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What changed in Local Bounti Corporation/DE's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Local Bounti Corporation/DE's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+399 added−443 removedSource: 10-K (2024-03-28) vs 10-K (2023-03-31)

Top changes in Local Bounti Corporation/DE's 2023 10-K

399 paragraphs added · 443 removed · 287 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

104 edited+30 added−33 removed75 unchanged
Biggest changeSustainable Development Goal CEA Benefit 2) Zero Hunger The flexibility of Local Bounti's locations enables access to fresh, local food from many parts of the world 6) Clean Water and Sanitation Drastic reduction in water usage in Local Bounti facilities conserves resources and does not produce polluted runoff like traditional, field-based agriculture 7) Affordable and Clean Energy Local Bounti facilities can be designed to be energy-efficient and sited with near renewable energy supply in the community and/or on-site, as well as take advantage of natural sunlight 8) Decent Work and Economic Growth Local Bounti provides full time, full year, indoor jobs versus transient, outdoor and seasonal labor in traditional agriculture 9) Industry, Innovation and Infrastructure Local Bounti spurs investment in sustainable and innovative infrastructure and technology, and provides jobs for local communities 11) Sustainable Cities and Communities Local Bounti locates facilities in and near urban environments, increasing jobs, taxes and investment in cities 12) Responsible Consumption and Production Due to reduction in transportation distance and controlled growing conditions, Local Bounti increases product shelf life and reduce food waste throughout the agricultural supply chain, as well as uses less land and fertilizer to grow more 13) Climate Action Distributed, regional production potential of Local Bounti drastically reduces emissions from food supply chain transportation 14) Life Below Water Local Bounti eliminates agricultural runoff and uses recycled plastics to reduce the pollution of aquatic habitats 15) Life on Land Local Bounti utilizes 90% less land and has zero high nutrient runoff and thus reduces the impact on wildlife and the environment 16) Peace Justice and Strong Institutions Local Bounti's company policies and values include anti-discrimination, human rights, and anti-bribery commitments 17) Partnerships for the Goals Local Bounti participates in the UN Global Compact and is a member of the GRI Community and International Fresh Produce Association ("IFPA") Large and growing market opportunity for CEA.
Biggest changeSustainable Development Goal CEA Benefit 2) Zero Hunger The flexibility of Local Bounti's locations enables access to fresh, local food 6) Clean Water and Sanitation Drastic reduction in water usage in Local Bounti facilities conserves resources and controls all aspects of water withdrawal, consumption, and discharge 7) Affordable and Clean Energy Local Bounti facilities can be designed to be energy-efficient and sited with near renewable energy supply in the community and/or on-site, as well as take advantage of natural sunlight 8) Decent Work and Economic Growth Local Bounti provides full time, full year, indoor jobs versus outdoor and seasonal labor in traditional agriculture 9) Industry, Innovation and Infrastructure Local Bounti spurs investment in sustainable and innovative infrastructure and technology, and provides jobs for local communities 11) Sustainable Cities and Communities Local Bounti locates facilities in and near urban environments, increasing jobs, taxes, and investment in cities 12) Responsible Consumption and Production Due to reduction in transportation distance and controlled growing conditions, Local Bounti increases product shelf life and reduces food waste throughout the agricultural supply chain, as well as uses less land and fertilizer to grow more 13) Climate Action Distributed, regional production potential of Local Bounti drastically reduces emissions from food supply chain transportation 14) Life Below Water Local Bounti controls all aspects of water withdrawal, consumption, and discharge and is actively working cross industry to increase recycling and the use of recycled content to reduce pollution 15) Life on Land Local Bounti utilizes 90% less land and locates facilities in areas identified by local communities that have been used previously for industrial or agricultural functions, reducing the impact on wildlife and the environment 16) Peace Justice and Strong Institutions Local Bounti's company policies and values include anti-discrimination, human rights, and anti-bribery commitments 17) Partnerships for the Goals Local Bounti participates in the UN Global Compact and is a member of the GRI Community and International Fresh Produce Association ("IFPA") Large and growing market opportunity for CEA.
Key considerations include meeting known demand from key existing customers within the network, as well as optimizing freight routes to ensure that transportation is optimized to limit cost while enhancing customer service with consistent delivery schedules.
Key considerations include meeting known demand from key existing customers within the network, as well as optimizing freight routes to ensure that transportation is optimized to limit cost while enhancing customer service with consistent delivery schedules.
We are working to develop key partnerships with agricultural and equipment vendors to ensure efficient construction. As a result, we believe we can build, scale and commission a facility within 15 months of acquiring the underlying land, which we believe is significantly faster than our competitors.
We are working to develop key partnerships with agricultural and equipment vendors to ensure efficient construction. As a result, we believe we can build, scale and commission a facility within 15 months of acquiring the underlying land, which we believe is significantly faster than our competitors.
Government Regulation Local Bounti is subject to laws and regulations administered by various federal, state and local government agencies in the United States, such as the United States Food and Drug Administration ("FDA"), the Federal Trade Commission ("FTC"), the Environmental Protection Agency ("EPA"), the Occupational Safety and Health Administration ("OSHA") and the USDA.
Government Regulation Local Bounti is subject to laws and regulations administered by various federal, state and local government agencies in the United States, such as the United States Food and Drug Administration ("FDA"), Federal Trade Commission ("FTC"), Environmental Protection Agency ("EPA"), Occupational Safety and Health Administration ("OSHA") and USDA.
Local Bounti is also restricted by the FDA and the USDA from making certain types of claims about our products, including nutrient content claims, health claims, organic claims and claims regarding the effects of our products on any structure or function of the body, whether express or implied, unless Local Bounti satisfies certain regulatory requirements.
Local Bounti is also restricted by the FDA and USDA from making certain types of claims about our products, including nutrient content claims, health claims, organic claims and claims regarding the effects of our products on any structure or function of the body, whether express or implied, unless Local Bounti satisfies certain regulatory requirements.
Lastly, global regions with geographic constraints to traditional agriculture, such as the Middle East and parts of Asia have expressed 15 interest in expanding CEA capabilities and represent potential significant opportunities for us to monetize our technology and expertise through international expansion, should we decide to expand into those markets.
Lastly, global regions with geographic constraints to traditional agriculture, such as the Middle East and parts of Asia have expressed interest in expanding CEA capabilities and represent potential significant opportunities for us to monetize our technology and expertise through international expansion, should we decide to expand into those markets.
This vertical nursery produces a stock of young plants to fill growing space in our controlled environment hydroponic greenhouses, where young plant growth is accelerated when exposed to a specified set of conditions, including natural light, temperature, humidity, carbon dioxide, nutrients, pH balance and other key variables.
This vertical nursery produces a stock of young plants to fill growing space in our controlled environment greenhouses, where young plant growth is accelerated when exposed to a specified set of conditions, including natural light, temperature, humidity, carbon dioxide, nutrients, pH balance and other key variables.
More information on our key ESG programs, goals, commitments, and metrics can be found in our most recent sustainability report, which is available on our website. Information contained on our website or connected thereto does not constitute part of, and is not incorporated by reference into, this Annual Report on Form 10-K.
More information on our key sustainability programs, goals, commitments, and metrics can be found in our most recent sustainability report, which is available on our website. Information contained on our website or connected thereto does not constitute part of, and is not incorporated by reference into, this Annual Report on Form 10-K.
We believe that our Stack & Flow Technology™, modular and distributed approach, and local branded product diversity provide competitive advantages over our peers as the mainstream facility formats in CEA present a challenging trade-off between yield and operating/capital costs.
We believe that our patented Stack & Flow Technology ® , modular and distributed approach, and local branded product diversity provide competitive advantages over our peers as the mainstream facility formats in CEA present a challenging trade-off between yield and operating/capital costs.
Local Bounti may be required to register with the FDA (depending on specific processing operations), in which case Local Bounti would have to comply with Current Good Manufacturing Practice, Hazard Analysis, and Risk-Based Preventive Controls for Human Food (the "Preventive Controls Rule"), as applicable.
Local Bounti may be required to register with the FDA, depending on specific processing operations, in which case Local Bounti would have to comply with Current Good Manufacturing Practice, Hazard Analysis, and Risk-Based Preventive Controls for Human Food, as applicable.
In the future, we seek to co-locate with nationally recognized distributors to leverage their existing 6 networks and thereby further decrease the carbon footprint of duplicative distribution, and we are currently evaluating the implementation of this strategy through our existing distribution network.
In the future, we seek to co-locate with nationally recognized distributors to leverage their existing networks and thereby further decrease the carbon footprint of duplicative distribution, and we are currently evaluating the implementation of this strategy through our existing distribution network.
The facility uses both conventional and organic growing methods and has a 13 centralized harvesting and packaging room that transforms freshly harvested produce into packaged goods ready for retail sale. Georgia Facility. Our Georgia Facility began operations in mid-2022.
The facility uses both conventional and organic growing methods and has a centralized harvesting and packaging room that transforms freshly harvested produce into packaged goods ready for retail sale. Georgia Facility. Our Georgia Facility began operations in mid-2022.
With a stable control of the plant environment, CEA can provide secure, high quality produce, year-round production of previously seasonal produce and higher production volume compared to conventional farming on the same size land.
With a stable control of the plant environment, CEA can provide secure, high quality produce, year-round production of previously seasonal produce and higher production volume compared to 7 conventional farming on the same size land.
Local Bounti is also subject to labor and employment laws, laws governing advertising, privacy laws, safety regulations and other laws, including consumer protection regulations that regulate retailers or govern the promotion and sale of merchandise.
Local Bounti is subject to labor and employment laws, laws governing advertising, privacy laws, safety regulations and other laws, including consumer protection regulations that regulate retailers or govern the promotion and sale of merchandise.
Additionally, we target initial addressable market facility expansion in states with favorable conditions for growth in light industrial production, including favorable state and local processes for facility siting, permitting, construction and 10 operation.
Additionally, we target initial addressable market facility expansion in states with favorable conditions for growth in light industrial production, including favorable state and local processes for facility siting, permitting, construction and operation.
Our approach combines the features that we found most attractive from vertical farming and traditional hydroponic greenhouse growing to grow plants during their early development in our "stack" phase. This reduces facility square footage, drives capital expenditure and operating expenditure efficiency, increases the annual turns of the farm, and ultimately leads to increased returns on invested capital.
Our approach combines the features that we found most attractive from vertical farming and traditional CEA greenhouse growing to grow plants during their early development in our "stack" phase. This reduces facility square footage, drives capital expenditure and operating expenditure efficiency, increases the annual turns of the farm, and ultimately leads to increased returns on invested capital.
Social – Employees : Being local and producing year-round not only allows for competitive produce prices and the opportunity for more consumers to access high quality produce, it also allows our facilities to offer full time, indoor jobs to members of the community, offsetting the seasonal work offered by more traditional agriculture businesses.
Social – Employees: Being local and producing year-round not only allows for competitive produce prices and the opportunity for more consumers to access high quality produce, but it also allows our facilities to offer full time, indoor jobs to members of the community, potentially offsetting the seasonal work offered by more traditional agriculture businesses.
We plan to use substantial pre-engineered, pre-fabricated and standardized components when building our modular facilities in order to reduce execution risk for facilities where we build from the ground up. For pre-existing facilities like those acquired with the Pete's Acquisition, we expect to update facilities using our Stack & Flow Technology™.
We plan to use 13 substantial pre-engineered, pre-fabricated and standardized components when building our modular facilities in order to reduce execution risk for facilities where we build from the ground up. For pre-existing facilities like those acquired with the Pete's Acquisition, we expect to update facilities using our patented Stack & Flow Technology ® .
When the plants reach targeted maturity, they are transported to hydroponic greenhouses, which are arranged on horizontal planes with natural sunlight and other controlled environmental variables, resulting in optimal growth conditions specified for each type of plant as well as space and energy efficiency.
When the plants reach targeted maturity, they are transported to CEA greenhouses, which are arranged on horizontal planes with natural sunlight and other controlled environmental variables, resulting in optimal growth conditions specified for each type of plant as well as space and energy efficiency.
Valiasek served as Chief Financial Officer from January 2017 to June 2019 and Chief Business Officer from June 2019 to March 2021 at Amyris (Nasdaq: AMRS), a science and technology leader in the research, development and production of sustainable ingredients for the clean health and beauty and flavors and fragrances markets. Prior to Amyris, Ms.
Valiasek served as Chief Financial Officer from January 2017 to June 2019 and Chief Business Officer from June 2019 to March 2021 at Amyris, a science and technology leader in the research, development and production of sustainable ingredients for the clean health and beauty and flavors and fragrances markets. Prior to Amyris, Ms.
Our proprietary process is a hybrid, 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 proprietary process is a hybrid, utilizing vertical farming in early plant growth, followed by greenhouse farming for final grow out. We designed our Stack & Flow Technology ® to give our greens exactly what they need at every step of their growth cycle.
We believe that CEA represents an attractive alternative for industry players seeking greater reliability and will lead to further adoption. 9 On a more global basis, CEA addresses 12 of the 17 total U.N. Sustainable Development Goals, including: U.N.
We believe that CEA represents an attractive alternative for industry players seeking greater reliability and will lead to further adoption. 8 On a more global basis, CEA addresses 12 of the 17 total U.N. Sustainable Development Goals, including: U.N.
We expect to continue to target new SKUs that incorporate spinach, kale, and arugula, which continue to grow in popularity in American households.
We expect to continue to target new SKUs that incorporate spinach and arugula, which continue to grow in popularity in American households.
Joyner also co-founded BrightMark, a growth equity and management firm providing capital and resources to venture, growth phase and middle-market businesses, and served as a Managing Partner from January 2014 to March 2021. At BrightMark, Mr.
Joyner also co-founded BrightMark Partners, LLC, a growth equity and management firm providing capital and resources to venture, growth phase and middle-market businesses, and served as a Managing Partner from January 2014 to March 2021. At BrightMark Partners, LLC, Mr.
Previously, she served as Vice President, General Counsel, and Secretary from January 2015 to December 2019 and Assistant General Counsel and Assistant Secretary from January 2012 to January 2015 of Intrepid Potash, Inc., a potash and specialty plant-nutrient company. From 2004 through 2011, Ms.
Previously, she served as Vice President, General Counsel, and Secretary from January 2015 to December 2019 and Assistant General Counsel and Assistant Secretary from January 2012 to January 2015 of Intrepid Potash, Inc. (NYSE: IPI), a potash and specialty plant-nutrient company. From 2004 through 2011, Ms.
We also intend to use certain social media channels as a means of disclosing information about Local Bounti and our products to our customers, investors and the public (e.g., @Local Bounti and #LocalBounti on Twitter).
We also intend to use certain social media channels as a means of disclosing information about Local Bounti and our products to our customers, investors and the public (e.g., @Local Bounti and #LocalBounti on X).
Controlling the environmental conditions in both the ‘Stack’ and ‘Flow’ components of our growing system helps to ensure healthy, nutritious, consistent, and delicious 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.
Controlling the environmental conditions in both the 'Stack' and 'Flow' components of our growing system helps to ensure healthy, nutritious, consistent, and delicious 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.
We believe that SKU diversity in these markets will allow us to capture more in-store real estate and will result in consumer loyalty across multiple regional markets. Local Bounti Product Offering Montana Facility. Our Montana Facility was built in 2019 and reached commercial operations in the second half of 2020.
We believe that SKU diversity in these markets will allow us to capture more in-store real estate and will result in consumer loyalty across multiple regional markets. Select Local Bounti Product Offerings Montana Facility. Our Montana Facility was built in 2019 and reached commercial operations in the second half of 2020.
Sustainability is at the core of our business focus, and our business directly addresses 12 of the 17 United Nations ("U.N.") Sustainable Development Goals. Our farming practices use 90% less land and water than traditional farming, and our usage of pesticides and herbicides is significantly lower as compared to field grown lettuce.
Sustainability is at the core of our business focus, and our business prioritizes 12 of the 17 United Nations ("U.N.") Sustainable Development Goals. Our farming practices use 90% less land and water than traditional farming, and our usage of pesticides and herbicides is significantly lower as compared to field grown lettuce.
McCandless was Chief Compliance Officer, Assistant General Counsel, and Corporate Secretary of Royal Gold, Inc., a precious metals streaming and royalty company, from January 2020 to January 2022.
McCandless was Chief Compliance Officer, Assistant General Counsel, and Corporate Secretary of Royal Gold, Inc. (Nasdaq: RGLD), a precious metals streaming and royalty company, from January 2020 to January 2022.
The Montana Facility incorporates our patent pending Stack & Flow Technology™, including five operational greenhouses, a cold storage room for finished goods and a packaging room with processing equipment to transform freshly harvested produce into packaged goods that are ready for retail shelves.
The Montana Facility incorporates our patented Stack & Flow Technology ® , including five operational greenhouses, a cold storage room for finished goods and a packaging room with processing equipment to transform freshly harvested produce into packaged goods that are ready for retail shelves.
McCandless served as Associate General Counsel – Securities, Disclosure, and Corporate Governance for CenturyLink, Inc. and Qwest Communications International Inc. Prior to joining Qwest, Ms. McCandless was an associate at the law firms of Hogan Lovells LLP and Cooley LLP. Ms.
McCandless served as Associate General Counsel – Securities, Disclosure, and Corporate Governance for CenturyLink, Inc. (NYSE: CTL) and Qwest Communications International Inc. (NYSE: Q). Prior to joining Qwest, Ms. McCandless was an associate at the law firms of Hogan Lovells LLP and Cooley LLP.
Our CEA methods enable year-round crop production and consistent supply regardless of the local climate or weather conditions. Highly scalable turnkey platform . Local Bounti's patent pending Farm of the Future™ facilities are designed to use pre-engineered, pre-fabricated and standardized components to enable efficient expansion with low execution risk or added costs.
Our CEA methods enable year-round crop production and consistent supply regardless of the local climate or weather conditions. Highly scalable turnkey platform . Local Bounti's facilities are designed to use pre-engineered, pre-fabricated and standardized components to enable efficient expansion with low execution risk or added costs.
We potentially compete with traditional greenhouse producers, as well as CEA companies using high technology greenhouses such as AppHarvest, Bright Farms, and Revol Greens. We also potentially compete against vertical farming operators, including AeroFarms, Bowery Farming, and Plenty.
We potentially compete with traditional greenhouse producers, as well as CEA companies using high technology greenhouses such as AppHarvest, Bright Farms, and Revol Greens. We also potentially compete against vertical farming operators, including AeroFarms, Bowery Farming, Gotham Greens, Little Leaf Farms, and Plenty.
Branded product with SKU diversity . Local Bounti products are currently sold at more than 10,000 retail locations across 35 U.S. states and Canadian provinces primarily through direct relationships with blue-chip retail customers, including Albertsons, Sam's Club, Kroger, Target, Walmart, Whole Foods, and AmazonFresh.
Branded product with SKU diversity . Local Bounti products are currently sold at more than 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, and AmazonFresh.
Local Bounti is also subject to state and local food safety regulation, including registration and licensing requirements for our farms, enforcement of standards for our products and farms by state and local health agencies and regulation of our trade practices in connection with selling our products.
Local Bounti is subject to state and local food safety regulation, including registration and licensing requirements for our facilities, enforcement of standards for our products and facilities by state and local health agencies and regulation of our trade practices in connection with selling our products.
Local Bounti products are currently sold at more than 10,000 retail locations across 35 U.S. states and Canadian provinces primarily through direct relationships with blue-chip retail customers, including Albertsons, Sam's Club, Kroger, Target, Walmart, Whole Foods, and AmazonFresh.
Local Bounti products are currently sold at more than 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, and AmazonFresh.
Local Bounti plans to install its patent pending Stack & Flow 5 Technology™ at its California facilities, combining the best aspects of vertical farming and greenhouse growing technologies to deliver higher yields of diverse leafy greens with superior unit economics.
Local Bounti plans to install its patented Stack & Flow Technology ® at its California facilities, combining the best aspects of vertical farming and greenhouse growing technologies to deliver higher yields of diverse leafy greens with superior unit economics.
Our hybrid facility design is at the core of our focus on unit economics and serves as a platform intended to grow margins through investment in technology and in the future, plant genetics. In our facility configuration, we grow plants during their early development period "stacked" in a space and energy efficient vertical nursery.
Our hybrid facility design is at the core of our focus on unit economics and serves as a platform intended to grow margins through investment in technology and yield improvement. In our facility configuration, we grow plants during their early development period "stacked" in a space and energy efficient vertical nursery.
Company Overview Local Bounti is a controlled environment agriculture (“CEA”) company that produces sustainably grown produce, focused today on living and loose leaf lettuce. Founded in 2018, and headquartered in Hamilton, Montana, Local Bounti utilizes its patent pending Stack & Flow Technology™ to grow healthy food sustainably and affordably.
Company Overview Local Bounti is a controlled environment agriculture ("CEA") company that produces sustainably grown produce, focused today on living and loose leaf lettuce. Founded in 2018, and headquartered in Hamilton, Montana, Local Bounti utilizes its patented Stack & Flow Technology ® to grow healthy food sustainably and affordably.
Users may automatically receive email alerts and other information about Local Bounti by signing up for email alerts under the Investors tab of our website. Executive Officers Below is biographical information about our executive officers: 19 Name Age Position Craig M. Hurlbert 60 Co-Chief Executive Officer and Director Travis M.
Users may automatically receive email alerts and other information about Local Bounti by signing up for email alerts under the Investors tab of our website. 18 Executive Officers Below is biographical information about our executive officers: Name Age Position Craig M. Hurlbert 61 Chief Executive Officer and Director Travis M.
Through the Pete's acquisition, we significantly increased our growing footprint, now operating three additional greenhouse growing facilities, including two in California and one in Georgia, the latter of which became operational in July 2022.
Through the Pete's Acquisition, we significantly increased our growing footprint, now operating three additional greenhouse growing facilities, including two in California and one in Georgia, the latter of which became operational in July 2022 and was further expanded in 2023.
The FDA and the USDA also require that certain information appear on our product labels and, more generally, that our labels and labeling be truthful and non-misleading. Similarly, the FTC requires that Local Bounti's marketing and advertising be truthful, non-misleading, not deceptive to consumers and not otherwise an unfair means of competition.
The FDA and USDA generally have the authority to inspect our facilities and require that certain information appear on our product labels and, more generally, that our labels and labeling be truthful and non-misleading. Similarly, the FTC requires that Local Bounti's marketing and advertising be truthful, non-misleading, not deceptive to consumers and not otherwise an unfair means of competition.
We believe the power of our brands, including Local Bounti and Pete's, and the quality of our products allow customers and consumers to associate Local Bounti produce with freshness and sustainability, and choose our products to enhance their diets while safeguarding the environment.
We believe the power of our brand and the quality of our products allow customers and consumers to associate Local Bounti produce with freshness and sustainability, and choose our products to enhance their diets while safeguarding the environment.
We will continue to consider underserved communities in our future site selection process as well. Governance: Local Bounti sees ESG as a competitive advantage and strives to be fully supportive of these endeavors at all levels of the Company. This alignment and focus will aid us in steering our long-term corporate actions in the right direction.
We will continue to consider opportunities for community engagement in future site selection process as well. 15 Governance: Local Bounti sees ESG as a competitive advantage and strives to be fully supportive of these endeavors at all levels of the Company. This alignment and focus will aid us in steering our long-term corporate actions in the right direction.
Continue to develop and diversify our sales channels and geographies . We intend to expand our sales channels where we can enhance our brand and maximize the efficiency of our distribution. We focus on the retail channel and complement our distribution with foodservice.
We intend to expand our sales channels where we can enhance our brand and maximize the efficiency of our distribution. We focus on the retail channel and complement our distribution with foodservice.
Joyner earned a Ph.D. from the University of Kansas, where his graduate focus was market research and statistics, a Certificate of Finance from the Wharton School at the University of Pennsylvania, a J.D. from the University of Montana, and his B.A. from the University of North Carolina-Chapel Hill, graduating with distinction. Brian Cook. Mr.
Joyner earned a Ph.D. from the University of Kansas, where his graduate focus was market research and statistics, a Certificate of Finance from the Wharton School at the University of Pennsylvania, a J.D. from the University of Montana, and his B.A. from the University of North Carolina-Chapel Hill, graduating with distinction . Kathleen Valiasek. Ms.
At the end of 2022, Local Bounti offered 25 SKUs across living and loose leaf lettuce, organic and conventional, cress and value add product lines, and intends to continue to expand its SKUs to meet customer demand.
At the end of 2023, Local Bounti offered 27 SKUs across living and loose leaf lettuce, organic and 11 conventional, cress and value add product lines, and intends to continue to expand its SKUs to meet customer demand.
Among other things, the farms in which our products are grown and packed must comply with regulatory requirements including Standards for the Growing, Harvesting, Packing and Holding of Produce for Human Consumption (the "Produce Safety Rule").
Among other things, the facilities in which our products are grown and packed must comply with regulatory requirements including the FDA’s Standards for the Growing, Harvesting, Packing and Holding of Produce for Human Consumption.
Hurlbert co-founded our predecessor company in August 2018. Mr. Hurlbert also co-founded BrightMark Partners, LLC ("BrightMark") a growth equity and management firm providing capital and resources to venture, growth phase and middle-market businesses, and served as a Managing Partner from January 2014 to March 2021. Previously, Mr.
Hurlbert also co-founded BrightMark Partners, LLC, a growth equity and management firm providing capital and resources to venture, growth phase and middle-market businesses, and served as a Managing Partner from January 2014 to March 2021. Previously, Mr.
Our stock keeping unit (“SKU”) assortment at the end of 2022 includes 25 SKUs across living and loose leaf lettuce, organic and conventional, cress and value add product lines.
Our stock keeping unit (“SKU”) assortment at the end of 2023 includes 27 6 SKUs across living and loose leaf lettuce, organic and conventional, cress and value add product lines.
Key considerations include meeting known demand from key existing customers within the network, as well as optimizing freight routes to ensure that transportation is optimized to limit cost while enhancing customer service with consistent delivery schedules. We are currently building two new facilities.
Key considerations include meeting known demand from key existing customers within the network, as well as optimizing freight routes to ensure that transportation is optimized to limit cost while enhancing customer service with consistent delivery schedules.
The farms also have to comply with FDA and USDA labeling and marketing requirements, and could be subject to the Organic Food Production Act, among other laws and regulations implemented by the FDA the USDA and other regulators.
Our facilities must comply with FDA and USDA labeling and marketing requirements and could be subject to the Organic Food Production Act, among other laws and regulations implemented by the FDA, the USDA, and other regulators.
At the end of 2022, we offered 25 SKUs across living and loose-leaf lettuce, under both organic and conventional growing methods. In addition, we also added multiple value add product lines to our SKU assortment, including two chef-inspired grab-and-go salad kits, and a heat and eat Asian chicken lettuce wrap meal kit.
At the end of 2023, we offered 27 SKUs across living and loose-leaf lettuce, under both organic and conventional growing methods. In addition, we also added multiple value add product lines to our SKU assortment, including two chef-inspired grab-and-go salad kits.
Today, 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 salad and cress. Local Bounti's founders are Craig M. Hurlbert and Travis M.
Today, 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.
The Nominating and Corporate Governance Committee periodically reviews our carbon and water data and provides oversite for climate-related risks and opportunities to operations. In 2022 the company launched its work to identify and assess climate-related risks and opportunities.
The Nominating and Corporate Governance Committee periodically reviews our carbon and water data and provides oversite for climate-related risks and opportunities to operations. In 2023, the Company conducted a climate change scenario based approach to its work to identify and assess climate-related risks and opportunities.
In December 2022, our Board approved a new Environmental Policy, which documents our policies relating to the environment, including the following: • Water Stewardship: We are committed to monitoring, reducing, and reusing water resources. • Climate Protection: We are committed to adopting a science-based target (SBT) in 2023 and being carbon neutral by 2050. 16 • Sustainable Packaging: We are committed to exceeding 30% post-consumer or bio-based content in our packaging by 2025. • Sustainable Sourcing: Our Board has approved a Supplier Code of Conduct, which address the standards of business conduct we expect from our suppliers.
In December 2022, our Board approved a new Environmental Policy, which documents our policies relating to the environment, including the following: • Water Stewardship: We are committed to monitoring, reducing, and reusing water resources. • Climate Protection: We are committed to being carbon neutral by 2050. • Sustainable Packaging: We are committed to using an average of 30% recycled content or responsibly sourced biobased content in consumer-facing packaging by the end of 2025. • Sustainable Sourcing: Our Board has approved a Supplier Code of Conduct, which address the standards of business conduct we expect from our suppliers.
Social – Community: We prioritize under-served communities where our facilities are located and as a corporation are and will continue donating produce to our communities. These investments are more impactful and provide better economic and social results in these underserved areas. These investments are supported by large on-going local purchases and significant employment.
Social – Community: We prioritize communities where our facilities are located and as a corporation are and will continue donating produce to our communities. These investments are supported by large on-going local purchases and significant employment.
Combined with our advanced technologies and the location of our facilities in less developed communities and areas with available supporting resources such as adequate water and renewable energy, we believe Local Bounti has the potential to be among the most sustainable produce suppliers in the nation.
Combined with our advanced technologies and the location of our facilities in proximity to retail partner distribution centers and communities with available supporting resources such as adequate water and renewable energy, we believe Local Bounti has the potential to be among the most sustainable produce suppliers in the nation. Our sustainability program is foundational to our business.
We regularly assess our pipeline of future farm locations to maximize our national distribution footprint. Key considerations include meeting known product demand from key existing customers within the network, as well as optimizing freight routes to ensure that transportation is optimized to limit cost while enhancing customer service with consistent delivery schedules.
Key considerations include meeting known product demand from key existing customers within the network, as well as optimizing freight routes to ensure that transportation is optimized to limit cost while enhancing customer service with consistent delivery schedules.
Our first CEA facility in Hamilton, Montana (the “Montana Facility”) commenced construction in 2019 and reached full commercial operation by the second half of 2020. In 2021, we successfully completed the expansion of our Montana Facility, more than doubling our production capacity.
Our first facility in Hamilton, Montana (the "Montana Facility") commenced construction in 2019 and reached full commercial operation by the second half of 2020. In 2021, we successfully completed the expansion of our Montana Facility, more than doubling our production capacity. The Montana Facility is currently used for commercial production, as well as research-and-development activities.
The value of local CEA facilities extends beyond our environmental goals. The short transport distances to our customers reduce food miles and transportation emissions. Delivering fresher and higher quality product reduces food waste in the supply chain and lowers consumer food waste.
The value of local CEA facilities extends beyond our environmental goals. The short transport distances to our customers reduce food miles and transportation emissions. Delivering fresher and higher quality product reduces food waste in the supply chain and lowers consumer food waste. Additionally, we use significantly less pesticides, and currently use recycled polyethylene terephthalate ("rPET") for some of our packaging.
Recent events, including the COVID-19 pandemic, have forced grocers, restaurants and other food providers to reconsider their supply chain risk and seek reliable and less variable suppliers.
CEA can also be implemented locally, which reduces the supply-chain risk associated with distanced or international suppliers. Recent events, including the COVID-19 pandemic, have forced grocers, restaurants and other food providers to reconsider their supply chain risk and seek reliable and less variable suppliers.
Valiasek has served as our Chief Financial Officer since November 2021 and served as Chief Financial Officer of our predecessor company from April 2021 to November 2021. Previously, Ms.
Valiasek has served as our Chief Financial Officer since April 2021. Previously, Ms.
Joyner has served as our Co-Chief Executive Officer and as a member of the Board since November 2021. Mr. Joyner co-founded our predecessor company in August 2018. Mr.
Joyner has served as our Chief Technology Officer since June 2023 and has served as a member of our Board since November 2021. He previously served as our Co-Chief Executive Officer from November 2021 to June 2023. Mr. Joyner co-founded Local Bounti in August 2018. Mr.
The Pasco facility will be comprised of three acres of greenhouse and multiple stack zones. Grown with Fewer Pesticides and Herbicides. Local Bounti produce is grown with significantly less pesticides and herbicides than traditional field-grown produce, is non-GMO, and is certified with Harmonized Good Agricultural Practices under a GFSI benchmarked program. Cargill Relationship.
Grown with Fewer Pesticides and Herbicides. Local Bounti produce is grown with significantly less pesticides and herbicides than traditional field-grown produce, is non-GMO, and is certified with Harmonized Good Agricultural Practices under a Global Food Safety Initiative ("GFSI") benchmarked program. Cargill Relationship.
We now have distribution to over 10,000 retail locations across 35 U.S. states and Canadian provinces, primarily through direct relationships with blue-chip retail customers, including Albertsons, Sam's Club, Kroger, Target, Walmart, Whole Foods, and AmazonFresh.
In early 2024, we will complete construction on two new facilities in Texas and Washington, bringing our total facility count to six. We now have distribution to over 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, and AmazonFresh.
For example, from November through March, approximately 90% of all leafy vegetables grown in the United States are sourced from Yuma County in southwest Arizona, according to the Yuma County Chamber of Commerce, which is hundreds of miles from where much of this food is ultimately consumed.
For example, the majority of leafy vegetables grown in the United States are sourced from Salinas Valley in northern California and Yuma County in southwest Arizona, which is hundreds (often thousands) of miles from where much of this food is ultimately consumed.
Trademarks and Other Intellectual Property Local Bounti owns patents, trademarks and other proprietary rights that are important to our business, including our principal trademarks, "Local Bounti®," "Stack & Flow Technology™," and "Farm of the Future™." Our 18 trademarks are registered with the United States Patent and Trademark Office ("USPTO") and select trademarks have been extended to multiple international markets.
Our operations, and those of our distributors and suppliers, are subject to various laws and regulations relating to environmental protection, water usage and discharge, water conservation and worker health and safety matters. 17 Trademarks and Other Intellectual Property Local Bounti owns patents, trademarks and other proprietary rights that are important to our business, including our principal trademarks for "Local Bounti" and "Stack & Flow Technology." As appropriate, our trademarks are registered with the United States Patent and Trademark Office ("USPTO") and select trademarks have been extended to multiple international markets.
Valiasek was typically engaged for critical roles on multi-year assignments including M&A transactions, debt and equity financings, IPOs, and spin-offs. Ms. Valiasek holds a B.B.A. from the University of Massachusetts at Amherst. B. David Vosburg Jr. Mr.
Valiasek was typically engaged for critical roles on multi-year assignments including M&A transactions, debt and equity financings, IPOs, and spin-offs. Ms. Valiasek holds a B.B.A. from the University of Massachusetts at Amherst. Margaret McCandless. Ms. McCandless has served as our General Counsel since February 2022 and our Corporate Secretary since March 2022. Before joining Local Bounti, Ms.
We expect to complete construction of our new facility in Mount Pleasant, Texas, in the fourth quarter of 2023 and our new facility in Pasco, Washington, in the first quarter of 2024. The Texas facility will be comprised of six acres of greenhouse and multiple stack zones.
We are currently building two new facilities in Mount Pleasant, Texas and Pasco, Washington that will both be completed in the first quarter of 2024. The Texas facility will be 12 comprised of six acres of greenhouse and multiple stack zones. The Washington facility will be comprised of three acres of greenhouse and multiple stack zones.
For pre-existing facilities like those acquired with the Pete's Acquisition, we expect to update facilities using our Stack & Flow Technology™, which would then benefit from the same baseline platform. Experienced management team. We have an experienced and passionate management team with deep industry knowledge and a diverse set of core competencies.
Our facilities have been purposely designed for rapid expansion, allowing us to potentially build and commission a facility within 15 months of land acquisition. For pre-existing facilities like those acquired with the Pete's Acquisition, we expect to update facilities using our patented Stack & Flow Technology ® , which would then benefit from the same baseline platform. Experienced management team.
Local Bounti is committed to improving our business using the benefits of a consistent, business wide focus on our stakeholders (employees, consumers, customers, communities and investors) and their growing interest in how our actions and products impact them. Our sustainability efforts are already generating tremendous business value with employee engagement, community commitment and reduction of valuable process inputs.
Many of our competitors do not have the commitment to an aggressively transparent process, disclosing the good and bad. Local Bounti is committed to improving our business using the benefits of a consistent, business wide focus on our stakeholders (employees, consumers, customers, communities and investors) and their growing interest in how our actions and products impact them.
Research reports attribute much of this shelf-life extension to the reduced bacteria, mildew and mold achieved using CEA production, as compared to traditionally grown products (even post-harvest washed). ESG and Sustainability Conventional agriculture has been feeding the world for hundreds of years, yet, given the negative impacts of climate change, it is now struggling to keep pace.
Research reports attribute much of this shelf-life extension to the reduced bacteria, mildew and mold achieved using CEA production, as compared to traditionally grown products (even post-harvest washed). 14 ESG and Sustainability Conventional agriculture faces challenges due to climate change, population growth, and geopolitical shifts.
We are also committed to paying a living wage, hiring locally, and promoting internally by investing in internal and community training programs. All employees receive benefits on their first day of work. To keep up with the evolving market, we survey all employees quarterly regarding various aspects of their employment experience.
We strive to hire locally and promote employees internally by investing in internal and community training programs. All full time Local Bounti employees receive benefits within their first month of work. To keep up with the evolving market, we survey all employees throughout the year regarding various aspects of their employment experience.
We believe consumers are increasingly drawn to local and sustainably grown food due to the freshness of the product, the taste, and a sense of supporting the local economy and environment. However, weather and geography limit the ability for traditional agriculture methods to provide most geographies with sufficient locally grown food year-round, or at all.
However, weather and geography limit the ability for traditional agriculture methods to provide most geographies with sufficient locally grown food year-round, or at all.
We designed and purpose-built our Farm of the Future™, which focuses on driving profitable unit economics and is based on our patent pending Stack & Flow Technology™. We are developing a centralized monitoring system which collects, organizes and analyzes data from distributed facilities.
We design and build our facilities by focusing on driving profitable unit economics and capitalizing on our patented Stack & Flow Technology ® . We are developing a centralized monitoring system which collects, organizes and analyzes data from distributed facilities.
With this approach, we believe that once Stack & Flow Technology™ is fully commissioned at a facility, the facility will yield 1.5 to 2.0 times more produce than traditional hydroponic greenhouse farms. Additionally, our greenhouse configuration is organized in a highly modular layout with our control center technology suite we are developing to centralize operational control.
With this approach, we believe that once Stack & Flow Technology ® is fully commissioned at a facility, the facility will yield 1.5 to 2.0 times more produce than traditional CEA greenhouse farms. This is evidenced in our Georgia facility, whereupon the commissioning of our Stack & Flow Technology ® , we doubled run-rate production.
We have entered into credit agreements with Cargill Financial, as described in Note 7, Debt , of the Consolidated Financial Statements. Our Competitive Strengths We believe the following competitive strengths will enable us to capitalize on the expanding opportunity for CEA and locally grown produce. Ability to drive production yield and lower costs.
Financial Statements and Supplementary Data, of this Annual Report on Form 10-K Our Competitive Strengths We believe the following competitive strengths will enable us to capitalize on the expanding opportunity for CEA and locally grown produce. Ability to drive production yield and lower costs.
The facility also includes a cold storage room for finished goods and a packaging room with processing equipment to transform freshly harvested produce into packaged goods that are ready for retail shelves.
The facility also includes a cold storage room for finished goods and a packaging room with processing equipment to transform freshly harvested produce into packaged goods that are ready for retail shelves. The Georgia site is laid out for potential future expansion. Development Pipeline. We regularly assess our pipeline of future farm locations to maximize our national distribution footprint.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe may be unable to integrate additional acquired businesses and technologies successfully or achieve the expected benefits of such acquisitions. • Local Bounti depends on employing a skilled local labor force, and failure to attract and retain qualified employees could negatively impact its business, results of operations and financial condition. • If Local Bounti fails to develop and maintain its brand, its business could suffer. • Local Bounti's estimates of market opportunity and forecasts of market growth may prove to be inaccurate, and even if the market in which it competes achieves the forecasted growth, Local Bounti's business could fail to grow at similar rates, if at all. • The effects of COVID-19, including the impact of new variants, and other potential future public health crises, epidemics, pandemics or similar events on Local Bounti's business, operating results and cash flows are uncertain. 22 • If Local Bounti cannot maintain its company culture or focus on its vision as it grows, Local Bounti's business and competitive position may be harmed. • Local Bounti may be unable to successfully execute on its growth strategy. • Local Bounti's operating costs to grow and sell its products may be higher than expected, which could impact its results and financial condition. • If Local Bounti's estimates or judgments relating to its critical accounting policies prove to be incorrect, its results of operations could be adversely affected. • Local Bounti previously identified a material weakness in its internal control over financial reporting as of December 31, 2021 and 2020.
Biggest changeWe may be unable to integrate additional acquired businesses and technologies successfully or achieve the expected benefits of such acquisitions. • Local Bounti depends on employing a skilled local labor force, and failure to attract and retain qualified employees could negatively impact its business, results of operations and financial condition. • If Local Bounti fails to develop and maintain its brand, its business could suffer. • Local Bounti's estimates of market opportunity and forecasts of market growth may prove to be inaccurate, and even if the market in which it competes achieves the forecasted growth, Local Bounti's business could fail to grow at similar rates, if at all. • If Local Bounti cannot maintain its company culture or focus on its vision as it grows, Local Bounti's business and competitive position may be harmed. • Local Bounti may be unable to successfully execute on its growth strategy. 21 • Local Bounti's operating costs to grow and sell its products may be higher than expected, which could impact its results and financial condition. • If Local Bounti's estimates or judgments relating to its critical accounting policies prove to be incorrect, its results of operations could be adversely affected. • If Local Bounti fails to continue to maintain an effective system of internal control over financial reporting, it may not be able to accurately report its financial results in a timely manner, which may adversely affect investor confidence in Local Bounti. • Local Bounti's ability to use its net operating loss ("NOL") carryforwards to offset future taxable income may be subject to certain limitations. • Local Bounti faces risks inherent in the CEA business, including the risks of diseases and pests. • Local Bounti may not be able to compete successfully in the highly competitive natural food market. • Local Bounti's ability to generate and grow revenue is dependent on its ability to increase the yield in each of the anticipated product lines it intends to grow.
Our trademarks are valuable assets that reinforce the distinctiveness of our brand to consumers, and our operations use intellectual property that is patented. We believe that the protection of our patents, trademarks, copyrights and domain names is important to its success. Local Bounti has also invested a significant amount of money in establishing and promoting its trademarked brand.
Our operations use intellectual property that is patented, and our trademarks are valuable assets that reinforce the distinctiveness of our brand to consumers. We believe that the protection of our patents, trademarks, copyrights and domain names is important to its success. Local Bounti has also invested a significant amount of money in establishing and promoting its trademarked brand.
Additionally, Local Bounti may be subject to significant income, withholding, and other tax obligations in the United States and may become subject to taxation in numerous additional U.S. state and local and non-U.S. jurisdictions with respect to income, operations and subsidiaries related to those jurisdictions.
Additionally, Local Bounti may be subject to significant income, withholding, and other tax obligations in the United States and may become subject to taxation in numerous additional state and local and non-U.S. jurisdictions with respect to income, operations and subsidiaries related to those jurisdictions.
In particular, we may encounter difficulties assimilating or integrating the business strategy, sales plans, technologies, products, distribution channels, personnel, or operations of the acquired companies, particularly if the key personnel of the acquired company choose not to work for us, their facilities are not easily adapted to work with our technology, or we have difficulty retaining the customers of any acquired business due to changes in ownership, management, 27 customers' experience with the acquired company prior to acquisition, or otherwise.
In particular, we may encounter difficulties assimilating or integrating the business strategy, sales plans, technologies, products, distribution channels, personnel, or operations of the acquired companies, particularly if the key personnel of the acquired company choose not to work for us, their facilities are not easily adapted to work with our technology, or we have difficulty retaining the customers of any acquired business due to changes in ownership, management, customers' experience with the acquired company prior to acquisition, or otherwise.
If issues are caused by human error during the various phases of seeding, germination, growing, harvesting, or other standard operating procedures, or if Local Bounti employees fail to properly oversee facility operations, then the yield and quality of Local Bounti's products could be diminished, which more generally could have material and adverse effects on Local Bounti's business, operating results, and financial condition; and 33 • Seed Supply and Quality.
If issues are caused by human error during the various phases of seeding, germination, growing, harvesting, or other standard operating procedures, or if Local Bounti employees fail to properly oversee facility operations, then the yield and quality of Local Bounti's products could be diminished, which more generally could have material and adverse effects on Local Bounti's business, operating results, and financial condition; and • Seed Supply and Quality.
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 ability to decrease its cost of goods sold over time is dependent on its ability to scale its operations and Local Bounti may not be able to achieve such decreases due to factors outside of its control such as inflation or global supply chain interruptions. • Any damage to or problems with Local Bounti's CEA facilities could severely impact Local Bounti's operations and financial condition. • There can be no assurance that current acquisitions, investments or expansions of scope of existing relationships will have a beneficial impact on Local Bounti's business, financial condition and results of operations. • Local Bounti may acquire additional greenhouses or other indoor farming operations, which may divert our management's attention and result in additional dilution to our stockholders.
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 ability to decrease its cost of goods sold over time is dependent on its ability to scale its operations and Local Bounti may not be able to achieve such decreases due to factors outside of its control such as inflation or global supply chain interruptions. • Any damage to or problems with Local Bounti's CEA facilities could severely impact Local Bounti's operations and financial condition. • There can be no assurance that future acquisitions, investments or expansions of scope of existing relationships will have a beneficial impact on Local Bounti's business, financial condition and results of operations. • Local Bounti may acquire additional greenhouses or other indoor farming operations, which may divert our management's attention and result in additional dilution to our stockholders.
At times, we rely on local contractors for the building of our CEA facilities, which could make us susceptible to local economic risks. If Local Bounti or its contractors encounter unexpected costs, delays or other problems in building any CEA facility, Local Bounti's financial position and ability to execute on its growth strategy 25 could be negatively affected.
At times, we rely on local contractors for the building of our CEA facilities, which could make us susceptible to local economic risks. If Local Bounti or its contractors encounter unexpected costs, delays or other problems in building any CEA facility, Local Bounti's financial position and ability to execute on its growth strategy could be negatively affected.
The costs to procure such materials and services to build new facilities may fluctuate widely based on the impact of numerous factors beyond Local Bounti's control including, international, economic and political trends, foreign currency fluctuations, expectations of inflation, global or regional consumptive patterns, speculative activities and increased or improved production and distribution methods.
The costs to procure such materials and services to build new or expanded facilities may fluctuate widely based on the impact of numerous factors beyond Local Bounti's control including, international, economic and political trends, foreign currency fluctuations, expectations of inflation, global or regional consumptive patterns, speculative activities and increased or improved production and distribution methods.
As a result, comparisons of Local Bounti's sales and operating results between different periods may not necessarily be meaningful comparisons. If Local Bounti is unable to operate facilities to reliably achieve the target channel mix on average, there could be material adverse effects on its business, operational results, and financial performance. • Energy Interruption.
As a result, comparisons of 25 Local Bounti's sales and operating results between different periods may not necessarily be meaningful comparisons. If Local Bounti is unable to operate facilities to reliably achieve the target channel mix on average, there could be material adverse effects on its business, operational results, and financial performance. • Energy Interruption.
In connection with the marketing and advertisement of its products, Local Bounti could be the target of claims relating to false or deceptive advertising, including under the auspices of the Federal Trade Commission and the consumer protection statutes of some states. CEA farming is a relatively new industry lacking a deep body of specific regulations applicable to its operations.
In connection with the marketing and advertisement of its products, Local Bounti could be the target of claims relating to false or deceptive advertising, including under the auspices of the Federal Trade Commission and the consumer protection statutes of some states. CEA is a relatively new industry lacking a deep body of specific regulations applicable to its operations.
Local Bounti's business could be adversely affected if it fails to effectively manage its future growth. • Local Bounti may require additional financing to achieve its goals, and a failure to obtain this necessary capital when needed on acceptable terms, or at all, may force Local Bounti to delay, limit, reduce or terminate its operations and future growth.
Local Bounti's business could be adversely affected if it fails to effectively manage its future growth. • Local Bounti will require additional financing to achieve its goals, and a failure to obtain this necessary capital when needed on acceptable terms, or at all, may force Local Bounti to delay, limit, reduce or terminate its operations and future growth.
These new and acquired facilities are much larger than our initial Montana Facility. Local Bounti may encounter unexpected challenges as it operates larger facilities, which could cause it to be unable to operate larger facilities reliably. The inability to operate larger facilities would have a material negative impact on Local Bounti's business and financial condition. • Channel Mix.
The new and acquired facilities are much larger than our initial Montana Facility. Local Bounti may encounter unexpected challenges as it operates larger facilities, which could cause it to be unable to operate larger facilities reliably. The inability to operate larger facilities would have a material negative impact on Local Bounti's business and financial condition. • Channel Mix.
Local Bounti's research and 30 development efforts focus on new varieties to expand product offerings, enhance farm unit economics, and create competitive advantages. If Local Bounti does not successfully commercialize new varieties of loose leaf lettuce products, its business, prospects, financial condition and results of operations could be materially and adversely affected.
Local Bounti's research and development efforts focus on new varieties to expand product offerings, enhance farm unit economics, and create competitive advantages. If Local Bounti does not successfully commercialize new varieties of loose leaf lettuce products, its business, prospects, financial condition and results of operations could be materially and adversely affected.
While the Company believes there to be a competitive market of supply chain service providers, if the cost of such services increases materially due to rising fuel costs, labor costs, or other 31 macroeconomic factors, which may be beyond its control, then Local Bounti's financial results could be materially and negatively impacted.
While the Company believes there to be a competitive market of supply chain service providers, if the cost of such services increases materially due to rising fuel costs, labor costs, or other macroeconomic factors, which may be beyond its control, then Local Bounti's financial results could be materially and negatively impacted.
Any of these events could adversely affect Local Bounti's business, operating results, financial condition and prospects. The loss of, or failure to achieve, any registered trademark or other intellectual property could enable other companies to compete more effectively with Local Bounti. We own patents, trademarks and other proprietary rights that are important to our business.
Any of these events could adversely affect Local Bounti's business, operating results, financial condition and prospects. The loss of, or failure to achieve, any registered patent, trademark, or other intellectual property rights could enable other companies to compete more effectively with Local Bounti. We own patents, trademarks and other proprietary rights that are important to our business.
Climate change, or legal, regulatory, or market measures to address climate change, may negatively affect our business and operations. There is growing concern that carbon dioxide and other greenhouse gases in the atmosphere may have an adverse impact on global temperatures, weather patterns, and the frequency and severity of extreme weather and 42 natural disasters.
Climate change, or legal, regulatory, or market measures to address climate change, may negatively affect our business and operations. There is growing concern that carbon dioxide and other greenhouse gases in the atmosphere may have an adverse impact on global temperatures, weather patterns, and the frequency and severity of extreme weather and natural disasters.
Climate change could have a negative effect on the productivity of our growing facilities, which could have an adverse impact on our business and results of operations. The increasing concern over climate change also may result in more regional, federal, or global legal and regulatory requirements to reduce or mitigate the effects of greenhouse gases or climate change.
Climate change could have a negative effect on the productivity of our growing facilities, which could have an adverse impact on our business and results of operations. The increasing concern over climate change 38 also may result in more regional, federal, or global legal and regulatory requirements to reduce or mitigate the effects of greenhouse gases or climate change.
Outcomes from audits or examinations by taxing authorities could have an adverse effect on Local Bounti's after-tax profitability and financial condition. Additionally, the IRS and several foreign tax authorities have increasingly focused attention on intercompany transfer pricing with respect to sales of products and services and 44 the use of intangibles.
Outcomes from audits or examinations by taxing authorities could have an adverse effect on Local Bounti's after-tax profitability and financial condition. Additionally, the IRS and several foreign tax authorities have increasingly focused attention on intercompany transfer pricing with respect to sales of products and services and the use of intangibles.
Brand value is based on perceptions of subjective qualities, and any incident that erodes the confidence of Local Bounti's consumers, 28 customers, distributors, or other strategic partners, including adverse publicity or a governmental investigation, litigation or regulatory enforcement action, could reduce the value of Local Bounti's brand and materially damage its business.
Brand value is based on perceptions of subjective qualities, and any incident that erodes the confidence of Local Bounti's consumers, customers, distributors, or other strategic partners, including adverse publicity or a governmental investigation, litigation or regulatory enforcement action, could reduce the value of Local Bounti's brand and materially damage its business.
Bad seed lots, low germination rates, and similar issues that affect growing also could result in Local Bounti's inability to achieve proper and consistent product yields or product quality, which could materially and adversely affect performance, and more generally could negatively impact Local Bounti's business, financial condition and operating results.
Bad seed lots, low germination rates, and similar issues that affect growing also could result in Local Bounti's inability to achieve proper and consistent product yields or product quality, which could materially and adversely affect 32 performance, and more generally could negatively impact Local Bounti's business, financial condition and operating results.
Moreover, volatile economic conditions may make it more likely that our suppliers and manufacturers may be unable to deliver supplies on time or at all, and there is no guarantee that we will be able to locate alternative suppliers of comparable quality on time and at an acceptable price.
Moreover, volatile economic conditions may make it more likely that our suppliers and manufacturers may be unable to deliver supplies on time or at all, and there is no 24 guarantee that we will be able to locate alternative suppliers of comparable quality on time and at an acceptable price.
Local Bounti's failure to protect its trademark rights could prevent Local Bounti in the future from challenging third parties who use names and logos similar to Local Bounti's trademarks, which may in turn cause consumer confusion or negatively affect consumers' perception of Local Bounti's brand and products.
Local Bounti's failure to protect its trademark rights could prevent Local Bounti in the future from challenging third parties who use names and 33 logos similar to Local Bounti's trademarks, which may in turn cause consumer confusion or negatively affect consumers' perception of Local Bounti's brand and products.
Local Bounti depends on employing a skilled local labor force, and failure to attract and retain qualified employees could negatively impact its business, results of operations and financial condition. Local Bounti's operations require significant labor, and the growing season for indoor vertical farming is year-round.
Local Bounti depends on employing a skilled local labor force, and failure to attract and retain qualified employees could negatively impact its business, results of operations and financial condition. Local Bounti's operations require significant labor, and the growing season for indoor farming is year-round.
Local Bounti grows plants with and without sunlight, thus requiring lighting technology and adequate power supply as primary factors of production. Local Bounti considers the reliability 26 of utilities and related infrastructure as a key factor in its site selection criteria for facility locations.
Local Bounti grows plants with and without sunlight, thus requiring lighting technology and adequate power supply as primary factors of production. Local Bounti considers the reliability of utilities and related infrastructure as a key factor in its site selection criteria for facility locations.
From time to time, Local Bounti may be party to various claims and litigation proceedings. Local Bounti will evaluate these claims and litigation proceedings to assess the likelihood of unfavorable outcomes and to estimate, if possible, the amount of potential losses. Based on these assessments and estimates, Local Bounti may establish reserves, as appropriate.
From time to time, Local Bounti may be party to various claims and litigation proceedings. Local Bounti will evaluate these claims and litigation proceedings to assess the likelihood of unfavorable outcomes and to estimate, if possible, the amount of potential losses. Based on these assessments and estimates, Local Bounti may establish 35 reserves, as appropriate.
In addition, in the past, following periods of volatility in the overall market and the market price of a particular company's securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted, could result in substantial costs and a diversion of management's attention and resources.
In addition, in the past, following periods of volatility in the overall market and the market price of a particular company's securities, securities class action litigation has often been 39 instituted against these companies. This litigation, if instituted, could result in substantial costs and a diversion of management's attention and resources.
If any analyst who may cover Local Bounti were to cease their coverage or fail to regularly publish reports on Local Bounti, we could lose visibility in the financial markets, which could cause the stock price or trading volume of Local Bounti securities to decline.
If any 43 analyst who may cover Local Bounti were to cease their coverage or fail to regularly publish reports on Local Bounti, we could lose visibility in the financial markets, which could cause the stock price or trading volume of Local Bounti securities to decline.
As a result, capital appreciation, if any, of our common stock will be the sole source of gain for the foreseeable future. 43 Anti-takeover provisions contained in our Certificate of Incorporation and Bylaws and applicable laws could impair a takeover attempt.
As a result, capital appreciation, if any, of our common stock will be the sole source of gain for the foreseeable future. Anti-takeover provisions contained in our Certificate of Incorporation and Bylaws and applicable laws could impair a takeover attempt.
Local Bounti's operations are, or will be, subject to regulation by the USDA, the FDA and other federal, state and local regulation, and while Local Bounti intends to comply with all such applicable regulations, there is no assurance that Local Bounti is, or will be, in compliance with all such regulations.
Local Bounti's operations are subject to regulation by the USDA, the FDA and other federal, state and local regulation, and while Local Bounti intends to comply with all such applicable regulations, there is no assurance that Local Bounti will be in compliance with all such regulations.
Any changes in the political issues and considerations may have a negative impact on Local Bounti's business, its financial condition and results of operations could be adversely affected.
Any changes in the political issues and 36 considerations may have a negative impact on Local Bounti's business, its financial condition and results of operations could be adversely affected.
As a result, the exercise price of the public warrants could be increased, the exercise period could be shortened and the number of shares of common stock purchasable upon exercise of a public warrant could be decreased, all without a holder's approval.
As a result, the exercise price of the 2021 warrants could be increased, the exercise period could be shortened and the number of shares of common stock purchasable upon exercise of a public warrant could be decreased, all without a holder's approval.
Redemption of the outstanding warrants could force you (a) to exercise your warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so, (b) to sell your warrants at the then-current market price when you might otherwise wish to hold your warrants or (c) to accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market value of your warrants.
Redemption of the outstanding warrants could force you to exercise your warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so, to sell your warrants at the then-current market price when you might otherwise wish to hold your warrants, or to accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market value of your warrants.
Local Bounti's strategy for new facility development depends on operating facilities that are at significantly larger production scale than its existing facilities. Local Bounti may encounter unexpected challenges at larger facilities, which may be related to construction, engineering and design, operations and logistics, sales and marketing, ramp-up schedule to full capacity, or otherwise.
Local Bounti's strategy for new facility development depends on operating facilities that are at significantly larger production scale than its initial facilities. Local Bounti may encounter unexpected challenges at larger facilities, which may be related to construction, engineering and design, operations and logistics, sales and marketing, ramp-up schedule to full capacity, or otherwise.
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 effect our business and operations.
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.
In addition, Local Bounti's information technology systems may be vulnerable to damage or interruption from circumstances beyond Local Bounti's control, including fire, natural disasters, systems failures, viruses and security breaches. Any such damage or interruption could negatively impact Local Bounti's business. Local Bounti uses or plans to use computers, software and technology in substantially all aspects of its business operations.
In addition, Local Bounti's information technology systems may be vulnerable to damage or interruption from circumstances beyond Local Bounti's control, including fire, natural disasters, systems failures, viruses and security breaches. Any such damage or interruption could negatively impact Local Bounti's business. Local Bounti uses computers, software and technology in substantially all aspects of its business operations.
The build-out of new facilities will require significant expenditures for capital improvements and operating expenses and may be subject to delays in construction and unexpected costs due to governmental approvals and permitting requirements, reliance on third parties for construction, delays relating to material delivery and supply chains, and fluctuating material prices.
The build-out of new facilities and retrofitting of acquired facilities will require significant expenditures for capital improvements and operating expenses and may be subject to delays in construction and unexpected costs due to governmental approvals and permitting requirements, reliance on third parties for construction, delays relating to material delivery and supply chains, and fluctuating material prices.
If Local Bounti is unable to develop and operate facilities at a larger scale than existing facilities, its business, financial condition and results of operations could be adversely affected. Expansion of Loose Leaf Lettuce Product Portfolio. Local Bounti expects to continue to develop and commercialize new varieties of loose leaf lettuce as a source of revenue growth.
If Local Bounti is unable to develop and operate facilities at a larger scale than initial facilities, its business, financial condition and results of operations could be adversely affected. Expansion of Loose Leaf Lettuce Product Portfolio. Local Bounti expects to continue to develop and commercialize new varieties of loose leaf lettuce as a source of revenue growth.
Refer to Note 7, Debt , of the Consolidated Financial Statements for more information about the credit facility. Risks Related to Local Bounti's Technology, Intellectual Property and Infrastructure Local Bounti may need to defend itself against intellectual property infringement claims, which may be time-consuming and could cause Local Bounti to incur substantial costs.
Refer to Note 8, Debt , of the Consolidated Financial Statements for more information about the credit facility. Risks Related to Local Bounti's Technology, Intellectual Property and Infrastructure Local Bounti may need to defend itself against intellectual property infringement claims, which may be time-consuming and could cause Local Bounti to incur substantial costs.
As such, we take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies, including (a) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, (b) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements and (c) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.
As such, we take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies, including the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements, and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.
Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business, financial condition, results of operations and cash flows. 23 RISK FACTORS Investment in our stock involves a high degree of risk.
Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business, financial condition, results of operations and cash flows. 22 RISK FACTORS Investment in our stock involves a high degree of risk.
This estimate does not reflect the possibility that we may not be able to access a portion of our existing cash, cash equivalents and investments due to market conditions, notwithstanding the fact that we did not have 24 any direct exposure to the recent events described below.
This estimate does not reflect the possibility that we may not be able to access a portion of our existing cash, cash equivalents and investments due to market conditions, notwithstanding the fact that we did not have any direct exposure to the events described below.
For these reasons, we may not be able to utilize a material portion of our reported NOLs as of December 31, 2022, even if we attain profitability, which could adversely affect our cash flows and results of operations.
For these reasons, we may not be able to utilize a material portion of our reported NOLs as of December 31, 2023, even if we attain profitability, which could adversely affect our cash flows and results of operations.
Local Bounti is a U.S. corporation and thus subject to U.S. corporate income tax on its worldwide income. Further, since Local Bounti's operations and customers are located throughout the United States, Local Bounti will be subject to various U.S. state and local taxes.
Local Bounti is a U.S. corporation and thus subject to U.S. corporate income tax on its worldwide income. Further, since Local Bounti's operations and customers are located throughout the United States, Local Bounti is subject to various U.S. state and local taxes.
If Local Bounti does not secure placement of its product with customers that can be supplied from new facilities, its business, financial condition and results of operations could be adversely affected.
If Local Bounti does not secure placement of its product with customers that can be supplied from new or expanded facilities, its business, financial condition and results of operations could be adversely affected.
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 effect our business and operations.
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.
In addition, acquisitions could present unforeseen integration obstacles or costs, may not enhance its business, and/or may involve risks that could adversely affect Local Bounti, including significant amounts of management time that may be diverted from operations in order to pursue and complete such transactions.
In addition, acquisitions, including the Pete's Acquisition, could present unforeseen integration obstacles or costs, may not enhance its business, and/or may involve risks that could adversely affect Local Bounti, including significant amounts of management time that may be diverted from operations in order to pursue and complete such transactions.
The agreement provides that the terms of the public warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 50% of the then-outstanding public warrants to make any change that adversely affects the interests of the registered holders of public warrants.
The agreement provides that the terms of the 2021 warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 50% of the then-outstanding 2021 warrants to make any change that adversely 41 affects the interests of the registered holders of 2021 warrants.
Any of the foregoing could have material adverse effects on Local Bounti's business, financial condition and results of operations. We may acquire additional greenhouses or other indoor farming operations, which may divert our management's attention and result in additional dilution to our stockholders.
Any of the foregoing could have material adverse effects on Local Bounti's business, financial condition and results of operations. 26 Local Bounti may acquire additional greenhouses or other indoor farming operations, which may divert our management's attention and result in additional dilution to our stockholders.
Accordingly, we may amend the terms of the public warrants in a manner adverse to a holder if holders of at least 50% of the then-outstanding public warrants approve of such amendment.
Accordingly, we may amend the terms of the 2021 warrants in a manner adverse to a holder if holders of at least 50% of the then-outstanding 2021 warrants approve of such amendment.
Local Bounti's after-tax profitability and financial results may also be adversely affected by changes in relevant tax laws and tax rates, treaties, regulations, administrative practices and principles, judicial decisions and interpretations thereof, in each case, possibly with retroactive effect. Local Bounti's ability to use its net operating loss carryforwards to offset future taxable income may be subject to certain limitations.
Local Bounti's after-tax profitability and financial results may also be adversely affected by changes in relevant tax laws and tax rates, treaties, regulations, administrative practices and principles, judicial decisions and interpretations thereof, in each case, possibly with retroactive effect. Local Bounti's ability to use its NOL carryforwards to offset future taxable income may be subject to certain limitations.
We may amend the terms of the public warrants in a manner that may be adverse to holders of public warrants with the approval by the holders of at least 50% of the then-outstanding public warrants.
We may amend the terms of the 2021 warrants in a manner that may be adverse to holders of 2021 warrants with the approval by the holders of at least 50% of the then-outstanding 2021 warrants.
Additionally, the environmental controls systems (which control temperature, water, humidity and other systems) for our current facilities, and expected for future facilities, could be subject to such cybersecurity risks and incursions, which could result in loss of entire crops in a short amount of time.
Additionally, the environmental controls systems (which control temperature, water, humidity and other systems) for our facilities could be subject to such cybersecurity risks and incursions, which could result in loss of entire crops in a short amount of time.
The exercise price of these warrants is $1.00 per share, which may not be exercised for Company common stock in excess of 4.99% (or up to 9.9% or 19.9% upon election by the holder, with 61 days’ notice of such increase) of the Company’s outstanding common stock at any given time.
The exercise price of these warrants is $6.50 per share, which may not be exercised for Company common stock in excess of 4.99% (or up to 9.9% or 19.9% upon election by the holder, with 61 days’ notice of such increase) of the Company’s outstanding common stock at any given time.
Demand for lettuce, cilantro, basil and other greens and herbs is subject to seasonal fluctuations and may adversely impact Local Bounti's results of operations in certain quarters. Demand for leafy greens products may be subject to some degree of seasonality due to consumer behavior.
Demand for lettuce, herbs, and other produce is subject to seasonal fluctuations and may adversely impact Local Bounti's results of operations in certain quarters. Demand for leafy greens products may be subject to some degree of seasonality due to consumer behavior.
If available, financing terms may lead to significant dilution of our stockholders' equity. • Local Bounti currently relies on a limited number of facilities for its operations. • Local Bounti's first facility has been in operation at commercial capacity for less than three years, which makes it difficult to forecast future results of operations. • The build-out of new facilities and retrofitting of acquired facilities will require significant expenditures for capital improvements and operating expenses and may be subject to delays in construction and unexpected costs due to governmental approvals and permitting requirements, reliance on third parties for construction, delays relating to material delivery and supply chains, and fluctuating material prices. • Local Bounti has entered into agreements with Cargill Financial for term loan credit facilities.
If additional financing is available, financing terms may lead to significant dilution of our stockholders' equity. • Local Bounti currently relies on a limited number of facilities for its operations. • Local Bounti has been operating facilities at commercial capacity for less than four years, which makes it difficult to forecast future results of operations. • The build-out of new facilities and retrofitting of acquired facilities will require significant expenditures for capital improvements and operating expenses and may be subject to delays in construction and unexpected costs due to governmental approvals and permitting requirements, reliance on third parties for construction, delays relating to material delivery and supply chains, and fluctuating material prices. • Local Bounti has entered into agreements with Cargill Financial for term loan credit facilities.
The public warrants were issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us.
The 2021 warrants were issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us.
In the event that Local Bounti's business expands domestically or internationally, its effective tax rates may fluctuate widely in the future. Future effective tax rates could be affected by operating losses in jurisdictions where no tax benefit can be recorded under U.S. GAAP, changes in deferred tax assets and liabilities, or changes in tax laws.
As Local Bounti's business expands domestically and possibly internationally, its effective tax rates may fluctuate widely in the future. Future effective tax rates could be affected by operating losses in jurisdictions where no tax benefit can be recorded under U.S. GAAP, changes in deferred tax assets and liabilities, or changes in tax laws.
During the year ended December 31, 2021, we may have experienced changes in our share ownership as a result of the merger of Legacy Local Bounti into Leo Holdings III Corp in November 2021, which may limit the future use of our net operating losses pursuant to Section 382 of the Code.
During the year ended December 31, 2021, we may have experienced changes in our share ownership as a result of the merger of Legacy Local Bounti into Leo Holdings III Corp in November 2021, which may limit the future use of our NOLs pursuant to Section 382 of the Code.
In this market, competition is based on, among other things, product quality and taste, brand 32 recognition and loyalty, product variety, product packaging and package design, shelf space, reputation, price, advertising, promotion and nutritional claims. The produce industry generally does not work on long-term contracts and is dependent upon consistent sales targets to be successful.
In this market, competition is based on, among other things, product quality and taste, brand recognition and loyalty, product variety, product packaging and package design, shelf space, reputation, price, advertising, promotion, and nutritional or growing-condition claims. 31 The produce industry generally does not work on long-term contracts and is dependent upon consistent sales targets to be successful.
Factors that could materially affect Local Bounti's future effective tax rates include, but are not limited to: (a) changes in tax laws or the regulatory environment, (b) changes in accounting and tax standards or practices, (c) changes in the composition of operating income by tax jurisdiction and (d) pre-tax operating results of Local Bounti's business.
Factors that could materially affect Local Bounti's future effective tax rates include, but are not limited to changes in tax laws or the regulatory environment, changes in accounting and tax standards or practices, changes in the composition of operating income by tax jurisdiction and pre-tax operating results of Local Bounti's business.
Specific legislative and regulatory proposals discussed recently that may adversely impact Local Bounti include, but are not limited to, changes to existing trade agreements, import and export regulations, tariffs, travel restrictions, customs duties, income tax regulations and the federal tax code, public company reporting requirements, environmental regulations, antitrust enforcement and regulation related to the COVID-19 pandemic.
Specific legislative and regulatory proposals discussed recently that may adversely impact Local Bounti include, but are not limited to, changes to existing trade agreements, import and export regulations, tariffs, travel restrictions, customs duties, income tax regulations and the federal tax code, public company reporting requirements, environmental regulations and antitrust enforcement.
Local Bounti's after-tax profitability and financial results could be subject to volatility or be affected by numerous factors, including (a) the availability of tax deductions, credits, exemptions, refunds and other benefits to reduce tax liabilities, (b) changes in the valuation of deferred tax assets and liabilities, if any, (c) the expected timing and amount of the release of any tax valuation allowances, (d) the tax treatment of stock-based compensation, (e) changes in the relative amount of earnings subject to tax in the various jurisdictions, (f) the potential business expansion into, or otherwise becoming subject to tax in, additional jurisdictions, (g) changes to existing intercompany structure (and any costs related thereto) and business operations, (h) the extent of intercompany transactions and the extent to which taxing authorities in relevant jurisdictions respect those intercompany transactions, and (i) the ability to structure business operations in an efficient and competitive manner.
Local Bounti's after-tax profitability and financial results could be subject to volatility or be affected by numerous factors, including the availability of tax deductions, credits, exemptions, refunds and other benefits to reduce tax liabilities, changes in the valuation of deferred tax assets and liabilities, if any, the expected timing and amount of the release of any tax valuation allowances, the tax 40 treatment of stock-based compensation, changes in the relative amount of earnings subject to tax in the various jurisdictions, the potential business expansion into, or otherwise becoming subject to tax in, additional jurisdictions, changes to existing intercompany structure (and any costs related thereto) and business operations, the extent of intercompany transactions and the extent to which taxing authorities in relevant jurisdictions respect those intercompany transactions, and the ability to structure business operations in an efficient and competitive manner.
There can be no assurance that current acquisitions, investments or expansions of scope of existing relationships will have a beneficial impact on Local Bounti's business, financial condition and results of operations. Local Bounti currently has acquisitions and investments with third parties that its management believes will complement or augment Local Bounti's existing business.
There can be no assurance that future acquisitions, investments or expansions of scope of existing relationships will have a beneficial impact on Local Bounti's business, financial condition and results of operations. Local Bounti at times has acquisitions and investments with third parties that its management believes will complement or augment Local Bounti's existing business.
Local Bounti's ability to compete successfully in new geographies depends on its ability to secure placement of its product with new customers, some of which we do not have existing relationships with today. Local Bounti's current strategy for new facility development depends on securing new customers such as food retailers and food service distributors.
Local Bounti's ability to compete successfully in new geographies depends on its ability to secure placement of its product with new customers, some of which the Company does not have existing relationships with today. Local Bounti's current strategy for new facility development depends on securing new customers such as food retailers and food service distributors.
Logistical problems, unexpected costs, and delays in facility construction, whether or not caused by the COVID-19 pandemic, which cannot be directly controlled by Local Bounti, can cause prolonged disruption to or increased costs of third-party transportation services used to ship materials, which could negatively affect Local Bounti's facility building schedule, and more generally its business, financial condition, results of operations and prospects.
Logistical problems, unexpected costs, and delays in facility construction, which cannot be directly controlled by Local Bounti, can cause prolonged disruption to or increased costs of third-party transportation services used to ship materials, which could negatively affect Local Bounti's facility building schedule, and more generally its business, financial condition, results of operations and prospects.
Local Bounti's business involves sensitive information and intellectual property, including know-how, private information about crew members and financial and strategic information about the Company and its business partners.
Local Bounti's business involves sensitive information and intellectual property, including know-how, private information about employees and financial and strategic information about the Company and its business partners.
In general, under Section 382, a corporation that undergoes an “ownership change,” as defined in the Code, is subject to limitations on its ability to utilize its pre-ownership change net operating loss carryforwards (NOLs) to offset future taxable income.
In general, under Section 382, a corporation that undergoes an “ownership change,” as defined in the Code, is subject to limitations on its ability to utilize its pre-ownership change NOL carryforwards to offset future taxable income.
Local Bounti's greenhouse equipment is costly to replace or repair, and its equipment supply chains may be disrupted in connection with pandemics, such as COVID-19, trade wars or other factors.
Local Bounti's greenhouse equipment is costly to replace or repair, and its equipment supply chains may be disrupted in connection with pandemics, trade wars or other factors.
Since inception, we have filed several patents protecting various features of our growing technology, including a patent that is pending for our Stack & Flow Technology TM . We also rely on unpatented proprietary expertise and copyright protection to develop and maintain its competitive position.
Since inception, we have filed several patents protecting various features of our growing technology, including a patent that has been issued for our Stack & Flow Technology ® . We also rely on unpatented proprietary expertise and copyright protection to develop and maintain its competitive position.
We have the ability to redeem outstanding warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the last reported sales price of the common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which we give proper notice of such redemption and provided certain other conditions are met.
We have the ability to redeem outstanding warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the last reported sales price of the common stock equals or exceeds $234.00 per share (as adjusted for the Reverse Stock Split (as defined below)) for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which we give proper notice of such redemption and provided certain other conditions are met.
In addition, Local Bounti may experience unexpected delays in building its facilities for a variety of reasons, including limited labor due to COVID-19 or other factors, unexpected construction problems or supply chain disruptions, all of which could harm Local Bounti's business, financial condition and results of operation.
In addition, Local Bounti may experience unexpected delays in building its facilities for a variety of reasons, including limited labor due to any pandemics or other public health crises or other factors, unexpected construction problems or supply chain disruptions, all of which could harm Local Bounti's business, financial condition and results of operation.
Local Bounti's first facility has been in operation at commercial capacity for less than three years, which makes it difficult to forecast future results of operations. The Montana Facility began commercial operations in the second half of 2020, marking the beginning of Local Bounti's first growing season.
Local Bounti has been operating facilities at commercial capacity for less than four years, which makes it difficult to forecast future results of operations. The Montana Facility began commercial operations in the second half of 2020, marking the beginning of Local Bounti's first growing season.
The issuance of additional common stock: • may significantly dilute the equity interests of our investors; • could cause a change in control if a substantial number of shares of common stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; and • may adversely affect prevailing market prices for the common stock and/or the public warrants.
The issuance of additional common stock: • may significantly dilute the equity interests of our investors; • could cause a change in control if a substantial number of shares of common stock are issued, which may affect, among other things, our ability to use our NOL carryforwards, if any, and could result in the resignation or removal of our present officers and directors; and • may adversely affect prevailing market prices for the common stock.
New or revised government laws and regulations could result in additional compliance costs and, in the event of non-compliance, civil remedies, including fines, injunctions, withdrawals, recalls, or seizures and confiscations, as well as potential criminal sanctions, any of which may adversely affect Local Bounti's business, results of operations, and financial condition. 40 Political issues and considerations could have a significant effect on Local Bounti's business.
New or revised government laws and regulations could result in additional compliance costs and, in the event of non-compliance, civil remedies, including fines, injunctions, withdrawals, recalls, or seizures and confiscations, as well as potential criminal sanctions, any of which may adversely affect Local Bounti's business, results of operations, and financial condition.
These net operating loss carryforwards can be indefinitely carried forward by the Company, but the deductibility of such net operating losses and certain tax credits in any given year is usually limited and may be further limited by Section 382 of the Internal Revenue Code (the Code).
These NOL carryforwards can be indefinitely carried forward by the Company, but the deductibility of such NOLs and certain tax credits in any given year is usually limited and may be further limited by Section 382 of the Internal Revenue Code (the “Code”).
We will remain an emerging growth company until the earliest of (a) the last day of the fiscal year (i) following March 2, 2026, the fifth anniversary of our initial public offering, (ii) in which we have total annual gross revenue of at least $1.07 billion (as adjusted for inflation pursuant to SEC rules from time to time) or (iii) in which we are deemed to be a large accelerated filer, which means the market value of the shares of common stock that are held by non-affiliates exceeds $700 million as of the last business day of our prior second fiscal quarter, and (b) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three year period. 47 In addition, Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the exemption from complying with new or revised accounting standards provided in Section 7(a)(2)(B) of the Securities Act as long as we are an emerging growth company.
We will remain an emerging growth company until the earliest of (a) the last day of the fiscal year (i) following March 2, 2026, the fifth anniversary of our initial public offering, (ii) in which we have total annual gross revenue of at least $1.07 billion (as adjusted for inflation pursuant to SEC rules from time to time) or (iii) in which we are deemed to be a large accelerated filer, which means the market value of the shares of common stock that are held by non-affiliates exceeds $700 million as of the last business day of our prior second fiscal quarter, and (b) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three year period.
This comprehensive regulatory program governs, among other things, the growing, packaging, labeling and safety of food. Under this program, the FDA requires that facilities that grow and pack, food products comply with a range of requirements, including standards for the growing, harvesting, packing and holding of produce. Our facilities are subject to periodic inspection by federal, state and local authorities.
Under this program, the FDA requires that facilities that grow and pack, food products comply with a range of requirements, including standards for the growing, harvesting, packing and holding of produce. Our facilities are subject to periodic inspection by federal, state and local authorities.
There is no guarantee that leafy greens and herbs 38 will continue to be demanded by consumers, or that consumers will prefer the leafy greens and herbs grown by Local Bounti versus competitors. Consumer trends toward crops with lower yields or at lower price points may adversely affect Local Bounti's financial performance.
There is no guarantee that these products will continue to be demanded by consumers, or that consumers will prefer the products produced by Local Bounti versus competitors. Consumer trends toward crops with lower yields or at lower price points may adversely affect Local Bounti's financial performance.
Local Bounti depends on third party general contractors to build its facilities. If Local Bounti does not effectively manage these projects and relationships, new facilities may not be completed on schedule or within allocated budgets. These delays and increased costs could adversely affect Local Bounti's financial results.
If Local Bounti does not effectively manage these projects and relationships, new facilities may not be completed on schedule or within allocated budgets. These delays and increased costs could adversely affect Local Bounti's financial results.
Local Bounti's sole material asset is its direct and indirect interests in its subsidiaries and, accordingly, Local Bounti is dependent upon distributions from its subsidiaries to pay taxes and cover its corporate and other overhead expenses and pay dividends, if any, on the common stock.
One of Local Bounti's most significant assets is its direct and indirect interests in its subsidiaries and, accordingly, Local Bounti is dependent upon distributions from its subsidiaries to pay taxes and cover its corporate and other overhead expenses and pay dividends, if any, on the common stock.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe table below sets forth certain information regarding these properties as of December 31, 2022: Facility Type/Use Location Owned/Leased Size (sq. ft.) Notes Hamilton Production Facility - Phase 1 & 2* Hamilton, MT Leased 93,544 Vacant Land for Future Production Facility* Hamilton, MT Owned 874,685 Carpinteria Production Facility* Carpinteria, CA Owned 558,000 Oxnard Production Facility* Oxnard, CA Owned 663,000 Georgia Production Facility - Phase 1A* Byron, GA Owned 179,073 Georgia Production Facility - 6M Tower* Byron, GA Owned 1,400 Georgia Production Facility - Phase 1B* Byron, GA Owned 127,596 Expected Completion Date Q2 2023 Georgia Production Facility - Phase 1C* Byron, GA Owned 39,000 Expected Completion Date Q4 2023 Texas Production Facility* Mount Pleasant, TX Owned 455,515 Expected Completion Date Q4 2023 Pasco Production Facility - Phase 1* Pasco, WA Owned 244,101 Expected Completion Date Q1 2024 Corporate Offices Hamilton, MT Leased 4,454 R&D Facility Corvallis, MT Leased 4,260 Corporate Housing Hamilton, MT Leased 6,000 _____________________ *Owned facilities are subject to a first-priority lien under the Credit Agreements with Cargill Financial.
Biggest changeThe table below sets forth certain information regarding these properties as of December 31, 2023: Facility Type/Use Location Owned/Leased* Size (sq. ft.) Montana Production Facility Hamilton, MT Leased 93,544 Vacant Land for Future Production Facility Hamilton, MT Owned 874,685 Carpinteria Production Facility Carpinteria, CA Leased 558,000 Oxnard Production Facility Oxnard, CA Leased 663,000 Georgia Production Facility Byron, GA Owned 347,269 Texas Production Facility Mount Pleasant, TX Owned 459,158 Washington Production Facility Pasco, WA Owned 244,101 Corporate Offices Hamilton, MT Leased 4,454 _____________________ *Owned facilities are subject to a first-priority lien under the Credit Agreements with Cargill Financial.
Item 2. Properties Our principal executive offices are located in Hamilton, Montana. In addition, we have a research and development facility in Hamilton, Montana, and CEA facilities in Montana, Washington, California, Georgia, and Texas.
Item 2. Properties Our principal executive offices are located in Hamilton, Montana. In addition, we have CEA facilities in Montana, Washington, California, Georgia, and Texas.
We expect to close the transactions contemplated by the Purchase and Sale Agreement in the second quarter of 2023. 48 We believe our facilities are adequate and suitable for our current needs and that, should it be needed, suitable additional or alternative space will be available to accommodate our operations.
We believe our facilities are adequate and suitable for our current needs and that, should it be needed, suitable additional or alternative space will be available to accommodate our operations.
Removed
On March 28, 2023, Local Bounti entered into a Purchase and Sale Agreement for a $35 million multi-site sale and leaseback transaction relating to the Carpinteria Facility and the Oxnard Facility (the “Sale and Leaseback Transaction”).

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeThe results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors. Item 4. Mine Safety Disclosures Not applicable. 49 PART II
Biggest changeThe results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors. Item 4. Mine Safety Disclosures Not applicable. 45 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeItem 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock and warrants are listed on the NYSE under the trading symbols of "LOCL" and "LOCL.WS," respectively.
Biggest changeItem 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is listed on the NYSE under the trading symbol of "LOCL." Holders of Common Stock As of December 31, 2023, there were 39 holders of record of our common stock.
Recent Sales of Unregistered Securities There were no unregistered sales of our equity securities during the period covered by this Annual Report on Form 10-K that were not previously reported in a Current Report on Form 8-K. Item 6. Reserved 50
Recent Sales of Unregistered Securities There were no unregistered sales of our equity securities during the period covered by this Annual Report on Form 10-K that were not previously reported in a Current Report on Form 8-K.
Our board of directors currently intends to retain any future earnings to support operations and to finance the growth and development of our business and does not intend to pay cash dividends on our common stock for the foreseeable future.
We currently intend to retain any future earnings and do not intend to pay cash dividends on our common stock for the foreseeable future.
Removed
Holders of Common Stock and Public Warrants As of December 31, 2022, there were 45 holders of record of our common stock and two holders of record of the public warrants.
Added
Share Repurchase Program On October 29, 2023, our Board of Directors authorized a new common stock repurchase program that allows us to repurchase up to $1.0 million in shares of our common stock. This new program commenced immediately.
Removed
Our ability to pay dividends is restricted by the terms of our credit agreements with Cargill Financial as described in Note 7, Debt , of the Consolidated Financial Statements.
Added
Under the repurchase program, we may purchase shares of common stock from time to time through a variety of methods, which may include but are not limited to open market purchases, the implementation of a 10b5-1 plan, privately negotiated transactions and/or any other available methods in accordance with Securities and Exchange Commission and other applicable legal requirements.
Added
The repurchase program will remain in effect until the amount authorized has been fully repurchased or until we suspend or terminate the program with an outside date of December 31, 2024. As of December 31, 2023, the approximate aggregate dollar value of shares that may yet be purchased under the repurchase program is $1.0 million.
Added
There were no repurchases made during the three months ended December 31, 2023. Item 6. Reserved 46

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeFor the year ended December 31, 2022, as part of our annual assessment, a qualitative goodwill assessment was performed and we determined it was not more likely than not that the fair value of our reporting unit was less than its carrying value. 53 Results of Operations Year Ended December 31, 2022 compared to Year Ended December 31, 2021 The following table sets forth our historical operating results for the periods indicated: Year Ended December 31, 2022 2021 $ Change (in thousands) Sales $ 19,474 $ 638 18,836 Cost of goods sold 17,259 432 16,827 Gross profit 2,215 206 2,009 Operating expenses: Research and development 14,059 3,425 10,634 Selling, general and administrative 82,682 41,498 41,184 Total operating expenses 96,741 44,923 51,818 Loss from operations (94,526) (44,717) (49,809) Other income (expense): Convertible Notes fair value adjustment — (5,067) 5,067 Interest expense, net (16,734) (6,618) (10,116) Other income 189 309 (120) Net loss $ (111,071) $ (56,093) (54,978) The following sections discuss and analyze the changes in the significant line items in our Consolidated Statements of Operations for the comparative periods in the table above.
Biggest changeAs a result of the unobservable inputs that were used to determine the expected volatility of the March 2023 Cargill Warrant, the fair value measurement of these warrants reflected a Level 3 measurement within the fair value measurement hierarchy. 49 Results of Operations Year Ended December 31, 2023 compared to Year Ended December 31, 2022 The following table sets forth our historical operating results for the periods indicated: Year Ended December 31, 2023 2022 $ Change % Change (in thousands) Sales $ 27,557 $ 19,474 8,083 42% Cost of goods sold (1)(2)(3) 25,341 17,259 8,082 47% Gross profit 2,216 2,215 1 —% Operating expenses: Research and development (2)(3) 16,086 14,059 2,027 14% Selling, general and administrative (2)(3) 64,559 82,682 (18,123) (22)% Goodwill impairment 38,481 — 38,481 100% Total operating expenses 119,126 96,741 22,385 23% Loss from operations (116,910) (94,526) (22,384) 24% Other income (expense): Change in fair value of warrant liability 18,483 — 18,483 100% Interest expense, net (25,745) (16,734) (9,011) 54% Other income 157 189 (32) (17)% Net loss $ (124,015) $ (111,071) (12,944) 12% (1) Amounts include the impact for non-cash increase in cost of goods sold attributable to the fair value basis adjustment to inventory in connection with the Pete's Acquisition as follows: Year Ended December 31, 2023 2022 $ Change % Change (in thousands) Cost of goods sold $ — $ 1,042 (1,042) (100)% Total business combination fair value basis adjustment to inventory $ — $ 1,042 (1,042) (100)% (2) Amounts include stock-based compensation as follows: Year Ended December 31, 2023 2022 $ Change % Change (in thousands) Cost of goods sold $ 123 $ 104 19 18% Research and development 1,464 2,057 (593) (29)% Selling, general and administrative 14,687 37,005 (22,318) (60)% Total stock-based compensation expense, net of amounts capitalized $ 16,274 $ 39,166 (22,892) (58)% (3) Amounts include depreciation and amortization as follows: Year Ended December 31, 2023 2022 $ Change % Change (in thousands) Cost of goods sold $ 3,513 $ 2,957 556 19% Research and development 2,505 1,304 1,201 92% Selling, general and administrative 7,114 6,166 948 15% Total depreciation and amortization $ 13,132 $ 10,427 2,705 26% 50 The following sections discuss and analyze the changes in the significant line items in our Consolidated Statements of Operations for the comparative periods in the table above.
Selling, General, and Administrative Expenses 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, Pete's acquisition related costs, insurance, marketing, advertising, computer hardware and software, and amortization of intangible assets, among others.
Selling, General, and Administrative Expenses 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, Pete's Acquisition related integration costs, insurance, marketing, advertising, computer hardware and software, and amortization of intangible assets, among others.
As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates. Recent Accounting Pronouncements For more information about recent accounting pronouncements, see Note 2, in our Notes to Consolidated Financial Statements included in "Part II, Item 8.
As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates. 54 Recent Accounting Pronouncements For more information about recent accounting pronouncements, see Note 2, in our Notes to Consolidated Financial Statements included in "Part II, Item 8.
Overview Our Mission and Vision Our mission is to bring our farm to your kitchen. Our vision is to deliver the freshest, locally grown produce over the fewest food miles. We believe that happy plants make happy taste buds and we are committed to reimagining the standards of freshness.
Our Mission and Vision Our mission is to bring our farm to your kitchen. Our vision is to deliver the freshest, locally grown produce over the fewest food miles. We believe that happy plants make happy taste buds and we are committed to reimagining the standards of freshness.
Critical Accounting Estimates Management's Discussion and Analysis of Financial Condition and Results of Operations is based upon our Consolidated Financial Statements, which have been prepared in accordance with GAAP. Our significant accounting estimates are more fully described in Note 2, Summary of Significant Accounting Policies , to our Consolidated Financial Statements.
Critical Accounting Estimates Management's Discussion and Analysis of Financial Condition and Results of Operations is based upon our Consolidated Financial Statements, which have been prepared in accordance with U.S. GAAP. Our significant accounting estimates are more fully described in Note 2, Summary of Significant Accounting Policies , to our Consolidated Financial Statements.
Net Cash Provided By Financing Activities Net cash provided by financing activities was $145.1 million for the year ended December 31, 2022, representing $124.6 million in proceeds from the issuance of debt and $23.3 million in proceeds from Private Placement financing (refer to Note 11, Stockholders' Equity (Deficit) , of the Consolidated Financial Statements for more information about the Private Placement), which was partially offset by $2.3 million payment of debt issuance costs.
Net cash provided by financing activities was $145.1 million for the year ended December 31, 2022, representing $124.6 million in proceeds from the issuance of debt and $23.3 million in proceeds from Private Placement financing (refer to Note 12, Stockholders' Equity , of the Consolidated Financial Statements for more information about the Private Placement), which was partially offset by $2.3 million payment of debt issuance costs.
Controlling the environmental conditions in both the ‘Stack’ and ‘Flow’ components of our growing system helps to ensure healthy, nutritious, consistent, and delicious 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.
Controlling the environmental conditions in both the 'Stack' and 'Flow' components of our growing system helps to ensure healthy, nutritious, consistent, and delicious 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.
Financial Statements and Supplementary Data" of this Annual Report on Form 10-K. 58
Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.
Net Cash Used In Investing Activities Net cash used in investing activities was $172.4 million for the year ended December 31, 2022, due primarily to the acquisitions described in Note 3, Acquisitions , including the Pete's Acquisition for net cash outlay of $90.6 million and the Property Acquisition for net cash outlay of $25.8 million.
Net cash used in investing activities was $172.4 million for the year ended December 31, 2022, due primarily to the acquisitions described in Note 3, Acquisitions , including the Pete's Acquisition for net cash outlay of $90.6 million and the Property Acquisition (as defined below) for net cash outlay of $25.8 million.
Our research and development efforts are focused on the development of our processes utilizing our CEA facilities, increasing production yields, developing new leafy green SKUs and value-added products such as grab-and-go salads, and exploring new crops, including berries.
Our research and development efforts are focused on the development of our processes utilizing our facilities, increasing production yields, developing new leafy green SKUs and value-added products such as grab-and-go salads, and exploring new crops, including spinach, arugula, and berries.
Cash expenditures over the next 12 months are expected to include interest payments on debt obligations, 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.
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.
We focus our research and development efforts on areas that we believe will generate future revenue and grow our intellectual property portfolio across process improvements, genetics, computer, vision, artificial intelligence, and process controls.
We focus our research and development efforts in areas we believe will generate future revenue and grow our intellectual property portfolio across process improvements, genetics, computer, vision, artificial intelligence, and process controls.
Company Overview Local Bounti is a controlled environment agriculture (“CEA”) company that produces sustainably grown produce, focused today on living and loose leaf lettuce. Founded in 2018, and headquartered in Hamilton, Montana, Local Bounti utilizes its patent pending Stack & Flow Technology™ to grow healthy food sustainably and affordably.
Company Overview Local Bounti is a controlled environment agriculture ("CEA") company that produces sustainably grown produce, focused today on living and loose leaf lettuce. Founded in 2018, and headquartered in Hamilton, Montana, Local Bounti utilizes its patented Stack & Flow Technology ® to grow healthy food sustainably and affordably.
Additional cash used in investing activities related to $56.0 million of purchases of equipment and other items for the Pasco, Georgia, and Texas CEA facilities.
Additional cash used in investing activities related to $56.0 million of purchases of equipment and other items for the Washington, Georgia, and Texas facilities.
We conduct an ongoing build-versus-buy analysis whenever we decide to build a new facility or acquire an existing facility. We also expect to expand our product offering to new varieties of fresh greens, herbs, berries, and other produce. Additionally, we evaluate commercial opportunities as part of these expansion efforts on an ongoing basis.
We conduct an ongoing build-versus-buy analysis whenever we decide to build a new facility or acquire an existing facility. We also continue to explore expanding our product offerings to new varieties of fresh greens, herbs, berries, and other produce. Additionally, we evaluate commercial opportunities as part of these expansion efforts on an ongoing basis.
We intend to increase our production capacity and expand our reach to new markets, new geographies, and new customers through either the building of new facilities or through the acquisition of existing greenhouse facilities which we will update with our Stack & Flow Technology™.
We intend to continue to increase our production capacity and expand our reach to new markets, new geographies, and new customers through the building of new facilities, the expansion of existing facilities, or the acquisition of existing greenhouse facilities, which we would evaluate to update with our Stack & Flow Technology ® .
Today, 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 salad and cress. Local Bounti's founders are Craig M. Hurlbert and Travis M.
Today, 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.
Our first CEA facility in Hamilton, Montana (the "Montana Facility") commenced construction in 2019 and reached full commercial operation by the second half of 2020. In 2021, we successfully completed the expansion of our Montana Facility, more than doubling our production capacity.
Our first facility in Hamilton, Montana commenced construction in 2019 and reached full commercial operation by the second half of 2020. In 2021, we successfully completed the expansion of our Montana Facility, more than doubling our production capacity. The Montana Facility is currently used for commercial production, as well as research-and-development activities.
The increase is offset by $27.3 million cash distribution to Legacy Local Bounti shareholders in connection with the closing of the Business Combination, $10.7 million cash repayment of debt, and the payment of $5.4 million in debt issuance costs. 57 Emerging Growth Company Status We are an "emerging growth company," as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act, and for so long as we continue to be an emerging growth company, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
Emerging Growth Company Status We are an "emerging growth company," as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act, and for so long as we continue to be an emerging growth company, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
Goodwill We account for acquired businesses using the acquisition method of accounting which requires that the assets acquired, and liabilities assumed be recorded at the date of acquisition at their respective fair values.
Our critical accounting policies that involve significant estimates and judgments of management include the following: Goodwill We account for acquired businesses using the acquisition method of accounting which requires that the assets acquired, and liabilities assumed be recorded at the date of acquisition at their respective fair values.
Sales We derive the majority of our revenue from the sale of produce. In response to realized cost inflation, we have implemented contractually allowable price increases which we anticipate to benefit from in 2023 and beyond. Sales increased by $18.8 million to $19.5 million for the year ended December 31, 2022 , compared to the year ended December 31, 2021.
Sales We derive our revenue from the sale of produce grown at our facilities. In response to realized cost inflation, we have implemented contractually allowable price increases which we anticipate to benefit from in future years. Sales increased by $8.1 million to $27.6 million for the year ended December 31, 2023, compared to the year ended December 31, 2022.
Currently, our primary sources of liquidity are cash on hand, cash flows generated from the sale of our products, and a credit facility with Cargill Financial.
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 (as defined below) with Cargill Financial.
These debt agreements contain various financial and non-financial covenants and certain restrictions on our business, which include restrictions on additional indebtedness and material adverse effects, that could cause us to be at risk of default.
We also had accrued interest of $9.8 million as of December 31, 2023. These debt agreements 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.
Factors Affecting Our Financial Condition and Results of Operations We expect to expend substantial resources as we: • identify and invest in future growth opportunities, including new product lines; 52 • complete construction and commissioning of new facilities in Pasco, Washington, and Mount Pleasant, Texas; • integrate Pete's operations into our business; • invest in product innovation and development; • invest in sales and marketing efforts to increase brand awareness, engage customers and drive sales of our products; and • incur additional general administration expenses, including increased finance, legal and accounting expenses associated with being a public company, and growing operations.
Factors Affecting Our Financial Condition and Results of Operations We have expended, and we expect to continue to expend, substantial resources as we: • complete construction and commissioning of new and expanded facilities; • standardize operating and manufacturing processes across our facilities; • identify and invest in future growth opportunities, including new product lines; • invest in product innovation and development; 48 • invest in sales and marketing efforts to increase brand awareness, engage customers and drive sales of our products; and • incur additional general administration expenses, including increased expenses associated with growing operations.
We capitalize interest costs on borrowings during the construction period of major construction projects as part of the cost of the constructed assets. During the year ended December 31, 2022, $1.2 million of interest expense has been capitalized.
We capitalize interest costs on borrowings during the construction period of major construction projects as part of the cost of the constructed assets. Interest expense, net increased by $9.0 million for the year ended December 31, 2023, compared to the year ended December 31, 2022.
The increase is primarily due to a $26.2 million increase in the principal amount outstanding on the Subordinated Facility and a $98.4 million increase in the principal amount outstanding on the Senior Facility as well as a variable rate increase as compared to the prior year period, which resulted in an additional interest expense, net of interest capitalized, of $10.0 million as compared to the prior year period.
The increase is primarily due to an increase in the principal amount outstanding on the Senior Facility as well as a variable rate increase on the Senior Facility period over period, which increased interest expense by $8.0 million over the prior year period.
At December 31, 2022, our payment obligations for the Subordinated Facility and the Senior Facility are as follows (1) : (in thousands) 2023 $ 22,376 2024 29,760 2025 32,221 2026 32,221 2027 32,221 Thereafter 152,542 Total $ 301,341 _____________________ (1) Interest is calculated based on a 12.5% interest rate for the Subordinated Facility and a 13.1% interest rate for the Senior Facility effective as of January 1, 2023.
At December 31, 2023, our principal and estimated interest payment obligations for the Senior Facility and the Subordinated Facility are as follows (1) : (in thousands) 2024 $ 32,521 2025 67,176 2026 75,114 2027 75,114 2028 283,945 Total $ 533,870 _____________________ (1) Interest is calculated based on a 12.5% interest rate for the Subordinated Facility and a 13.86% interest rate for the Senior Facility effective as of January 1, 2024.
No interest was capitalized during the year ended December 31, 2021. 55 Liquidity and Capital Resources We have incurred losses and generated negative cash flows from operations since our inception.
During the 12 months ended December 31, 2023 and 2022, we capitalized $14.9 million and $1.7 million of interest, respectively. Liquidity and Capital Resources We have incurred losses and generated negative cash flows from operations since our inception.
Net cash used in operating activities was $20.1 million for the year ended December 31, 2021 due to a net loss of $56.1 million, partially offset by non-cash activities of $17.9 million in stock-based compensation expense, $5.1 million in fair value adjustments to the Convertible Notes, $1.4 million of interest expense on the Convertible Notes, $0.9 million in debt extinguishment expense, $0.8 million in amortization of debt issuance costs, $0.7 million in depreciation expense, and $9.5 million net increase of cash from changes in assets and liabilities primarily driven by increase in accrued construction expenses related to the Pasco CEA facility.
Net cash used in operating activities was $48.8 million for the year ended December 31, 2022 due to a net loss of $111.1 million, partially offset by non-cash activities of $39.2 million in stock-based compensation expense, net of amounts capitalized, $5.4 million in depreciation expense, $5.0 million in amortization expense, $3.0 million in amortization of debt issuance costs, $2.6 million in loss on disposal of property and equipment, and $5.4 million net increase of cash from changes in assets and liabilities.
We now have distribution to over 10,000 retail locations across 35 U.S. states and Canadian provinces, primarily through direct relationships with blue-chip retail customers, including Albertsons, Sam's Club, Kroger, Target, Walmart, Whole Foods, and AmazonFresh.
In early 2024, we will complete construction on two new facilities in Texas and Washington, bringing our total facility count to six. We now have distribution to over 13,000 retail locations across 35 U.S. sta tes , primarily through direct relationships with blue-chip retail customers, including Albertsons, Sam's Club, Kroger, Target, Walmart, Whole Foods, and AmazonFresh.
As of December 31, 2022, the principal amount due under our credit facilities with Cargill Financial totaled $140.9 million, none of which is classified as current.
At December 31, 2023, we had an accumulated deficit of $303.3 million and cash and cash equivalents and restricted cash of $16.9 million. As of December 31, 2023, the principal amount due under our credit facilities with Cargill Financial totaled $317.5 million, none of which is classified as current.
Also, while we believe the amendment to the Cargill Financial credit facility provides adequate resources and flexibility to fund our planned construction projects, our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth in Item 1A, Risk Factors .
Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth in Item 1A, Risk Factors .
The increase was due to increased investment in personnel, materials, supplies, and facility capacity as we continue to expand our product offering and refine our growing process. We incurred costs for research and development of our production, harvesting, and post-harvest packaging techniques and processes, as well as production surplus costs related to the development and testing of our production processes.
We also incurred costs for research and 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.
Interest Expense, net Interest expense consists primarily of interest expense related to the loans with Cargill Financial and interest recognized per the terms of our financing obligation related to the Montana facility. Interest expense, net increased by $10.1 million for the year ended December 31, 2022, compared to the year ended December 31, 2021.
Interest Expense, net 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.
In October 2022, we signed a five-year offtake agreement with Sam's Club for our leafy greens production starting at our greenhouse facility in Georgia.
In October 2022, we signed a five-year offtake agreement with Sam's Club for our leafy greens production starting at our greenhouse facility in Georgia. 47 Commercial Facility Expansion Update Byron, Georgia Facility Expands Throughput In December 2023, we successfully doubled our run-rate production out of the Georgia facility due to our implementation of our Stack & Flow Technology ® in the fourth quarter of 2023.
Net cash used in investing activities was $29.7 million for the year ended December 31, 2021, which was made up of purchases of equipment and other items related to the expansion of the Montana Facility and construction equipment for the Pasco CEA facility.
Net Cash Used In Investing Activities Net cash used in investing activities was $162.3 million for the year ended December 31, 2023, due primarily to purchases of equipment and other items for the Washington, Georgia, and Texas facilities.
If we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying value, we then perform a quantitative assessment.
As a result of this qualitative assessment in the fourth quarter of 2023, we determined that it was more likely than not that the fair value of our single reporting unit was less than its carrying value. Therefore, we performed a subsequent quantitative assessment.
We expect that, over time, cost of goods sold will decrease as a percentage of sales, as a result of scaling our business. Cost of goods sold increased by $16.8 million for the year ended December 31, 2022, compared to the year ended December 31, 2021, due to increased sales during 2022 driven by the acquisition of Pete's.
We expect that, over time, cost of goods sold will decrease as a percentage of sales, as a result of scaling our business.
Selling, general, and administrative expenses increased by $41.2 million for the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to a $20.2 million increase in stock-based compensation expense driven by the vesting of stock awards, a $6.2 million increase in employee salaries, wages, benefits, and payroll taxes and fees due to increased headcount from Company growth and the Pete's Acquisition and to support operations as a public company, a $5.0 million increase in amortization of intangibles acquired as part of the Pete's Acquisition, a $3.1 million increase in insurance costs, and a $2.3 million increase in professional legal, accounting, and consulting fees.
The overall decrease in selling, general and administrative expenses was partially offset by an increase of $2.2 million in loss on disposals charges for construction-in-progress assets, an increase of $1.7 million in professional, legal, accounting, and consulting fees, an increase of $0.9 million in amortization of intangible assets acquired as part 51 of the Pete's Acquisition, and an increase of $2.0 million in salaries, wages, and benefits due to increased headcount from Company growth and the Pete's Acquisition.
The calculation also includes an unused commitment fee of 1.25%. 56 Cash Flow Analysis A summary of our cash flows from operating, investing and financing activities is presented in the following table: Year Ended December 31, (in thousands) 2022 2021 Net cash used in operating activities $ (48,808) $ (20,108) Net cash used in investing activities (172,385) (29,666) Net cash provided by financing activities 145,054 150,806 Cash and cash equivalents and restricted cash at beginning of year 101,077 45 Cash and cash equivalents and restricted cash at end of year $ 24,938 $ 101,077 Net Cash Used In Operating Activities Net cash used in operating activities was $48.8 million for the year ended December 31, 2022 due to a net loss of $111.1 million, partially offset by non-cash activities of $39.2 million in stock-based compensation expense, $5.4 million in depreciation expense, $5.0 million in amortization expense, $3.0 million in amortization of debt issuance costs, $2.6 million in loss on disposal of property and equipment, and $5.4 million net increase of cash from changes in assets and liabilities.
There were no repurchases made during the three months ended December 31, 2023. 53 Cash Flow Analysis A summary of our cash flows from operating, investing and financing activities is presented in the following table: Year Ended December 31, (in thousands) 2023 2022 Net cash used in operating activities $ (33,157) $ (48,808) Net cash used in investing activities (162,265) (172,385) Net cash provided by financing activities 187,379 145,054 Cash and cash equivalents and restricted cash at beginning of year 24,938 101,077 Cash and cash equivalents and restricted cash at end of year $ 16,895 $ 24,938 Net Cash Used In Operating Activities Net cash used in operating activities was $33.2 million for the year ended December 31, 2023, primarily due to a net loss of $124.0 million, which included a non-cash gain of $18.5 million related to change in fair value of warrant liability.
Through the Pete's acquisition, we significantly increased our growing footprint, now operating three additional greenhouse growing facilities, including two in California and one in Georgia, the latter of which became operational in July 2022.
In 2022, we acquired California-based complementary greenhouse farming company Hollandia Produce Group, Inc. and its subsidiaries, which operated under the name Pete's. Through the Pete's Acquisition, we significantly increased our growing footprint to include two then-existing facilities in California and one under-construction facility in Georgia. The Georgia facility became operational in July 2022 and was further expanded in 2023.
Net cash provided by financing activities was $150.8 million for the year ended December 31, 2021, representing $137.5 million in proceeds from the completion of the Business Combination, $26.3 million cash received from the issuance of the Cargill Loans, $26.0 million cash received from the issuance of Convertible Notes, and $3.9 million net proceeds from financing obligations.
Net Cash Provided By Financing Activities Net cash provided by financing activities was $187.4 million for the year ended December 31, 2023, comprised of $152.6 million of proceeds from the issuance of debt and $35.0 million of proceeds from the sale and leaseback transaction for the California Facilities.
We expect that, over the long term, research and development will decrease as a percentage of sales, as a result of the establishment of our growing process. 54 Research and development costs increased by $10.6 million for the year ended December 31, 2022, compared to the year ended December 31, 2021.
Research and development costs increased by $2.0 million for the year ended December 31, 2023, compared to the year ended December 31, 2022. The increase was due to increased investment in personnel, materials, supplies, and facility capacity usage for research and development purposes as we continue to expand our product offering and refine our growing process.
The Subordinated Facility and the Senior Facility are included in "Long-term debt" on the Consolidated Balance Sheet. We are required to maintain cash on hand to cover upcoming interest payments under the Credit Facilities. This amount totals $11.3 million and is reflected in the Consolidated Balance Sheet as restricted cash and cash equivalents at December 31, 2022.
As of December 31, 2023, a total of $48.1 million and $269.4 million was outstanding on the Subordinated Facility and the Senior Facility, respectively. The Subordinated Facility and the Senior Facility are included in "Long-term debt" on the Consolidated Balance Sheet.
Removed
Immediately after expansion, this facility was dedicated equally to commercial production and research and development that focused on new products, technology and system design. Today, the majority of the Montana Facility is dedicated to commercial production, but we continue to utilize dedicated space for research and development to improve our existing and future facilities.
Added
We have been able to expand distribution of our market-leading Grab & Go Salad Kits and are set to expand our baby leaf portfolio by introducing several high-velocity offerings including spinach, arugula, 50/50 blend and power greens by the third quarter of 2024.
Removed
On April 4, 2022, Local Bounti acquired California-based complementary greenhouse farming company Hollandia Produce Group, Inc. and its subsidiaries (the "Pete's Acquisition"), which operate under the name Pete's ("Pete's").
Added
Since then, we have experienced additional throughput in the facility as a result of ongoing yield increases that have increased production by an additional 50%, which equates to production that is approximately three-times that of a year ago. With the facility now fully scaled, we are focused on satisfying existing demand from retailers across the southeastern U.S.
Removed
Joyner, business partners with a track record of building and managing capital-intensive, commodity-based businesses in energy, water, and industrial technology. After initially setting out to invest in a CEA business, Craig and Travis could not find a suitable existing business or technology in which to invest.
Added
Mount Pleasant, Texas & Pasco, Washington Facilities Complete, Commissioning Underway We commenced operations and seeding at both our Texas and Washington facilities in late January and expect to begin shipping out of both facilities to customers in the second quarter of 2024. The Texas facility fortifies our distribution in markets across Texas, Oklahoma, Louisiana, Mississippi, Arkansas, Kansas, and Missouri.
Removed
Instead, they took a clean sheet approach and began to build a business with long-term CEA leadership in mind and a focus on unit economics and sustainability. With this background, we created our high-yield and low-cost Stack & Flow Technology™.
Added
The Washington facility bolsters our distribution capabilities in the Pacific Northwest to serve our expanding retail customer base. Intent to Expand Capacity at Existing Facilities in 2024 Plans are underway to build additional capacity across our network of facilities enabled with Stack & Flow Technology ® .
Removed
Local Bounti plans to install its patent pending Stack & Flow Technology™ at its California facilities, combining the best aspects of vertical farming and greenhouse growing technologies to deliver higher yields of diverse leafy greens with superior unit economics. We derive the majority of our revenue from the sale of produce.
Added
The locations and degree of expansion will be announced at a future date, but construction is currently anticipated to begin late in the second quarter of 2024. 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.
Removed
We grow and package fresh greens that are sold into existing markets and channels such as food retailers and food service distributors from our Montana facility and two California facilities, and beginning in the third quarter of 2022, from our new Georgia facility.
Added
Next Facility to be Opened in the Midwest We are planning our next high-tech Stack & Flow CEA facility to be built in the Midwestern U.S.
Removed
Sales are recognized at a point in time when control of the goods is transferred to the customer. We offer sales incentives to our customers, including temporary price reductions. We anticipate that these promotional activities could impact sales and that changes in such activities could impact period-over-period results.
Added
The region is in close proximity to existing, customers' distribution networks and will support growing retail demand for our products and will improve service to retail partners throughout the Midwest and also provide improved access to the Northeast.
Removed
Sales may also vary from period to period depending on the purchase orders we receive, the volume and mix of 51 products sold and the channels through which our products are sold. In response to realized cost inflation, we have implemented contractually allowable price increases which we anticipate to benefit from in 2023 and beyond.
Added
We expect to name the future location following completion of negotiations and are targeting construction to begin in the third quarter of 2024. This future facility is expected to comprise a six acre greenhouse that is supported by multiple Stack zones.
Removed
We continue to advance our expansion of the Georgia facility, which will double the existing footprint and further enhance capacity with the addition of our Stack & Flow Technology TM to meet pent up demand for Local Bounti packaged salads to current customers and open the opportunity to earn new business in that region.
Added
Hamilton, Montana Facility to Transition from R&D to Commercial Production We expect to transition in 2024 the majority of our Montana Facility from its current focus on research and development to a commercially oriented facility that is growing produce for sale to customers.
Removed
Commercial Facility Expansion Update Georgia Facility - Phase 1-A, 1-B and 1-C Progress We completed our first "Stack" vertical zone in the fourth quarter, as part of our Stack & Flow Technology™ implementation, and are producing product in Phase 1-A.
Added
This transition will follow the capacity enhancements brought about by the completion of our Georgia facility and the commencement of operations at both Texas and Washington and is expected to help drive us toward our goal of achieving positive adjusted EBITDA in early 2025.
Removed
Construction of Phase 1-B is progressing and we now expect completion of this phase early in the second quarter of 2023. Following Phase 1-B completion, the site’s greenhouse footprint will be established and ready to integrate the complementary Stack zones that comprise Phase 1-C.
Added
Recent Developments In the second quarter of 2024, we expect to close four previously disclosed Conditional Commitment Letters ("CCLs") from a commercial finance lender executed in the second half of 2023.
Removed
Georgia Facility - Construction Commences on “Stack” Integration Georgia facility Phase 1-C construction has commenced, which reflects the integration of the vertical “Stack” component of the facility architecture. We now expect this work to be completed and operational early in the fourth quarter of 2023.
Added
Together, the CCLs provide for total financing of approximately $228 million to fund our 2024 facility expansions, our new greenfield facility in the Midwest, and to repay certain existing construction financing which will lower our cost of capital. The funding expected pursuant to the CCLs is subject to the completion of definitive documents and the satisfaction of customary closing conditions.
Removed
Our Stack & Flow Technology TM is expected to add approximately 40% of incremental revenue generating capacity to the finished Georgia facility, which will be comprised of six acres of greenhouses and multiple climate, water, and spectral controlled Stack zones.
Added
Our actual results may differ from these estimates under different assumptions or conditions.
Removed
Texas Facility In early January 2023, we started construction of the six-acre facility, which will leverage our proprietary Stack & Flow Technology™ to grow and sell our indoor grown line of packaged leafy greens. Varieties will include spring mix, butter lettuce, romaine crisp, green leaf, and additional blends.
Added
After performing the quantitative impairment test in accordance with ASC 350-20-35-3C, we determined that the carrying amount of our single reporting unit exceeded the fair value of the reporting unit, resulting in a goodwill impairment of $38.5 million for the year ended December 31, 2023. We did not record any impairment expense for the year ended December 31, 2022.
Removed
The addition of the new facility in northeast Texas is expected to fortify our distribution in markets across Texas, Oklahoma, Louisiana, Mississippi, Arkansas, Kansas, and Missouri. Further, the facility is designed to provide additional capacity to meet existing demand from our direct relationships with blue-chip retailers and distributors throughout the region.
Added
Derivatives On March 28, 2023, Local Bounti Operating Company LLC, the Company and certain subsidiaries entered into a Sixth Amendment to the Original Credit Agreements (the "Sixth Amendment") with Cargill Financial.
Removed
The facility is expected to commence operations in the fourth quarter of 2023. Washington Facility The Pasco, Washington facility continues to progress with anticipated completion in the first quarter 2024, which reflects our decision to stagger construction to accommodate the commissioning of our Texas facility in the fourth quarter of 2023.
Added
In connection with the Sixth Amendment, we issued Cargill Financial 5.4 million warrants with a per share exercise price of $13.00 per share (both number of warrants and per share exercise price adjusted for the June 15, 2023 Reverse Stock Split (as defined in Note 12, Stockholders' Equity , to our Consolidated Financial Statements)) and a 5-year term that expires on March 28, 2028 (the "March 2023 Cargill Warrant").
Removed
The Washington facility will be comprised of multiple Stack zones and three acres of greenhouse.
Added
On January 23, 2024, the Company entered into an amendment to amend the March 2023 Cargill Warrant.
Removed
Recent Developments On March 28, 2023, Local Bounti entered into an amendment to the Credit Agreements with Cargill Financial to expand the term loan credit facility from $170 million to up to $280 million per the terms and conditions of the agreement, including capital to fund construction at the Local Bounti's facilities in Georgia, Texas, and Washington, subject to certain conditions.
Added
The amendment amended the exercise price of the March 2023 Cargill Warrant from $13.00 to $6.50 per share of common stock (refer to Note 18, Subsequent Events , of the Consolidated Financial Statements for more information about the amendment to the March 2023 Cargill Warrant).

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