Debt |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt |
Debt Debt consisted of the following:
U.S. Bounti, LLC Convertible Notes and Warrants
2025 Convertible Note and Warrants
On August 1, 2025, the Company entered into a Convertible Note and Warrant Purchase Agreement with U.S. Bounti, LLC, providing for the issuance of (i) a convertible note with an initial principal balance of $10.0 million (the "2025 Note") and (ii) a common stock purchase warrant (the "2025 U.S. Bounti Warrant") pursuant to which U.S. Bounti, LLC has the right to purchase and acquire 550,000 shares of the Company's common stock at an exercise price of $0.125 per share.
The 2025 Note bears interest at a rate of 6.0% per year, commencing on August 1, 2025 with a maturity date of August 1, 2030. Interest will accrue semi-annually on each June 30 and December 31, commencing December 31, 2025 (each, a "2025 Note PIK Interest Payment Due Date"), and will be payable semi-annually in arrears on each 2025 Note PIK Interest Payment Due Date by automatically increasing the principal amount of the 2025 Note by the amount of such interest (with such increased amount thereafter accruing interest as well) on each 2025 Note PIK Interest Payment Due Date ("2025 Note PIK Interest"). From time to time after August 1, 2028, interest may be payable quarterly in arrears in cash on each March 31, June 30, September 30 and December 31, commencing December 31, 2028 (each, a "2025 Note Cash Interest Payment Due Date"), in each case, in an amount equal to interest accrued during the quarter ending on such 2025 Note Cash Interest Payment Due Date, so long as certain conditions are met, including receipt of the prior written approval of Cargill Financial, as sole lender under the Senior Facility, if the senior obligations thereunder have not been paid in full, as further set forth in the 2025 Note.
During the term of the 2025 Note, the 2025 Note will be convertible into shares of the Company's common stock from time to time at the option of U.S. Bounti, LLC, upon delivery on one or more occasions of a written notice to the Company electing to convert all or any portion of the 2025 Note Obligations Amount (as defined in the 2025 Note). The initial conversion price of the Note is $2.50 per share of the Company's common stock (the "2025 Note Conversion Price"). The 2025 Note Conversion Price is subject to adjustment for stock splits, dividends or distributions, recapitalizations or similar transactions. On August 1, 2029, 50% of the 2025 Note Obligations Amount will automatically convert into shares of the Company's common stock at the 2025 Note Conversion Price. The remaining 50% of the 2025 Note Obligations Amount will automatically convert into shares of the Company's common stock at the 2025 Note Conversion Price on the maturity date of the 2025 Note. Notwithstanding the foregoing, however, 50% of the 2025 Note Obligations Amount may be payable in cash on August 1, 2029, with the remaining 50% of the 2025 Note Obligations Amount repaid in cash on the maturity date of the 2025 Note, so long as certain conditions are met as set forth in the 2025 Note, including receipt of the prior written approval of Cargill Financial, as sole lender under the Senior Facility, if the senior obligations thereunder have not been paid in full. Conversion of the full initial principal amount of the 2025 Note would result in the issuance of 4,000,000 shares of common stock if converted at $2.50 per share, which amount is subject to increase by any 2025 Note PIK Interest that is added to the outstanding principal under the terms of the 2025 Note. The 2025 Note is subordinated to obligations under the Company’s Senior Facility. The Company evaluated the conversion feature embedded in the 2025 Note and determined that bifurcation is not required. Although the conversion feature meets the definition of a derivative, it qualifies for the derivative scope exception because it is convertible into a fixed number of shares at a fixed conversion price and meets the other indexation guidance under ASC 815-40-15, and the conversion option is not precluded from equity classification. Accordingly, the conversion feature has not been separately accounted for as a derivative.
On October 14, 2025, the Company’s stockholders approved, for purposes of complying with the rules of the NYSE, (i) the issuance of up to 5,131,871 shares of the Company's common stock upon the conversion of the 2025 Note, and (ii) the issuance of up to 550,000 shares of the Company's common stock underlying the 2025 U.S. Bounti Warrant.
The Company determined that the 2025 U.S. Bounti Warrant requires liability classification under Accounting Standards Codification ("ASC") 815 and will be remeasured at fair value each reporting period, with changes recognized in earnings. 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 warrant is accounted for at fair value until settled through exercise or expiration and is classified as a derivative liability in the Condensed Consolidated Balance Sheets at March 31, 2026, and December 31, 2025. The 2025 U.S. Bounti Warrant's initial fair value of $1.5 million was recorded as a debt discount to the $10.0 million 2025 Note, and will be amortized to interest expense over the 5-year term of the 2025 Note using the effective interest method. See Note 7, Fair Value Measurements, for a discussion of the method used to determine the fair value of the 2025 U.S. Bounti Warrant.
2026 Convertible Note and Warrants
On March 13, 2026, the Company entered into a Convertible Note and Warrant Purchase Agreement with U.S. Bounti, LLC, providing for the issuance of (i) a convertible note with an initial principal balance of $15.0 million (the "2026 Note") and (ii) a common stock purchase warrant (the "2026 U.S. Bounti Warrant") pursuant to which U.S. Bounti, LLC has the right to purchase and acquire 5,500,000 shares of the Company's common stock at an exercise price of $0.125 per share.
The 2026 Note bears interest at a rate of 7.0% per year, commencing on March 13, 2026 with a maturity date of March 13, 2031. Interest will accrue semi-annually on each June 30 and December 31, commencing December 31, 2026 (each, a "2026 Note PIK Interest Payment Due Date"), and will be payable semi-annually in arrears on each 2026 Note PIK Interest Payment Due Date by automatically increasing the principal amount of the 2026 Note by the amount of such interest (with such increased amount thereafter accruing interest as well) on each 2026 Note PIK Interest Payment Due Date ("2026 Note PIK Interest"). From time to time after March 13, 2029, interest may be payable quarterly in arrears in cash on each March 31, June 30, September 30 and December 31, commencing December 31, 2029 (each, a "2026 Note Cash Interest Payment Due Date"), in each case, in an amount equal to interest accrued during the quarter ending on such 2026 Note Cash Interest Payment Due Date, so long as certain conditions are met, including receipt of the prior written approval of Cargill Financial, as sole lender under the Senior Facility, if the senior obligations thereunder have not been paid in full, as further set forth in the 2026 Note.
During the term of the 2026 Note, the 2026 Note will be convertible into shares of the Company's common stock from time to time at the option of U.S. Bounti, LLC, upon delivery on one or more occasions of a written notice to the Company electing to convert all or any portion of the 2026 Note Obligations Amount (as defined in the 2026 Note). The initial conversion price of the 2026 Note is $2.50 per share of the Company's common stock (the "2026 Note Conversion Price"). The 2026 Note Conversion Price is subject to adjustment for stock splits, dividends or distributions, recapitalizations or similar transactions. On March 13, 2030, 50% of the 2026 Note Obligations Amount will automatically convert into shares of the Company's common stock at the 2026 Note Conversion Price. The remaining 50% of the 2026 Note Obligations Amount will automatically convert into shares of the Company's common stock at the 2026 Note Conversion Price on the maturity date of the 2026 Note. Notwithstanding the foregoing, however, 50% of the 2026 Note Obligations Amount may be payable in cash on March 13, 2030, with the remaining 50% of the 2026 Note Obligations Amount repaid in cash on the maturity date of the 2026 Note, so long as certain conditions are met as set forth in the 2026 Note, including receipt of the prior written approval of Cargill Financial, as sole lender under the Senior Facility, if the senior obligations thereunder have not been paid in full.
Conversion of the full initial principal amount of the 2026 Note would result in the issuance of 6,000,000 shares of common stock if converted at $2.50 per share, which amount is subject to increase by any 2026 Note PIK Interest that is added to the outstanding principal under the terms of the 2026 Note. The 2026 Note is subordinated to obligations under the Company’s Senior Facility. The Company evaluated the conversion feature embedded in the 2026 Note and determined that bifurcation is not required. Although the conversion feature meets the definition of a derivative, it qualifies for the derivative scope exception because it is convertible into a fixed number of shares at a fixed conversion price and meets the other indexation guidance under ASC 815-40-15, and the conversion option is not precluded from equity classification. Accordingly, the conversion feature has not been separately accounted for as a derivative.
The Company determined that the 2026 U.S. Bounti Warrant requires liability classification under ASC 815 and will be remeasured at fair value each reporting period, with changes recognized in earnings. 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 warrant is accounted for at fair value until settled through exercise or expiration and is classified as a derivative liability in the Condensed Consolidated Balance Sheets at March 31, 2026, and December 31, 2025. The 2026 U.S. Bounti Warrant’s initial fair value of $6.0 million was recorded as a debt discount to the $15.0 million 2026 Note, and will be amortized to interest expense over the 5-year term of the 2026 Note using the effective interest method. See Note 7, Fair Value Measurements, for a discussion of the method used to determine the fair value of the 2026 U.S. Bounti Warrant.
Cargill Senior Facility
Agreements with Cargill Financial
On September 3, 2021, Local Bounti Operating Company LLC and certain subsidiaries entered into a multiple-advance term loan credit agreement (the "Senior Credit Agreement" and "Senior Facility") and a subordinated credit agreement (the "Subordinated Credit Agreement" and "Subordinated Facility" and, together with the Senior Credit Agreement, the "Original Credit Agreements") with Cargill Financial.
As further described below, Local Bounti Operating Company LLC and certain subsidiaries entered into subsequent amendments to the Original Credit Agreements (as so amended, collectively referred to as the "Amended Credit Agreements"). Significant amendments to the Original Credit Agreements are further described below.
Eleventh Amendment to the Senior Credit Agreement
On March 31, 2025, the Company, along with certain of its subsidiaries, entered into the Eleventh Amendment with Cargill Financial to further amend the Original Credit Agreements ("Amended Senior Credit Agreement"). Pursuant to the Eleventh Amendment, (i) $139.0 million of loans outstanding under the Senior Facility, together with all accrued and unpaid interest was cancelled, and (ii) $58.0 million of loans outstanding under the Subordinated Credit Agreement, together with all accrued and unpaid interest, was cancelled, constituting all of the loans and interest outstanding under the Subordinated Credit Agreement. In accordance with the Eleventh Amendment, the aggregate principal amount of loans outstanding under the Senior Facility subsequent to the Eleventh Amendment was $312.0 million. Additionally, in connection with the Eleventh Amendment, the per share exercise price of the Original Warrants (as defined below in Note 7, Fair Value Measurements), was amended from $6.50 to $4.00 per share with an amended expiration date of March 31, 2033.
The Company concluded the Eleventh Amendment met the definition of a troubled debt restructuring as the Company was experiencing financial difficulties and the creditor granted a concession as a result of the reduction of principal, cancellation of accrued interest, modification of interest rates, and the extension of the maturity date under the Original Credit Agreements. Therefore, no gain was recognized on the cancellation of debt. Instead, $181.7 million of cancelled principal and $15.4 million of accrued interest, net of $29.0 million of unamortized debt discount remaining under the original Senior Facility, was recorded as a debt premium (representing the excess of the $480.0 million carrying amount of the Senior Facility and the Subordinated Facility prior to the restructuring over the new $312.0 million principal amount of the Senior Facility subsequent to the Eleventh Amendment) that is amortized as a reduction to interest expense over the 10-year term of the Amended Senior Credit Agreement using the effective interest method.
Twelfth Amendment to the Senior Credit Agreement
In connection with the issuance of the 2025 Note with U.S. Bounti and the U.S. Bounti Warrant (each as defined below), on August 1, 2025, the Company also entered into a Twelfth Amendment to its Senior Credit Agreement with Cargill Financial, pursuant to which $10.0 million of outstanding loans under the Senior Facility were cancelled and discharged. Following the amendment, the aggregate principal amount of loans outstanding under the Senior Facility is $302.0 million.
The Company concluded the Twelfth Amendment met the definition of a troubled debt restructuring as the Company was experiencing financial difficulties and the creditor granted a concession as a result of the reduction of principal. Therefore, no gain was recognized on the cancellation of debt. Instead, $10.0 million of cancelled principal was recorded as a debt premium that 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.
General Provisions of the Senior Facility
Pursuant to the Eleventh Amendment, interest on the Senior Facility will accrue at three-month SOFR plus 2.0%. On April 1, 2031, the interest rate will increase to three-month SOFR plus 6.0%. From January 1, 2027 to December 31, 2029, interest will accrue on $100 million of the Senior Facility and will be due and payable in cash starting the first business day after the close of each calendar quarter, beginning with the quarter commencing April 1, 2027, and continuing through December 31, 2029. Interest accruing on the outstanding principal balance of the Senior Facility in excess of $100 million will, at the Company’s option, either be paid in cash or paid in kind, beginning with the quarter commencing April 1, 2027, and continuing through December 31, 2029.
From January 1, 2030 to March 31, 2031, interest will accrue on up to $200 million of the Senior Facility and will be due and payable in cash starting the first business day after the close of each calendar quarter, beginning with the quarter commencing April 1, 2030, and continuing through March 31, 2031. Interest accruing on the outstanding principal balance of the Senior Facility in excess of $200 million will, at the Company's option, either be paid in cash or paid-in-kind, beginning with the quarter commencing April 1, 2027, and continuing through March 31, 2031.
At all times after April 1, 2031, interest shall be payable only in cash on the first business day after each calendar quarter ends. Additionally, beginning in the fourth quarter of 2027, 50% of the free cash flow generated in the preceding quarter must be used for principal repayment on a quarterly basis. The maturity date of the Senior Facility subsequent to the Eleventh Amendment is December 31, 2035.
The Amended Senior Credit Agreement includes affirmative and negative covenants and events of default, and other requirements and restrictions. The financial covenants under the Amended Senior Credit Agreement, as modified in connection with the 2026 Note and related consent from Cargill Financial, consist of the following:
•Minimum Consolidated Interest Coverage Ratio: Beginning June 30, 2027, the Company must maintain a Consolidated Interest Coverage Ratio of at least 1.00 to 1.00, increasing to 1.25 to 1.00 on June 30, 2028, and thereafter.
•Minimum Liquidity: The Company is required to maintain minimum liquidity of $3.5 million through September 30, 2026 and $2.0 million thereafter.
•Minimum EBITDA: The Company must achieve minimum Consolidated Adjusted EBITDA of $0 for the quarter ending March 31, 2027; $3.0 million for each of the quarters ending December 31, 2027 and March 31, 2028; and $7.0 million for the twelve-month period ending March 31, 2028. Adjusted EBITDA is a non-GAAP financial measure defined as net loss before the impact of interest expense, depreciation, and amortization, and adjusted to exclude stock-based compensation expense, change in fair value of warrant liabilities, and certain other non-core items.
•Current Ratio: Starting June 30, 2027, the Company must maintain a minimum current ratio covenant of at least 1.00 to 1.00, increasing to 1.20 to 1.00 beginning June 30, 2028, and thereafter.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||