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Item 1A. Risk Factors
TheExcept as set forth below, there have been no material updates to our risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2023.
Risks Related to Local Bounti's Business
There is substantial doubt regarding Local Bountis ability to continue as a going concern. Local Bounti will require additional financing to continue as a going concern, and a failure to obtain this necessary capital on acceptable terms, or at all, may force Local Bounti to delay, limit, reduce or terminate its operations and future growth. If additional financing is available, financing terms may lead to significant dilution of our stockholders equity.
The CEA business is highly capital-intensive. Local Bounti has incurred losses and generated negative cash flows from operations since its inception. At September 30, 2024, Local Bounti 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 Facilities with Cargill Financial.
Local Bountis current operating plan indicates that it 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 begin generating sufficient positive gross profit to cover its losses. These conditions raise substantial doubt about Local Bountis ability to continue as a going concern through the next twelve months. This substantial doubt about our ability to continue as a going concern may adversely affect our stock price and our ability to raise capital.
Our ability to continue as a going concern is dependent upon our ability to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due, and to generate profitable operations in the future. We plan to provide for our capital requirements through amounts available under our credit facilities with Cargill Financial, our current cash position, cash generated from product sales, anticipated additional deferrals of future cash interest and principal payments under the Company's credit facilities with Cargill Financial, and additional working capital through other sources of debt and equity financings. There can be no assurance that we will be able to raise additional capital to fund operations with terms acceptable to us, or at all, and failure to obtain this necessary capital may force Local Bounti to delay, limit, reduce or terminate its operations and future growth.
Such financings may result in dilution to stockholders, issuance of securities with priority as to liquidation and dividend and other rights more favorable than common stock, imposition of debt covenants and repayment obligations, or other restrictions that may adversely affect Local Bountis business.
Risks Related to Local Bounti's Term Loan Facility
Local Bounti has entered into agreements with Cargill Financial for term loan credit facilities. The credit facilities are secured by all of the Company's and its subsidiaries' assets, including their intellectual property. If we are unable to meet certain conditions precedent, we may not be able to draw down funds available under the facilities, which could materially and adversely affect our business and operations. Additionally, if there is an occurrence of an uncured event of default, Cargill Financial has the right to foreclose on all of the Company's and its subsidiaries' assets, and securities in the Company could be rendered worthless.
Local Bounti's credit facilities with Cargill Financial are secured by all of the Company's and its subsidiaries' assets, including their intellectual property. Additionally, the definitive documentation for the credit facilities states that if Local Bounti defaults on its obligations, Cargill Financial could foreclose on all Local Bounti assets, which would materially harm Local Bounti's business, financial condition and results of operations. The credit facilities 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. We are currently in compliance with the financial covenants under the credit facilities, but in the past, we have periodically failed to meet certain quarterly financial covenants. While we
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were able to obtain 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.
The pledge of our assets and other restrictions may also limit Local Bounti's flexibility in raising capital for other purposes. Because all of Local Bounti's assets are pledged under the credit facility, Local Bounti's ability to incur additional secured indebtedness or to sell or dispose of assets to raise capital may be impaired, which could have an adverse effect on Local Bounti's financial flexibility. Further, there are numerous conditions precedent to drawing down amounts available under the credit facility, including that amounts remaining to be drawn are at Cargill Financial's discretion. If we are unable to meet these conditions precedent, we may not be able to draw down funds available under the facilities, which could materially and adversely affect our business and operations. Refer to Note 6, Debt, of the Unaudited Condensed Consolidated Financial Statements for more information about the credit facility.