LOCL 10-K & 10-Q changes, risk factors and insider trading

•Local Bounti is an early-stage company withhas a history of losses and expects to incur significant expenses and continuing losses for the foreseeable future. Local Bounti has only recently started to generate revenue and itsBounti’s ability to continue to generate revenue is uncertain given Local Bounti's limited operating history. Local Bounti may never achieve or sustain profitability. Local Bounti's business could be adversely affected if it fails to effectively manage its future growth.

Local Bounti is an early-stage company withhas a history of losses and expects to incur significant expenses and continuing losses for the foreseeable future. Local Bounti has only recently started to generate revenue and itsBounti’s ability to continue to generate revenue is uncertain given Local Bounti's limited operating history. Local Bounti may never achieve or sustain profitability. Local Bounti's business could be adversely affected if it fails to effectively manage its future growth.

Given that Local Bounti has only recently started to generate revenue and given that it has limited operating history, Local Bounti'sits ability to continue to generate revenue is uncertain. Local Bounti believes it will continue to incur net losses for the foreseeable future as it continues its facility expansion and commercial sales of its products. Local Bounti expects to expend substantial resources as it:

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. If we are unable to secure additional financing in the future, we will not be able to continue as a going concern. If additional financing is available, financing terms may lead to significant dilution of our stockholders’ equity (deficit).deficit.

Local Bounti expects that its existing cash on hand, projected cash generated from product sales, as well as the PIPEadditional Financing asfinancing disclosed in Note 18, Subsequent Events, of the Consolidated Financial Statements will be sufficient to fund its planned operating expenses and capital expenditure requirements through at least the next 12 months. Our access to funding sources and other credit arrangements in amounts adequate to finance or capitalize our current and projected future business operations could be significantly impaired by factors that affect us, the financial institutions with which we have arrangements directly, or the financial services industry or economy in general.

In 2024, Local Bounti completed construction on two new facilities in Texas and Washington, bringing its total facility count to six. Adverse changes or developments affecting Local Bounti's facilities could impair Local Bounti's ability to produce its products. Any shutdown or period of reduced production, which may be caused by regulatory noncompliance or other issues, as well as other factors beyond Local Bounti's control, such as severe weather conditions, natural disaster, fire, power interruption, work stoppage, disease outbreaks or pandemics (such as COVID-19), equipment failure or delay in supply delivery, would significantly disrupt Local Bounti's ability to grow and deliver its produce in a timely manner, meet its contractual obligations and operate its business. 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. If any material amount of Local Bounti's machinery were damaged, Local Bounti would be unable to predict when, if at all, it could replace or repair such machinery or find co-manufacturers with suitable alternative machinery, which could adversely affect Local Bounti's business, financial condition and results of operations.

Local Bounti's build out of new or expanded CEA facilities will be dependent on a number of key inputs and their related costs including materials such as steel, concrete, glass, electrical and mechanical components, and other supplies, as well as electricity and other local utilities. Local Bounti intends to use substantial pre-engineered, pre-fabricated, and standardized components when building our modular facilities. We have developed key partnerships with agricultural and equipment vendors for construction of future CEA facilities. Any significant interruption or negative change in the availability or economics of the supply chain for key inputs could materially 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. In addition, international supply chains may be impacted by events outside of our control, including but not limited to pandemics or other public health crises,crises and geopolitical events, such as the conflict between Russia and Ukraine andUkraine, the conflict in Israel and the Gaza Strip, the current political situation in Venezuela and instability in the Middle East, and limit our ability to procure timely delivery of supplies or finished goods and services. 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. Any inability to secure required materials and services to build out such facility, or to do so on appropriate terms, could have a materially adverse impact on Local Bounti's business, financial condition and operating results. Local Bounti may also face unexpected delays in obtaining the required governmental permits and approvals in connection with the build-out of its planned facilities which could require significant time and financial resources and delay its ability to operate these facilities.

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 controlcontrol, including,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. For example, COVID-19 and its variants in the past impacted worldwide economic activity. Constrained access to materials and services required for Local Bounti to construct and commission new facilities could lead to increased costs or delays that could materially and adversely affect Local Bounti's business.

•Production Scale. In 2024, we completed construction on two new facilities in Texas and Washington, bringing our total facility count to six. Our newer 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.

Market opportunity estimates and growth forecasts, including those Local Bounti has generated itself, are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate. Variables that go into the calculation of Local Bounti's market opportunity are subject to change over time, and there is no guarantee that any particular number or percentage of customers covered by these market opportunity estimates will purchase Local Bounti's products at all or generate any particular level of revenue for Local Bounti. Any expansion in Local Bounti's market depends on a number of factors, including the cost and perceived value associated with its product and those of its competitors. Even if the market in which Local Bounti competes meets the size estimates and growth forecasts, Local Bounti's business could fail to grow at the rate it anticipates, if at all. Local Bounti's growth is subject to many factors, including success in implementing its business strategy, which is subject to many risks and uncertainties. Accordingly, the forecasts of market growth,growth should not be taken as indicative of Local Bounti's future revenue or growth prospects.

Expansion into Additional Markets and Verticals. In the future, Local Bounti may pursue new markets, new crops, and new product categories, by leveraging its technology platform to target what the Company may see as opportunities to expand its addressable market. For example, Local Bounti has recently expanded into selling salad kits. If it chooses to pursue such opportunities, Local Bounti will need to prioritize which opportunities it plans to develop, and there can be no guarantee that Local Bounti will select or prioritize ones that ultimately prove appropriate for commercialization. Further, Local Bounti may spend time and resources developing opportunities that may never materialize into new commercial business applications, or that may be developed at the expense of other appropriate commercial opportunities, which may ultimately have been a better selection for reasons such as revenue growth, profitability, market expansion, or other financial and strategic considerations.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated financial statements for external purposes in accordance with U.S. GAAP. In the past, we have identified material weaknesses in our internal control over financial reporting. If we identify material weaknesses in the design or operating effectiveness of our internal control over financial reporting in the future, these weaknesses could result in material misstatements to our annual or interim Consolidated Financial Statements that might not be prevented or detected on a timely basis, or in delayed filing of required periodic reports. If Local Bounti is unable to assert that its internal control over financial reporting is effective, or when required in the future, if the Company's independent registered public accounting firm is unable to express an unqualified opinion as to the effectiveness of the internal control over financial reporting, investors may lose confidence in the accuracy and completeness of Local Bounti's financial reports, the market price of the common stock could be adversely affected and the Company could become subject to litigation or investigations by the NYSE, the SEC, or other regulatory authorities, which could require additional financial and management resources.

Local Bounti's credit facility with Cargill Financial is secured by all of the Company's and its subsidiaries' assets, including their intellectual property. Additionally, the definitive documentation for the credit facilities states that if Local Bounti defaults on its obligations, Cargill Financial could foreclose on all Local Bounti assets, which would materially harm Local Bounti's business, financial condition and results of operations. The pledge of these assets and other restrictions may also limit Local Bounti's flexibility in raising capital for other purposes. Because all of Local Bounti's assets are pledged under the credit facility, Local Bounti's ability to incur additional secured indebtedness or to sell or dispose of assets to raise capital may be impaired, which could have an adverse effect on Local Bounti's financial flexibility.flexibility in planning for, and reacting to, changes in business conditions. Further, there are numerous conditions precedent to drawing down remaining amounts available under the credit facility, including that amounts remaining to be drawn are at Cargill Financial's discretion. If we are unable to meet these conditions precedent, we may not be able to draw down funds available under the facilities, which could materially and adversely affect our business and operations. Refer toSee Note 7, Debt, of the Consolidated Financial Statements for more information about the credit facility. In addition, a failure to comply with the provisions of our credit facilities could result in a default or an event of default that could enable Cargill Financial to declare the outstanding principal of that debt, together with accrued and unpaid interest, to be immediately due and payable. If the payment of outstanding amounts under our credit facilities is accelerated, our assets may be insufficient to repay such amounts in full, and our stockholders could experience a partial or total loss of their investment, and we could be forced into bankruptcy or liquidation.

We own patents, trademarks and other proprietary rights that are important to our business. 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 itsour success. Local Bounti has also invested a significant amount of money in establishing and promoting its trademarked brand. 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 itsour competitive position. We believe our continued success depends, to a significant degree, upon our ability to protect and preserve our intellectual property, including patents, trademarks and copyrights.

Local Bounti uses computers, software and technology in substantially all aspects of its business operations. Local Bounti's employees also use mobile devices, social networking and other online activities to connect with other employees, distributors, customers and consumers. Such uses give rise to cybersecurity risks, including security breaches, espionage, system disruption, theft and inadvertent release of information. Cybersecurity incidents are increasing in their frequency, sophistication and intensity and have become increasingly difficult to detect. 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. Any cybersecurity incidents, including breaches or attacks, could result in interruptions, delays or cessation of operations and loss of existing or potential suppliers or customers. In addition, breaches of our information technology systems or security measures (including those of our third-party partners) and the unauthorized dissemination of sensitive personal, proprietary or confidential information about our business, our business partners, customers or other third parties could expose us to significant potential liability and reputational harm, materially damage our customer and business partner relationships, and subject us to significant reputational, financial, legal, and operational consequences. Moreover, any breach or attack could result in litigation against us by customers or other third parties whose data is compromised by any attack.

•Consumer Preferences. Local Bounti's current products include loose leaf and living lettuce, herbs,lettuce and pre-packaged salads. 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. If Local Bounti expands its product offerings to include other produce, it will similarly be impacted by consumer preferences for such products.

Political issues and considerations, including potential tariffs, could have a significant effect on Local Bounti's business.

There is continuing uncertainty with respect to, among other things, legislation, regulation and government policy at the federal, state and local levels. Specific legislative and regulatory proposals discussed recentlyDevelopments that may adversely impactaffect Local Bounti include, but are not limited to, changes to trade and industrial policy (including tariffs, import restrictions and customs enforcement), modifications to existing trade agreements, importadjustments to federal and exportstate tax laws and regulations, tariffs, customs duties, income tax regulations and the federal tax code,evolving public company reporting and corporate governance requirements, environmental regulationsclimate- and sustainability-related disclosure and compliance obligations, environmental, health, safety and food labeling standards and enhanced antitrust enforcement.enforcement, including in labor markets. 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.

As of December 31, 2024,2025, we had approximately $595.6$373.8 million of federal and state NOL carryforwards available to reduce future taxable income. 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”). 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. During the year ended December 31, 2021, we 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. Also, future changes in our stock ownership, some of which are outside of our control, could result in an ownership change under Section 382 of the Code; if that occurs, our ability to utilize NOLs could be further limited. Furthermore, our ability to utilize NOLs of companies that we may acquire in the future may be subject to limitations under Section 382 of the Code. For these reasons, we may not be able to utilize a material portion of our reported NOLs as of December 31, 2024,2025, even if we attain profitability, which could adversely affect our cash flows and results of operations.

Our common stock is listed on the NYSE. The NYSE requires us to continue to meet certain listing standards. On AprilFebruary 3,5, 2024,2026, we received a written notice (the "Notice") from the NYSE that we were not in compliance with the continued listing standards set forth in Rule 802.01B of the NYSE Listed Company Manual (the “Minimum Market Capitalization Standard”) because our average global market capitalization over a consecutive 30 trading-day period was less than $50 million and, at the same time, our last reported stockholders' equity (deficit) was less than $50 million. Subsequently, we submitted, and the NYSE accepted,submitted a plan setting forth the actions we wereare taking that wereare designed to regain compliance with the Minimum Market Capitalization Standard within 18nine months of receipt of the Notice (the “Market Capitalization Cure Period”). Our common stock continues to be listed and traded on the NYSE during the Market Capitalization Cure Period, subject to compliance with other NYSE continued listing standards and continued quarterly review by the NYSE of our progress with respect to the plan. We can provide no assurances that we will be able to satisfy any of the steps outlined above and maintain the listing of our common stock on the NYSE.

Local Bounti is a controlled environment agriculture ("CEA") company that produces sustainably grown produce, focused primarily on living lettuce, salad kits, and loose leaf lettuce, arugula, spinach, and basil.lettuce. Founded in 2018 and headquartered in Hamilton, Montana, Local Bounti utilizes its patented Stack & Flow Technology® to grow healthy food sustainably and affordably. Our proprietary process is a hybrid growing approach, utilizing vertical farming in early plant growth, followed by greenhouse farming for final grow out. We designed our Stack & Flow Technology® to give our products exactly what they need at every step of their growth cycle. Our goal is to grow in an environmentally sustainable manner that not only increases harvest efficiency and enhances unit economics, but also limits water usage and reduces the carbon footprint of the production and distribution process. Controlling the environmental conditions in both the 'Stack' and 'Flow' components of our growing system helps to ensure healthy, nutritious, and consistent products that are non-genetically modified organisms ("non-GMO"). We use 90% less water, 90% less land, and significantly less pesticides and herbicides than traditional outdoor agriculture operations.

Our first facility in Hamilton, Montana (the "Montana Facility") commenced construction in 2019 and2019, reached commercial operation by the second half of 2020.2020, and now acts as a corporate headquarters without active commercial operations. The Company is currently evaluating the future commercial use of its Montana facility because we no longer have additional capacity at other facilities. Management is exploring various utilization options, including supporting capacity needs within the Company’s existing network as well as potential third-party commercial arrangements. 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 initially became operational in July 2022 and was significantly expanded in 2023. In 2024, we completed construction on two new facilities in Washington and Texas, bringing our total facility count to six.Texas.

We distribute our products to approximately 13,000 retail locations across 35 U.S. states, primarily through direct relationships with blue-chip retail customers, including Albertsons, Sam's Club, Kroger, Target, Walmart, Whole Foods, Brookshire's, H-E-B, Sprouts, and AmazonFresh.H-E-B. Our primary products include living butter lettuce – for which we are a leading provider with an approximate 80% share of the CEA market within the Western U.S. – as well as packaged leafy greens and cress. We recently introduced new Grab & Go Salads and additions to our baby leaf portfolio with several high-velocity offerings, including Spinach, Arugula, and Basil. In addition, we introduced 50/50 blend and power greens in the third quarter of 2024. We signed an offtake agreement with Sam's Club in October 2022 for our leafy greens production, initially from our Georgia facility and now including both our Georgia and Texas facilities. The offtake agreement provides for the sale of defined minimum quantities of leafy greens from our Georgia and Texas facilities and runs through September 2028.

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®.Technology. 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.

Capacity Expansion Project Update

Plans remain in place to build additional capacity across our network of facilities enabled with our patented Stack & Flow Technology®.Technology. The planned expansions are designed to provide additional capacity and allow for our growing product assortment to meet existing demand from our direct relationships with blue-chip retailers and distributors. The timing and scope of these projects, including plans to expand into the Midwest, remain under review pending ongoing discussions with retailers to optimize those facilities for specific products in support of retail commitments and strategies to expand distribution.

On March 28, 2023, Local Bounti Operating Company LLC, the Company and certain subsidiarieswe entered into a Sixth Amendment to the Original Credit Agreements (the "Sixth Amendment") with Cargill Financial. In connection with the Sixth Amendment, we issued Cargill Financial 5.4 million warrants with a per shareper-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 11, Stockholders' Equity (Deficit), to our Consolidated Financial Statements)) and a 5-yearfive-year term that expires onexpiring March 28, 2028 (the "“March 2023 Cargill Warrant"”). On January 23, 2024, the Company entered into an amendment to amend the March 2023 Cargill Warrant. The amendmentwe amended the exercise price of the March 2023 Cargill Warrant to reduce the exercise price from $13.00 to $6.50 per share of common stock (refer tosee Note 7, Debt, of the Consolidated Financial Statements for moreadditional information). aboutThe theinitial amendment$25.7 tomillion fair value of the March 2023 Cargill Warrant). was recorded as additional debt discount and a derivative liability in the "Warrant liability" line item of the Consolidated Balance Sheets.

Due to certain provisions that could result in the issuance of additional shares upon settlement, the warrant instrument did not meet the fixed-for-fixed criteria necessary for the instrument to be classified and recorded within equity. As a result, the March 2023 Cargill WarrantOriginal isWarrants are accounted for at fair value until settled through exercise or expiration and is classified as a derivative warrant liability in the Consolidated Balance Sheets at December 31, 20242025 and 2023,2024, in accordance with ASC Topic 815-40, Derivatives and Hedging: Contracts in Entity’s Own Equity.

We utilize a Black-Scholes option pricing model ("“Black-Scholes model"”) to estimate the fair value of the MarchCargill 2023Original CargillWarrants and the U.S. Bounti Warrant at each reporting date. The application of the Black-Scholes model utilizesinvolves significant assumptions and estimatesestimates, toincluding determine an appropriatethe risk-free interest rate, expected volatility, remaining contractual term, dividend yield, discountany dueapplicable todiscounts for exercise restrictions, and the fair value of our common stock. Any significant adjustments to thethese unobservable inputs would directly impact the fair value of the related warrant liability.liabilities. AsBecause athe resultvaluation of thethese derivative warrant instruments incorporates unobservable inputsinputs, thatincluding werethose used to determine the expected volatility of the March 2023 Cargill Warrant,volatility, the fair value measurementmeasurements ofare theseclassified warrants reflected aas Level 3 measurement within the fair value measurement hierarchy.

Long-lived assets that are held and used are tested for impairment at the asset group level. An asset group is the unit of account for a long-lived asset or assets to be held and used, which represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. Since each Company greenhouse facility is able to generate identifiable cash flows, each of our facilities is considered to be an asset group. The Company did not recognize any impairment of long-lived assets for the years ended December 31, 2024 and 2023.

We derive our revenue from the sale of produce grown at our facilities. Sales increased by $10.6$10.2 million to $38.1$48.4 million for the year ended December 31, 2024,2025, compared to the year ended December 31, 2023.2024. The increase was due to increased production and growth in sales from our facility in Georgia and sales from our new facilities in Texas and Washington, which began shipping and selling products in the second quarter of 2024.

Research and development expenses primarily consist of costs associated with the ongoing development, improvement, testing, alteration, and refinement of our product offerings, production lines, manufacturing processes, growing techniques, and post-harvest packaging methods. Our research and development efforts focus on enhancing each facility’s indoor environmental controls, growing recipes, and refining Stack & Flow Technology® processes, all aimed at meeting facility design and production yield specifications. Additionally, we also focus on the development of new leafy green product offerings, value-added products such as Grab & Go Salads, and new crops, including spinach, arugula, basil,arugula and berries. Research and development activities are conducted at the facilities in Montana, Texas, Washington, California, and Georgia.

Research and development costs increased by $6.2$3.3 million for the year ended December 31, 2024,2025, compared to the year ended December 31, 2023.2024. The increase is driven primarily by the additional development of our production, harvesting, and post-harvest packaging techniques and processes, including production surplus costs, related to the development and testing of our commercial-scale Stack & Flow Technology® and production processes at the WashingtonWashington, Texas, and TexasGeorgia facilities.

Selling, general,Sales and administrativemarketing 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, expensestransportation forand third-partydelivery professional services, insurance,costs, marketing, advertising, computer hardware and software, and amortization of intangible assets,advertising, among others.

Selling, general,General and administrative expenses decreasedincreased by $23.8$0.9 million for the year ended December 31, 2024,2025, compared to the year ended December 31, 2023,2024, primarily driven by aan $12.9impairment charge of $3.7 million decreaserelated to Pete's trade name and an increase in stock-based compensation thatof $1.4 million, which was partially offset by a resultdecrease of prior year awards that were issued at a higher fair value that fully vested and were expensed in prior periods, as compared to the fair value of awards being expensed in the current period. Additional decreases as compared to the prior year period were a $3.9$1.7 million decrease in salaries, benefits, and payroll-related expenses, $3.6 milliona decrease inof legal, accounting, and professional consulting costs, and a $2.9$1.4 million decrease in loss on disposalsdisposal charges primarily for construction-in-progressof assets, which was partially offset by an increase of $1.0 million in insurance, and ana increasedecrease of $0.9 million in transportationprofessional andfees. deliveryThe costs.remaining difference is due to individually immaterial differences.

The change in fair value of warrant liability includes the mark-to-market adjustments to the warrantCargill Amended Warrants liability and the initial issuance and subsequent mark-to-market adjustments to the U.S. Bounti Warrant liability to reflect itstheir fair value as of the end of the reporting period. The decreaseincrease in fair value of the warrant liability is primarily due to the decreaseEleventh Amendment entered into on March 31, 2025, which amended the Cargill Original Warrants by decreasing the per share exercise price of the Cargill Original Warrants from $6.50 to $4.00 per share with an amended expiration date of March 31, 2033 and the issuance of the U.S. Bounti Warrant in connection with the issuance of a convertible note with an initial principal balance of $10.0 million on August 1, 2025. The issuance of the U.S. Bounti Warrant and the change in terms of the Cargill Amended Warrants increased the value of the warrants and the related liability for year ended December 31, 2025. Additional increase in the value of the warrants for the year ended December 31, 2025 is primarily due to a net increase in our closing stock price onat December 31, 2024,2025 compared to the closing stock price on the prior measurement date of December 31, 2023.2024. The period-end close stock price is a key input to the Black-Scholes model we use to measure and estimate the fair value of the warrant at the end of each reporting period.

Interest expense, net increaseddecreased by $33.2$26.8 million for the year ended December 31, 2024,2025, compared to the year ended December 31, 2023.2024. The increasedecrease is primarily due to a significant increasedecrease in the principal amount outstanding onunder the Senior Facility,Facility and a reduction in the contractual interest rate as a result of the Eleventh Amendment, which increaseddecreased interest expense by $31.6$27.1 millionmillion, net of interest capitalized, over the prior year period. Also contributing to the net increase was $1.5 million of incremental interest expense for the financing obligations related to the California Facilities. During the year ended December 31, 2024 and 2023, we capitalized $10.8 million and $14.9 million of interest, respectively.

Other (expense) incomeincome, net for the year ended December 31, 2024 consists primarily of a $3.0 million write-off of financing fees related to unsuccessful efforts in raising additional capital during the year ended December 31, 2024.

As of December 31, 2024,2025, the principal amount due under our credit facilities with Cargill Financial totaled $467.9$302.0 million, none of which $20.2 million is classified as current. WeIn alsoaddition, hadthe accruedCompany interesthas an outstanding convertible note for $10.0 million to U.S. Bounti, LLC, none of $15.3which millionis classified as ofcurrent. December 31, 2024. TheseThe debt agreements with Cargill Financial contain various financial and non-financial covenants and certain restrictions on our business, which include restrictions on additional indebtedness, minimum liquidity and other financial covenants, and material adverse effects that could cause us to be at risk of default. A failure to comply with the covenants and other provisions of these debt instruments, including any failure to make payments when required, would generally result in events of default under such instruments, which could result in the acceleration of a substantial portion of such indebtedness.

The CEA business is capital-intensive. Currently, our primary sources of liquidity and capital resources are cash on hand, cash flows generated from the sale of our products, and the credit facilities with U.S. Bounti, LLC and Cargill Financial. Cash expenditures over the next 12 months are expected to include general operating costs for employee wages and related benefits, outside services for legal, accounting, IT infrastructure, and costs associated with growing, harvesting, and selling our products, such as the purchase of seeds, soil, nutrients, and other growing supplies, shipping and fulfillment costs, and facility maintenance costs.

There have been no material updates to our risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2025.2025, other than as set forth below:

Our first facility in Hamilton, Montana (the "Montana Facility") commenced construction in 2019, reached commercial operation by the second half of 2020, and now acts as a corporate headquarters without active commercial operations. The Company is currently evaluating the future commercial use of its Montana facility because we no longer have additional capacity at other facilities.facility. Management is exploring various utilization options, including supporting capacity needs within the Company’s existing network as well as potential third-party commercial arrangements. In 2022, we acquired California-based complementary greenhouse farming company Hollandia Produce Group, Inc. and its subsidiaries, which operated under the name Pete's (the "Pete's Acquisition"). 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 significantly expanded in 2023. In 2024, we completed construction of two new facilities in Washington and Texas.

We continue to advance our yield improvement and cost reduction initiatives across our facility network. Tower upgrades were completed at our Georgia, TexasTexas, and Washington facilities during the fourth quarter of 2025, which resulted in enhanced production efficiency and an approximate 10% increase in run-rate yield capacity to reach theour highest historical yields inand ourits history.yields remain at this improved run-rate capacity today.

Plans remain in place to build additional capacity across our network of facilities enabled with our patented Stack & Flow Technology®.Technology. The expansions are designed to provide additional capacity and allow for our growing product assortment to meet existing demand from our direct relationships with blue-chip retailers and distributors. The timing and scope of these projects, including plans to expand into the Midwest, remain under review pending ongoing discussions with retailers to optimize those facilities for specific products in support of retail commitments and strategies to expand distribution.

Three and Six Months Ended MarchJune 31,30, 2026 compared to the Three and Six Months Ended MarchJune 31,30, 2025

We derive our revenue from the sale of produce grown at our five facilities. Sales increased by $1.7 million for the three months ended MarchJune 31,30, 2026, compared to the three months ended MarchJune 31,30, 2025 and sales increased by $3.5 million for the six months ended June 30, 2026, compared to the six months ended June 30, 2025. The increase was due to increased production and growth in sales from our facilities in Georgia, Texas and Washington.

Cost of goods sold increased by $1.7$2.2 million for the three months ended MarchJune 31,30, 2026, compared to the three months ended MarchJune 31,30, 2025 and increased by $3.8 million for the six months ended June 30, 2026, compared to the six months ended June 30, 2025. The increase was due to production ramp-up at our facilities in Georgia, Texas and Washington.

Research and development costs decreased by $1.3$1.9 million for the three months ended MarchJune 31,30, 2026, compared to the three months ended MarchJune 31,30, 2025 and decreased by $3.2 million for the six months ended June 30, 2026, compared to the six months ended June 30, 2025. The decrease was primarily attributable to the maturation of our production, harvesting, and post-harvest packaging initiatives. As testing and refinement of our commercial-scale Stack & Flow Technology and related production processes at the Washington, Texas, and Georgia facilities progressed toward operational deployment, associated development activities declined.

Sales and marketing costs increased by $0.1$0.5 million for the three months ended MarchJune 31,30, 2026, compared to the three months ended MarchJune 31,30, 2025. The increase is driven primarily by an increase of $0.1$0.4 million in transportation and delivery costs as a result of increased shipments of produce driven by an increase in sales. The remaining difference is due to individually immaterial differences.

General and administrative expenses decreased by $0.6$0.5 million for the three months ended MarchJune 31,30, 2026, compared to the three months ended MarchJune 31,30, 2025, primarily driven by a decrease of $1.1$0.3 million in salaries, benefits, and payroll-related expensesexpenses, a decrease of $0.9 million in stock-based compensation, and a decrease of $0.2$0.3 million in insurancedepreciation expense,and whichamortization. This decrease was partially offset by an increase of $1.0$0.7 million in professional fees primarily related to litigation and financingan activities.increase of $0.3 million in property tax. The remaining difference is due to individually immaterial differences.

During the comparative periods, fluctuations in fair value were driven primarily by (i) amendments to the Cargill Amended Warrants, including reductions in exercise price and extensions of contractual lives pursuant to the Eleventh Amendment to our credit agreement, (ii) the issuance of the 2026 U.S. Bounti Warrant and the 2025 U.S. Bounti Warrant, and (iii) changes in key valuation inputs, most notably our stock price at each reporting date. As a result of these factors, the Company recognized a net loss of $1.4 million and a net gain of $5.2$3.9 million for the three and six months ended MarchJune 31,30, 2026, respectively, compared to a net loss of $3.5$1.5 million inand a net loss of $5.0 million for the prior-yearthree period.and six months ended June 30, 2025, respectively.

Interest expense, net decreased by $14.8$0.1 million for the three months ended MarchJune 31,30, 2026, compared to the three months ended MarchJune 31,30, 2025 and decreased by $14.9 million for the six months ended June 30, 2026, compared to the six months ended June 30, 2025. The decrease for the six months ended June 30, 2026, compared to the six months ended June 30, 2025 is primarily due to a decrease in the principal amount outstanding under the Senior Facility as well as a reduction in the overall interest rate as a result of the Eleventh Amendment, which decreased interest expense by $15.0 million, net of interest capitalized, over the prior year period. This decrease was partially offset by an increase of $0.2 million of interest expensed related to our three financing obligations related to sale leaseback transactions.Amendment.

We have incurred losses and generated negative cash flows from operations since our inception. At MarchJune 31,30, 2026, we had an accumulated deficit of $530.3$550.1 million and cash and cash equivalents and restricted cash of $18.8$10.1 million.

As of MarchJune 31,30, 2026, the principal amount due under our credit facility with Cargill Financial totaled $302.8 million, none of which is classified as current. In addition, the Company has outstanding convertible notes forwith an initial principal of $25.0 million to U.S. Bounti, LLC, none of which is classified as current. Subsequent to June 30, 2026, the Company issued an additional convertible note to U.S. Bounti, LLC with an initial principal balance of $12.5 million, together with a warrant to purchase 1,000,000 shares of the Company's common stock, which provided $12.5 million of gross proceeds. See Note 13, Subsequent Events, to the Unaudited Condensed Consolidated Financial Statements for further information. The debt agreements with Cargill Financial contain various financial and non-financial covenants and certain restrictions on our business, which include restrictions on additional indebtedness, minimum liquidity and other financial covenants, and material adverse effects that could cause us to be at risk of default. A failure to comply with the covenants and other provisions of these debt instruments, including any failure to make payments when required, would generally result in events of default under such instruments, which could result in the acceleration of a substantial portion of such indebtedness.

The CEA business is capital-intensive. Currently, our primary sources of liquidity and capital resources are cash on hand andhand, cash flows generated from the sale of our products.products, and proceeds from the August 2026 convertible note financing. 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. Also,In we are scheduled to begin making quarterly cashaddition, interest payments on April 1, 2027 on the first $100 million principal balance of the Cargill Senior Facility (as discussed further in the Cargill Loans section below). is scheduled to become payable in cash quarterly beginning April 1, 2027; however, pursuant to the August 2026 letter agreement with Cargill Financial, the Company may elect, so long as no default or event of default has occurred and is continuing, to pay interest accrued during the quarters ending March 31, 2027 and June 30, 2027 in kind. If the Company makes this election for both quarters, the first required quarterly cash interest payment would occur on October 1, 2027, with respect to interest accrued during the quarter ending September 30, 2027. The quarterly cash interest payments are estimated to be approximately $1.5 million each quarter through January 2, 2030, based on the current three-month SOFR rate plus the applicationapplicable margin.

As of MarchJune 31,30, 2026, a total of $302.8 million of principal was outstanding on the Senior Facility. The Senior Facility is included in "Long-term debt, net" on the Unaudited Condensed Consolidated Balance Sheets. The Eleventh Amendment, as described in Note 6, Debt, to the Unaudited Condensed Consolidated Financial Statements, resulted in a lower principal balance and a reduced interest rate. In addition, a debt premium recorded in connection with the amendment will be amortized as a reduction to interest expense over the 10-year term of the Amended Senior Credit Agreement using the effective interest method.

From January 1, 2027 to December 31, 2029, interest will accrue on $100 million of the Senior Facility and will be due and payable in cash starting the first business day after the close of each calendar quarter, beginning with the quarter commencing April 1, 2027, and continuing through December 31, 2029.2029; provided that, pursuant to the August 2026 letter agreement with Cargill Financial described in Note 13, Subsequent Events, interest accrued during the quarters ending March 31, 2027 and June 30, 2027 may, at the Company's election and so long as no default or event of default has occurred and is continuing, be paid in kind. Interest accruing on the outstanding principal balance of the Senior Facility in excess of $100 million will, at the Company’s option, either be paid in cash or paid in kind, beginning with the quarter commencing April 1, 2027, and continuing through December 31, 2029. As the Company expects to elect to pay interest accrued during the quarters ending March 31, 2027 and June 30, 2027 in kind pursuant to the August 2026 letter agreement, no cash interest payments are expected to be due inwithin the next twelve months, theand accrued interest has been classified within "“Accrued interest, noncurrent"” on the Unaudited Condensed Consolidated Balance Sheets.

Net cash used in operating activities was $6.1$13.4 million for the threesix months ended MarchJune 31,30, 2026 due to a net loss of $12.7$32.5 million, a non-cash gain of $5.2$3.9 million related to change in fair value of warrant liabilities, and $2.1$4.1 million in amortization of debt premium. This was partially offset by non-cash activities of $5.6$11.2 million in depreciation and amortization expense, $1.0$2.0 million in stock-based compensation expense, net of amounts capitalized, $0.1$0.3 million in amortization of debt issuance costs, and $7.2$13.1 million net increase of cash from changes in operating assets and liabilities.

Net cash used in operating activities was $9.6$18.3 million for the threesix months ended MarchJune 31,30, 2025 due to a net loss of $37.7$59.3 million. This was partially offset by non-cash activities of $15.3 million in paid-in-kind interest, a non-cash loss of $3.5$5.0 million related to change in fair value of warrant liabilities,liability, $5.0$10.0 million in depreciation expense, $0.9$2.9 million in stock-based compensation expense, net of amounts capitalized, $1.8 million in amortization expense, and $2.1 million in amortization of debt issuance costs.

Net cash used in investing activities was $1.1$2.2 million for the threesix months ended MarchJune 31,30, 2026, due primarily to purchases of construction materials and services, equipment, and other items for the Washington and Texas facilities.

Net cash used in investing activities was $5.0$10.9 million for the threesix months ended MarchJune 31,30, 2025, due primarily to purchases of construction materials and services, equipment, and other items for the Washington and Texas facilities.

Net cash provided by financing activities was $15.2$15.0 million for the threesix months ended MarchJune 31,30, 2026, primarily driven by $14.9 million of proceeds from the issuance of the U.S. Bounti, LLC convertible note.

Net cash provided by financing activities was $35.5$34.9 million for the threesix months ended MarchJune 31,30, 2025, comprised of $21.5$21.4 million of proceeds from the issuance of Series A Preferred Stock andStock, $10.5 million of proceeds from the issuance of debt.debt, and $3.5 million from the issuance of common stock.