Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes that appear elsewhere in this Annual Report on Form 10‑K. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report on Form 10‑K, particularly in “Risk Factors.”
Company Update
AquaBounty has historically pursued a growth strategy that included the construction of large-scale RAS farms for producing our GE Atlantic salmon. We had commenced construction of our 10,000 metric ton Ohio Farm Project, but paused the construction in June 2023, as the cost estimate to complete the farm continued to substantially increase due to inflation and other factors. Further, these cost increases impaired our ability to pursue municipal bond financing, which was a necessary component of our funding strategy. We subsequently engaged an investment bank to pursue a range of funding and strategic alternatives and to assist management in the prioritization of our core assets. These efforts resulted in the sale of our Indiana Farm in July 2024, recurring sales throughout 2024 and 2025 of selected Ohio Equipment Assets originally intended for the Ohio Farm Project, and the sale of our Canadian Farms, and our Corporate IP in March 2025. After completion of these transactions, our primary remaining asset is our investment in the Ohio Farm Project, consisting of the remaining Ohio Equipment Assets and the Ohio Farm Site. We continue to work with an investment bank to identify the optimal path forward for realizing the potential of this asset, including its possible sale.
Discontinued Operations
As noted above, we sold our Indiana Farm in July 2024, our Canadian Farms in March 2025, and have been selling Ohio Equipment Assets to generate liquidity. In conjunction with the work that our investment bank has done to help us realize the value of our Ohio Farm Project, we received a non-binding Letter of Interest to purchase our Ohio subsidiary. Though this offer is currently being considered by the Company, we determined the actions in 2025 that contributed to receiving the non-binding Letter of Interest to be a triggering event for revaluing these assets and we designated the Ohio Farm Project as a discontinued operation, along with the Indiana Farm and the Canadian Farms in our consolidated financial statements for the years ended December 31, 2025 and 2024 in this Form 10-K (see Note 4 to our consolidated financial statements for additional information).
Impairment Charges on Discontinued Operations
During the second quarter of 2024, we began to market our Indiana Farm for sale. The sale was completed in July and included certain Ohio Equipment Assets that had been purchased for the Ohio Farm Project. Based on the net sale price, we recorded an impairment charge against the Indiana Farm of $22.5 million. We then conducted an impairment analysis of the remaining Ohio Equipment Assets, resulting in an impairment charge of $26.3 million. At that time, we made the decision to continue to sell certain of our Ohio Equipment Assets in order to generate cash for liquidity, and therefore we reclassed our Ohio Equipment Assets as Assets Held for Sale on our consolidated balance sheet.
We continued to sell Ohio Equipment Assets during the remainder of 2024, and based on these additional transactions, we conducted an impairment analysis at year-end on the remaining Ohio Equipment Assets that were held for sale, along with the Ohio Farm Site. As a result of this analysis, we recorded impairment charges of $18.2 million and $57.3 million against the Ohio Equipment Assets and the Ohio Farm Site, respectively.
In December of 2024, we entered into a Letter of Intent with a buyer to purchase the Canadian Farms. The transaction closed in March 2025 and we recorded an impairment charge of $5.4 million based on the net sale price.
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During 2025, we continued to sell Ohio Equipment Assets to generate liquidity and at December 31, 2025, we reassessed the value of the Ohio Farm Project. Based on the potential net sale value of the assets, we recorded an impairment charge of $14.4 million and reclassified the Ohio Farm Project assets as Assets Held for Sale on our consolidated balance sheet.
The table below depicts the impairments charges recorded for our discontinued operations during 2025 and 2024 by asset group totaling $14.4 million and $129.6 million, respectively.
Impairment Charges
Impairment Item
Ohio Equipment Assets
Ohio Farm Site
Indiana Farm
Canadian Farms
Total Discontinued Operations
Financial Overview
With the exit from our fish rearing operations, we have significantly reduced our headcount and on-going operating costs. We maintain a small core group of corporate individuals to oversee our strategic options, our asset sale transactions and our books and records. As of December 31, 2025, we had an accumulated deficit of $388 million and $501 thousand in cash on our consolidated balance sheet. We require new funding to provide liquidity for working capital and to fund our evolving strategic plan. Consequently, 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 acceptable terms, or at all.
Sales and Marketing Expenses
Our sales and marketing expenses have historically included agency fees for investor-related activities. With the sale of our Canadian Farms and the corresponding cessation of our salmon rearing activities in March 2025, we no longer have sales and marketing expenses.
Research and Development Expenses
With the sale of our Canadian Farms and the corresponding cessation of our salmon rearing activities in March 2025, we no longer have research and development operations.
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, rent and utilities, insurance, and legal services. We had three and five employees in our general and administrative group at December 31, 2025 and 2024, respectively. We expect our general and administrative expenses to remain stable until a new strategic direction of the Company is selected.
Asset Impairment
Asset impairment includes the non-cash charges recorded for the sale of our Corporate IP.
Other Income (Expense), Net
Interest expense includes the interest on our loans and accounts payable for our continuing operations. Loan forgiveness relates to the termination of an outstanding loan. Other income (expense) includes bank charges, fees, and interest income from our continuing operations.
Loss from Discontinued Operations
Loss from Discontinued Operations includes all operating costs for our Ohio Farm Project, our Indiana Farm and our Canadian Farms, including fish and egg production costs, sales and marketing, research and development, general and administrative expenses, non-cash long-lived asset impairment charges, a net realizable value adjustment of inventory, interest expense and banking fees.
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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. The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses during the reporting periods. We evaluate these estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are more fully described in Note 2 to our audited consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K, we believe that the following accounting policies and estimates are the most critical for fully understanding and evaluating our financial condition and results of operations.
Valuation of Long-Lived Assets
We evaluate long-lived assets to be held and used, which include property, plant and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Conditions that would necessitate an impairment assessment include a significant decline in the observable market value of an asset, a significant change in the extent or manner an asset is used, or a significant adverse change that would indicate that the carrying amount of an asset or group of assets is not recoverable. Our decision in 2024 to sell certain Ohio Equipment Assets and the Canadian Farms to provide additional liquidity indicated the carrying amount of all Ohio Farm Project property, plant and equipment may not be recoverable. We compared future anticipated undiscounted cash flows for the different Ohio Farm Project asset groups to the carrying value of such asset groups, noting that the carrying value of these assets exceeded the cash flows. Therefore, we proceeded to engage a third-party valuation consultant to assist in the calculation of the fair values of these different asset groups.
Fair value of the Ohio Equipment Assets as of December 31, 2024 was determined based upon our actual experience of similar sales for these assets in 2024 and early 2025. The fair value of the Ohio Farm Site land and construction in process was primarily determined based on the income approach. The income approach is a valuation technique in which fair value is based on forecasted future cash flows, discounted at the appropriate rate of return commensurate with the risk, as well as current rates of return for equity and debt capital as of the valuation date. The forecast used in our estimation of fair value was developed by management based on various established business models, incorporating adjustments to reflect management's planned changes in operations and market considerations. The discount rate utilizes a risk adjusted weighted average cost of capital. To assess the reasonableness of the calculated fair value, we compared the ratio of fair value to carrying value prior to the recording of any impairment to the ratio of net realizable values to the carrying value prior to impairment to our transactions involving the Indiana Farm, Canadian Farms and Ohio Equipment Asset sales.
Fair value of the Ohio Farm Project as of December 31, 2025 was determined based on information derived from our asset sales activities and the non-binding Letter of Interest we received to purchase our Ohio subsidiary. This purchase offer is currently being considered by the Company, as part of our deliberations on our strategic shift. The Ohio Farm Project was classified as a discontinued operation and its assets and liabilities were reclassified as current assets held for sale and current liabilities held for sale, respectively based on the potential sale. The value recorded in our consolidated financial statements under current assets held for sale is the expected net proceeds from the possible sale of $9.6 million.
During the years ended December 31, 2025 and 2024, we recorded $14.4 million and $129.8 million, respectively of impairment charges to write down the carrying value of long-lived assets. See additional discussion regarding this impairment in "Note 4 – Discontinued Operations and Assets Held for Sale” of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K.
Recent Accounting Pronouncements
For a discussion of these items, see “Note 2 – Recently Issued Accounting Standards” of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K.
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Results of Operations
Comparison of the year ended December 31, 2025 to the year ended December 31, 2024.
The following table summarizes our results of operations for the years ended December 31, 2025 and 2024, together with the changes in those items in dollars (in thousands) and as a percentage:
Years Ended
December 31,
Dollar
Change
Change
Costs and expenses
Sales and marketing
Research and development
General and administrative
Asset impairment, net
Operating loss
Other income (expense)
Loss from continuing operations
Loss from discontinued operations
Net loss
Sales and Marketing Expenses
Sales and marketing expenses for the year ended December 31, 2025 decreased by $185 thousand from the year ended December 31, 2024 due to decreases in personnel costs and program spending related to the sale of our Indiana Farm and Canadian Farms. We are no longer incurring sales and marketing expenses.
Research and Development Expenses
There were no research and development expenses for the year ended December 31, 2025, as we no longer have research and development operations after the sale of our Canadian Farms and the corresponding cessation of our salmon rearing activities.
General and Administrative Expenses
General and administrative expenses for the year ended December 31, 2025 decreased $5.0 million from the year ended December 31, 2024, primarily due to reductions in personnel costs, legal fees, state excise tax liabilities, share-based compensation costs, professional fees, audit fees, and travel, partly offset by legal settlement expenses.
Asset Impairment
There were no asset impairment charges for continuing operations for the year ended December 31, 2025. For the year ended December 31, 2024, we recorded a non-cash impairment charge of $191 thousand against Corporate IP.
Other Income (Expense)
Other expense for 2025 and 2024 is comprised of interest income, interest on debt, and bank charges. Other income for 2025 is related to the forgiveness of an outstanding loan.
Loss from Discontinued Operations
The loss from discontinued operations for the year ended December 31, 2025 was significantly lower than for the year ended December 31, 2024, as the Indiana Farm and the Canadian Farms were sold in July 2024 and March 2025, respectively. The loss in 2025 is primarily due to a non-cash asset impairment charge of $14.4 million recorded against the Ohio Farm Project in conjunction with its potential sale.
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Liquidity and Capital Resources
Sources of Liquidity
We have incurred losses from operations since our inception in 1991, and, as of December 31, 2025, we had an accumulated deficit of $388 million. We expect to continue to experience significant losses for the foreseeable future, and we will require additional cash to provide liquidity for working capital and to fund our evolving strategic plan. Liquidity has primarily come from equity financings, supplemented by debt transactions and asset sales.
During 2025 and 2024, we received $3.3 million and $6.9 million, respectively, in debt proceeds. During 2025 and 2024, we sold $7.1 million and $10.5 million, respectively of assets. In the future, we expect to use a combination of asset sales and debt and equity issuances to fund our continuing operations.
As of December 31, 2025, we had $501 thousand in cash balances.
Our principal contractual commitments include 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).
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
Change
Change
Net cash (used in) provided by:
Operating activities
Investing activities
Financing activities
Effect of exchange rate changes on cash
Net change in cash
Cash Flows from Operating Activities
Net cash used in operating activities during the year ended December 31, 2025, was primarily due to our $18.5 million net loss, offset by non-cash share-based compensation charges of $71 thousand and long-lived asset impairment charges of $14.4 million, and increased by loan forgiveness and other non-cash gains of $2.4 million and working capital uses of $2.4 million. Spending on both continuing and discontinued operations decreased in the current year, due to the sales of the Indiana Farm and the Canadian Farms, and the associated reductions in personnel, marketing programs, outside research projects, professional services, and share-based compensation. The decrease in c ash related to working capital uses was primarily due to reductions in accounts payable and accrued liabilities and increases in prepaid and other assets.
Net cash used in operating activities during the year ended December 31, 2024, was primarily due to our $149.2 million net loss, partially offset by non-cash depreciation and share-based compensation charges of $1.2 million, long-lived asset impairment charges of $129.8 million, and working capital sources of $4.3 million. Spending on both continuing and discontinued operations decreased in 2024 as compared to 2023, before the recording of non-cash impairment charges, due to the sale of the Indiana Farm, and reductions in personnel, marketing programs, outside research projects, professional services, and share-based compensation. The increase in cash provided by working capital sources was due to reductions in inventory and other current assets, along with increases in accounts payable and accrued expenses.
Cash Flows from Investing Activities
Net cash provided by investing activities was $7.1 million during the year ended December 31, 2025, compared to $7.6 million during the year ended December 31, 2024. During 2025, we received $7.1 million from the sale of our Canadian Farms and certain Ohio Equipment Assets. During 2024, we used $2.9 million for the purchase of property, plant and equipment at our farm sites, and we received $10.5 million from the sale of our Indiana Farm and certain Ohio Equipment Assets.
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Cash Flows from Financing Activities
Net cash provided by financing activities was $1.9 million during the year ended December 31, 2025, compared to net cash used in financing activities of $2.7 million during the year ended December 31, 2024. During 2025, we received $3.3 million in proceeds from new debt, and we repaid $1.4 million of outstanding debt. During 2024, we received $6.9 million in proceeds from new debt, and we repaid $9.6 million 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. As of December 31, 2025, we had $501 thousand in cash balances. 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. 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.
In April 2024, we entered into a Loan Agreement with JMB Capital Partners Lending, LLC to fund working capital through a secured term loan of up to $10 million that was scheduled to mature on July 31, 2024 or, if earlier, upon the sale of certain collateral or upon an Event of Default (as defined in the Loan Agreement). Of the total loan amount, $5 million was advanced in April 2024 and $1.5 million was advanced in July 2024. The loan bore interest at a rate of 15% on its outstanding principal balance and was subject to a commitment fee equal to 5% and an exit fee equal to 8%. Of the initial loan advancement, approximately $2.8 million was used to pay the remaining outstanding balance of our term loan with First Farmers Bank & Trust, upon which the $1 million of restricted cash held by us as of December 31, 2023 was no longer deemed to be restricted. The outstanding loan balance of $6.5 million was repaid on July 26, 2024 from the net proceeds of the Indiana farm sale.
During 2024, we completed the sale of our Indiana Farm, along with certain Ohio Equipment Assets for net proceeds of $9.2 million. During 2025, we completed multiple sales of certain Ohio Equipment Assets for cumulative gross proceeds of $5.0 million and we completed the sale of our Canadian Farms for gross proceeds of $2.1 million. In October 2025, we completed an issuance of senior notes for net proceeds of $3.3 million. We plan to continue to sell assets, or to issue equity or debt securities to increase our cash liquidity and fund our evolving strategic plan.
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 sales of non-core assets, equity offerings, debt financings, government or other third-party funding, strategic alliances, and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of holders of our common stock will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of holders of our common stock. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends. If we raise additional funds through government or other third-party funding, marketing and distribution arrangements, or other collaborations, strategic alliances, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs, or product candidates or to grant licenses on terms that may not be to 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.
