Local Bounti Corporation — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. Although the request refers to 2021 Q4, this filing reports full-year results, not standalone fourth-quarter results. Local Bounti is an early-stage controlled-environment agriculture company; its first commercial facility is in Hamilton, Montana. The November 2021 SPAC business combination was accounted for as a reverse recapitalization, so reported operating history is that of Legacy Local Bounti.
Financial performance and position
| Metric | 2021 | 2020 |
|---|---|---|
| Revenue | $638,000 | $82,000 |
| Gross profit (loss) | $206,000; 32.3% gross margin | ($9,000); negative gross margin |
| Operating expenses | $44.923 million | $7.913 million |
| Operating loss | ($44.717 million) | ($7.922 million) |
| Net loss | ($56.093 million); diluted loss per share $1.06 | ($8.409 million); diluted loss per share $0.17 |
| Cash used in operating activities | $20.108 million | $3.838 million |
| Cash used in investing activities | $29.666 million | $3.422 million |
| Cash provided by financing activities | $150.806 million | $5.168 million |
Revenue consisted of $551,000 from produce and $87,000 from intellectual-property sales. Produce revenue increased as commercial production expanded; commercial operations began in the second half of 2020. The filing does not provide standalone Q4 revenue or earnings.
At year-end, cash and cash equivalents were $96.661 million, plus $4.416 million of restricted cash; current assets were $105.508 million and current liabilities were $17.968 million. Net working capital was $87.540 million. Total assets were $143.930 million. Long-term debt, net of deferred financing costs, was $11.199 million; the underlying Cargill subordinated loan balance was $16.293 million. The company also reported a $13.070 million financing obligation related to its Montana facility sale-and-finance-leaseback arrangement.
Material changes and operating developments
- Revenue rose by $556,000 year over year, from a small base. Produce was sold in more than 500 retail locations by year-end.
- Net loss widened by $47.684 million. Selling, general and administrative expense increased by $34.664 million, including $8.353 million of one-time business-combination costs, a $14.600 million increase in stock-based compensation, and higher payroll and professional fees. Research and development expense increased by $2.346 million.
- The Montana facility expansion increased capacity by approximately 140% to 12 hydroponic ponds; it was fully commissioned in Q4. Commercial butter-lettuce crop turns reached 17 annually at year-end, versus nine in 2020, an 88% improvement.
- The November business combination and PIPE financing generated substantial funding; financing cash flow included $137.532 million of net business-combination proceeds. The company also converted its convertible notes into common shares at closing.
- Construction of the Pasco, Washington facility was paused while the company reassessed its design and expansion plan in light of the proposed Pete’s acquisition. Site preparation and permits were in place, and management said it remained committed to the facility.
Outlook, financing, and risks
- Management stated that cash and available credit were expected to cover planned operating expenses, capital expenditures, and debt service for at least the next 12 months. The company nevertheless expects continuing losses and substantial spending on facilities, technology, products, and public-company costs; additional financing may be needed.
- No numeric revenue or earnings guidance was provided. Strategic targets included expanding from eight SKUs in 2021 to 15–25 by year-end 2022, and achieving a facility capital-cost-to-run-rate-EBITDA ratio of 3.0x by 2025. These are management targets, not guarantees.
- On March 14, 2022, after year-end, Local Bounti agreed to acquire Pete’s for approximately $122.5 million, subject to adjustments: $92.5 million cash and $30 million in stock. A separate $25.8 million property acquisition was also planned. Management expected closing in Q2 2022. The filing describes this as pending, not completed.
- The related Cargill credit amendment contemplated up to $170 million of aggregate commitments for the acquisition, property purchase, facility upgrades, and expansion. It also increases both facility interest rates by 2 percentage points, reduces the minimum liquidity covenant from $30 million to $20 million, requires a $2 million amendment fee, and provides for 1,932,931 shares to Cargill at closing. The existing credit facility is secured by substantially all company assets, including intellectual property.
- Principal risks include limited operating history, recurring losses, reliance on the Montana facility, capital-intensive expansion, construction and supply-chain delays, inflation, labor and energy costs, crop disease and food-safety events, customer concentration, and execution and integration risks if Pete’s is acquired. Four customers represented approximately 82% of 2021 revenue.
- Management identified a material weakness in internal control over financial reporting for 2021 and 2020, citing insufficient qualified accounting personnel and inadequate segregation of duties. Disclosure controls were deemed ineffective; remediation was underway. The 2021 financial statements received an unqualified audit opinion, but the auditor did not opine on internal-control effectiveness. The 2020 audit report included a going-concern emphasis.
- The company reported no material pending litigation. It had approximately $41.8 million of federal and state net operating loss carryforwards, subject to potential limitations, and recorded a full valuation allowance against deferred tax assets.
Key investor verification points
- Confirm actual post-year-end status, funding, and closing terms of the Pete’s acquisition and the separate property purchase; verify resulting debt, interest costs, liquidity covenant headroom, and share dilution.
- Track whether Local Bounti remediates the material weakness and improves its financial-reporting controls.
- Assess whether crop-turn improvements, gross margins, and cost reductions are sustained as production scales beyond Montana.
- Monitor cash burn, capital spending, operating losses, and whether stated liquidity assumptions remain adequate.
- Evaluate dependence on a small number of customers and the practical ability to integrate Pete’s facilities, workforce, technology, and distribution relationships.