AQUABOUNTY TECHNOLOGIES INC

Nature of business

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 2024 and 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 as of December 31, 2025 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 an investment bank to identify the optimal path forward for realizing the potential of this asset.

Going Concern Uncertainty

Since inception, the Company has incurred cumulative net losses of $388 million and expects that this will continue for the foreseeable future. As of December 31, 2025, the Company had $501 thousand in cash on its 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. Limited operating assets, dependency on capital raising activities and cumulative net losses raises substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the accompanying consolidated financial statements are issued. The accompanying 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, 2025, the Company’s management continued to sell assets to generate cash for working capital, while exploring 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.

During 2025, the Company completed multiple sales of certain Ohio Equipment Assets for cumulative gross proceeds of $5.0 million and the sale of the Canadian Subsidiary for gross proceeds of $2.1 million. On October 28, 2025, the Company completed an issuance of $4.0 million in senior notes. The net proceeds of $3.3 million were used for working capital and for the payment of certain outstanding liabilities.

Basis of presentation

The consolidated financial statements include the accounts of the Parent and its wholly owned subsidiaries. The entities are collectively referred to herein as the “Company.” All inter-company transactions and balances have been eliminated upon consolidation.

2. Summary of significant accounting policies

Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of expenses during the reporting periods. Actual results could differ from those estimates.

Comprehensive loss

The Company displays comprehensive loss and its components as part of its consolidated financial statements. Comprehensive loss consists of net loss and other comprehensive income (loss). Other comprehensive income (loss) includes foreign currency translation adjustments.

Foreign currency translation

The functional currency of the Parent and U.S. subsidiaries is the US Dollar. The functional currency of the Canadian Subsidiary was the Canadian Dollar (C$). For the Canadian Subsidiary, assets and liabilities were translated at the exchange rates in effect at the balance sheet date, equity accounts were translated at the historical exchange rate, and the income statement accounts were translated at the average rate for each period during the year. Net translation gains or losses were adjusted directly to a separate component of other comprehensive income (loss) within stockholders’ equity. With the sale of the Canadian Subsidiary in March 2025, the Company does not expect to incur foreign translation gains or losses in the future.

Cash equivalents

The Company considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents. Cash equivalents consist primarily of business savings accounts, certificates of deposit and money market accounts.

Fair Value of Financial instruments

The Company groups its financial instruments measured at fair value, if any, in three levels based on the markets in which the instruments are traded and the reliability of the assumptions used to determine fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial instruments with readily available quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgement used in measuring fair value. The three levels of the fair value hierarchy are as follows:

Level 1: Inputs to the valuation methodology are quoted prices, unadjusted, for identical assets or liabilities in active markets.

Level 2: Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or inputs derived principally from, or that can be corroborated by, observable market data by correlation or other means.

Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement. Level 3 assets and liabilities include financial instruments whose value is determined using discounted cash flow methodologies, as well as instruments for which the determination of fair value requires significant management judgement or estimation.

The carrying amounts reported in the consolidated balance sheets for prepaid expenses and other current assets and accounts payable approximate fair value based on the short-term maturity of these instruments. All of the Company’s interest-bearing debt is at fixed rates. See Notes 4 and 6 for discussion of Level 3 non-recurring measurements used for long-lived assets.

Intangible assets

Definite lived intangible assets include patents and licenses. Patent costs consist primarily of legal and filing fees incurred to file patents on proprietary technology developed by the Company. Patent costs are amortized on a straight-line basis over 20 years beginning with the filing date of the applicable patent. License fees are capitalized and expensed over the term of the licensing agreement.

In March 2025, all of the Company’s intangible assets were sold in conjunction with the sale of the Canadian Subsidiary.

Property, plant and equipment

Property, plant and equipment are recorded at cost. The Company depreciates all asset classes over their estimated useful lives, as follows:

The Company commences depreciation on an asset when it is placed into service.

Impairment of long-lived assets

The Company reviews the carrying value of its long-lived assets, definite lived intangible assets, and property, plant and equipment when facts and circumstances suggest that they may be impaired. The carrying values of such assets are considered impaired when the estimated undiscounted cash flows from such assets are less than their carrying values. An impairment loss, if any, is recognized in the amount of the difference between the carrying amount and the fair value of such assets.

Leases

The Company leases certain facilities, property, and equipment under noncancelable operating leases. A determination is made if an arrangement is a lease at its inception, and leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. For operating leases, expense is recognized on a straight-line basis over the lease term.

Income taxes

The Company uses the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recorded for the expected future tax consequences of temporary differences between the financial reporting and income tax bases of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the differences reverse. A valuation allowance is established to reduce net deferred tax assets to the amount expected to be realized. The Company follows accounting guidance regarding the recognition, measurement, presentation and disclosure of uncertain tax positions in the financial statements. Tax positions taken or expected to be taken in the course of preparing the Company’s tax returns are required to be evaluated to determine whether the tax positions are “more likely than not” to be upheld under regulatory review. The resulting tax impact of these tax positions is recognized in the financial statements based on the results of this evaluation. The Company didnot recognize any tax liabilities associated with uncertain tax positions, nor has it recognized any interest or penalties related to unrecognized tax positions. The Company is not currently under exam and is no longer subject to federal and state tax examinations by tax authorities for years before 2022.

Net loss per share

Basic and diluted net loss per share available to common stockholders have been calculated by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Basic net loss per share is based solely on the number of shares of common stock outstanding during the year. Fully diluted net loss per share includes the number of shares of common stock issuable upon the exercise of warrants or options with an exercise price less than the fair value of the common stock. Since the Company is reporting a net loss 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 potentially dilutive securities have been excluded from the calculation of diluted net loss per share, as their effect is anti-dilutive:

The Company measures and recognizes all share-based payment awards, including stock options and restricted share units made to employees and directors, based on estimated fair values. The fair value of a share-based payment award is estimated on the date of grant using an option pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service period in the Company’s consolidated statement of operations. The Company uses the Black-Scholes option pricing model (“Black-Scholes”) as its method of valuation. Non-employee share-based compensation is accounted for using Black-Scholes to determine the fair value of warrants or options awarded to non-employees with the fair value of such issuances expensed over the period of service.

Recently Issued Accounting Standards

In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 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 in the year ended December 31, 2027 and interim disclosures in the year ended December 31, 2028.

3. 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. The Company did hold cash balances in bank accounts located in Canada, prior to the sale of the Canadian Subsidiary in March 2025. These amounts were subject to foreign currency exchange risk, which was minimized by the Company’s policy to limit the balances held in these accounts. Balances in Canadian bank accounts at December 31, 2025 and 2024 totaled $0 and $166 thousand, respectively.

4. 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. Consequently, each of these farms have been designated as discontinued operations in the consolidated financial statements for the years ended December 31, 2025 and 2024.

The Company has been working with its investment bank to identify the optimal path forward for realizing the potential of its assets, including a possible sale of the Ohio Farm Project. The Company received a non-binding Letter of Interest to purchase the Ohio subsidiary. Though this offer is currently under consideration, the Company has determined that the actions and decisions that occurred leading up to receiving this offer constituted a triggering event for revaluing these assets and has included the Ohio Farm Project in discontinued operations in the consolidated financial statements for the years ended December 31, 2025 and 2024.

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

5. Prepaid and other current assets

Major classifications of prepaid and current assets are summarized as follows for December 31, 2025 and 2024:

6. Debt

The current terms and conditions of long-term debt outstanding as of December 31, 2025 and 2024 for continuing operations, are as follows:

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

ACOA Atlantic Innovation Fund Grant

In January 2009, the Canadian Subsidiary was awarded an Atlantic Innovation Fund (“AIF”) grant from the Atlantic Canada Opportunities Agency (“ACOA”) to provide a contribution towards the funding of a research and development project. Contributions under the grant were made through 2014 and were to be repaid in the form of a 10% royalty on any products that were commercialized out of this research project until the loan was fully repaid.

On February 14, 2025, ACOA terminated the outstanding loan with the Company’s Canadian Subsidiary and forgave the outstanding balance of C$2.9 million ($2.0 million).

Senior Notes

On October 28, 2025, the Company entered into Note Purchase Agreements with certain investors providing for the issuance and sale of senior notes (“Senior Notes”) in an aggregate principal amount of $4.0 million in a private placement transaction. The Senior Notes have the following characteristics and terms: (i) unsecured, (ii) nonconvertible, (iii) bear interest at 18% per annum, (iv) scheduled maturity date of 18 months from closing, and (v) principal and interest payable at maturity, or earlier if accelerated pursuant to an event of default. The Senior Notes provide for certain restrictive covenants of the Company, as well as events of default including, but not limited to, (a) non-payment, (b) breach of covenants, (c) insolvency, (d) unauthorized changes to board composition, (e) failure to maintain Nasdaq listing compliance, (f) delayed SEC filings, and (g) financial restatements with material adverse effect. The Company anticipates it will receive a notice from Nasdaq in early 2026 regarding the Company’s deficiency in Nasdaq’s minimum book equity compliance, which could result in an event of default if the deficiency is not cured. Among other remedies, the Senior Notes provide the Investors the right to nominate an additional director to the Board upon the occurrence of an event of default, subject to certain conditions. The Agreements required certain resignations from and appointments to the Board at the time of the transaction closing date and upon the occurrence of certain events and criteria.

The net proceeds from the issuance of the Senior Notes are to be used for general corporate purposes, including working capital and operational funding, as well as the repayment of certain debts.

Term Note

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 was secured by the assets of the Company’s Ohio Farm Project and was 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 carriedno interest, except in the event of a default, in which case any amount due for payment would be assessed accrued interest at 3% per annum. On July 22, 2025, the Term Note was again amended to alter the timing of the remaining payments. The Company completed its scheduled payments on the Term Note on December 18, 2025.

Vendor Note

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. This Vendor Note has been reclassified within Current Liabilities Held for Sale for discontinued operations at December 31, 2025 (see Note 4).

7. Stockholders’ equity

The Company’s stockholders have authorized 80 million shares of stock, of which 5 million are authorized as preferred stock and 75 million as common stock.

Common stock

The holders of the common stock are entitled toone vote for each share held at all meetings of stockholders. Dividends and distribution of assets of the Company in the event of liquidation are subject to the preferential rights of any outstanding preferred shares.

In 2006, the Company established the 2006 Equity Incentive Plan (as amended, the “2006 Plan”). The 2006 Plan provided for the issuance of incentive stock options to employees of the Company and non-qualified stock options and awards of restricted stock to directors, officers, employees, and consultants of the Company. In accordance with its original terms, the 2006 Plan terminated on March 18, 2016. All outstanding awards under the 2006 Plan will continue until their individual termination dates.

In March 2016, the Company’s Board of Directors adopted the AquaBounty Technologies, Inc. 2016 Equity Incentive Plan (as amended, the “2016 Plan”) to replace the 2006 Plan. The 2016 Plan provides for the issuance of incentive stock options, non-qualified stock options, and awards of restricted and direct stock purchases to directors, officers, employees, and consultants of the Company.

Total common shares authorized under the 2016 Plan are 215,000, of which 107,704 shares are reserved for future issuance as of December 31, 2025.

Restricted stock

The Company’s restricted stock activity under the 2016 Plan is summarized as follows:

During 2025 and 2024, the Company expensed $33 thousand and $168 thousand, respectively, related to restricted stock awards. At December 31, 2025, the balance of unearned share-based compensation to be expensed in future periods related to the restricted stock awards is $0.

Stock options

The Company’s stock option activity under the 2006 Plan and the 2016 Plan is summarized as follows:

Stock options issued to employees, members of the Board, 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 in 2025 or 2024 and there wereno stock options exercised in 2025 or 2024. As of December 31, 2025 and 2024, the total intrinsic value of exercisable and outstanding stock options was $0.

The following table summarizes information about stock options outstanding and exercisable as of December 31, 2024:

Total share-based compensation on stock option grants amounted to $38 thousand and $132 thousand for the years ended December 31, 2025 and 2024, respectively. As of December 31, 2025, the balance of unearned share-based compensation to be expensed in future periods related to unvested share-based awards is $5 thousand. The period over which the unearned share-based compensation is expected to be earned is 0.2 years.

The following table summarizes share-based compensation costs recognized in the Company’s Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2025 and 2024:

8. Income taxes

The components of loss from continuing operations before income taxes for the years ended December 31, 2025 and 2024 are presented below:

Income taxes computed using the federal statutory income tax rate differ from the Company’s effective tax rate for the years ended December 31, 2025 and 2024 primarily due to the following:

As of December 31, 2025, the Company had domestic net operating loss carryforwards of approximately $278 million, after consideration of limitations pursuant to section 382, to offset future federal taxable income, which begin to expire in 2034. Of this amount, the Company had domestic net operating loss carryforwards of approximately $250 million, which can be carried forward indefinitely. The future utilization of certain historic net operating loss and tax credit carryforwards, however, is subject to annual use limitations based on the change in stock ownership rules of Internal Revenue Code Sections 382 and 383. The Company experienced a change in ownership under these rules during 2012 and revised its calculation of net operating loss carryforwards based on annual limitation rules. Since the Company has incurred only losses from inception and there is uncertainty related to the ultimate use of the loss carryforwards and tax credits, a valuation allowance has been recognized to offset the Company’s deferred tax assets, andno benefit for income taxes has been recorded.

The IRS released guidance which modified the procedures for taxpayers that incur specified research or experimental (R&E) expenditures to change their method of accounting to comply with the new capitalization and amortization rules provided in Section 174, as revised by the Tax Cuts and Jobs Act. The Section 174 rules require taxpayers to capitalize and amortize specified R&E expenditures over a period of five years (for domestic research) or 15 years (for foreign research), beginning with the midpoint of the taxable year in which the expenses are paid or incurred. The impact defers the tax benefit of R&E expenditures.

Significant components of the Company’s deferred tax assets and liabilities are as follows:

9. 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 December 31, 2025, will not have a material adverse effect on the Company’s financial position or results of operations.

Lease commitments

The Company’s lease right of use assets and obligations as of December 31, 2025 and 2024 were $23 thousand and $52 thousand, respectively and there was 0.8 years remaining on its lease commitment. Operating lease expenses for the years ended December 31, 2025 and 2024 were $32 thousand and $41 thousand, respectively.

10. Retirement plan

The Company has a savings and retirement plan for its US employees that qualifies under Section 401(k) of the Internal Revenue Code. The plan covers substantially all employees and provides for voluntary contributions by participating employees up to the maximum contribution allowed under the Internal Revenue Code. Contributions by the Company can be made, as determined by the Board of Directors, provided the amount does not exceed the maximum permitted by the Internal Revenue Code. Company contributions made and expensed in operations in connection with the plan during the years ended December 31, 2025 and 2024, amounted to $29 thousand and $70 thousand, respectively.

11. Segment Reporting

The Company adopted ASU 2023-07 effective for the annual period beginning January 1, 2024. The enhanced segment disclosure requirements were applied retrospectively to all prior periods presented in the financial statements, and prior period disclosures were based on the significant segment expense categories identified and disclosed in the period of adoption.

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’ssingle operating and reportable segment differ significantly from those described in Note 2 - Summary of Significant Accounting Policies. 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.

12. Subsequent events

On February 11, 2026, the Company completed a public offering of 1,269,509 Common Shares and 67,706 warrants for Common Shares for net proceeds of approximately $1.0 million.