AppHarvest, a leading US indoor-farming company in the food and beverage industry, has recently filed for Chapter 11 bankruptcy protection. This move comes after AeroFarms, another prominent indoor-farming player based in New Jersey, also sought the same legal process due to challenges in the capital market.
With a net loss of $176.6m in the past year and $166.2m in the previous year, AppHarvest aims to address its outstanding liabilities and undergo a financial and operational transition. To facilitate this, the company has filed voluntary petitions for protection under Chapter 11 in the US Bankruptcy Court for the Southern District of Texas.
AppHarvest operates four indoor farms located in the Appalachian mountain range in Kentucky, specializing in tomatoes, strawberries, cucumbers, and leafy greens. However, as part of its restructuring plan, the company intends to sell its Berea facility to Mastronardi Produce for $3.75m, while receiving additional funding and support from its restructuring partner.
The restructuring plan and the sale of the Berea facility are subject to court approval, which includes a $30m debtor-in-possession financing from Equilibrium Capital, a sustainable agriculture investor based in San Francisco. These funds aim to provide necessary liquidity for the operations at AppHarvest’s three remaining facilities in Morehead, Somerset, and Richmond.
Earlier in July, Jonathan Webb, the founder of AppHarvest, stepped down as CEO and took on the role of chief strategy officer, with Tony Martin, an experienced executive in controlled environment agriculture, replacing him. Martin highlights that the Chapter 11 filing is a protective measure while the company transitions its strategic plan, Project New Leaf, which has shown promising progress in terms of operational efficiencies, increased sales, cost savings, and product quality.
Despite generating sales of $14.6m in the past year, marking a 60% increase from the previous year, AppHarvest’s adjusted EBITDA remained negative at $72m. The company’s financial position, as of March, showed cash and cash equivalents of $54.3m. In 2021, AppHarvest went public through a merger with Nasdaq-listed special purpose acquisition company Novus Capital and successfully raised $46m through a share offering.
The struggle faced by AppHarvest and AeroFarms reflects the challenges within the controlled indoor farming industry. Capital-intensive and requiring significant investment and scale, many companies in the sector are yet to achieve profitability. Several indoor-farming players, such as Eider, Upward Farms, Future Crops, and Agricool, have already ceased operations due to the financial burdens. Infarm, a German indoor-farming business founded in 2013, underwent restructuring, streamlining its market presence, cutting jobs, and relocating its operations to the UK from Berlin.