integration process, and we may not be able to successfully integrate any businesses, assets, products, technologies, or personnel that we might acquire in the future without a significant expenditure of operating, financial, and management resources.
Acquisitions, investments or mergers involve numerous risks, including: difficulti es integrating the purchased operations, technologies, or products; unanticipated costs and other liabilities; diversion of management’s attention from our core business; adverse effects on existing business relationships with current and/or prospective customers and/or suppliers; risks associated with entering markets in which we have no or limited prior experience; and potential loss of k ey employees.
A breach of any of these covenants could result in a default under the term loan agreement, which could cause all of the outstanding indebtedness under our 17 Table of Contents term loan to become immediately due and payable.
Our ability to comply with these covenants may be affected by events beyond our control, and we may not be able to meet those covenants. A breach of any of these covenants could result in a default under the term loan agreement, which could cause all of the outstanding indebtedness under our term loan to become immediately due and payable.
Although fish grown in RAS production systems are not subject to the disease and parasite issues that can affect salmon grown in ocean pens, there is the potential for organisms that are ubiquitous to freshwater environments to become pathogenic if the fish are subjected to stressful conditions or there is an issue with biomass management.
Although fish grown in RAS production systems are not subject to the disease and parasite issues that can affect salmon grown in ocean pens, there is the potential for organisms that are ubiquitous to freshwater environments to become pathogenic if the fish are subjected to stressful conditions or there is an issue with biomass management. 18 Table of Contents We maintain high standards for the quality of our product and if we determine that a harvest has not met such standards, we may be required to reduce our inventory and write down the value of the harvest to reflect net realizable value.
Such a product recall also could result in adverse publicity, damage to our reputation, and a loss of consumer or customer confidence in our products, which could have a material adverse effect on our business results and the value of our brands.
Such a product recall also could result in adverse publicity, damage to our reputation, and a loss of consumer confidence in our products, which could have a material adverse effect on our business results and the value of our brands. 20 Table of Contents Security breaches, cyber-attacks and other disruptions could compromise our information, expose us to fraud or liability, or interrupt our operations, which would cause our business and reputation to suffer.
Labeling requirements could cause consumers to view the label as either a warning or as an indication that GE Atlantic salmon is inferior to conventional Atlantic salmon, which could negatively impact consumer acceptance of our product.
Labeling requirements could cause consumers to view the label as either a warning or as an indication that GE Atlantic salmon is inferior to conventional Atlantic salmon, which could negatively impact consumer acceptance of our product. 25 Table of Contents Risks Relating to Intellectual Property Competitors and potential competitors may develop products and technologies that make ours obsolete or garner greater market share than ours.
We cannot predict if investors will find our shares of common stock to be less attractive because we may rely on these exemptions. If some investors find our shares of common stock less attractive as a result, there may be a less active trading market for our shares of common stock, and our share price may be more volatile.
We cannot predict if investors will find our shares of common stock to be less attractive because we rely and may in the future continue to rely on these exemptions.
Certain of our competitors may be better funded than we are and/or benefit from government support and other incentives that are not available to us.
Our ability to compete successfully will depend on our ability to demonstrate that our GE Atlantic salmon is superior to and/or less expensive than other products available in the market. Certain of our competitors may be better funded than we are and/or benefit from government support and other incentives that are not available to us.
We may not be able to obtain the approvals and permits that will be necessary in order to construct our facilities as planned. We will need to obtain a number of required permits in connection with the hydrology, construction and operation of our farms, which is often a time-consuming process.
We will need to obtain a number of required permits in connection with the hydrology, construction and operation of our farms, which is often a time-consuming process. We will also need to obtain FDA approval to grow our GE Atlantic salmon in the facility.
The financing of our Ohio farm through the placement of municipal bonds may require restrictive debt covenants that could limit our control over the farm’s operation and restrict our ability to utilize a portion of any cash that the farm generates.
Increases in interest rates, especially if coupled with reduced government spending and volatility in financial markets, may have the effect of further increasing economic uncertainty and heightening these risks. 16 Table of Contents The financing of our Ohio farm through the placement of municipal bonds may require restrictive debt covenants that could limit our control over the farm’s operation and restrict our ability to utilize a portion of any cash that the farm generates.
We have never declared or paid cash dividends on our common stock. We do not anticipate paying cash dividends in the foreseeable future and intend to retain all of our future earnings, if any, to finance the operations, development, and growth of our business.
We do not anticipate paying cash dividends in the foreseeable future and intend to retain all of our future earnings, if any, to finance the operations, development, and growth of our business. There can be no assurance that we will have sufficient surplus under Delaware law to be able to pay any dividends at any time in the future.
You may also have to sell some or all of your shares of our common stock in order to generate cash flow from your investment in us. ‎ 30 Table of Contents Item 1B. Unresolved Staff Comments None.
As a result, absent payment of dividends, only appreciation of the price of our common stock, which may never occur, will provide a return to stockholders. You may also have to sell some or all of your shares of our common stock in order to generate cash flow from your investment in us. ‎ 29 Table of Contents Item 1B.
If we fail in our integration efforts with respect to any of our acquisitions and are unable to efficiently operate as a combined organization, our business and financial condition may be adversely affected. We have entered into agreements that require us to pay a significant portion of our future revenue to third parties.
If we fail in our integration efforts with respect to any of our acquisitions and are unable to efficiently operate as a combined organization, our business and financial condition may be adversely affected. High customer concentration exposes us to various risks faced by our major customers and may subject us to significant fluctuations or declines in revenues.
Recent increases in interest rates have increased our expected borrowing costs for the construction of our planned farm in Pioneer, Ohio, and may also affect our ability to obtain working capital through borrowings such as bank credit lines and public or private sales of debt securities, which may result in lower liquidity, increased expense and difficulty in financing our expansion plans, reduced working capital and other adverse impacts on our business.
Increases in interest rates will increase the cost of our indebtedness for construction financing and may also affect our ability to obtain working capital through borrowings, such as bank credit lines and public or private sales of debt securities.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties Our corporate headquarters are located in Maynard, Massachusetts, and consist of approximately 3,500 square feet of office space under a month-to-month lease. We own a production grow-out farm in Indiana, which has the potential to produce 1,200 metric tons of our fish annually.
Biggest changeItem 2. Properties Our corporate headquarters is located in Harvard, Massachusetts, and consists of approximately 2,000 square feet of office space under a three-year lease. We own a production grow-out farm in Indiana, which has the potential to produce 1,200 metric tons of our fish annually. However, in February 2024, we announced our plan to sell our Indiana farm operations.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAs of March 3, 2023, there were approximately 214 holders of record of our common stock. The actual number of shareholders is greater than this number and includes shareholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees. The transfer agent for our common stock is Computershare Trust Company, N.A.
Biggest changeAs of March 25, 2024, there were approximately 220 holders of record of our common stock. The actual number of stockholders is greater than this number and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees. The transfer agent for our common stock is Computershare Trust Company, N.A.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is currently traded on the Nasdaq Capital Market under the symbol “AQB.” As of March 3, 2023, 71,110,713 shares of our common stock were issued and outstanding.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is currently traded on the Nasdaq Capital Market under the symbol “AQB.” As of March 25, 2024, 3,857,444 shares of our common stock were issued and outstanding.
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Securities Authorized for Issuance Under Equity Compensation Plans The information under “Equity Compensation Plan Information” to be included in our definitive proxy statement relating to our 2023 annual meeting of stockholders to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2022, is incorporated herein by reference. 31 Table of Contents Item 6.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeCash used for working capital was due primarily to increases in receivables and prepaid expenses, partially offset by increases in accounts payable and accrued expenses and a decrease in inventory. 35 Table of Contents Cash Flows from Investing Activities During 2022, we used $65.1 million for construction charges and equipment deposits for our Ohio farm, $1.4 million and $1.0 million for equipment purchases and deposits for our Indiana and Rollo Bay farms, respectively, and we received $101.8 million on the net sales of marketable securities.
Biggest changeDuring 2022, we used $65.1 million for construction charges and equipment deposits for our Ohio farm, and $1.4 million and $1.0 million for equipment purchases and deposits for our Indiana and Rollo Bay farms, respectively, and we received $101.8 million on the net sales of marketable securities. 35 Table of Contents We have paused construction at our Ohio farm, but we expect expenditures on capital projects to increase in future periods once we secure additional funding and resume construction at the site.
Spending on operations increased in 2022 due to increases in production activities at our Rollo Bay and Indiana farm sites, increases in headcount and increases in costs for insurance, taxes, and professional fees. Cash used for working capital was due primarily to increases in inventory and prepaid expenses, partially offset by an increase in accrued expenses.
Spending on operations increased in 2022 due to increases in production activities at our Rollo Bay and Indiana farm sites, increases in headcount and increases in costs for insurance, taxes, and professional fees. The increase in cash used for working capital was due primarily to increases in inventory and prepaid expenses, partially offset by an increase in accrued expenses.
We measure inventory at the lower of cost or net realizable value (“NRV”), where NRV is defined as the estimated market price, less the estimated costs of processing, packaging and transportation. We consider fish that has been harvested and transported from its farm to be fish for sale. Revenue Recognition We generate revenue from the sale of our products.
We measure inventory at the lower of cost or net realizable value (“NRV”), where NRV is defined as the estimated market price, less the estimated costs of processing, packaging and transportation. We consider fish that have been harvested and transported from its farm to be fish for sale. Revenue Recognition We generate revenue from the sale of our products.
Recent Accounting Pronouncements We do not expect any recently issued, but not yet effective, accounting standards to have a material effect on our results of operations or financial condition. 33 Table of Contents Results of Operations Comparison of the year ended December 31, 2022 to the year ended December 31, 2021.
Recent Accounting Pronouncements We do not expect any recently issued, but not yet effective, accounting standards to have a material effect on our results of operations or financial condition. 33 Table of Contents Results of Operations Comparison of the year ended December 31, 2023 to the year ended December 31, 2022.
A portion of production costs is absorbed into inventory as fish in process to the extent that these costs do not exceed the net realizable value of the fish biomass. The costs that are not absorbed into inventory, as 32 Table of Contents well as any net realizable value inventory adjustments, are classified as production costs .
A portion of production costs is absorbed into inventory as fish in process to the extent that these costs do not exceed the net realizable value of the fish biomass. The costs that are not absorbed into inventory, as well as any net realizable value inventory adjustments, are classified as product costs .
Our research and development expenses consist primarily of: salaries and related overhead expenses for personnel in research and development functions; fees paid to contract research organizations and consultants who perform research for us; costs related to laboratory supplies used in our research and development efforts; and costs related to the operation of our field trials.
Our research and development expenses consist primarily of salaries and related overhead expenses for personnel in research and development functions; fees paid to contract research organizations and consultants who perform research for us; and costs related to laboratory supplies used in our research and development efforts.
For more information, see “ Our business plans include the need for substantial additional capital and without it we may not be able to implement our strategy as planned or at all .” Cash Flows from Financing Activities During 2022, we received approximately $476 thousand in proceeds from new debt and we repaid $640 thousand of outstanding debt.
For more information, see “ Our current business plans include the need for substantial additional capital, and without it, we may not be able to implement our strategy as planned or at all .” Cash Flows from Financing Activities During 2023, we received approximately $418 thousand in proceeds from new debt, and we repaid $726 thousand of outstanding debt.
Financial Overview We expect to generate product revenue primarily through the sales of our GE Atlantic salmon. We also sell conventional Atlantic salmon, salmon eggs, fry, and byproducts. We expect our future capital requirements will be substantial, particularly as we continue to develop our business and expand our commercial activities, as discussed in “Liquidity and Capital Resources”.
Financial Overview We expect our future capital requirements will be substantial, particularly as we continue to develop our business and expand our commercial activities, as discussed in “Liquidity and Capital Resources”. Product Revenue We have generated product revenue primarily through the sales of our GE Atlantic salmon, supplemented by sales of conventional Atlantic salmon, salmon eggs, fry, and byproducts.
Our land-based Recirculating Aquaculture System farms, located in Indiana in the United States and Prince Edward Island in Canada, are close to key consumption markets and are designed to prevent disease and to include multiple levels of fish containment to protect wild fish populations.
Our land-based Recirculating Aquaculture System farms, including our grow-out farm located in Indiana in the United States and our broodstock and egg production farm located on Prince Edward Island in Canada, are close to key consumption markets and are designed to prevent disease and to include multiple levels of fish containment to protect wild fish populations.
Our production costs also include the labor and related costs to maintain our salmon broodstock. As of December 31, 2022 and 2021, we had seventy and sixty-one employees, respectively engaged in production activities. Sales and Marketing Expenses Our sales and marketing expenses currently include salaries and related costs for our sales personnel and consulting fees for market-related activities.
Our product costs also include the labor and related costs to maintain our salmon broodstock. As of December 31, 2023 and 2022, we had 82 and 70 employees, respectively, engaged in production activities. Sales and Marketing Expenses Our sales and marketing expenses currently include salaries and related costs for our sales personnel and agency fees for market-related activities.
During the current year, we increased the volume of harvests of GE Atlantic salmon from our Indiana farm and completed the final harvests of GE Atlantic salmon from our Rollo Bay farm, as it began its transition into a broodstock facility.
During the current year, we increased the volume of harvests of GE Atlantic salmon from our Indiana farm and completed the transition of our Rollo Bay farm to a broodstock and egg production facility.
Net cash used in operating activities during the year ended December 31, 2021, was primarily comprised of our $22.3 million net loss, offset by non-cash depreciation and stock compensation charges of $2.2 million and increased by working capital uses of $349 thousand.
Net cash used in operating activities during the year ended December 31, 2022, was primarily comprised of our $22.2 million net loss, partially offset by non-cash depreciation and share-based compensation charges of $2.6 million and increased by working capital uses of $1.4 million.
Total Other (Income) Expense Total other (income) expense for 2022 is comprised of interest income, interest on debt, bank charges, and a loss on the disposal of assets. Total other (income) expense for 2021 is comprised of interest income, interest on debt and bank charges.
Total Other (Expense) Income Total other (expense) income for 2023 and 2022 is comprised of interest income, interest on debt, bank charges, and miscellaneous gains and losses on the disposal of assets.
Our principal contractual commitments include capital expenditure obligations, repayments of debt and related interest, and payments under operating leases. Refer to the notes in our consolidated financial statements for further information about our capital expenditure commitments (Note 6), debt (Note 7), and lease payment obligations (Note 10).
Refer to the notes in our consolidated financial statements for further information about our capital expenditure commitments (Note 6), debt (Note 7), and lease payment obligations (Note 10).
The ability of the Indiana subsidiary to meet its debt covenants over the next twelve months is dependent upon its operating performance. Until such time, if ever, as we can generate positive operating cash flows, we may finance our cash needs through a combination of equity offerings, debt financings, government or other third-party funding, strategic alliances, and licensing arrangements.
Until such time, if ever, as we can generate positive cash flows from operating activities, we may finance our cash needs through a combination of equity offerings, debt financings, government or other third-party funding, strategic alliances, and licensing arrangements, as well as our announced plan to sell our Indiana farm.
Other income (expense) includes bank charges, fees, interest income, miscellaneous gains or losses on asset disposals and realized gains or losses on investments. Critical Accounting Policies and Estimates This Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on our consolidated financial statements, which we have prepared in accordance with GAAP.
Critical Accounting Policies and Estimates This Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on our consolidated financial statements, which we have prepared in accordance with GAAP.
Our Indiana farm required extensive repairs to one of its buildings during Q4 of the current year, which impacted the number of fish that could be harvested and sold during the final two months of the year. Repairs commenced immediately on the building and no fish were impacted by the situation.
Our Indiana farm required extensive repairs to one of its buildings during the fourth quarter of 2022, which impacted the number of fish that could be harvested and sold during the final two months of 2022 and the first two months of 2023.
Inventories Inventories are mainly comprised of feed, eggs, fry, fish in process and fish for sale. Fish in process inventory is a biological asset that is measured based on the estimated biomass of fish on hand. We have established a standard procedure to estimate the biomass of fish on hand using counting and sampling techniques.
Inventories Inventories are mainly comprised of feed, eggs, fry, fish in process and fish for sale. Fish in process inventory is a biological asset that is measured based on the estimated biomass of fish on hand. The estimate of fish biomass contains uncertainty, as we cannot weigh each individual fish until harvest.
Spending on operations increased in 2021 due to increases in production activities at our Rollo Bay and Indiana farm sites and outside consulting and advisory fees.
Spending on operations increased in 2023 due to increases in production activities at our Rollo Bay and Indiana farm sites, increases in headcount and increases in costs for excise taxes, legal fees and professional fees.
We are experiencing higher costs for farming supplies, transportation costs, wage rates, and other direct operating expenses. Additionally, inflation has impacted the cost estimates for our Ohio farm project, which is now expected to be in the range of $375 million to $395 million. We expect inflation to continue to negatively impact our results of operations for the near-term.
We are experiencing higher costs for farming supplies, transportation costs, wage rates, and other direct operating expenses, as well as for capital expenditures related to the construction of our farm in Ohio. We expect inflation to continue to negatively impact our results of operations for the near-term.
The following table summarizes our results of operations for the years ended December 31, 2022 and 2021, together with the changes in those items in dollars (in thousands) and as a percentage: Year Ended ‎ December, 31 Dollar % 2022 2021 Change Change Product revenue $ 3,137 $ 1,175 1,962 167% Operating expenses: Product costs 13,630 10,786 2,844 26% Sales and marketing 1,139 1,262 (123) (10)% Research and development 904 2,146 (1,242) (58)% General and administrative 9,787 9,103 684 8% Operating loss (22,323) (22,122) (201) 1% Total other (income) expense (166) 201 (367) (183)% Net loss $ (22,157) $ (22,323) 166 (1)% Product Revenue Product revenue for the years ended December 31, 2022 and 2021 consisted of sales of our GE Atlantic salmon and conventional Atlantic salmon eggs, fry and byproducts.
The following table summarizes our results of operations for the years ended December 31, 2023 and 2022, together with the changes in those items in dollars (in thousands) and as a percentage: Years Ended ‎ December 31, Dollar % 2023 2022 Change Change Product revenue $ 2,473 $ 3,137 (664) (21)% Operating expenses: Product costs 15,282 13,631 1,651 12% Sales and marketing 796 1,139 (343) (30)% Research and development 704 904 (200) (22)% General and administrative 13,008 9,787 3,221 33% Operating loss 27,317 22,324 4,993 22% Total other (expense) income (241) 167 (408) (244)% Net loss $ 27,558 $ 22,157 5,401 24% Product Revenue Product revenue for the year ended December 31, 2023 consisted of sales of our GE Atlantic salmon and conventional Atlantic salmon eggs, fry and byproducts.
If we cannot continue as a going concern, our stockholders would likely lose most or all of their investment in us.
If we are unable to generate additional funds in a timely manner, we will exhaust our resources and will be unable to maintain our currently planned operations. If we cannot continue as a going concern, our stockholders would likely lose most or all of their investment in us.
During 2021, we also included the cost of our conventional salmon donation program. As of December 31, 2022 and 2021, we had two and one employees, respectively, dedicated to sales and marketing. We expect our sales and marketing expenses to increase as our production output and revenues grow.
As of December 31, 2023 and 2022, we had one and two employees, respectively, dedicated to sales and marketing. We expect our sales and marketing expenses to increase as our production output and revenues grow. 32 Table of Contents Research and Development Expenses We recognize research and development expenses as they are incurred.
Production Costs Production costs include the labor and related costs to grow out our fish, including feed, oxygen, and other direct costs; overhead; and the cost to process and ship our products to customers.
With the expected sale of our Indiana farm, our product revenues will consist of conventional Atlantic salmon eggs and fry for the near term. Product Costs Product costs include the labor and related costs to grow out our fish, including feed, oxygen, and other direct costs; overhead; and the cost to process and ship our products to customers.
Cash Flows The following table sets forth the significant sources and uses of cash for the periods set forth below (in thousands): Year Ended ‎ December 31, Dollar % 2022 2021 Change Change Net cash (used in) provided by: Operating activities $ (21,007) $ (20,472) (535) 3% Investing activities 34,350 (107,539) 141,889 (132)% Financing activities (162) 121,179 (121,341) (100)% Effect of exchange rate changes on cash 3 36 (33) (92)% Net increase in cash $ 13,184 $ (6,796) 19,980 (294)% Cash Flows from Operating Activities Net cash used in operating activities during the year ended December 31, 2022, was primarily comprised of our $22.2 million net loss, offset by non-cash depreciation and stock compensation charges of $2.6 million and increased by working capital uses of $1.4 million.
Cash Flows The following table sets forth the significant sources and uses of cash for the periods set forth below (in thousands): Years Ended ‎ December 31, Dollar % 2023 2022 Change Change Net cash (used in) provided by: Operating activities $ (24,236) $ (21,007) (3,229) 15% Investing activities (68,893) 34,350 (103,243) (301)% Financing activities (309) (162) (147) 91% Effect of exchange rate changes on cash 3 3 - —% Net change in cash $ (93,435) $ 13,184 (106,619) (809)% Cash Flows from Operating Activities Net cash used in operating activities during the year ended December 31, 2023, was primarily due to our $27.6 million net loss, partially offset by non-cash depreciation and share-based compensation charges of $2.7 million and decreased by working capital sources of $0.6 million.
General and Administrative Expenses General and administrative expenses consist primarily of salaries and related costs for employees in executive, corporate, and finance functions. Other significant general and administrative expenses include corporate governance and public company costs, regulatory affairs, rent and utilities, insurance, and legal services.
Other significant general and administrative expenses include corporate governance and public company costs, regulatory affairs, rent and utilities, insurance, and legal services. We had 15 and 16 employees in our general and administrative group at December 31, 2023 and 2022, respectively.
Increases included headcount additions, feed costs and other direct supplies, as well as the costs for processing and transportation to bring our product to market. These cost increases were partly offset by an increase in the NRV of the fish in process inventory, which allowed more production cost to be absorbed into inventory.
Increases included headcount additions, feed costs and other direct supplies, maintenance and repairs, as well as the costs for processing and transportation to bring our product to market.
Interest income in 2022 was up considerably over 2021, due to our investments in marketable securities. Liquidity and Capital Resources Sources of Liquidity We have incurred losses from operations since our inception in 1991, and, as of December 31, 2022, we had an accumulated deficit of $193 million.
Liquidity and Capital Resources Sources of Liquidity We have incurred losses from operations since our inception in 1991, and, as of December 31, 2023, we had an accumulated deficit of $221 million. We expect to continue to experience losses from operations for the foreseeable future and we will require substantial additional cash to fund our business plans.
Research and Development Expenses As of December 31, 2022 and 2021, we employed twelve and nineteen scientists and technicians, respectively, at our facilities on Prince Edward Island to oversee the lines of fish we maintain for research and development purposes. We recognize research and development expenses as they are incurred.
As of December 31, 2023 and 2022, we employed six and 12 scientists and technicians, respectively, at our farms to oversee the lines of fish we maintain for research and development purposes. General and Administrative Expenses General and administrative expenses consist primarily of salaries and related costs for employees in executive, corporate, and finance functions.
Net of this charge, sales and marketing expenses increased in the current period, due to an increase in headcount and marketing program costs. Research and Development Expenses Research and development expenses for the year ended December 31, 2022 , were down from the corresponding period in 2021 due to the transition of broodstock husbandry costs to production operations.
Sales and Marketing Expenses Sales and marketing expenses for the year ended December 31, 2023 were down from the year ended December 31, 2022, primarily due to a decrease in marketing program costs.
Year Ended ‎ December 31, % 2022 2021 Change Change Harvest of GE Atlantic salmon (kg of live weight) 512,274 288,362 223,912 78% Product revenue GE Atlantic salmon revenue $ 2,914 $ 783 $ 2,131 272% Non-GE Atlantic salmon revenue 187 391 (204) (52)% Other revenue 36 1 35 3,500% Total product revenue $ 3,137 $ 1,175 $ 1,962 167% Production Costs Production costs for the year ended December 31, 2022, were up from the corresponding period in 2021, due to production cost increases for labor and other direct costs related to increased production output.
Years Ended ‎ December 31, % 2023 2022 Change Change Harvest of GE Atlantic salmon (mt) 492 430 62 14% Product revenue GE Atlantic salmon revenue $ 2,332 $ 2,913 $ (581) (20)% Non-GE Atlantic salmon revenue 124 187 (63) (34)% Other revenue 17 37 (20) (54)% Total product revenue $ 2,473 $ 3,137 $ (664) (21)% Product Costs Product costs for the year ended December 31, 2023 were up from the year ended December 31, 2022, due to production cost increases for labor and other direct costs related to increased production output and inflation.
General and Administrative Expenses General and administrative expenses for the year ended December 31, 2022, were up from the corresponding period in 2021 due to increases in personnel, auditing and legal fees, insurance costs, taxes and stock compensation charges, partly offset by decreases in consulting and outside advisory fees.
During the current period, research activities continued in key strategic areas of genomics and breeding, gene editing, fish health and operational optimization. 34 Table of Contents General and Administrative Expenses General and administrative expenses for the year ended December 31, 2023 were up from the year ended December 31, 2022, due to increases in legal fees, state excise taxes, personnel, audit fees, consulting fees and share-based compensation charges.
We had sixteen and fourteen employees in our general and administrative group at December 31, 2022 and 2021, respectively. Other Income (Expense), Net Interest expense includes the interest on our outstanding loans and the amortization of debt issuance costs.
Other Income (Expense), Net Interest expense includes the interest on our outstanding loans and the amortization of debt issuance costs. Other income (expense) includes bank charges, fees, interest income, miscellaneous gains or losses on asset disposals and realized gains or losses on investments.
We expect to continue to experience losses from operations for the foreseeable future and we will require substantial additional cash to fund our business plans. Liquidity has primarily come from equity financings, supplemented by debt transactions.
Liquidity has primarily come from equity financings, supplemented by debt transactions. During 2023 and 2022, we received $418 thousand and $476 thousand, respectively, in debt proceeds on an existing loan facility. In the future, we expect to use both debt and equity issuances to fund our continued operations and growth opportunities.
Removed
COVID-19 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.
Added
Company Update We have 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.
Removed
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 we continue to monitor their status.
Added
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.
Removed
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. Inflation Recently elevated global inflation rates continue to impact all areas of our business.
Added
Consequently, we require new financing to provide liquidity for working capital and to fund the construction of our farm in Pioneer, Ohio.
Removed
During the next several years, we expect that our working capital requirements and our capital expenditures will increase substantially due to our plans to construct new land-based production farms. Product Revenue We currently generate product revenue through the sales of our GE Atlantic salmon, conventional Atlantic salmon eggs and fry, and salmon byproducts.
Added
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. Inflation Recently elevated global inflation rates continue to impact all areas of our business.
Removed
We measure our harvest volume of GE Atlantic salmon in terms of metric tons (“mt”) of live weight taken out of the water. We expect revenues to grow modestly in 2023 and in the future, we believe that our revenue will depend upon the number and capacity of grow-out farms we have in operation and the market acceptance we achieve.
Added
We have therefore established a standard procedure to estimate the biomass of fish on hand using counting and sampling techniques. Historically, our estimate of fish biomass has had a variability of approximately 4%.
Removed
However, we expect the repairs to continue into Q2 of 2023, which will continue to impact the number of fish harvested.
Added
The decrease in revenue during the year ended December 31, 2023 was primarily due to changes in product mix during the first half of 2023 and decreases in market prices for Atlantic salmon in the second half of 2023.
Removed
The improvement in NRV was due to higher market pricing and lower costs per pound for transportation and processing.
Added
Research and Development Expenses Research and development expenses for the year ended December 31, 2023 were down from the year ended December 31, 2022, due to the receipt of provincial government grant funds in support of local hiring and a reduction in outside research costs.
Removed
Sales and Marketing Expenses Sales and marketing expenses for the year ended December 31, 2022, were down from the corresponding period in 2021 primarily due to the non-recurrence of an expense incurred during 2021 related to the donation of conventional Atlantic salmon to local food charities.
Added
Gross research and development expenses for the year ended December 31, 2023, excluding the grant funds, were $816 thousand versus $935 thousand in 2022.
Removed
Net of this change, research and development expenses for the current period remained relatively unchanged as compared with the prior period. Cost increases for headcount and lab supplies were offset by decreases in field trials and outside contract service fees.
Added
The change in total other (expense) income in the year ended December 31, 2023, compared to the year ended December 31, 2022, was primarily due to interest income, which was down considerably in 2023 compared to 2022, due to a reduction in marketable securities.
Removed
During the current period, research activities included feed 34 Table of Contents nutrition trials, discovery research in salmon immunology and work on a genome study to identify genes associated with economically important traits in salmon.
Added
As of December 31, 2023, we had $9.2 million in cash, cash equivalents, and restricted cash. Our principal contractual commitments include capital expenditure obligations, repayments of debt and related interest, and payments under operating leases.
Removed
During 2021, we completed a public equity offering of 14,950,000 shares of common stock for net proceeds of approximately $119.1 million and we issued 530,414 shares of common stock through the conversion of outstanding warrants for total proceeds of $1.7 million. During 2022, we received $476 thousand in debt proceeds from the draw-down on an existing loan facility.
Added
The decrease in cash provided by working capital was due primarily to a decrease in inventory and prepaid expenses, partially offset by an increase in accrued expenses. We expect cash flows from operating activities to remain negative and roughly flat in the near term.
Removed
In the future, we expect to use bond issuances to fund the construction of our farms and we may use additional equity issuances to supplement these costs or to fund other growth opportunities. As of December 31, 2022, we had $102.6 million in cash and cash equivalents, and restricted cash.
Added
Cash Flows from Investing Activities During 2023, we used $65.1 million for construction charges and equipment deposits for our Ohio farm, and $2.2 million and $1.6 million for equipment purchases and deposits for our Indiana and Rollo Bay farms, respectively.
Removed
We expect cash flows from operating activities to remain negative and roughly consistent until our Ohio farm is in operation.
Added
During 2022, we received approximately $476 thousand in proceeds from new debt, and we repaid $640 thousand of outstanding debt. Future Capital Requirements Since inception, we have incurred cumulative net losses and negative cash flows from operating activities and we expect this to continue for the foreseeable future.
Removed
During 2021, we used $5.7 million for renovations to our Indiana farm and Fortune Bay hatchery sites and for construction charges at our Rollo Bay farm, $45 thousand for deposits on equipment purchases and $101.8 million on the net purchase of marketable securities.
Added
As of December 31, 2023, we had $9.2 million of cash, cash equivalents, and restricted cash, a significant portion of which is required to fund our current liabilities and other contractual obligations.
Removed
We expect expenditures on capital projects to increase in future periods as we continue construction of our Ohio farm.
Added
Our ability to continue as a going concern is dependent upon our ability to raise additional capital, and there can be no assurance that such capital will be available in sufficient amounts, on a timely basis, on terms acceptable to us, or at all.
Removed
During 2021, we received approximately $119.1 million in net proceeds from the issuance of shares of common stock in a public equity offering, $1.7 million from the exercise of warrants, and $606 thousand from new debt. This was offset by $272 thousand in debt repayment.
Added
This raises substantial doubt about our ability to continue as a going concern within one year after the date that the accompanying consolidated financial statements are issued.
Removed
Future Capital Requirements In February 2021, we completed an equity raise with net proceeds of $119.1 million and we had $102.6 million of cash, cash equivalents, and restricted cash as of December 31, 2022.
Removed
Our plans include the continued construction of a 10,000 metric ton salmon farm in Ohio at a total project cost that is estimated to range from $375 million to $395 million. We plan to use cash-on-hand and debt financing to fund the construction.
Removed
While we have committed a significant amount of our current cash to fund a portion of the project, if necessary, we can utilize that cash for working capital purposes, and therefore we believe we have sufficient cash to meet our requirements for at least the next twelve months from the filing date of these consolidated financial statements.
Removed
In 2020, we entered into a term loan agreement with First Farmers Bank and Trust in the amount of $4 million, which is secured by the assets of our Indiana subsidiary and a corporate guarantee.
Removed
The agreement contains certain financial and non-financial covenants, which if not met, could result in an event of default pursuant to the terms of the loan. At December 31, 2022, the Indiana subsidiary was in compliance with its loan covenants.
Removed
If we are unable to generate additional funds in the future through financings, sales of our products, government grants, loans, or from other sources or transactions, we will exhaust our resources and will be unable to maintain our currently planned operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAs of December 31, 2022 and 2021, we had $5.1 million and $5.8 million, respectively, in interest-bearing debt instruments on our consolidated balance sheet.
Biggest changeAs of December 31, 2023 and December 31, 2022, we had $4.6 million and $5.1 million, respectively, in interest-bearing debt instruments on our consolidated balance sheet. All of our interest-bearing debt is at fixed rates, except for our loan with First Farmers’ Bank and Trust, which will have a rate reset in July 2025.
Net translation gains or losses are adjusted directly to a separate component of other comprehensive loss within shareholders’ equity.
Net translation gains or losses are adjusted directly to a separate component of other comprehensive loss within stockholders’ equity.
The functional currency of our Canadian subsidiary is the Canadian Dollar, and the functional currency of our U.S. and Brazil subsidiaries is the U.S. Dollar.
Foreign Currency Exchange Risk Our functional currency is the U.S. Dollar. The functional currency of our Canadian subsidiary is the Canadian Dollar, and the functional currency of our U.S. and Brazil subsidiaries is the U.S. Dollar.
Removed
All of our interest-bearing debt is at fixed rates, except for our loan with First Farmers’ Bank and Trust which has a rate reset in July 2025. 36 Table of Contents Foreign Currency Exchange Risk Our functional currency is the U.S. Dollar.