AQUABOUNTY TECHNOLOGIES INC

Condensed Consolidated Balance Sheets

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Condensed Consolidated Statements of Operations and Comprehensive 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 a 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 the Company’s 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 half 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 $373 million and expects that this will continue for the foreseeable future. As of June 30, 2025, the Company had $730 thousand 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.

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 June 30, 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 Loss Per Share

Basic and diluted net loss per share available to common stockholders has been calculated by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Basic net loss per share is based solely on the number of shares of common stock outstanding during the period. The calculation of fully diluted net loss per share would include 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 all periods presented, all potential shares of common stock are considered anti-dilutive and are excluded from the calculation of diluted net loss per share.

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 June 30, 2025 and December 31, 2024.

Included in the table for Current Assets Held for Sale is $100 thousand and $6.3 million of the Ohio Equipment Assets for June 30, 2025 and December 31, 2024, respectively. During the six months ended June 30, 2025, the Company sold certain Ohio Equipment Assets for gross proceeds of $5.0 million. The remaining assets were determined to have a fair value of $100 thousand and a non-cash impairment charge of $1.2 million was recorded in continuing operations.

The table below presents the major areas of the balance sheet that constitute assets and liabilities held for sale.

The two tables below present the major areas of the income statement and the cash flow statement, respectively, 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 $715 thousand, for the six months ended June 30, 2025 and 2024, respectively.

The Company’s decision in 2024 to sell certain Ohio Equipment Assets, the Indiana Farm 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. The Company 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, the Company proceeded to calculate the fair values of these different asset groups, representing a Level 3 fair value measurement. The Company recorded non-cash impairment charges of $101.9 million against continuing operations during 2024, in addition to reclassifying $6.3 million of Ohio Equipment Assets to Assets Held for Sale as of December 31, 2024.

As of June 30, 2025, construction in process related only to the Ohio Farm Site, and an additional$930 thousand has been contractually committed.

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.

In October 2024, the Company entered into a secured promissory note (“Term Note”) for $1.3 million with a vendor for services provided during 2024. The Term Note is secured by the assets of the Company’s Ohio Farm Project and is due in full on December 31, 2025, withtwo intermediate scheduled payments. On March 18, 2025, an amendment to the Term Note was executed to alter the amount and timing of the intermediate payments. The Term Note carriesno interest, except in the event of a default, in which case any amount due for payment will be assessed accrued interest at 3% per annum. At June 30, 2025, the Company was in default on its scheduled payments, and on July 22, 2025, the Term Note was again amended to alter the timing of the remaining payments and the Company is in compliance with the terms of the loan as amended (see Note 14).

On June 11, 2025, the Company converted $7.4 million of outstanding accounts payable with a vendor into a secured promissory note (“Vendor Note”). The Vendor Note is secured by the assets of the Company’s Ohio Farm Site, has a 12-month term and carries an 8% interest rate, with thefirst six-months interest free.

The Company recognized interest expense of $0 and $922 thousand for the six months ended June 30, 2025 and 2024, respectively, on its interest-bearing debt.

Principal payments due on the debt are as follows:

9. Leases

The tables below summarize the Company’s outstanding lease liabilities at June 30, 2025 and December 31, 2024 and its lease expense for the six months ended June 30, 2025 and 2024:

10. Stockholders’ Equity

Share-based compensation

At June 30, 2025, the Company has reserved 46,495 and 0 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 100,128 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 six months ended June 30, 2025, is as follows:

During the six months ended June 30, 2025 and 2024, the Company expensed $33 thousand and $97 thousand, respectively, related to the stock awards.

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 six months ended June 30, 2025.

There wasno intrinsic value for options outstanding or exercisable at June 30, 2025 and December 31, 2024.

The following table summarizes information about options outstanding and exercisable at June 30, 2025:

Total share-based compensation on stock-option grants amounted to $24 thousand and $77 thousand for the six months ended June 30, 2025 and 2024, respectively. At June 30, 2025, the balance of unearned share-based compensation to be expensed in future periods related to unvested share-based awards was $19 thousand. The period over which the unearned share-based compensation is expected to be earned is approximately 0.7 years.

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 June 30, 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 a net loss for the six months ended June 30, 2025, and is forecasting losses through the remainder of the year, 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 June 30, 2025, the Company hadno unrecognized income tax benefits that would reduce the Company’s effective tax rate if recognized.

14. Subsequent Events

On July 22, 2025, the Company executed an amendment on its secured Term Note with a vendor. The Company was in default on its scheduled loan payments, which among other things could have accelerated the due date on the full balance of the loan. The amendment provided for a new payment schedule and the Company is in compliance with the terms of the loan as amended.

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