AQUABOUNTY TECHNOLOGIES INC

Condensed Consolidated Balance Sheets

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Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

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Condensed Consolidated Statements of Changes in Stockholders’ Equity

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Condensed Consolidated Statements of Cash Flows

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Notes to the condensed consolidated financial statements

(unaudited)

1. Nature of Business and Organization

AquaBounty Technologies, Inc. (the “Parent” and, together with its wholly owned subsidiaries, the “Company”) was incorporated in December 1991 in the State of Delaware for the purpose of conducting research and development of the commercial viability of a group of proteins commonly known as antifreeze proteins. In 1996, the Parent obtained the exclusive licensing rights for a gene construct (transgene) used to create a breed of farm-raised Atlantic salmon that exhibit growth rates that are substantially faster than conventional Atlantic salmon.

The Company has historically pursued a growth strategy that included the construction of large-scale recirculating aquaculture system (“RAS”) farms for producing its genetically engineered Atlantic salmon (“GE Atlantic salmon”). The Company had commenced construction of its 10,000 metric ton farm in Pioneer, Ohio (“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 its ability to pursue municipal bond financing, which was a necessary component of its funding strategy. The Company subsequently engaged an investment bank to pursue a range of funding and strategic alternatives and to assist management in the prioritization of the Company’s core assets. These efforts resulted in the sale of the Company’s grow-out farm in Indiana (“Indiana Farm”) in July 2024, recurring sales throughout the remainder of 2024 and the first quarter of 2025 of selected equipment originally intended for the Ohio Farm Project (“Ohio Equipment Assets”), and the sale of the Company’s Canadian subsidiary, including the broodstock farms owned by the Canadian subsidiary in Prince Edward Island, Canada (“Canadian Farms”) and its intellectual property for GE Atlantic salmon, along with trademarks and patents (“Corporate IP”) in March 2025. After completion of these transactions, the Company’s primary remaining asset is its investment in the Ohio Farm Project, consisting of the remaining Ohio Equipment Assets and the land and construction in process (“Ohio Farm Site”). The Company continues to work with its investment bank to identify the optimal path forward for realizing the potential of this asset, either through new investment, partnership or other strategic options.

2. Going Concern Uncertainty

Since inception, the Company has incurred cumulative net losses of $369 million and expects that this will continue for the foreseeable future. As of March 31, 2025, the Company had $1.4 million in cash and cash equivalents on its condensed consolidated balance sheet.

The Company’s ability to continue as a going concern is dependent upon its ability to raise additional capital, including its ability to sell assets to generate liquidity to fund ongoing operations, and there can be no assurance that such capital will be available in sufficient amounts, on a timely basis, or on terms acceptable to the Company, or at all. This raises substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the accompanying condensed consolidated financial statements are issued. The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business and do not include any adjustments that might result from the outcome of this uncertainty.

During the year ended December 31, 2024, the Company’s management conducted a comprehensive process to explore and evaluate strategic alternatives to raise funds with the goal of maximizing stockholder value. Potential alternatives that were evaluated included, but were not limited to, equity or debt financing, a merger, and the sale of all or part of the Company.

3. Basis of Presentation

The unaudited interim condensed consolidated financial statements include the accounts of AquaBounty Technologies, Inc. and its wholly owned direct subsidiaries. All intercompany transactions and balances have been eliminated upon consolidation.

The unaudited interim condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States (“GAAP”) consistent with those applied in, and should be read in conjunction with, the Company’s audited financial statements and related notes for the year ended December 31, 2024. The unaudited interim condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the Company’s financial position as of March 31, 2025, results of operations and cash flows for the interim periods presented, and are not necessarily indicative of results for subsequent interim periods or for the full year. The unaudited interim condensed consolidated financial statements do not include all of the information and notes required by GAAP for complete financial statements, as allowed by the relevant SEC rules and regulations; however, the Company believes that its disclosures are adequate to ensure that the information presented is not misleading.

Discontinued Operations

As noted above, the Company sold its Indiana Farm in July 2024 and its Canadian Farms in March 2025. These farms have been designated as discontinued operations in these interim condensed consolidated financial statements for all periods presented (see Note 5).

Net Income (Loss) Per Share

Basic and diluted net income or loss per share available to common stockholders has been calculated by dividing net income or loss by the weighted average number of shares of common stock outstanding during the period. Basic net income or loss per share is based solely on the number of shares of common stock outstanding during the period. The calculation of fully diluted net income per share includes the number of shares of common stock issuable upon the exercise of vested options with an exercise price less than the fair value of the common stock and unvested stock awards, less the hypothetical number of shares of common stock that could be repurchased with stock option proceeds and unrecognized stock compensation.

For the periods with a net loss, all potential shares of common stock are considered anti-dilutive and are excluded from the calculation of diluted net loss per share. For the periods with net income, all potential shares of common stock would be anti-dilutive and are excluded from the calculation of diluted net income per share, because the Company hasno vested options with an exercise price less than the fair value of the common stock and unrecognized stock compensation on unvested stock awards would be able to purchase more shares of common stock than the number of unvested stock awards.

The following table contains the Company’s potentially dilutive securities:

Accounting Pronouncements

In November 2024, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2024-03, Disaggregation of Income Statement Expenses, to enhance the transparency of certain expense disclosures. The update requires disclosure of specific expense categories in the notes to the financial statements at interim and annual reporting periods. The update requires disaggregated information about certain prescribed expense categories underlying any relevant income statement expense caption. The amendments in this update are effective for public entities for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027. The amendments may be adopted either prospectively or retrospectively. Early adoption is permitted. The Company is currently evaluating the impacts of this update and plans to adopt these amendments for annual disclosures for the year ended December 31, 2027 and interim disclosures in the year ended December 31, 2028.

Management does not expect any other recently issued, but not yet effective, accounting standards to have a material effect on its results of operations or financial condition.

4. Risks and Uncertainties

The Company is subject to risks and uncertainties associated with its current operations. Such risks and uncertainties include, but are not limited to: (i) timing of securing additional sources of cash; (ii) realization of asset values different than those recorded on the Company’s consolidated balance sheet; and (iii) stockholder approval of any plans made by the Company’s management and board of directors that require stockholder approval.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to credit risk consist principally of cash and cash equivalents. This risk is mitigated by the Company’s policy of maintaining all balances with highly rated financial institutions and investing in cash equivalents with maturities of less than 90 days. The Company’s cash balances may at times exceed insurance limitations.

5. Discontinued Operations and Assets Held for Sale

In July 2024, the Company sold its Indiana Farm for a sale price of $9.5 million less transaction expenses of $305 thousand, which included certain Ohio Equipment Assets with a carrying value of $13.0 million that had been purchased for the Company’s Ohio Farm Project. In December 2024, the Company announced the winddown of its Canadian fish rearing operations and sold its Canadian Farms in March 2025 for a sale price of $5.2 million, including the assumption of $3.2 million in outstanding loans, less transaction expenses of $216 thousand. These decisions by the Company represented a strategic shift that has had a major effect on the Company’s operations and financial results. As a result, the operations of the Indiana Farm and the Canadian Farms have been reclassified as discontinued operations on a retrospective basis for all periods presented. Accordingly, the assets and liabilities of these operations are separately reported as “assets and liabilities held for sale” as of March 31, 2025 and December 31, 2024.

Included in the table for Current Assets Held for Sale is $4.1 million and $6.3 million of the Ohio Equipment Assets for March 31, 2025 and December 31, 2024, respectively. During the period ended March 31, 2025, the Company sold certain Ohio Equipment Assets for net proceeds of $2.3 million that were partially impaired in 2024, and further impaired other Ohio Equipment Assets. The net result was a gain recognized on the sale of $307 thousand.

Provided below are the major areas of the financial statements that constitute discontinued operations.

6. Prepaid and Other Current Assets

Major classifications of prepaid and other current assets are summarized as follows:

7. Property, Plant and Equipment

Major classifications of property, plant and equipment are summarized as follows:

Depreciation expense was $0 and $572 thousand, for the three months ended March 31, 2025 and 2024, respectively.

As of March 31, 2025, construction in process included $22.0 million for construction related to the Ohio farm site. An additional$3.8 million has been contractually committed for these farm sites as of March 31, 2025.

8. Debt

On February 14, 2025, the Atlantic Canada Opportunities Agency (“ACOA”) terminated the outstanding loan with the Company’s Canadian subsidiary under its Atlantic Innovation Fund (“AIF”) Grant in the amount of C$2.9 million ($2.0 million). The AIF Grant was awarded in 2009 and provided a contribution towards the funding of a research and development project. Repayment was to be based on royalties from the resulting products from the research, however no product from the research was commercialized.

The Company recognized interest expense of $0 and $42 thousand for the three months ended March 31, 2025 and 2024, respectively, on its interest-bearing debt.

Principal payments due on the long-term debt are as follows:

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9. Leases

The tables below summarize the Company’s outstanding lease liabilities at March 31, 2025 and December 31, 2024 and its lease expense for the three months ended March 31, 2025 and 2024:

10. Stockholders’ Equity

Share-based compensation

At March 31, 2025, the Company has reserved 50,378 and 8,334 shares of common stock issuable upon the exercise of outstanding stock options and unvested stock awards, respectively, under its 2006 and 2016 Equity Incentive Plans. An additional 96,245 shares of common stock are reserved for future equity awards under the 2016 Equity Incentive Plan.

Unvested Stock Awards

A summary of the Company’s unvested stock awards for the three months ended March 31, 2025, is as follows:

During the three months ended March 31, 2025 and 2024, the Company expensed $24 thousand and $46 thousand, respectively, related to the stock awards. At March 31, 2025, the balance of unearned share-based compensation to be expensed in future periods related to the stock awards is $9 thousand. The period over which the unearned share-based compensation is expected to be earned is approximately 0.2 years.

Stock options

The Company’s option activity is summarized as follows:

Unless otherwise indicated, options issued to employees, members of the Board of Directors, and non-employees generally vest over a period ofone year tothree years and are exercisable for a term of 10 years from the date of issuance. There wereno stock options granted during the three months ended March 31, 2025.

There wasno intrinsic value for options outstanding or exercisable at March 31, 2025 and December 31, 2024.

The following table summarizes information about options outstanding and exercisable at March 31, 2025:

Total share-based compensation on stock-option grants amounted to $16 thousand and $59 thousand for the three months ended March 31, 2025 and 2024, respectively. At March 31, 2025, the balance of unearned share-based compensation to be expensed in future periods related to unvested share-based awards was $26 thousand. The period over which the unearned share-based compensation is expected to be earned is approximately 1.0 year.

11. Commitments and Contingencies

The Company recognizes and discloses commitments when it enters into executed contractual obligations with other parties. The Company accrues contingent liabilities when it is probable that future expenditures will be made and such expenditures can be reasonably estimated.

The Company is subject to legal proceedings and claims arising in the normal course of business. Management believes that final disposition of any such matters existing at March 31, 2025, will not have a material adverse effect on the Company’s financial position or results of operations.

12. Segment Reporting

The Company adopted ASU 2023-07 effective for the annual period beginning January 1, 2024.

The financial information presented to and reviewed by the Company’s chief operating decision maker, who is the interim chief executive officer, chief financial officer and treasurer, is not prepared in accordance with GAAP, therefore, certain accounting policies

of the Company’s single operating and reportable segment differ significantly from those described in the Company’s 2024 Annual Report on Form 10-K, which was filed on March 27, 2025. The significant difference between how management prepares financial information for internal purposes and GAAP is that internal information is focused on overall cash expenditures.

Management monitors the financial results for internal purposes under a cash expenditure approach rather than GAAP, because management believes such results more closely align to how the business is currently managed with consideration of the Company’s overall focus on liquidity.

Management has identified net cash expenditures as the key performance measure that is used for evaluating the business. The chief operating decision maker uses this measure on a monthly basis when assessing performance and when making decisions about how to allocate operating resources, such as payments to vendors.

The Company believes that net cash expenditures, which is a non-GAAP measure, is the most directly comparable measure to GAAP. As such, the required disclosures of reportable segment expenses and segment loss in the tables below are prepared in accordance with the financial information presented to management and reviewed by the Company’s chief operating decision maker on a regular basis.

13. Income Taxes

The Company reported net income for the three months ended March 31, 2025, but is forecasting losses through the remainder of the year ending December 31, 2025, resulting in an estimated net loss for both financial statement and tax purposes for the year ending December 31, 2025. Therefore, no federal or state income taxes are expected andnone have been recorded at this time. Income taxes have been accounted for using the liability method.

Due to the Company’s history of losses since inception, there is not enough evidence at this time to support that the Company will generate future income of a sufficient amount and nature to utilize the benefits of its net deferred tax assets. Accordingly, the deferred tax assets have been reduced by a full valuation allowance, since the Company does not currently believe that realization of its deferred tax assets is more likely than not.

As of March 31, 2025, the Company hadno unrecognized income tax benefits that would reduce the Company’s effective tax rate if recognized.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations