AppHarvest, a high-tech controlled environment agriculture (CEA) company, has disclosed in an SEC filing that there are significant doubts about the company’s ability to continue as a going concern. The filing states that the company has incurred losses from operations and generated negative cash flows since inception. In addition, AppHarvest’s current operating plan, which includes planting and harvesting activities, is expected to continue incurring losses and generate negative cash flows from operating activities.
Moreover, the company’s debt service requirements and plans to build and start up future CEA facilities will hurt liquidity, raising substantial doubt about the company’s ability to continue as a going concern. The CEA agriculture business is highly capital-intensive. AppHarvest expects to expend significant resources to complete the build-out of facilities under construction, develop related technology, and attract and retain skilled labor.
AppHarvest acknowledges that it will need to raise additional funds to operate the business, meet obligations as they become due, and continue the ongoing construction, build-out, and start-up of CEA facilities. To that end, the company entered into a Sale-Leaseback Transaction with Mastronardi Berea LLC in December 2022. In addition, on February 9, 2023, they entered into an Underwriting Agreement with Cowen and Company, LLC, relating to issuing and selling 40,000,000 shares of common stock.
Despite these actions, the company is exploring additional financing alternatives, including but not limited to additional sale-leaseback transactions, third-party equity or debt financing, and other sources such as strategic relationships or other transactions with third parties. However, financing may not be available to the company in the necessary time frame, in amounts that they require, on acceptable terms, or at all.
Suppose AppHarvest cannot raise the necessary funds when needed. In that case, it may materially and adversely impact the company’s ability to execute its operating plans. The operation of current and future CEA facilities could be delayed, scaled back, or abandoned. Suppose the company cannot continue as a going concern. In that case, it may have to dispose of assets and realize significantly less than the values they carry on consolidated financial statements, causing shareholders to lose all or part of their investment.
In the absence of additional sources of financing, AppHarvest expects that its existing cash and cash equivalents will only allow them to continue planned operations into the fourth quarter of 2023. The company’s current situation highlights the challenges faced by high-tech agricultural companies that require significant upfront investments in capital and technology, which may take longer than expected to generate revenue and achieve profitability.
Image provided by AppHarvest
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