The latest current report is out from AppHarvest, and it’s not good.
AppHarvest sold the 15 acre Berea plant to one of its largest and primary distributors, Mastronardi, in December of 2022. The move was to raise much needed cash for the company’s ongoing concerns. Last week, it was disclosed that Mastronardi is now trying to terminate that lease with AppHarvest.
On July 5, 2023, AppHarvest Berea farm received a notice of default and termination from Mastronardi LLC, as landlord.
The termination letter alleges an ongoing and continuing violation of section 8.1(n) of the lease, with respect to maintenance of minimum production volumes at the Berea property, which Mastronardi alleges entitles it to terminate the lease in accordance with the terms. The termination letter, moreover, demands that AppHarvest Berea vacate the leased property and includes an assertion of reserved rights to initiate legal proceedings against Appharvest Berea.
Appharvest Berea contests that there has been any violation or continues to be violations under that section 8.1(n) of the lease, or any other provisions. They state they expressly reserve all rights that it has under the lease and applicable law with respect to the termination letter, including any right, it may have to counter claims, or the offset of any damages, resulting from Mastronards attempted termination. The company says it is working with Mastronardi to come to a resolution and will pursue a defense to any enforcement action taken by Mastronardi, but the company cannot guarantee a resolution on a timely basis, on favorable terms, or at all. AppHarvest further says, if the company is unable to resolve the alleged defaults under the lease, it would have a material adverse effect on the company’s liquidity, financial condition and results of operations, and could cause the company to become bankrupt or insolvent.
These latest revelations were made public last week in the company’s most recent 8- K form filed with the Securities and Exchange Commission. Such forms are required by publicly traded companies to disclose major events that shareholders should know about.
The same disclosure also mentions a $455,720 interest payment that has been deferred past the expiration date of the applicable grace period to a creditor. The company says it is continuing dialogue with the creditor in an effort to bring resolution to the matter, but the company cannot guarantee a resolution on a timely basis, on favorable terms, or at all.
Following any event of such a default, the creditor would have the right to pursue, among other things, judicial foreclosure of the real property located at the Richmond, Kentucky AppHarvest facility on Speedwell Road, together with the personal property and fixtures.
Travis Parman, AppHarvest’s Chief Communications officer, offered WBON-TV9 these comments regarding the recent filing:
Equilibrium dispute (Creditor)
“Based on ongoing dialogue with Equilibrium, the AppHarvest board has elected to defer an interest payment while seeking resolution to a lease issue.”
Mastronardi dispute:
“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. AppHarvest will defend its position with counterclaims should any damages result from Mastronardi’s attempted termination of the lease, and AppHarvest business operations will continue as usual.”
