Local Bounti Corporation/DE
For the period ended Mar 31, 2025. Filed May 15, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 15, 2025
LOCL$0.87-3.9%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-14.
0001840780-24-000028
Item 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-15.
0001840780-25-000015
Item 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 91 previous paragraphs and 79 current paragraphs.
40 unchanged; 22 reworded; 15 added; 25 removed; 4 previous and 2 current paragraphs rearranged.
Tables are not compared: 6 previous and 5 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (15)
Current report
Texas Facility Product Mix Transition Progress
Current report
We continue to make significant progress at our six-acre Texas facility. In response to evolving customer demands, we strategically reconfigured three acres of the facility—originally designed for head lettuce production—to create a flexible growing environment capable of producing both head lettuce and cut products based on customer preferences. This purposeful design approach highlights our commitment to adaptability and customer-centric operations. While this reconfiguration temporarily impacted the full utilization of the facility in the second half of 2024 and first quarter of 2025, we are now in the final stages of completing this reconfiguration and expect to begin commercial production in this section starting in second quarter of 2025. The automated harvesting equipment for the configuration is expected to be installed early third quarter 2025, replacing the temporary harvester it will use during second quarter, and is expected to drive operational efficiencies and margin improvement.
Current report
We continue to expand our commercial footprint with several notable distribution wins in the first quarter of 2025. We expanded our Texas-grown Arugula offering with Brookshire's in approximately 80 stores and began distributing Organic Living Butter Lettuce from California to HEB. We have also launched our basil program with several regional retailers and wholesalers in the Pacific Northwest.
Current report
Our relationship with Walmart continues to strengthen, building on the 191 stores already being served with premium baby leaf varieties. We have secured an additional commitment to serve 13 Walmart distribution centers with Conventional Living Butter Lettuce, with shipments having commenced in late April from both the California and Texas facilities.
Current report
We have also evolved our Grab-and-Go Salad Kit offerings to better serve retail partners and consumer trends. This includes the launch of new salad kits in Q1 2025, with additional flavors expected to be introduced in Q3, as well as the creation of a new product line that meets the needs of today's value-oriented consumer. We are particularly excited about our upcoming exclusive launch of a new larger, approximately 12-ounce family-sized Caesar salad kit with a large multi-national retailer in the Pacific Northwest beginning in the third quarter. In addition, we continue to expand our relationship with a leading meal subscription business that is now seeking additional SKUs.
Current report
Sales and Marketing
Current report
Sales and marketing costs increased by $0.3 million for the three months ended March 31, 2025, compared to the three months ended March 31, 2024. The increase is driven primarily by an increase in transportation and delivery costs as a result of increased shipments of produce driven by an increase in sales.
Current report
General, and Administrative
Current report
General, and administrative expenses increased by $2.3 million for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily driven by a $1.4 million increase in stock-based compensation that was a result of prior year stock-based compensation that resulted in a net benefit for the three months ended March 31, 2024 due to forfeitures of RSU awards. Additional increases as compared to the prior year period were a $0.3 million increase in salaries, benefits, and payroll-related expenses, and a $0.5 million increase in insurance.
Current report
The CEA business is capital-intensive. Currently, our primary sources of liquidity and capital resources are cash on hand, cash flows generated from the sale of our products, and the credit facilities with Cargill Financial. Cash expenditures over the next 12 months are expected to include general operating costs for employee wages and related benefits, outside services for legal, accounting, IT infrastructure, and costs associated with growing, harvesting, and selling our products, such as the purchase of seeds, soil, nutrients, and other growing supplies, shipping and fulfillment costs, and facility maintenance costs.
Current report
We also believe additional cash can be secured through other debt, equity financings, or sale leaseback financing, if necessary. However, there can be no assurance that equity or debt financing will be available to us should we need it or, if available, that the terms will be satisfactory to us and not dilutive to existing shareholders. Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth in Item 1A, Risk Factors, of the Company's most recent Annual Report on Form 10-K. Our failure to raise capital as and when needed could have significant negative consequences for our business, financial condition, and results of consolidated operations.
Current report
As of March 31, 2025, a total of $312.0 million of principal was outstanding on the Senior Facility. The Senior Facility is included in "Long-term debt" on the Unaudited Condensed Consolidated Balance Sheets. We expect our interest expense to decrease by at least 50% following the Eleventh Amendment to our Senior Facility with Cargill Financial, as described in Note 6, Debt, to the Unaudited Condensed Consolidated Financial Statements. The amendment resulted in a lower principal balance and a reduced interest rate. In addition, a debt premium recorded in connection with the amendment will be amortized as a reduction to interest expense over the 10-year term of the Amended Senior Credit Agreement using the effective interest method.
Current report
From January 1, 2027 to December 31, 2029, interest will accrue on $100 million of the Senior Facility and will be due and payable in cash starting the first business day after the close of each calendar quarter, beginning with the quarter commencing April 1, 2027, and continuing through December 31, 2029. Interest accruing on the outstanding principal balance of the Senior Facility in excess of $100 million will, at the Company’s option, either be paid in cash or paid in kind, beginning with the quarter commencing April 1, 2027, and continuing through December 31, 2029.
Current report
From January 1, 2030 to March 31, 2031, interest will accrue on up to $200 million of the Senior Facility and will be due and payable in cash starting the first business day after the close of each calendar quarter, beginning with the quarter commencing April 1, 2030, and continuing through March 31, 2031. Interest accruing on the outstanding principal balance of the Senior Facility in excess of $200 million will, at the Company's option, either be paid in cash or paid-in-kind, beginning with the quarter commencing April 1, 2027, and continuing through March 31, 2031.
Current report
At all times after March 31, 2031, interest shall be payable only in cash on the first business day after each calendar quarter end. Additionally, beginning in the fourth quarter of 2027, 50% of the free cash flow generated in the preceding quarter must be used for principal repayment on a quarterly basis. The maturity date of the Senior Facility subsequent to the Eleventh Amendment is December 31, 2035.
Removed paragraphs (25)
Previous report
Hamilton, Montana Facility Transition to Commercial Production Now Complete
Previous report
We completed the transition of our Montana facility from a research and development focus to a commercially oriented focus growing produce for sale to customers in the third quarter of 2024. This transition follows the capacity enhancements brought about by the completion of the Georgia facility and the commencement of operations at both the Texas and Washington facilities and is expected to help drive toward our goal of achieving positive adjusted EBITDA in the second quarter of 2025.
Previous report
We expanded our product assortment in the third quarter of 2024 by introducing several high-velocity offerings, including Arugula, Spinach, Spring Mix & Spinach Blend, Power Crisp, and Basil. We began shipping our entire assortment to customers during the third quarter and added additional distribution with retailers in the mass and grocery channels in the fourth quarter.
Previous report
We continued our rollout of Grab-and-Go Salad Kits to customers throughout the Pacific Northwest and Southern United States. The Grab-and-Go assortment includes four unique flavor offerings: Artisanal Chicken Caesar, Memphis Inspired Chicken, Sweet Poppy Power, and Modern Greek Style.
Previous report
Three and Nine Months Ended September 30, 2024 compared to the Three and Nine Months Ended September 30, 2023
Previous report
Selling, General, and Administrative Expenses
Previous report
Selling, general, and administrative expenses decreased by $2.1 million for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, related to a $1.6 million decrease in stock-based compensation expense, a $0.5 million decrease in salaries, benefits, and payroll related fees, a $0.3 million decrease in legal, accounting, and professional consulting fees, and a $0.1 million decrease in marketing and advertising costs, which was partially offset by an increase of $0.4 million on loss on disposal of fixed assets.
Previous report
Selling, general, and administrative expenses decreased by $16.4 million for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, primarily related to a $10.1 million decrease in stock-based compensation expense that was a result of prior year awards that were issued at a higher fair value, as compared to the fair value of awards being expensed in the current period, that fully vested and expensed in prior periods. Additional decreases as compared to the prior year period were a $2.9 million decrease in legal, accounting, and professional consulting fees, a $2.2 million decrease in salaries, benefits, and payroll related fees, a $0.5 million decrease in transaction costs, and a $0.5 million decrease in marketing and advertising costs, which was partially offset by an increase of $0.4 million on loss on disposal of fixed assets.
Previous report
During the quarter ended September 30, 2024, we failed to comply with the following financial covenants: minimum liquidity, minimum production, maximum cash operating expense ratio, and certain capital expenditure limitations. We obtained waivers for these covenant violations and, therefore, are in compliance with the credit facilities’ covenants as of September 30, 2024. While we obtained permanent waivers for all past covenant violations, there can be no assurances that we will be able to obtain waivers for any future covenant compliance violations. A failure to comply with the covenants and other provisions of these debt instruments, including any failure to make payments when required, would generally result in events of default under such instruments, which could result in the acceleration of a substantial portion of such indebtedness.
Previous report
Our current operating plan indicates that we will continue to incur losses from operations and generate negative cash flows from operating activities until the Texas and Washington facilities start operating at full commercial scale and generate sufficient gross profit to cover our losses. Our cash on hand as of September 30, 2024, and projected cash inflows generated from operations over the next 12 months are expected to be insufficient to fund anticipated cash outflows for operations and the required debt service obligations beginning April 1, 2025. These conditions raise substantial doubt about our ability to continue as a going concern for the next twelve months.
Previous report
Our plan to alleviate the conditions that raised substantial doubt about our ability to continue as a going concern includes the following:
Previous report
•Renegotiate the terms of the credit facilities with Cargill Financial to provide additional working capital over the next twelve months, subject to terms and conditions precedent to the Senior Facility.
Previous report
•Renegotiate the terms of the credit facilities with Cargill Financial to defer all principal payments due under the Senior Facility through November 30, 2025, subject to terms and conditions precedent to the Senior Facility.
Previous report
•Renegotiate the terms of the credit facilities with Cargill Financial to allow for the payment in kind of the interest payments on the Senior Facility and the Subordinated Facility through November 30, 2025, subject to terms and conditions precedent to the Senior Facility.
Previous report
•Renegotiate the terms of the credit facilities with Cargill Financial to waive the restricted cash requirement of two quarters of future interest and principal payments through November 30, 2025, subject to terms and conditions precedent to the Senior Facility.
Previous report
•Continue to ramp production at the Company’s Washington and Texas facilities to full commercial scale to accelerate and significantly increase revenue growth.
Previous report
•Reduce production costs as a result of manufacturing and technical developments.
Previous report
•Lower research and development and general and administrative costs.
Previous report
•Reduce or delay uncommitted capital expenditures, including nonessential facilities and information technology projects.
Previous report
•Raise additional working capital through other sources of debt and equity financings.
Previous report
While we fully expect to implement and execute our plans and to have access to these additional sources of capital, such plans or other additional sources of financing may not be achievable on favorable terms and conditions, or at all, and these conditions and events in the aggregate do not alleviate substantial doubt regarding our ability to continue as a going concern over the next twelve months from the date these Unaudited Condensed Consolidated Financial Statements are issued.
Previous report
This substantial doubt about our ability to continue as a going concern may adversely affect our stock price and our ability to raise capital, and failure to obtain this necessary capital on acceptable terms, or at all, may force us to delay, limit, reduce, or terminate our operations and future growth. We will need to raise additional working capital funds to operate our business and fund continued construction, commissioning, and operating at commercial scale with sufficient gross profit, which is expected to extend beyond the next twelve months from the date these Unaudited Condensed Consolidated Financial Statementsare issued. If additional financing is available, financing terms may lead to significant dilution of our stockholders’ equity.
Previous report
In September 2021, the Company and Cargill Financial entered into the Senior Facility and the Subordinated Facility. Subsequent to the amendments described in Note 6, Debt, of the Unaudited Condensed Consolidated Financial Statements, Cargill Financial may in its sole discretion provide advances under the Facilities of up to $343.5 million (plus paid-in-kind interest and fees), including working capital advances and capital to fund the remaining construction costs at our facilities in Georgia, Texas, and Washington, subject to certain conditions. The credit facilities, as amended, require quarterly principal and interest payments beginning April 1, 2025, which is reflected in the table below, and the funding of a debt service reserve on April 1, 2025 equal to two quarters of principal and interest payments. The Senior Facility and the Subordinated Facility are included in "Short-term debt" and "Long-term debt" on the Unaudited Condensed Consolidated Balance Sheets.
Previous report
At September 30, 2024, our principal and estimated interest payment obligations for the Senior Facility and the Subordinated Facility are as follows(1):
Previous report
(1)Interest is calculated based on a 12.5% interest rate for the Subordinated Facility and a 13.10% interest rate for the Senior Facility effective as of October 1, 2024.
Reworded paragraphs (22)
Previous wording
Our mission is to revolutionize agriculture, ensuring accessibility to fresh, sustainable, locally grown produce to nourish communities everywhere for generations to come. Our vision is to reimagine freshness. We envision a future where transformative innovation and technology combine to enable us to locally grow produce with minimal food miles, ensuring the freshest and most sustainable offerings for communities everywhere. We believe that happy plants make happy taste buds, and we are committed to reimagining the standards of freshness. We also believe that local is the best kind of business, and we are committed to helping communities thrive for generations to come. We are committed to building empowered local teams. Together, we are capable of extraordinary achievements in sustainable agriculture.
Current wording
Our mission is to revolutionize agriculture, ensuring accessibility to fresh, sustainable, locally grown produce to nourish communities everywhere for generations to come. Our vision is to reimagine freshness. We envision a future where transformative innovation and technology combine to enable us to grow produce locally with minimal food miles, ensuring the freshest and most sustainable offerings for communities everywhere. We believe that happy plants make happy taste buds, and we are committed to reimagining the standards of freshness. We also believe that local is the best kind of business, and we are committed to helping communities thrive for generations to come. We are committed to building empowered local teams. Together, we believe we are capable of extraordinary achievements in sustainable agriculture.
Previous wording
Local Bounti is a controlled environment agriculture ("CEA") company that produces sustainably grown produce, focused primarily on living and loose leaf lettuce, arugula, spinach, and basil. Founded in 2018, and headquartered in Hamilton, Montana, Local Bounti utilizes its patented Stack & Flow Technology® to grow healthy food sustainably and affordably. Our proprietary process is a hybrid growing approach, utilizing vertical farming in early plant growth, followed by greenhouse farming for final grow out. We designed our Stack & Flow Technology® to give our products exactly what they need at every step of their growth cycle. Our goal is to grow in an environmentally sustainable manner that not only increases harvest efficiency and enhances unit economics, but also limits water usage and reduces the carbon footprint of the production and distribution process. Controlling the environmental conditions in both the 'Stack' and 'Flow' components of our growing system helps to ensure healthy, nutritious, and consistent products that are non-genetically modified organisms ("non-GMO"). We use 90% less water, 90% less land, and significantly less pesticides and herbicides than traditional outdoor agriculture operations.
Current wording
Local Bounti is a controlled environment agriculture ("CEA") company that produces sustainably grown produce, focused primarily on living and loose leaf lettuce, arugula, bok choy, and basil. Founded in 2018 and headquartered in Hamilton, Montana, Local Bounti utilizes its patented Stack & Flow Technology® to grow healthy food sustainably and affordably. Our proprietary process is a hybrid growing approach, utilizing vertical farming in early plant growth, followed by greenhouse farming for final grow out. We designed our Stack & Flow Technology® to give our products exactly what they need at every step of their growth cycle. Our goal is to grow in an environmentally sustainable manner that not only increases harvest efficiency and enhances unit economics, but also limits water usage and reduces the carbon footprint of the production and distribution process. Controlling the environmental conditions in both the 'Stack' and 'Flow' components of our growing system helps to ensure healthy, nutritious, and consistent products that are non-genetically modified organisms ("non-GMO"). We use 90% less water, 90% less land, and significantly less pesticides and herbicides than traditional outdoor agriculture operations.
Previous wording
We distribute our products to approximately 13,000 retail locations across 35 U.S. states, primarily through direct relationships with blue-chip retail customers, including Albertsons, Sam's Club, Kroger, Target, Walmart, Whole Foods, Brookshire's, H-E-B, and AmazonFresh. Our primary products include living butter lettuce – for which we are a leading provider with an approximate 80% share of the CEA market within the Western U.S. – as well as packaged leafy greens and cress. We recently introduced new Grab & Go Salad Kits and additions to our baby leaf portfolio with several high-velocity offerings, including spinach, arugula, and basil. In addition, we introduced 50/50 blend and power greens in the third quarter of 2024. We signed an offtake agreement with Sam's Club in October 2022 for our leafy greens production initially from our Georgia facility and now including both our Georgia and Texas facilities. The offtake agreement provides for the sale of defined minimum quantities of leafy greens from our Georgia and Texas facilities and runs through September 2028.
Current wording
We distribute our products to approximately 13,000 retail locations across 35 U.S. states, primarily through direct relationships with blue-chip retail customers, including Albertsons, Sam's Club, Kroger, Target, Walmart, Whole Foods, Brookshire's, H-E-B, Sprouts, and AmazonFresh. Our primary products include living butter lettuce – for which we are a leading provider with an approximate 80% share of the CEA market within the Western U.S. – as well as packaged leafy greens and cress. We recently introduced new Grab & Go Salads and additions to our baby leaf portfolio with several high-velocity offerings, including bok choy, arugula, and basil. In addition, we introduced 50/50 blend and power greens in the third quarter of 2024. We signed an offtake agreement with Sam's Club in October 2022 for our leafy greens production, initially from our Georgia facility and now including both our Georgia and Texas facilities. The offtake agreement provides for the sale of defined minimum quantities of leafy greens from our Georgia and Texas facilities and runs through September 2028.
Previous wording
Plans remain in place to build additional capacity across our network of facilities enabled with our Stack & Flow Technology®. The planned expansions are designed to provide additional capacity and allow for our growing product assortment to meet existing demand from our direct relationships with blue-chip retailers and distributors. The timing and scope of these projects, which include plans to expand into the Midwest, remain under review pending ongoing discussions with retailers to optimize those facilities for specific products in support of retail commitments and strategies to expand distribution.
Current wording
Plans remain in place to build additional capacity across our network of facilities enabled with our patented Stack & Flow Technology®. The expansions are designed to provide additional capacity and allow for our growing product assortment to meet existing demand from our direct relationships with blue-chip retailers and distributors. The timing and scope of these projects, including plans to expand into the Midwest, remain under review pending ongoing discussions with retailers to optimize those facilities for specific products in support of retail commitments and strategies to expand distribution.
Previous wording
Sales increased by $3.4 million for the three months ended September 30, 2024, compared to the three months ended September 30, 2023. The increase was due to increased production and growth in sales from our facility in Georgia and sales from our new facilities in Texas and Washington, which began shipping and sell products in the second quarter of 2024.
Current wording
Sales increased by $3.2 million for the three months ended March 31, 2025, compared to the three months ended March 31, 2024. The increase was due to increased production and growth in sales from our facility in Georgia and sales from our new facilities in Texas and Washington, which began shipping and selling products in the second quarter of 2024.
Previous wording
Cost of goods sold is the direct cost of growing produce for sale at our greenhouse facilities, including labor costs, which consists of wages, salaries, benefits, and stock-based compensation, seeds, soil, nutrients and other input supplies, packaging materials, depreciation, utilities and other manufacturing overhead. We expect that, over time, cost of goods sold will decrease as a percentage of sales, as a result of scaling our business.
Current wording
Cost of goods sold is the direct cost of growing produce for sale at our greenhouse facilities, including labor costs, which consists of wages, salaries, benefits, and stock-based compensation, seeds, soil, nutrients and other input supplies, packaging materials, depreciation, utilities, and other manufacturing overhead. As we scale our business, we expect the cost of goods sold to decrease over time as a percentage of sales.
Previous wording
Cost of goods sold increased by $2.4 million for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, due primarily to production ramp-up at our new Texas and Washington facilities and increased production at our Georgia facilities.
Current wording
Cost of goods sold increased by $2.5 million for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, due primarily to production ramp-up at our new Texas and Washington facilities and increased production at our Georgia facilities.
Previous wording
Research and development expenses consist primarily of costs related to the continued development of our production, harvesting, and post-harvest packaging methods, techniques, and processes, as well as production surplus costs related to the development and testing of our production processes during the post-commissioning phase at our new facilities. Our research and development efforts are focused on the development of environmental controls and Stack and Flow processes to increase production yields and to develop new leafy green SKUs, value-added products such as grab-and-go salads, and new crops, including spinach, arugula, basil, and berries. Research and development is performed at the Montana, Texas, Washington, California, and Georgia facilities, where we continue to develop our commercial scale Stack & Flow Technology® and processes for implementation throughout our facility footprint.
Current wording
Research and development expenses primarily consist of costs associated with the ongoing development, improvement, testing, alteration, and refinement of our product offerings, production lines, manufacturing processes, growing techniques, and post-harvest packaging methods. Our research and development efforts focus on enhancing each facility’s indoor environmental controls, growing recipes, and refining Stack & Flow Technology® processes, all aimed at meeting facility design and production yield specifications. Additionally, we also focus on the development of new leafy green product offerings, value-added products such as Grab & Go Salads, and new crops, including arugula, basil, and berries. Research and development activities are conducted at the facilities in Montana, Texas, Washington, California, and Georgia.
Previous wording
Research and development costs increased by $2.1 million for the three months ended September 30, 2024, compared to the three months ended September 30, 2023 and increased by $3.0 million for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. The increase for both the quarter to date and year to date period is related primarily to the additional development of our production, harvesting, and post-harvest packaging techniques and processes, including production surplus costs, related to the development and testing of our commercial scale Stack & Flow Technology® and production processes at the Washington, and Texas facilities.
Current wording
Research and development costs increased by $3.5 million for the three months ended March 31, 2025, compared to the three months ended March 31, 2024. The increase is driven primarily by the additional development of our production, harvesting, and post-harvest packaging techniques and processes, including production surplus costs, related to the development and testing of our commercial-scale Stack & Flow Technology® and production processes at the Washington and Texas facilities.
Previous wording
Selling, general, and administrative expenses consist of employee compensation, including salaries, benefits, and stock-based compensation for our executive, legal, finance, information technology, human resources and sales and marketing teams, expenses for third-party professional services, insurance, marketing, advertising, computer hardware and software, and amortization of intangible assets, among others. We expect selling, general, and administrative expenses to continue decreasing for the remainder of 2024 due primarily to realized employee related cost savings of approximately $5.0 million on an annualized basis as a result of our actions to streamline our organizational structure in late 2023 and early 2024.
Current wording
General, and administrative expenses consist of employee compensation, including salaries, benefits, and stock-based compensation for our executive, legal, finance, information technology, and human resources teams, expenses for third-party professional services, insurance, computer hardware and software, and amortization of intangible assets, among others.
Previous wording
The change in fair value of warrant liability includes the mark-to-market adjustments to the warrant liability to reflect its fair value as of the end of the reporting period. The decrease in the fair value of warrant liability for the three months ended September 30, 2024 is primarily due to the decrease in our closing stock price at September 30, 2024 compared to the closing stock price on the prior measurement date of June 30, 2024. The increase in fair value of the warrant liability for the nine months ended September 30, 2024 is primarily due to a net increase in our closing stock price at September 30, 2024 compared to the closing stock price on the prior measurement date of December 31, 2023. The period-end close stock price is a key input to the Black-Scholes model we use to measure and estimate the fair value of the warrant at the end of each reporting period.
Current wording
The change in fair value of warrant liability includes the mark-to-market adjustments to the warrant liability to reflect its fair value as of the end of the reporting period. The increase in fair value of the warrant liability is primarily due to the Debt Restructuring Agreement, which amended the Original Warrants by decreasing the per share exercise price of the Original Warrants from $6.50 to $4.00 per share with an amended expiration date of March 31, 2033. This change in terms increased the value of the warrants and the related liability.
Previous wording
Interest expense consists primarily of contractual interest and amortization of debt issuance costs, net of interest capitalized for construction assets, related to the loans from Cargill Financial and also interest recognized per the terms of our financing obligations related to our Montana Facility and our Carpinteria Facility and Oxnard Facility (collectively, the “California Facilities”). We capitalize interest costs on borrowings during the construction period of major construction projects as part of the cost of the constructed assets.
Current wording
Interest expense consists primarily of contractual interest and amortization of debt issuance costs, net of interest capitalized for construction assets, related to the loans with Cargill Financial, and also interest recognized per the terms of our financing obligation related to the Montana Facility and the California Facilities. We capitalize interest costs on borrowings during the construction period of major construction projects as part of the cost of the constructed assets.
Previous wording
Interest expense, net increased by $11.2 million for the three months ended September 30, 2024, compared to the three months ended September 30, 2023. The increase is primarily due to a significant increase in the principal amount outstanding on the Senior Facility which increased interest expense by $10.9 million over the prior year period. Also contributing to the net increase was $0.3 million of incremental interest expense for the financing obligations related to the California Facilities. During the three months ended September 30, 2024 and 2023, we capitalized $0.4 million and $4.2 million of interest, respectively.
Current wording
Interest expense, net increased by $9.2 million for the three months ended March 31, 2025, compared to the three months ended March 31, 2024. The increase is primarily due to a significant increase in the principal amount outstanding on the Senior Facility, which increased interest expense by $3.4 million over the prior year period. Also contributing to the net increase was a decrease in capitalized interest of $5.6 million during the three months ended March 31, 2025 as compared to the prior year due to interest capitalized during the construction of the Washington and Texas facilities in the prior year period. During the three months ended March 31, 2025 and 2024, we capitalized $0.1 million and $5.7 million of interest, respectively.
Previous wording
The CEA business is highly capital-intensive. Since our inception, we have incurred losses and generated negative cash flows from operations. At September 30, 2024, we had an accumulated deficit of$387.0 million and, cash and cash equivalents and restricted cash of$6.8 million. Currently, our primary sources of liquidity and capital resources are cash on hand, cash flows generated from the sale of our products, and the credit facilities with Cargill Financial.
Current wording
We have incurred losses and generated negative cash flows from operations since our inception. At March 31, 2025, we had an accumulated deficit of $460.9 million and cash and cash equivalents and restricted cash of $28.4 million.
Previous wording
As of September 30, 2024, our outstanding debt principal totaled $431.7 million, and on April 1, 2025, we are required to begin making quarterly principal payments under the Senior Facility and quarterly interest payments under both the Senior Facility and the Subordinated Facility. Also, the credit facilities contain various financial and non-financial covenants and certain restrictions on our business, which include restrictions on additional indebtedness, minimum liquidity, and other financial covenants, and material adverse effects that could cause us to be at risk of default.
Current wording
As of March 31, 2025, the principal amount due under our credit facility with Cargill Financial totaled $312.0 million, none of which is classified as current. The debt agreements with Cargill Financial contain various financial and non-financial covenants and certain restrictions on our business, which include restrictions on additional indebtedness, minimum liquidity and other financial covenants, and material adverse effects that could cause us to be at risk of default. A failure to comply with the covenants and other provisions of these debt instruments, including any failure to make payments when required, would generally result in events of default under such instruments, which could result in the acceleration of a substantial portion of such indebtedness.
Previous wording
We have two financing obligations related to sale leaseback transactions that did not qualify for sales treatment of the underlying assets. In June 2020, the Company completed the construction of the Montana Facility. Subsequent to its completion, the Company entered into a sale leaseback transaction of the Montana Facility with Grow Bitterroot, LLC, a related party, for total consideration of $6.9 million with a current lease term of 20 years. On April 27, 2023, Hollandia Real Estate, LLC, a wholly owned subsidiary of the Company, and STORE Master Funding XXXI, LLC consummated a $35 million multi-site sale and leaseback transaction with an initial term of 25 years relating to our California Facilities.
Current wording
We have two financing obligations related to sale leaseback transactions that did not qualify for sales treatment of the underlying assets. In June 2020, the Company completed the construction of the Montana Facility. Subsequent to its completion, the Company entered into a sale leaseback transaction of the Montana Facility with Grow Bitterroot, LLC, a related party, for total consideration of $6.9 million with a current lease term of 20 years. On April 27, 2023, Hollandia Real Estate, LLC, a wholly owned subsidiary of the Company, and STORE Master Funding XXXI, LLC consummated a $35 million multi-site sale and leaseback transaction with an initial term of 25 years relating to our Carpinteria Facility and our Oxnard Facility (collectively, the "California Facilities").
Previous wording
Net cash used in operating activities of $26.0 million for the nine months ended September 30, 2023 was driven by a net loss of $58.5 million. The net loss included a non-cash gain in fair value of warrant liability of $16.9 million. These amounts were partially offset by non-cash activities of $13.7 million in stock-based compensation expense, net of amounts capitalized, $15.8 million of paid-in-kind interest, $5.2 million in depreciation expense, $5.0 million in amortization expense, $5.2 million in amortization of debt issuance costs, and $2.7 million net increase of cash from changes in operating assets and liabilities.
Current wording
Net cash used in operating activities was $9.6 million for the three months ended March 31, 2025 due to a net loss of $37.7 million. This was partially offset by non-cash activities of $15.3 million in paid-in-kind interest, a non-cash loss of $3.5 million related to change in fair value of warrant liability, $5.0 million in depreciation expense, $0.9 million in amortization expense, and $2.1 million in amortization of debt issuance costs.
Previous wording
Net cash used in operating activities was $28.3 million for the nine months ended September 30, 2024 primarily due to a net loss of $83.6 million. This was partially offset by non-cash activities of $23.3 million in paid-in-kind interest, $10.3 million in depreciation expense, $6.3 million in amortization of debt issuance costs, $2.7 million in amortization expense, $2.1 million in stock-based compensation expense, net of amounts capitalized, and $5.7 million net increase of cash from changes in operating assets and liabilities.
Current wording
Net cash used in operating activities was $7.1 million for the three months ended March 31, 2024 due to a net loss of $24.1 million and an increase in other assets of $2.9 million. This was partially offset by non-cash activities of $9.8 million in paid-in-kind interest, a non-cash loss of $4.2 million related to change in fair value of warrant liability, $2.3 million in depreciation expense, $0.9 million in amortization expense, and $2.1 million in amortization of debt issuance costs.
Previous wording
Net cash used in investing activities was $72.6 million for the nine months ended September 30, 2024, due primarily to purchases of construction materials and services, equipment, and other items for the Washington, Texas, and Georgia facilities.
Current wording
Net cash used in investing activities was $5.0 million for the three months ended March 31, 2025, due primarily to purchases of construction materials and services, equipment, and other items for the Washington and Texas facilities.
Previous wording
Net cash used in investing activities was $117.2 million for the nine months ended September 30, 2023, due primarily to purchases of equipment and other items for the Washington, Georgia, and Texas facilities.
Current wording
Net cash used in investing activities was $35.0 million for the three months ended March 31, 2024, due primarily to purchases of construction materials and services, equipment, and other items for the Washington and Texas facilities.
Previous wording
Net cash provided by financing activities was $136.6 million for the nine months ended September 30, 2023, comprised of $101.9 million of proceeds from the issuance of debt and $35.0 million of proceeds from the sale and leaseback transaction with STORE for the Hollandia Facilities.
Current wording
Net cash provided by financing activities was $35.5 million for the three months ended March 31, 2025, comprised of $21.5 million of proceeds from the issuance of Series A Preferred Stock and $10.5 million of proceeds from the issuance of debt.
Previous wording
Net cash provided by financing activities was $90.8 million for the nine months ended September 30, 2024, comprised of $90.9 million of net proceeds from the issuance of debt.
Current wording
Net cash provided by financing activities was $39.9 million for the three months ended March 31, 2024, comprised of $39.9 million of net proceeds from the issuance of debt.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
Three Months Ended March 31, 2025 compared to the Three Months Ended March 31, 2024
Current report — wording carried from elsewhere
Sales and marketing expenses consist of employee compensation, including salaries, benefits, and stock-based compensation for our sales and marketing teams, transportation and delivery costs, marketing, and advertising, among others.
Rearranged previous paragraphs (4)
Previous report — wording carried elsewhere
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Previous report — wording carried elsewhere
Sales increased by $7.4 million for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. The increase was due to increased production and growth in sales from our facility in Georgia and, to a lesser extent, sales from our new facilities in Texas and Washington, which began shipping and sell products in the second quarter of 2024.
Previous report — wording carried elsewhere
Cost of goods sold increased by $5.4 million for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, due primarily to production ramp-up at our new Texas and Washington facilities and increased production at our Georgia facilities.
Previous report — wording carried elsewhere
Interest expense, net increased by $22.5 million for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. The increase is primarily due to a significant increase in the principal amount outstanding on the Senior Facility which increased interest expense by $21.0 million over the prior year period. Also contributing to the net increase was $1.5 million of incremental interest expense for the financing obligations related to the California Facilities. During the nine months ended September 30, 2024 and 2023, we capitalized $10.5 million and $9.5 million of interest, respectively.