AppHarvest is facing a possible eviction from its Kentucky-based greenhouse as their landlord claims they violated their Lease Agreement. This becomes clear from a Form 8-K distributed to investors, required to provide them with timely notification of significant changes at a listed company.
On July 5, AppHarvest received a Termination Letter from the landlord of the facility, namely Mastronardi, claiming that the company didn't achieve minimum production volumes, which they say is considered a contract violation and allegedly entitles it to terminate the Lease.
AppHarvest contests the alleged violation, and says its working with Mastronardi to find a resolution.
The greenhouse of contention was acquired by COFRA and Mastronardi from AppHarvest through a sales leaseback construction for over $127 million on December 27, 2022. The initial lease rate was 7.5% over 10 years, with four renewal terms of five years each.
AppHarvest believes it has met the terms of its lease agreement for the Berea farm and recognizes that such notices from creditors are not uncommon as a strategy for firms attempting to push their way to the front of the line in case of an actual default.
"We will defend our position with counterclaims should any damages result from Mastronardi’s attempted termination of the lease", they add.
AppHarvest business operations continue as usual.
AppHarvest struggles
News on AppHarvest's struggles started circulating last year. In a quarterly report filed on November 7, the company's ability to continue operating was questioned unless it raised additional capital. "As of September 30, 2022, we had $36.2 million of cash on hand and an accumulated deficit of $270.6 million. In October 2022, we entered into a $30.0 million note and loan agreement with Mastronardi Produce-USA, Inc. ("Mastronardi USA") and received $15.0 million upon execution. In November 2022, we initiated a third restructuring plan to further reduce operating costs and our losses. Despite these actions, management believes there is substantial doubt about our ability to continue as a going concern and absent additional sources of financing. We expect that our existing cash and cash equivalents will only allow us to continue our planned operations into the first quarter of 2023."
According to wdrb.com, a previous filing revealed that the company stopped production at its Kentucky facility in April after discovering Listeria monocytogenes, a disease-causing bacteria.
On top of the troubles with Mastronardi, just slightly over a month ago, Equilibrium Sustainable Food sought the immediate repayment of a $66.7 million loan that AppHarvest used to build a tomato farm in Richmond. AppHarvest commented that the lender was misunderstanding the situation and was working to resolve the issue directly with Equilibrium.