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As filed with the Securities and Exchange Commission on August 19, 2022.
Registration No. 333-266210
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No.2
to
Form S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Kalera Public Limited Company
(Exact Name of Registrant as Specified in Its Charter)
Republic of Ireland6770Not Applicable
(State or Other Jurisdiction of
Incorporation or Organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification Number)
10 Earlsfort Terrace
Dublin 2, D02 T380, Ireland
Telephone + 353 01 920 1000
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
Fernando Cornejo
Kalera plc
7455 Emerald Dunes Dr.
Orlando, Florida 32822
+1 (407) 574-8204
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
David Dixter
Milbank LLP
100 Liverpool Street
London, EC2M 2AT
United Kingdom
+44 20 7615 3000
Approximate date of commencement of proposed sale to the public: From time to time after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 (the “Securities Act”) check the following box. ☒
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. 
_________________________
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until this registration statement shall become effective on such date as the U.S. Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.



The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities, nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
PRELIMINARY PROSPECTUSSubject to CompletionAugust 19, 2022
PROSPECTUS FOR UP TO 16,743,750 ORDINARY SHARES
UP TO 14,437,500 ORDINARY SHARES ISSUABLE UPON EXERCISE OF WARRANTS
AND UP TO 6,171,875 WARRANTS OF
KALERA PUBLIC LIMITED COMPANY
This prospectus relates to the ordinary shares, with a nominal value of $0.0001 (the “Kalera Ordinary Shares”), of Kalera Public Limited Company, a public limited company incorporated under the laws of the Republic of Ireland with registered number 606356 (the “Registrant”) and warrants to purchase Kalera Ordinary Shares, each one whole warrant entitling the holder thereof to subscribe for one Ordinary Share at a purchase price of $11.50 per share (the “Kalera Warrants”).
The registration statement of which this prospectus forms a part relates to the issuance by us from time to time of an aggregate of up to 14,437,500 Kalera Ordinary Shares, issuable upon the exercise of the Kalera Warrants.
The registration statement also relates to the offer and sale from time to time by the selling securityholders named herein (the “Selling Securityholders”) of (i) up to 16,743,750 Kalera Ordinary Shares consisting of (a) up to 1,796,875 Kalera Ordinary Shares issued in connection with the Business Combination in exchange for Agrico Class B ordinary shares initially purchased by DJCAAC LLC, a Delaware limited liability company (“Sponsor”) for $25,000, or for approximately $0.005 per share, in a private placement prior to the initial public offering of Agrico Acquisition Corp., a Cayman Islands exempted company (“Agrico”), (b) up to 6,171,875 Kalera Ordinary Shares issuable upon the exercise of the Kalera Warrants of the Sponsor that were automatically adjusted from Agrico Warrants in connection with the Business Combination, such Agrico Warrants initially purchased by the Sponsor in a private placement at the time of the Agrico IPO for a purchase price of $1.00 per warrant, (c) up to 275,000 Kalera Ordinary Shares issued to Maxim Partners LLC on June 28, 2022 at a value equivalent to approximately $7.93 per share, in connection with a settlement agreement entered into on June 26, 2022, (d) up to 1,000,000 Kalera Ordinary Shares, issued or to be issued to former securityholders of Kalera SA, a Luxembourg public limited company (société anonyme) (“Kalera SA”) at a price of $10.00 per share upon the conversion of a Secured Convertible Bridge Promissory Note (as defined below), (e) up to 2,300,000 Kalera Ordinary Shares issued to Armistice Capital Master Fund Ltd. (“Armistice”) on July 11, 2022 at a price of $4.00 per share in a private placement pursuant to a securities purchase agreement dated July 7, 2022 (the “Private Placement”), (f) up to 200,000 Kalera Ordinary Shares issuable upon the exercise of the Pre-Funded Warrants, which have an exercise price of $4.00 per share that has been pre-paid to the amount of $3.9999, such that $0.0001 of the exercise price remains payable on exercise, and (g) 5,000,000 Kalera Ordinary Shares issuable upon the exercise of the Series A Warrants and the Series B Warrants, which have an exercise price of $4.41 per share, and (ii) up to 6,171,875 Kalera Warrants of the Sponsor that were automatically adjusted from Agrico Warrants in connection with the Business Combination, such Agrico Warrants initially purchased by the Sponsor in a private placement at the time of the Agrico IPO for a purchase price of $1.00 per warrant.
We are registering the offer and sale of these securities to satisfy certain registration rights we have granted. We will receive proceeds from Kalera Warrants covered by this registration statement in the event that such Kalera Warrants are exercised for cash. We will not receive any of the proceeds from the sale of the securities by the Selling Securityholders. Because the exercise price of the Kalera Warrants substantially exceeds the current trading price of the Kalera Ordinary Shares, there is no assurance that the Kalera Warrants will be in the money prior to their expiration and it is unlikely that holders of the Kalera Warrants will be able to exercise such Kalera Warrants in the near future, if at all. As a result, we are unlikely to receive any proceeds from the exercise of the Kalera Warrants in the near future, if at all. We will pay the expenses associated with registering the sales by the Selling Securityholders, as described in more detail in the section titled “Use of Proceeds” appearing elsewhere in this prospectus.
The Selling Securityholders may sell any, all or none of the securities and we do not know when or in what amount the Selling Securityholders may sell their securities hereunder following the effective date of this registration statement. The Selling Securityholders may sell the securities described in this prospectus in a number of different ways and at varying prices. We provide more information about how the Selling Securityholders may sell their securities in the section titled “Plan of Distribution” appearing elsewhere in this prospectus.
Due to the significant number of Agrico Shares that were redeemed in connection with the Business Combination, the number of Kalera Ordinary Shares that the Selling Securityholders can sell into the public markets pursuant to this prospectus will constitute a considerable percentage of our public float. As a result, the resale of Kalera Ordinary Shares pursuant to this prospectus could have a significant negative impact on the trading price of



the Kalera Ordinary Shares. This impact may be heightened by the fact that, as described above, certain of the Selling Securityholders purchased Kalera Ordinary Shares at prices that are well below the current trading price of the Kalera Ordinary Shares. The 31,181,250 Kalera Ordinary Shares that may be resold and/or issued into the public markets pursuant to this prospectus represent approximately 69.8% of the 44,679,328 Kalera Ordinary Shares outstanding as of August 19, 2022 (after giving effect to the exercise of all outstanding Kalera Warrants, Kalera Options and Armistice Warrants) and the Kalera Warrants that may be resold into the public markets pursuant to this prospectus represent approximately 42.8% of the 14,437,500 Kalera Warrants outstanding as of August 19, 2022.
Kalera Ordinary Shares and Kalera Warrants are listed on The Nasdaq Capital Market (“Nasdaq”) under the symbols KAL and KALWW, respectively. On August 17, 2022, the closing sale price of the Kalera Ordinary Shares was $2.91 per share and the closing sale price of the Kalera Warrants was $0.14 per warrant.
We are an “emerging growth company,” as defined under the federal securities laws, and, as such, may elect to comply with certain reduced public company reporting requirements for future filings.
Investing in our securities involves a high degree of risk. Before buying any securities, you should carefully read the discussion of the risks of investing in our securities in “Risk Factors” beginning on page 6 of this prospectus.
You should rely only on the information contained in this prospectus or any prospectus supplement or amendment hereto. We have not authorized anyone to provide you with different information.
Neither the Securities Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is August 19, 2022.



TABLE OF CONTENTS
Page
You should rely only on the information contained in this prospectus or in any free writing prospectus prepared by us or on our behalf. We have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date.
i


FREQUENTLY USED TERMS
Unless otherwise stated or unless the context otherwise requires, the term (i) “Agrico” refers to Agrico Acquisition Corp., a Cayman Islands exempted company, (ii) “Kalera”, the “Company”, “Registrant”, “we”, “us” and “our” refers to Kalera Public Limited Company, a public limited company incorporated in Ireland with registered number 606356, and where appropriate, our wholly owned subsidiaries and (iii) “Kalera SA” or “Lux Holdco” refers to Kalera S.A., a public limited company incorporated in Luxembourg,.
In this document:
“$” means the currency in dollars of the United States of America.
“2022 Plan” means the 2022 Long-Term Stock Incentive Plan of Kalera.
“Agrico Articles” means the Amended and Restated Memorandum and Articles of Association of Agrico adopted on July 7, 2021.
“Agrico Class A ordinary shares” means the class A ordinary shares of Agrico, par value $0.0001 per share.
“Agrico Class B ordinary shares” means the class B ordinary shares of Agrico, par value $0.0001 per share.
“Agrico Initial Shareholders” means holders of Founder Shares prior to the Agrico IPO, including the Sponsor.
“Agrico IPO” means the initial public offering of Agrico Units consummated on July 12, 2021.
“Agrico Ordinary Shares” means Agrico Class A ordinary shares and Agrico Class B ordinary shares.
“Agrico Public Warrant” means each whole warrant (other than the Private Placement Warrants), entitling the holder thereof to purchase one Agrico ordinary share at a price of $11.50 per share.
“Agrico Share Issuance” means the issuance by Agrico of Agrico Ordinary Shares to Kalera.
“Agrico Shareholders” means the holders of Agrico Shares, including the Agrico Initial Shareholders and members of the Agrico management team, provided that each Agrico Initial Shareholder’s and member of Agrico’s management team’s status as an “Agrico Shareholder” shall only exist with respect to such Agrico Shares.
“Agrico Shares” means Class A ordinary shares of Agrico issued as part of the Agrico Units sold in the Agrico IPO.
“Agrico Units” means the Agrico units issued in the Agrico IPO, each consisting of one ordinary share and one-half of one Agrico Public Warrant.
“Agrico Warrants” means Private Placement Warrants and Agrico Public Warrants, collectively.
“Armistice” means Armistice Capital Master Fund Ltd.
“Armistice Warrants” means the Pre-Funded Warrants, the Series A Warrants and the Series B Warrants.
“Business Combination” means the transactions contemplated by the Business Combination Agreement.
“Business Combination Agreement” means the Business Combination Agreement, dated as of January 30, 2022, as amended from time to time, by and among Agrico, Kalera SA, Kalera, Cayman Merger Sub and Lux Merger Sub.
“Cayman Merger Sub” means Kalera Cayman Merger Sub, a Cayman Islands exempted company.
“Closing” means the consummation of the transactions contemplated under the Business Combination Agreement.
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“Code” means the Internal Revenue Code of 1986, as amended.
“CVR” means one contractual contingent value right per Kalera Share which shall represent the right to receive up to two contingent payments of Kalera Ordinary Shares
“CVR Agreement” means the Contingent Value Rights Agreement entered into by Kalera and the Rights Agent party thereto.
“CVR Shares” means the Kalera Ordinary Shares issuable pursuant to the CVRs upon the satisfaction of certain conditions.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“First Closing” means the consummation of the First Merger and the related transactions thereby.
“First Closing Date” means the date on which all conditions of the First Closing are satisfied.
“First Merger” means the first merger pursuant to which Cayman Merger Sub merged with and into Agrico, with Agrico continuing as the surviving entity of the First Merger and as a wholly owned subsidiary of Kalera.
“First Merger Effective Time” has the meaning assigned to it in the Business Combination Agreement.
“Founder Shares” means Agrico Class B ordinary shares initially purchased by the Sponsor in a private placement prior to the Agrico IPO, of which 1,796,875 are currently outstanding.
“IRS” means the Internal Revenue Service of the United States.
“Kalera” means Kalera Public Limited Company, a public limited company incorporated under the laws of the Republic of Ireland.
“Kalera Articles” means the consolidated articles of association of Kalera, as amended from time to time.
“Kalera Capital Reduction” means certain of the Kalera SA Shares and all the Kalera SA Options being cancelled and ceasing to exist or being assumed (as applicable) upon completion of the Second Merger by way of a capital reduction pursuant to the Luxembourg Companies Act.
“Kalera Options” has the meaning assigned to the term “Pubco Options” in the Business Combination Agreement.
“Kalera Ordinary Shares” means the ordinary shares of Kalera.
“Kalera SA Options” has the meaning assigned to the term “Kalera Options” in the Business Combination Agreement.
“Kalera SA Shareholders” means the holders of Kalera SA Shares.
“Kalera SA Shares” the ordinary shares of Kalera SA.
“Kalera Warrant” means each one whole warrant entitling the holder thereof to subscribe for one Kalera Ordinary Share at a purchase price of $11.50 per share.
“Lux Merger Sub” means Kalera Luxembourg Merger Sub SARL, a Luxembourg limited liability company (société à responsabilité limitée).
“Luxembourg Company Law” means the Luxembourg law dated August 10, 1915 on commercial companies, as amended.
“Maxim” means Maxim Group, LLC, Agrico’s underwriters in the Agrico IPO.
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“Merger Subs” means collectively, Cayman Merger Sub and the Lux Merger Sub.
“Nasdaq” means the The Nasdaq Capital Market.
“Pre-Funded Warrants” means 200,000 pre-funded warrants issued to Armistice under the Securities Purchase Agreement, exercisable as of July 11, 2022 for up to 200,000 Ordinary Shares.
“Private Placement Warrants” means the Agrico Warrants purchased by the Sponsor and Maxim in a private placement at the time of the Agrico IPO for a purchase price of $1.00 per warrant, each of which is exercisable for one ordinary share.
“Redemption” means the right of the holders of Agrico Shares to have their shares redeemed in accordance with the procedures set forth in the Prospectus.
“Redemption Price” means an amount equal to a pro rata portion of the aggregate amount on deposit in the Trust Account two (2) days prior to the completion of the Business Combination calculated in accordance with the Agrico Articles (as equitably adjusted for shares splits, shares dividends, combinations, recapitalizations and the like after the Closing).
“SEC” means the U.S. Securities and Exchange Commission.
“Second Closing” means the consummation of the Business Combination (other than those transactions which occur on the First Closing).
“Second Closing Date” means the date on which all conditions of the Second Closing were satisfied.
“Second Merger” means the second merger pursuant to which Lux Merger Sub merged with and into Kalera SA with Kalera SA as the surviving entity of such merger.
“Second Merger Effective Time” has the meaning assigned to it in the Business Combination Agreement.
“Securities” means the Kalera Ordinary Shares and Kalera Warrants offered and sold under this registration statement.
“Securities Act” means the U.S. Securities Act of 1933, as amended.
“Securities Purchase Agreement” means the securities purchase agreement entered into on July 7, 2022 between Kalera and Armistice.
“Series A Warrants” means the 2,500,000 series A warrants issued to Armistice on July 11, 2022, exercisable six months from their date of issuance at an exercise price of $4.41 per share and expiring two years from their date of issuance.
“Series B Warrants” means the 2,500,000 series B warrants issued to Armistice on July 11, 2022, exercisable six months from their date of issuance at an exercise price of $4.41 per share and expiring five and a half years from their date of issuance.
“Sponsor” means DJCAAC LLC, a Delaware limited liability company and each of the persons set forth on Schedule I to the Sponsor Support Agreement.
“Sponsor Support Agreement” means the agreement among the Sponsor, Agrico and Kalera SA entered into on January 30, 2022.
“Trust Account” means the trust account that held a portion of the proceeds of the Agrico IPO and the concurrent sale of warrants to the Sponsor in a private placement.
“U.S. GAAP” means United States generally accepted accounting principles.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the information in this prospectus constitutes forward-looking statements for the purposes of federal securities laws. You can identify these statements by forward-looking words such as “may,” “might,” “could,” “will,” “would,” “should,” “expect,” “possible,” “potential,” “anticipate,” “contemplate,” “believe,” “estimate,” “plan,” “predict,” “project,” “intends,” and “continue” or similar words. You should read statements that contain these words carefully because they:
discuss future expectations; or
state other “forward-looking” information.
Forward-looking statements in this prospectus may include, for example, statements about:
the expected benefits and costs of the Business Combination;
changes in Kalera’s strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects and plans;
the implementation, market acceptance and success of Kalera’s business models;
the impact of health epidemics, including the coronavirus SARS-CoV-2 (“COVID-19”), pandemic, on Kalera’s business and the actions Kalera may take in response thereto;
Kalera’s expectations regarding its ability to obtain and maintain intellectual property protection and not infringe on the rights of others;
expectations regarding the time during which Kalera will be an emerging growth company under the JOBS Act;
Kalera’s future capital requirements and sources and uses of cash;
Kalera’s ability to obtain funding for its operations;
Kalera’s business, expansion plans and opportunities;
the outcome of any known and unknown litigation and regulatory proceedings; and
Kalera believes it is important to communicate its expectations to its security holders. However, there may be events in the future that Kalera is not able to predict accurately or over which it has no control. The risk factors and cautionary language discussed in this prospectus, including in the section titled “Risk Factors,” provide examples of risks, uncertainties and events that may cause actual results to differ materially from the expectations described by Kalera in such forward-looking statements, including among other things:
changes adversely affecting the vertical farming industry and the development of existing or new technologies;
the effect of the COVID-19 pandemic on Kalera’s business;
the ability of Kalera to obtain financing to address its liquidity, operating or capital expenditure needs or other financing objectives on favorable terms, if at all;
the potential restrictive terms, dilutive impact or other material adverse effects of the terms of any financing arrangements entered into by Kalera;
the outcome of any legal proceedings that may be instituted against Kalera following the announcement of the Business Combination and transactions contemplated thereby;
lack of useful financial information for an accurate estimate of future capital expenditures;
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possibility of continuing to incur losses for the foreseeable future;
potential delay in the completion of new facilities;
the competitiveness of the agriculture industry;
the difficulty of controlling customer perception of Kalera’s brand;
the limits that are imposed on Kalera by the amount of facilities in operation at a given time;
distribution agreements with third parties;
consolidation of customers or suppliers;
consumer preferences and spending habits;
the volatility of energy costs.
changes in applicable laws or regulations, including environmental and export control laws;
the ability to retain key employees;
Kalera’s business strategy and plans;
Kalera’s ability to target and retain customers and suppliers;
the failure to build Kalera’s finance infrastructure and improve its accounting systems and controls;
whether and when Kalera might pay dividends; and
the ability of Kalera to source its materials from an ethically and sustainably sourced supply chain.
You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this prospectus.
All forward-looking statements included herein attributable to Kalera or any person acting on Kalera’s behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Except to the extent required by applicable laws and regulations, Kalera undertakes no obligations to update these forward-looking statements to reflect events or circumstances after the date of this prospectus or to reflect the occurrence of unanticipated events.
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PROSPECTUS SUMMARY
This summary highlights information contained in greater detail elsewhere in this prospectus. This summary is not complete and does not contain all the information that may be important to you. You should read the entire prospectus carefully before making your investment decision with respect to our Kalera Ordinary Shares or Kalera Warrants. You should carefully consider, among other things, the financial statements included elsewhere in this prospectus and the related notes, and the sections titled “Risk Factors,” “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus. Unless expressly indicated or the context requires otherwise, the terms the “Company,” “Kalera,” the “Registrant,” “we,” “us” and “our” in this prospectus refer to Kalera Public Limited Company, and where appropriate, our wholly-owned subsidiaries.
Kalera is a leading vertical farming company. We utilize proprietary technology and plant and seed science to sustainably grow local, delicious, nutrient-rich, pesticide-free, non-GMO leafy greens year-round. In contrast to produce that requires costly and extended long-haul supply chains, our leafy greens are delivered within hours of harvesting, always fresh, and maintain a longer shelf life. Our high-yield, automated, data-driven hydroponic production facilities have been designed for rapid roll-out with attractive unit economics to grow leafy greens faster, cleaner and in a manner that is better for the environment than traditional farming. Given our cost-efficient production process from seed to harvest and capital discipline, we are able to sell our “better than organic” produce at competitive prices. With our mission to serve humanity, wherever we are, fresh, safe, sustainable and affordable nourishment, we aim to become a global leader in controlled-environment agriculture (“CEA”) for leafy greens addressing an expanding $50 billion addressable market opportunity for vertical farming products.
Kalera was incorporated under the laws of the Republic of Ireland as a private limited company, for purposes of a business combination. Kalera was re-registered as an Irish public limited company on March 29, 2022 and changed its name to “Kalera Public Limited Company” on April 4, 2022. Kalera owns no material assets and does not operate any businesses.
The mailing address of Kalera’s principal executive offices are 7455 Emerald Dunes Dr., Suite 2100, Orlando Florida 32822, and its phone number is. +1 (407) 574-8204. Kalera’s corporate website address is https://www.kalera.com. Kalera’s website and the information contained on, or that can be accessed through, the website is not deemed to be incorporated by reference in, and is not considered part of, this joint proxy statement/prospectus.
Kalera announces material information to the public through a variety of means, including filings with the Securities and Exchange Commission, press releases, public conference calls, Kalera’s website (https://www.kalera.com/), and its investor relations website (https://investors.kalera.com/). Kalera uses these channels, as well as social media, including its LinkedIn account (https://www.linkedin.com/company/kalera) to communicate with investors and the public news and developments about Kalera and other matters. Therefore, Kalera encourages investors, the media, and others interested in the Company to review the information it makes public in these locations, as such information could be deemed to be material information.
The Business Combination
Pursuant to the Business Combination Agreement, dated January 30, 2022 (the “Business Combination Agreement”), on June 28, 2022 Kalera SA and Lux Merger Sub on one hand and Agrico and Cayman Merger Sub on the other hand consummated the mergers and the Kalera Capital Reduction, as a result of which the holders of Agrico Ordinary Shares received shares in the capital of Kalera, holders of Agrico Warrants had their Agrico Warrants assumed by Kalera and automatically adjusted to become exercisable for shares in the capital of Kalera, Kalera SA Shareholders (except Kalera) received shares in the capital of Kalera, the holders of the Kalera SA Options received options in the capital of Kalera, and Kalera SA became a wholly owned subsidiary of Kalera (the transactions contemplated by the Business Combination Agreement collectively, the “Business Combination”).
Stock Exchange Listing
Kalera Ordinary Shares and Kalera Warrants are currently listed on Nasdaq under the symbols KAL and KALWW, respectively.
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Summary of Risk Factors
Our business is subject to numerous risks and uncertainties, including those highlighted in the section title “Risk Factors.” Such risks include, but are not limited to:
Substantial doubt regarding Kalera’s ability to continue as a going concern or maintain adequate liquidity to fund its operations;
Kalera is in an early commercial phase, and is highly dependent on a successful roll-out and commercialization of its products;
Kalera lacks useful financial information for the accurate estimation of its future capital expenditures and unit economics;
Kalera is an early stage company with a history of losses and expects to continue to incur losses going forward;
Kalera may be unable to successfully integrate &ever in order to realize the anticipated benefits;
Kalera’s growth plans depend on deploying new production facilities, which will require significant expenditures;
Inflation and increases in operating costs could materially and adversely impact Kalera;
Kalera’s success, competitive position and future revenues will depend in part on its ability to further develop and protect its intellectual property and know-how;
Kalera’s commercial success is dependent on its ability to enter into produce distribution agreements and other agreements with third parties;
Kalera uses a limited number of distributors for the substantial majority of its sales;
Consolidation of customers or the loss of a significant customer could negatively impact Kalera’s sales and profitability;
Kalera may face difficulties as it expands its operations into geographical locations in which it has no prior operating experience;
Kalera may not be able to identify suitable acquisition candidates or consummate acquisitions on acceptable terms;
The failure of suppliers to perform their obligations, Kalera’s inability to replace or renew supply agreements, or disruptions in the supply chain;
Estimates of market opportunity and forecasts of market growth may prove to be inaccurate or not materialize;
Failure to retain and motivate Kalera’s senior management may adversely affect its operations and growth prospects;
Kalera is reliant on key personnel and the ability to attract new, qualified personnel;
Ingredient, packaging and energy costs are volatile and may rise significantly;
Kalera relies on information technology systems and any inadequacy, failure, interruption or security breaches of those systems, including a cybersecurity incident or other technology disruptions, may harm its ability to effectively operate its business;
The recent development of the coronavirus (COVID-19) pandemic and its multiple variants;
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Conducting business internationally, and international geopolitical events and economic factors, create operational, financial and tax risks for Kalera’s business;
Kalera’s management has limited experience in operating a U.S. public company;
Potential dilutive impact, restrictions or other terms in Kalera’s financing arrangements;
Each of Kalera and Agrico has identified a material weakness in its internal control over financial reporting and Kalera may be unable to establish and maintain effective internal control over financial reporting;
Nasdaq may delist Kalera’s securities on its exchange;
The market price of Kalera’s securities may be volatile and fluctuate substantially, which could result in substantial losses for investors and may subject Kalera to securities litigation suits;
Kalera’s ability to utilize its federal net operating loss and tax credit carryforwards may be limited under applicable laws;
The grant and future exercise of registration rights;
Sales of a substantial number of Kalera securities could adversely affect the market price of its securities;
The issuance of the CVR Shares could materially dilute Kalera Shareholders;
Kalera may be a passive foreign investment company, which could result in adverse U.S. federal income tax consequences to U.S. investors;
Kalera may be considered a U.S. corporation for U.S. federal income tax purposes, which could result in adverse U.S. federal tax consequences to Kalera and its investors; and
Kalera’s operations are subject to FDA, USDA, EPA and OSHA governmental regulation and state regulation and Kalera is exposed to risks related to regulatory processes and changes in regulatory environment.
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THE OFFERING
Issuance of ordinary shares
Ordinary shares offered by Kalera
Up to 14,437,500 Kalera Ordinary Shares, issuable upon the exercise of Kalera Warrants.
Ordinary shares outstanding prior to exercise of all Kalera Warrants23,677,828 shares (as of August 19, 2022).
Ordinary shares outstanding assuming exercise of all Kalera Warrants38,115,328 shares (based on total shares outstanding on August 19, 2022).
Exercise price of all Kalera Warrants$11.50 per share, subject to adjustment as described herein.
Use of Proceeds
We will receive up to an aggregate of approximately $166 million from the exercise of all Kalera Warrants, assuming the exercise in full of all Kalera Warrants for cash. We expect to use the net proceeds, if any, from the exercise of the Kalera Warrants for general corporate purposes. Because the exercise price of the Kalera Warrants substantially exceeds the current trading price of the Kalera Ordinary Shares, there is no assurance that the Kalera Warrants will be in the money prior to their expiration and it is unlikely that holders of the Kalera Warrants will be able to exercise such Kalera Warrants in the near future, if at all. As a result, we are unlikely to receive any proceeds from the exercise of the Kalera Warrants in the near future, if at all. See the section titled “Use of Proceeds.”
Resale of ordinary shares and warrants

Ordinary shares offered by the selling securityholders hereunder
An aggregate of up to 16,743,750 Kalera Ordinary Shares, which includes:
PIPE Shares. Up to (i) 2,300,000 Kalera Ordinary Shares issued to Armistice on July 11, 2022 pursuant to the Securities Purchase Agreement, and (ii) 5,200,000 Kalera Ordinary Shares issuable upon exercise of the Armistice Warrants, issued to Armistice on July 11, 2022 pursuant to the Securities Purchase Agreement.
Sponsor Ordinary Shares. Up to (i) 1,796,875 Kalera Ordinary Shares issued in connection with the Business Combination in exchange for Class B ordinary shares of Agrico initially purchased by the Sponsor in a private placement prior to the initial public offering of Agrico, and (ii) 6,171,875 Kalera Ordinary Shares issuable upon the exercise of the Kalera Warrants held by the Sponsor in connection with the Business Combination.
Maxim Ordinary Shares. Up to 275,000 Kalera Ordinary Shares issued to Maxim Partners LLP on June 28, 2022, in connection with a settlement agreement entered into on June 26, 2022.
Ordinary Shares Issuable to certain Former Kalera SA Security Holders. Up to 1,000,000 Kalera Ordinary Shares issuable upon the conversion of the Secured Convertible Bridge Promissory Note to certain former security holders of Kalera SA.
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Warrants offered by the selling securityholders hereunder
An aggregate of up to 6,171,875 Kalera Warrants of the Sponsor that were automatically adjusted from warrants to purchase ordinary shares of Agrico in connection with the Business Combination.
Use of Proceeds
We will not receive any proceeds from the sale of our securities offered by the Selling Securityholders under this prospectus (the “Securities”). See the section titled “Use of Proceeds” appearing elsewhere in this prospectus for more information.
Risk Factors
See the section titled “Risk Factors” and other information included in this prospectus for a discussion of factors that you should consider carefully before deciding to invest in our securities.
Nasdaq symbol
The Ordinary Shares and Kalera Warrants are currently listed on Nasdaq under the symbols KAL and KALWW, respectively.
Lock-Up RestrictionsOf the Kalera Ordinary Shares that may be offered or sold by Selling Securityholders identified in this prospectus, 1,796,875 Kalera Ordinary Shares issued in connection with the Business Combination in exchange for Agrico Class B ordinary shares initially purchased by the Sponsor in a private placement prior to the initial public offering of Agrico, are subject to certain lock-up restrictions as identified in the section titled “Plan of Distribution-Lock-Up Restrictions.”
For additional information concerning the offering, see the section titled “Plan of Distribution” beginning on page 121 of this prospectus.
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RISK FACTORS
An investment in our securities involves a high degree of risk. You should carefully consider the risks described below before making an investment decision. The value of your investment in Kalera will be subject to significant risks affecting Kalera and inherent in the industry in which Kalera operates. If any of the events described below occur, the business and financial results could be adversely affected in a material way. This could cause the trading price of Kalera Ordinary Shares and Kalera Warrants to decline, perhaps significantly, and you therefore may lose all or part of your investment. Please see the section titled “Where You Can Find Additional Information” in this prospectus. The risks set out below are not exhaustive and do not comprise all of the risks associated with an investment in Kalera. Additional risks and uncertainties not currently known to Kalera or which Kalera currently deems immaterial may also have a material adverse effect on Kalera’s business, financial condition, results of operations, prospects and/or its share price.
Risks Relating to Kalera’s Business and the Industry in Which it Operates
There is substantial doubt about Kalera’s ability to continue as a going concern, and Kalera will need to raise additional capital in the future in order to execute its roll-out and commercialization strategy or for other purposes, which may not be available on favorable terms, or at all.
Kalera’s operating losses and accumulated deficits raise substantial doubt about its ability to continue as a going concern. Kalera will need to raise additional capital in order to execute and complete its roll-out and commercialization strategy, and to fund its operations. Because the exercise price of $11.50 of the Kalera Warrants substantially exceeds the current trading price of $2.91 of the Kalera Ordinary Shares, there is no assurance that the Kalera Warrants will be in the money prior to their expiration and it is unlikely that holders of the Kalera Warrants will be able to exercise such warrants in the near future, if at all. As a result, the Kalera Warrants may not provide any additional capital.
There is a risk that adequate sources of funds may not be available at all, or not available at acceptable terms and conditions, when needed. Kalera may need to seek additional funds through public or private equity or debt financings or other sources, such as strategic collaborations. If Kalera raises additional funds by issuing additional equity securities, or through instruments convertible into equity securities, the existing shareholders may be significantly diluted. Further, equity or debt financings may result in issuance of securities with priority as to liquidation and dividend and other rights more favorable than shares, imposition of debt covenants and repayment obligations, or other restrictions that may adversely affect Kalera’s business. If funding is insufficient at any time in the future, Kalera may be unable to fund its current and ongoing roll-out and commercialization strategy and lose business opportunities and thereby risk failing to respond to competitive pressures. Failure to obtain the necessary capital when needed could force Kalera to delay, limit, reduce or terminate its product development or commercialization efforts.
In addition, Kalera may seek additional capital due to favorable market conditions or strategic considerations even if Kalera believes that it has sufficient funds for current or future operating plans. There can be no assurance that financing will be available to Kalera on favorable terms, or at all. If Kalera for any reason does not obtain additional funding as needed in the future, this could have a material adverse effect on its revenues, profitability, liquidity, cash flow, financial position and/or prospects.
Kalera is in an early commercial phase, and is highly dependent on a successful roll-out and commercialization of its products.
Kalera is in an early commercial phase, and is highly dependent on succeeding with its roll-out and commercialization strategy in order to deliver future operating profits. In 2020, Kalera started to execute a strategy for rapid capacity expansion based on installing and operating large-scale production facilities allowing it to target and expand its customer base to large US regional and national accounts such as grocery chains, distributors and contract food service companies. Kalera has until recently solely been present in the US produce market, with a roll-out and commercialization plan for establishing its business throughout the US, by building new large-scale production facilities in US cities and areas that it currently is not present in and that provide attractive markets. Through the acquisition (the “&ever Acquisition”) of the vertical farming company &ever GmbH (“&ever”) in
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October 2021, and the purchase of NOX Culinary General Trading Company LLC’s 50% remaining interest in &ever Middle East Holding Ltd. (“&ever ME”) to own 100% of &ever ME, Kalera has also added operations in Germany, Kuwait and Singapore. Going forward, Kalera is seeking to further expand its US and international operations.
Kalera’s failure to execute its roll-out and commercialization strategy or to manage its growth effectively could adversely affect its business, financial condition, results of operations, cash flow and/or prospects. In addition, there can be no guarantee that even if Kalera successfully implements its strategy, it would result in Kalera achieving its business and financial objectives, taking advantage of market opportunities, satisfying customer requirements or securing additional customer commitments, any of which could adversely affect Kalera’s business, financial condition and results of operations. Indeed, as vertical farming itself is a relatively new concept, the industry and Kalera’s markets may fail to grow or grow more slowly than expected. Kalera’s management team will review and evaluate the business strategy with the board of directors on a regular basis, and Kalera may decide to alter or discontinue elements of its business strategy and may adopt alternative or additional strategies in response to the operating environment or competitive situation or other factors or events beyond its control.
Kalera lacks useful financial information for the accurate estimation of its future capital expenditures and unit economics.
As a result of Kalera being in an early commercial phase, there is a lack of useful financial information for the accurate estimation of future capital expenditures and unit economics. This applies in particular to Kalera’s Orlando, Atlanta, Houston, Denver, and Kuwait facilities, which commenced operations in February 2020, September 2021 (post electrical component upgrades), October 2021, April 2022 and March 2020 respectively, and on which its estimates of capital expenditure and unit economics for new facilities are based. Any failure by Kalera to estimate its capital expenditure and unit economics accurately could limit its ability to implement its roll-out and commercial strategy and to accurately forecast future cash flow needs. In addition, the economics for new facilities can also be subject to adverse changes or developments affecting any new facilities and that could impair Kalera’s ability to produce the business results and prospects as expected. Such adverse changes and developments include, but are not limited to, natural disasters, fire, power interruptions, disease outbreaks or pandemics (such as COVID-19), or changes in customer demand.
Kalera is an early stage company with a history of losses and expects to continue to incur losses going forward.
Kalera is an early stage company and has incurred significant operating losses since its incorporation. Historically, Kalera has financed its operations mainly through the sale of equity securities and in part through diverse financing arrangements. Going forward, Kalera expects to continue to incur operating losses for the foreseeable future and no assurances can be given on when, or if at all, Kalera will achieve profitability from its operations. The extent of Kalera’s losses going forward will depend, in part, on its future expenses and its ability to generate revenue. Achieving profitability is dependent on a number of factors, amongst others, Kalera succeeding with its roll-out and commercialization strategy, but also the operating environment, the competitive environment and other factors or events beyond its control.
Kalera expects the rate at which it will incur losses to be significantly higher in future periods as it:
expands its commercial production capabilities and incurs construction costs associated with building its facilities;
completes the buildout of its facilities in Honolulu, Columbus, Seattle, St Paul, and Singapore;
identifies and invests in future growth opportunities, including new or expanded facilities and new product lines and potentially undertaking future acquisitions such as the &ever acquisition;
integrates the business of &ever;
increases its spending on research, innovation and development;
increases its expenditures associated with its supply chain;
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increases its sales and marketing activities to increase brand awareness and the sales of its products and develops its distribution infrastructure; and
incurs additional general and administrative expenses, including increased finance, legal and accounting expenses, to support its growing operations and infrastructure.
The abovementioned efforts may be more expensive than Kalera currently estimates or such investments may not result in additional or commensurately higher revenue, which would further increase its losses. In addition, its revenue growth may slow or decline for a number of other reasons, including reduced demand for its products, increased competition, a decrease in the growth or reduction in size of its overall market, the impacts to its business from the COVID-19 pandemic, or if Kalera cannot capitalize on growth opportunities. Kalera may never succeed in becoming profitable and, even if it does, it may never generate revenue or sustainable income that is significant enough to maintain profitability. Should any of these risks materialize, it could have a material and adverse effect on its business, financial condition, results of operations, cash flows, time to market and prospects.
Kalera’s business may suffer if it does not achieve the anticipated benefits of the &ever Acquisition.
Kalera expects to achieve certain benefits as a result of the &ever Acquisition. There can be no assurances that Kalera will realize the expected benefits currently anticipated from the &ever Acquisition or that &ever will perform according to Kalera’s projections following the &ever Acquisition. A failure to achieve any of the anticipated benefits of the &ever Acquisition or a failure of &ever to perform according to Kalera’s projections could adversely affect Kalera’s business, financial condition and results of operations.
Kalera may be unable to successfully integrate &ever in order to realize the anticipated benefits of the &ever Acquisition or do so within the intended time frame.
Kalera has and will be required to devote significant management attention and resources to integrating the business practices and operations of &ever with Kalera. This integration may prove to be more difficult, costly and time-consuming than expected, which could cause us not to realize some or all of the anticipated benefits from the &ever Acquisition. Potential difficulties we may encounter as part of the integration process include the following:
any delay in the integration of management teams, strategies, operations, products and services;
diversion of the attention of management of Kalera or &ever as a result of the &ever Acquisition;
differences in business backgrounds, corporate cultures and management philosophies that may delay successful integration;
the ability to retain key employees;
potential unknown liabilities and unforeseen increased expenses or delays associated with the &ever Acquisition, including costs to integrate &ever beyond current estimates; and
the disruption of, or the loss of momentum in, either Kalera’s or &ever’s ongoing operations or inconsistencies in standards, controls, procedures and policies.
Any of these factors could adversely affect &ever’s ability to maintain relationships with customers, suppliers, employees and other constituencies or Kalera’s ability to achieve the anticipated benefits of the &ever Acquisition or could reduce earnings or otherwise adversely affect Kalera’s business, financial condition and results of operations after the &ever Acquisition.
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Kalera’s growth plans depend on deploying new production facilities, which will require significant expenditures and may be subject to delays in construction and unexpected costs due to governmental approvals and permitting requirements, reliance on third parties for construction, delays relating to material delivery and supply chains, and fluctuating material prices.
Kalera’s build-out of new production facilities will be dependent on a number of key inputs and their related costs including materials such as steel, aluminum, plastic materials, electronic components, horticultural lights, and other supplies, as well as access to electricity, internet, and other local utilities. Any significant interruption or negative change in the availability or economics of the supply chain for key inputs for new facility build-out could materially impact Kalera’s business, financial condition and operating results. Kalera plans to rely on local contractors for the building of its production facilities. If Kalera or its contractors encounter unexpected costs, delays or other problems in building any production facility, Kalera’s financial position and ability to execute on its growth strategy could be negatively affected. Any inability to secure required materials and services to build out such facility, or to do so on appropriate terms, could have a materially adverse impact on Kalera’s business, financial condition and operating results. Kalera may also face unexpected delays in obtaining the required governmental permits and approvals in connection with the build-out of its planned facilities which could require significant time and financial resources and delay its ability to operate these facilities.
The costs to procure such materials and services to build new facilities may fluctuate widely based on the impact of numerous factors beyond the Kalera’s control including, international, economic and political trends, foreign currency fluctuations, inflation, global or regional consumptive patterns, speculative activities and increased or improved production and distribution methods.
COVID-19 continues to impact worldwide economic activity, and the governments of many countries, states, cities and other geographic regions have taken preventative or protective actions, which are creating disruption in global supply chains such as closures or other restrictions on the conduct of business operations of manufacturers, suppliers and vendors. The recovery from COVID-19 also may have risks in that increased economic activity globally or regionally may result in high demand for, and constrained access to, materials and services required for Kalera to construct and commission new facilities, which may lead to increased costs or delays that could materially and adversely affect Kalera’s business.
Global demand on shipping and transport services may cause delays in key input supply, which could impact Kalera’s ability to obtain materials or build its production facilities in a timely manner. These factors could otherwise disrupt the Group’s operations and could negatively impact its business, financial condition and results of operations. Logistical problems, unexpected costs, and delays in production facility construction, whether or not caused by the COVID-19 pandemic, which cannot be directly controlled by Kalera, may cause prolonged disruption to or increased costs of third-party transportation services used to ship materials, which could negatively affect the Kalera’s facility building schedule, and more generally its business, financial condition, results of operations and prospects. If Kalera experiences significant unexpected delays in construction, it may have to delay or limit its growth depending on the timing and extent of the delays, which could harm Kalera’s business, financial condition and results of operation.
Inflation and increases in operating costs could materially and adversely impact Kalera’s business, financial position, results of operations, and cash flows.
The cost of producing and supplying Kalera’s products is affected by many factors, some of which can be volatile and some of which may be challenging. The cost of producing and supplying Kalera’s products could be impacted by significant inflation in labor, raw materials, energy and other items necessary to produce and supply our products. Kalera may not be able to increase prices to pass through all cost inflation or to improve its productivity sufficiently to nullify such impact of cost inflation, which could have a material adverse impact on Kalera’s business, financial condition, results of operations, and cash flows.
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A delay in the completion of, or cost overruns in relation to, the construction of new facilities may affect Kalera’s ability to achieve its operational plan and full schedule of production, thereby adversely impacting Kalera’s business and results of operations.
As of the date of this prospectus, Kalera has three large-scale facilities under construction, which are expected to be completed during 2022 and 2023. For the large-scale facilities, Kalera leases buildings but bears the cost associated with customizing the buildings for its vertical farming operations. For customizing the buildings, Kalera relies on third party constructors and other service providers. Any delay by such third parties in the completion of construction may result in a decrease in revenues expected to be received by Kalera from operations as a result of the commencement of full-scale operations on a date later than originally expected, thereby adversely impacting Kalera’s business and results of operations, especially if completion of construction is delayed on several large-scale production facilities at the same time. The construction of new facilities is also subject to other risks that may cause delays or cost overruns, including issues tied to material delivery, supply chains, fluctuating material prices, transportation services, electricity and other local utilities. These risks may in turn cause disruptions to operations and the need to implement changes in production to adapt to such delays, including the commissioning of systems before final completion, all of which could have a material adverse effect on production and Kalera’s business, results of operations, cash flows, financial condition and/or prospects.
Production ramp-up time is dependent on a number of factors, all of which may affect full schedule of production and yields achieved
Kalera currently has five large-scale facilities in operation, all in production ramp-up phase. The estimated time it takes to ramp-up the production and the production yields achieved are subject to several factors, some of which are beyond Kalera’s control. For example, COVID-19, which significantly impacted the foodservice industry in Central Florida and beyond, resulted in lower production needs. As a consequence, Kalera may have to slow down the ramp-up of its production from a large-scale facility and Kalera may also need to alter the proportion or production that is planned for either the retail market or the food service industry.
Obtaining good production yields, is dependent on a number of factors, where the most important is achieving good environmental conditions at the facilities, hereunder temperature, humidity and sufficient airflow. Additional factors include supplying adequate light to the crops, water, and fertilizers. Climate control, air flow, lighting, water treatment, irrigation, and nutrient dosage equipment may break down due to several possible causes, some of which are beyond Kalera’s control. Returning down equipment back to operation after a breakdown event may be delayed due to slow response time by manufacturers, suppliers, dealers, or repair service providers and/or by delayed availability of replacement parts.
Ramping up and maintaining strong production yields is also dependent on availability and development of a trained work force. Lack of a trained work force may negatively affect production ramp-up plans and yields achieved.
Should the production ramp-up phase take longer than projected at one or several facilities or if Kalera does not succeed in obtaining strong production yields, this could have a material adverse effect on production and Kalera’s business, results of operations, cash flows, financial condition and/or prospects.
The industry in which Kalera operates is highly competitive and Kalera may not be able to compete successfully in such industry.
Kalera competes in an industry still under establishment that is increasingly competitive. The competition is comprised of both traditional farming and companies in CEA. Kalera expects to continue to experience competition from both existing and new competitors, some of which are more established and who may have (i) greater capital and/or commercial, marketing and technical resources, (ii) longer operating histories and/or (iii) superior brand recognition. Kalera’s competitors may be able to adapt more quickly to new or emerging technologies, changes in customer requirements and changes in the regulatory environment. In addition, current and potential competitors have established or may establish financial or strategic relationships among themselves or with existing or potential customers or other third parties. Accordingly, new competitors or alliances among competitors could emerge and rapidly acquire significant market share. Kalera’s competitors may also improve their relative competitive position
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by successfully introducing new products or products that can be substituted for Kalera’s products, improving their production processes, or expanding their capacity or production capabilities. This could put pressure on Kalera to reduce its prices, resulting in lower profitability or, in the alternative, cause Kalera to lose market share if Kalera fails to reduce prices. If Kalera is unable to keep pace with its competitors’ product and manufacturing process innovations or cost position, it could harm Kalera’s results of operations, financial condition and cash flows.
Further, Kalera believes that competitive pressure will likely increase as early entrants into the market start to show revenue growth and profitability. If Kalera is unable to remain competitive, this could have a material adverse effect on its revenues, profitability, liquidity, cash flow, financial positions and/or prospects.
If Kalera fails to develop and maintain its brand, its business could suffer.
Kalera’s continuing mission is to build an iconic vertical farming brand that is focused on sustainable and technology driven agriculture. Kalera’s success depends on its ability to maintain and grow the value of the Kalera brand. Maintaining, promoting and positioning Kalera’s brand and reputation will depend on, among other factors, the success of Kalera’s product offerings, food safety, quality assurance, marketing and merchandising efforts, Kalera’s continued focus on the environment and sustainability and Kalera’s ability to provide a consistent, high-quality consumer and customer experience. If Kalera is unable to promote its brand successfully or if its competitors’ marketing efforts are more effective, Kalera could fail to capture market share. In addition, any negative publicity, regardless of its accuracy, could impair Kalera’s business.
There can be no assurance that Kalera’s products will always comply with the standards set for its products. In addition, Kalera has no control over its products once purchased by consumers. Accordingly, consumers may use Kalera’s products in a manner that is inconsistent with Kalera’s directions or store Kalera’s products for long periods of time, which may adversely affect the quality and safety of Kalera’s products. If consumers do not perceive Kalera’s products to be safe or of high quality, then the value of Kalera’s brand would be diminished, and its business, results of operations and financial condition would be adversely affected. Real or perceived quality or food safety concerns or failures to comply with applicable food regulations and requirements, whether or not ultimately based on fact and whether or not involving Kalera (such as incidents involving Kalera’s competitors) may have a substantial and adverse effect on Kalera’s brand, reputation and operating results.
Further, the growing use of social and digital media by Kalera, Kalera’s customers and third parties increases the speed and extent that information or misinformation and opinions can be shared. Negative publicity about Kalera, Kalera’s partners, any person associated with Kalera, including board members and key employees and/or Kalera’s products on social or digital media, or in general, could seriously damage Kalera’s brand and reputation. Brand value is based on perceptions of subjective qualities, and any incident that erodes the trust and loyalty of Kalera’s consumers, customers or distributors, including adverse publicity or a governmental investigation, litigation or regulatory enforcement action, could significantly reduce the value of Kalera’s brand and significantly damage its business. If Kalera does not achieve and maintain a favorable perception of its brand, its business, financial condition and results of operations could be adversely affected.
Kalera’s success, competitive position and future revenues will depend in part on its ability to further develop and protect its intellectual property and know-how.
Kalera’s intellectual property mainly relates to production processes and methods, plant nutrient mixture formulas, custom hardware, software code, and its trademarks. Our intellectual property forms the foundation of Kalera and drives the key elements of the business strategy. Any failure by Kalera in protecting its intellectual property rights adequately could result in its competitors offering similar products, potentially resulting in the loss of some of its competitive advantage and a decrease in its revenue which would adversely affect its business, prospects, financial condition, operating results and/or prospects. Kalera’s success depends, at least in part, on its ability to further develop and protect its intellectual property. Kalera relies on a combination of patents, trade secrets, including know-how, limiting access to key information, confidentiality provisions in agreements, confidentiality procedures and IT security to protect its intellectual property rights. Kalera cannot give any assurance that the measures implemented to protect intellectual property rights will give satisfactory protection, that its intellectual property rights can be successfully defended and asserted in the future or that third parties will not infringe upon or
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misappropriate any such rights. Adequate remedies may not be available in the event of an unauthorized use or disclosure of its production expertise or proprietary plant science. Intellectual property disputes and proceedings and infringement claims could be burdensome and may result in a significant distraction for management and significant expense. Whether or not measures to secure the intellectual property and other confidential information are successful, such information may still become known to existing or new competitors or be independently developed.
Kalera’s failure to process, obtain or maintain adequate protection of its intellectual property rights for any reason, may have a material adverse effect on Kalera’s business, results of operations, financial condition and/or prospects.
Where Kalera believes patent protection is not appropriate or obtainable, Kalera relies on trade secrets to protect some of its technology and proprietary information. However, trade secrets can be difficult to protect. The misappropriation or other activities that may compromise Kalera’s trade secrets may lead to a reduction or loss of its competitive advantages resulting from such trade secrets. Further, litigating a claim that a third party had misappropriated Kalera’s trade secrets would be expensive and time consuming, and the outcome may be unpredictable. Moreover, if Kalera’s competitors independently develop similar knowledge, methods and know-how, it will be difficult for Kalera to enforce its rights and its business could be harmed.
Further, Kalera may be required to make significant capital investments into the research and development of production methods, plant nutrient mixture formulas, custom hardware and software codes and other intellectual property as Kalera develops, improves and scales its processes, technologies and products, and failure to fund and make these investments, or underperformance of the technology funded by these investments, could severely impact Kalera’s business, financial condition, results of operations and prospects.
Kalera currently relies on a limited number of facilities for all of its operations.
As of the date of this prospectus, Kalera has five large-scale facilities in operation. Adverse changes or developments affecting any of these facilities could impair its ability to produce its products and fulfill its contractual obligations. Any shutdown or period of reduced production at a single facility, which may be caused by regulatory noncompliance or other issues, as well as other factors beyond its control, such as severe weather conditions, natural disaster, fire, power interruption, work stoppage, disease outbreaks or pandemics (such as COVID-19), equipment failure or delay in supply delivery, would significantly disrupt its ability to grow and deliver its produce in a timely manner, meet its contractual obligations and operate its business. As an example, Kalera’s Atlanta facility experienced intermittent faults on electrical components that drive the grow lights. The intermittent outages forced delays in shipments to new customers, which negatively impacted revenues in May, June, and July 2021.
The equipment in Kalera’s facilities is costly to replace or repair, and its equipment supply chains may be disrupted in connection with pandemics, such as COVID-19, trade wars or other factors. If any material amount of its machinery were damaged, it would be unable to predict when, if at all, Kalera could replace or repair such machinery or find suitable alternative machinery, which could adversely affect its business, financial condition, results of operations and prospects. Any insurance coverage that Kalera has acquired may not be sufficient to cover all of its potential losses and may not continue to be available to it on acceptable terms, or at all.
Kalera’s commercial success is dependent on its ability to enter into produce distribution agreements and other agreements with third parties.
Kalera’s large-scale production facilities generally serve customers within a 300-mile radius of the relevant facility. As Kalera continues its roll-out plan by building new facilities, Kalera may be dependent on entering into new produce distribution agreements with new customers located within the target radius or renegotiating existing produce distribution agreements to also cover such new areas. Should Kalera be unsuccessful in entering into new produce distribution agreements, this could in turn have a material adverse effect on its business, results of operations, financial condition and/or prospects.
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Kalera uses a limited number of distributors and large retailers for the substantial majority of its sales, and if it experiences the loss of one or more of its distributors or large retailers and cannot replace them in a timely manner, Kalera’s results of operations may be adversely affected.
Many customers purchase Kalera’s products through food distributors which purchase, store, sell, and deliver its products to food service providers or retailers. Alternatively, some large retail customers may purchase products directly from Kalera. For the six months ended June 30, 2022, Kalera’s largest customers in terms of their respective percentage of sales included the following: Publix (26%), H-E-B Grocery (16%), Kroger (10$), Sysco (9%), Harvill’s Produce Co. (9%) and US Foods (5%). For the foreseeable future, Kalera expects that most of its sales will be made through a core number of distributors or directly to a core number of large retailers. Kalera does not have short-term or long-term commitments or minimum purchase volumes in its contracts with the distributors or large retailers that ensure future sales of its products. If Kalera loses one or more of its significant distributors or large retailers and cannot replace the distributor or large retailer or do so in a timely manner, its business, results of operation and financial condition may be materially adversely affected.
Consolidation of customers or the loss of a significant customer could negatively impact Kalera’s sales and profitability.
Supermarkets in North America continue to consolidate. This consolidation has produced larger, more sophisticated organizations with increased negotiating and buying power that are able to resist price increases, as well as operate with lower inventories, decrease the number of brands that they carry and increase their emphasis on private label products, all of which could negatively impact Kalera’s business. The consolidation of retail customers also increases the risk that a significant adverse impact on their business could have a corresponding material adverse impact on Kalera’s business.
The loss of any large customer, the reduction of purchasing levels or the cancellation of any business from a large customer for an extended length of time could negatively impact Kalera’s sales and profitability. Furthermore, as retailers consolidate, they may reduce the number of branded products they offer in order to accommodate private label products and generate more competitive terms from branded suppliers. Consequently, Kalera’s financial results may fluctuate significantly from period to period based on the actions of one or more significant retailers. A retailer may take actions that affect Kalera for reasons that it cannot always anticipate or control, such as their financial condition, changes in their business strategy or operations, the introduction of competing products or the perceived quality of its products. Despite operating in different channels, Kalera’s retailers sometimes compete for the same consumers. Because of actual or perceived conflicts resulting from this competition, retailers may take actions that negatively affect Kalera.
Kalera may face difficulties as it expands its operations into geographical locations in which it has no prior operating experience.
Kalera’s growth strategy includes developing new vertical farming facilities and the expansion of its product lines.
Kalera’s newest facilities include those in Atlanta, Georgia, which began operations in March 2021, Houston, Texas, which began operations in October 2021, and Denver, which began operations in April 2022. Internationally, Kalera’s newest facility is in Kuwait, acquired through the &ever Acquisition, which began operations in March 2020 and continued ramp-up in October 2021 after Kuwait’s COVID-19 related international travel ban had been lifted. Any substantial delay in bringing these facilities up to full production on our current schedule may hinder Kalera’s ability to produce all of the estimated produce and/or achieve its expected financial performance. Even if Kalera’s new facilities are brought up to full production according to our current schedule, they may not provide all of the operational and financial benefits Kalera expects to receive.
Identifying, planning, developing, constructing and finishing new large-scale vertical farming facilities has required and will continue to require substantial time, efforts and resources. Kalera may be unsuccessful in identifying available sites that are conducive to its planned projects, and even if identified, Kalera may ultimately be unable to lease or purchase the land for any number of reasons. Additionally, if Kalera overestimates market demand and expands into new locations too quickly, Kalera may have significantly underutilized assets and may experience
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reduced profitability. If Kalera does not accurately align capacity at its facilities with demand, its business, financial condition and results of operations could be adversely affected. Kalera intends to further expand its footprint in order to enter into new markets, including new international locations. It may be difficult for Kalera to understand and accurately predict taste preferences and purchasing habits of consumers in these new geographic markets. It is costly to establish, develop and maintain wide ranging operations and develop and promote its brand in multiple markets. As Kalera expands its business into new locations, Kalera may encounter regulatory, legal, personnel, technological and other difficulties that increase its expenses and/or delay its ability to become profitable in such locations, which may have a material adverse effect on its business and brand.
A continued rollout of Kalera’s in-store grow towers and grow boxes is dependent on Kalera being able to reach agreements with new supermarket chains. Further, Kalera may spend time and resources developing facilities at the expense of other appropriate facilities, which may ultimately have been a better selection or more profitable location, or the project start date for new facilities may have to be postponed due to existing facilities and/or other operations and projects requiring more resources than originally estimated.
A key element of Kalera’s growth strategy depends on Kalera’s ability to develop, produce and market new products and improvements to its existing products that meet its standards for quality and appeal to consumer preferences. The success of Kalera’s innovation and product development efforts is affected by its ability to anticipate changes in consumer preferences, the technical capability of its innovation staff in developing and testing product prototypes, including complying with applicable governmental regulations, and the success of its management and sales and marketing teams in introducing and marketing new products. Failure to develop, produce and market new products that appeal to consumers may lead to a decrease in Kalera’s growth, sales and profitability. The development and introduction of new products requires substantial research, development and marketing expenditures, which Kalera may be unable to recoup if the new products do not gain widespread market acceptance. Kalera may invest in product opportunities that are not ultimately successful or profitable. If Kalera is unsuccessful in meeting its objectives with respect to new or improved products, its business could be harmed.
Kalera’s sales and operating results will be adversely affected if it fails to implement our growth strategy successfully or if it invests resources in a growth strategy that ultimately proves unsuccessful as Kalera expands its operations into new geographical locations.
Kalera may not be able to identify suitable acquisition candidates or consummate acquisitions on acceptable terms, and as Kalera acquires companies or technologies in the future, they could prove difficult to integrate, disrupt Kalera’s core business, dilute stockholder value and adversely impact Kalera’s business and operating results and the value of your investment.
As part of Kalera’s business strategy, it regularly evaluates investments in, or acquisitions of, complementary businesses, joint ventures, services, products and technologies. Kalera acquired Vindara, Inc. (“Vindara”) and &ever in 2021. Kalera intends to continue to pursue complementary acquisitions in the future, expand its customer base and provide access to new markets and increase benefits of scale. Acquisitions involve certain known and unknown risks that could cause actual growth or operating results to differ from expectations. For example:
Kalera may not be able to identify suitable acquisition candidates or to consummate acquisitions on acceptable terms;
Kalera may pursue additional international acquisitions, which could pose more risks than domestic acquisitions;
Kalera competes with others to acquire complementary products, technologies and businesses, which may result in decreased availability of, or increased price for, suitable acquisition candidates;
Kalera may not be able to obtain the necessary financing, on favorable terms or at all, to finance any or all of its potential acquisitions;
Kalera may ultimately fail to consummate an acquisition even if Kalera announces that it plans to acquire a technology, product or business; and
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acquired technologies, products or businesses may not perform as Kalera expects and Kalera may fail to realize anticipated revenue and profits.
In addition, Kalera’s acquisition strategy may divert management’s attention away from Kalera’s existing business, resulting in the loss of key customers or employees, and expose Kalera to unanticipated problems or legal liabilities, including responsibility as a successor for undisclosed or contingent liabilities of acquired businesses or assets.
If Kalera fails to conduct due diligence on its potential targets effectively, Kalera may, for example, not identify problems at target companies or fail to recognize incompatibilities or other obstacles to successful integration. Kalera’s inability to successfully integrate future acquisitions could impede Kalera from realizing all of the benefits of those acquisitions and could severely weaken its business operations. The integration process may disrupt Kalera’s business and, if new technologies, products or businesses are not implemented effectively, may preclude the realization of the full benefits expected by Kalera, which could harm its results of operations. In addition, the overall integration of new technologies, products or businesses may result in unanticipated challenges, expenses, liabilities and competitive responses. The difficulties integrating an acquisition include, among other things:
issues in integrating the target company’s technologies, products or businesses with ours;
incompatibility of marketing and administration methods;
maintaining employee morale and retaining key employees;
integrating the cultures of both companies;
preserving important strategic customer relationships;
consolidating corporate and administrative infrastructures and eliminating duplicative operations; and
coordinating and integrating geographically separate organizations.
In addition, even if the operations of an acquisition are integrated successfully, Kalera may not realize the full benefits of the acquisition, including the synergies, cost savings or growth opportunities that Kalera expects. These benefits may not be achieved within the anticipated time frame, or at all. Further, acquisitions may cause Kalera to:
issue consideration shares or carry out share issues to fund the purchase price for the acquisition, both of which could dilute shareholders’ ownership percentages;
use a substantial portion of available cash resources;
increase its interest expense, leverage and debt service requirements if Kalera incurs additional debt to pay for an acquisition;
assume liabilities for which it does not have indemnification from the former owners; further, indemnification obligations may be subject to dispute or concerns regarding the creditworthiness of the former owners;
record goodwill and non-amortizable intangible assets that are subject to impairment testing and potential impairment charges;
experience volatility in earnings due to changes in contingent consideration related to acquisition earn-out liability estimates;
incur amortization expenses related to certain intangible assets;
lose existing or potential contracts as a result of conflict of interest issues;
become subject to adverse tax consequences or deferred compensation charges;
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incur large and immediate write-offs; or
become subject to litigation.
Consumer satisfaction is important to Kalera’s success, and the lack thereof, may have a material effect on its financial performance.
The market in which Kalera operates is subject to changes in consumer preference, perception and spending habits. Kalera’s products are ultimately sold to consumers which may have different product criteria and expectations with regard to leafy greens, such as, but not limited to, cleanness, pesticide-free, non-GMO, locally grown, nutrient rich, quality in general and price. Failing to meet one or more of such criteria can reduce consumer satisfaction for Kalera’s products, and result in consumers not buying them. Unsatisfied consumers may further generate negative publicity and affect our reputation. Even if Kalera meets one or more of the aforementioned criteria, other factors could result in the consumers not buying our products, amongst others, consumer income and spending habits among consumers, concerns regarding vertical farming as opposed to traditional farming, consumers not being able to differentiate the quality of Kalera’s products from those of its competitors, competitors being able to market and advertise their products towards consumers better, Kalera not being successful in identifying trends in consumer preferences and growing or developing products that respond to such trends in a timely manner, shifts in the perceived value for Kalera products relative to alternatives or consumer confidence in and perception of the safety and quality of our products. Should consumers, for any reason, not buy Kalera’s products, this may impact the willingness of Kalera’s customers, which are predominantly distributors to the foodservice market segment and retailers, to continue to do business with Kalera, which in turn would have a material adverse effect on our business, results of operations, financial condition and/or prospects.
The failure of suppliers to perform their obligations, Kalera’s inability to replace or renew supply agreements when they expire, or disruptions in the supply chain could increase Kalera’s cost of goods sold, interrupt production, result in a loss of customers or damage to Kalera’s reputation, or otherwise adversely affect Kalera’s results of operations.
Aside from the raw materials used in our production process, Kalera’s facilities require certain other materials, such as LED grow lights and racks to be supplied on time and in the correct quantities in order to function properly. If Kalera is unable to secure agreements for the necessary amount of such supplies, if the terms of such agreements are not honored or if a supplier terminates an agreement, Kalera will be required to obtain alternate sources for the relevant materials. Kalera may not be able to obtain these materials in sufficient quantities, on economic terms, or in a timely manner, and Kalera may not be able to enter into long-term supply agreements on terms as favorable to it, if at all. A lack of availability of any such materials could limit Kalera’s production capabilities and prevent Kalera from fulfilling customer orders, and therefore harm its reputation as well as our business, results of operations, financial condition and/or prospects.
For example, Kalera has an arrangement with Signify pursuant to which Signify is the exclusive supplier for LED grow lights for Kalera’s farms. Any inability to maintain or renew this relationship on favorable terms, or at all, could have a material adverse effect on Kalera’s financial condition and results of operations.
In addition, Kalera screens suppliers for quality, if those suppliers are unable to fulfill orders on a timely basis or choose to terminate or otherwise breach contractual arrangements, Kalera may not be able to obtain products from alternate sources or in a timely manner. The loss of one or more significant suppliers or a supplier of certain key products, or a significant change in the business strategies of Kalera’s suppliers, could interrupt production.
Estimates of market opportunity and forecasts of market growth may prove to be inaccurate or not materialize, and even if the market in which Kalera competes achieves the forecasted growth, its business could fail to grow at similar rates, if at all.
According to IndexBox, the global market for lettuce and chicory has seen stable growth with a CAGR of 1.2% from 2007 to 2017, and is projected to continue its stable development, resulting in an increased market volume in the years to come. Projections, market opportunity estimates and estimates on future market growth, including those included in this prospectus are subject to significant uncertainty and are based on assumptions and estimates that
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may not prove to be accurate, particularly in light of the ongoing COVID-19 pandemic and the related economic impact. The variables that go into the calculation of expected market opportunity are subject to change over time, and there is no guarantee that any particular number or percentage of customers covered by these market opportunity estimates will purchase our products at all or generate any particular level of revenue for us. Any expansion in Kalera’s market depends on a number of factors, including the cost and perceived value associated with our products and those of Kalera’s competitors. Even if the market in which Kalera competes meets the size estimates and growth forecast, Kalera’s business could fail to grow at the rate anticipated, if at all. Kalera’s growth is subject to many factors, including success in implementing its business strategy, which is subject to many risks and uncertainties.
Failure to retain and motivate Kalera’s senior management may adversely affect its operations and growth prospects.
Kalera’s success relies upon the continued service of certain members of its senior management, particularly those with specialist scientific knowledge such as Dr. Cristian Toma, our Chief Science Officer and Co-Founder, and Dr. Jade Stinson, President and Co-Founder of Vindara. Such executives have been primarily responsible for determining the strategic direction of Kalera’s business and for executing its growth strategy and are integral to its brand, culture and the reputation Kalera enjoys with suppliers, distributors, customers and consumers. The loss of the services of any executives could have a material adverse effect on its business and prospects, as Kalera may not be able to find suitable individuals to replace them on a timely basis, if at all. In addition, any such departure could be viewed in a negative light by investors and analysts, which may cause the price of Kalera’s common stock to decline.
Kalera is reliant on key personnel and the ability to attract new, qualified personnel.
Kalera is highly dependent upon having a highly qualified team and is therefore reliant on key personnel and the ability to retain and attract new, qualified personnel, particularly those with experience in plant science and genetics. The loss of a key person might impede the achievement of Kalera’s development and commercial objectives. Competition for key personnel with the required competences and experience is intense, and the competition for such personnel is expected to continue to increase. Many of the companies that Kalera competes with for experienced employees have greater resources than Kalera and may be able to offer more attractive terms of employment. There is no assurance that Kalera will be able to recruit the required new key personnel in the future. Any failure to retain or attract such personnel could result in Kalera not being able to successfully implement its strategy, which could have a material and adverse effect on Kalera’s business, financial condition, results of operations, cash flows and/or prospects.
Ingredient, packaging and energy costs are volatile and may rise significantly, which may negatively impact the profitability of Kalera’s business.
Kalera purchases large quantities of raw materials, including seeds, nutrients and growing media. In addition, Kalera purchases and uses significant quantities of cardboard, film and plastic to package its products. Costs of ingredients and packaging are volatile and can fluctuate due to conditions that are difficult to predict, including global competition for resources, weather conditions, consumer demand and changes in governmental trade and agricultural programs. Volatility in the prices of raw materials and other supplies that Kalera purchases could increase its cost of sales and reduce our profitability. In addition, energy costs are one of the most significant elements in Kalera’s cost of goods sold because of the LED grow lights are used in its facilities, making Kalera vulnerable to any spikes in price and also to power outages. Without an energy supply our facilities can keep plants alive for a maximum of four (4) days, meaning that a prolonged disruption in the supply of energy would be devastating for Kalera’s produce. Kalera may not be able to implement price increases for its products to cover any increased costs, and any price increases Kalera does implement may result in lower sales volumes. If Kalera is not successful in managing its ingredient, packaging and energy costs, if Kalera is unable to increase our prices to cover increased costs or if such price increases reduce its sales volumes, then such increases in costs will adversely affect its business, financial condition, results of operations, cash flow and/or prospects.
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Kalera faces risks inherent in the agriculture business, including the risks of diseases and pests.
Kalera produces lettuce and leafy greens inside controlled environment growing facilities. As such, Kalera is subject to the risks inherent in an agricultural business, such as insects, plant and seed diseases and similar agricultural risks, which may include crop losses. Although its grocery is grown in climate-controlled circumstances, there can be no assurance that natural elements will not have an effect on production. In particular, plant diseases, such as root rot, virus, or pest infestations, can destroy all or a significant portion of its produce and could eliminate or significantly reduce production at a growing facility.
Although Kalera uses cleanroom technologies and procedures to reduce the risks of diseases and pests, such risks may not be totally eliminated. In addition, diseases and pests can make their way into facilities from outside sources over which Kalera has limited or no control. Diseases and pests can be inadvertently brought in by employees, from seeds and vendors and from the trucks that transport supplies to the facilities. Once a disease or pest is introduced, Kalera will need to quickly identify the problem and take remedial action in order to preserve the growing season. Failure to identify and remediate any diseases or pests in a timely manner could cause the loss of all or a portion of Kalera’s crop and result in substantial time and resources to resume operations. Crop losses as a result of these agricultural risks could negatively impact Kalera’s business, prospects, financial condition, results of operations and cash flows.
The outbreak of COVID-19 may have significant negative effects on Kalera’s business.
Kalera’s performance is affected by the global economic conditions in the market in which it operates. The global economy has been experiencing a period of uncertainty since the outbreak of COVID-19, which was recognized as a pandemic by the World Health Organization in March 2020. The global outbreak of COVID-19, and the extraordinary health measures and restrictions on a local and global basis imposed by authorities across the world has, and may continue to cause, disruptions in Kalera’s value chain. Moreover, as a result of COVID-19, national authorities adopted several laws and regulations with immediate effect and which provide a legal basis for the government to implement measures in order to limit the contagion and the consequences of COVID-19. Companies have also taken precautions, such as requiring employees to work remotely, imposing travel restrictions and temporarily closing businesses. To the extent that these restrictions remain in place, or are re-imposed, additional prevention and mitigation measures are implemented in the future, or there is uncertainty about the effectiveness of these or any other measures to contain or treat COVID-19, there is likely to be an adverse impact on global economic conditions and consumer confidence and spending, which could materially and adversely affect Kalera’s operations and demand for its products. There may also be significant reductions or volatility in consumer demand for Kalera’s products due to the temporary inability of consumers to purchase these products due to illness, quarantine or financial hardship, shifts in demand away from one or more of our products, decreased pantry-loading activity, any of which may negatively impact Kalera’s results, including as a result of an increased difficulty in planning for operations and future growing seasons.
Some of the consequences for Kalera, more specifically, have been:
Some of Kalera’s key customers, such as US Foods, FreshPoint and Levy, are predominantly distributors to the foodservice industry customers, and sales through these channels have been negatively impacted by temporary shutdowns due to COVID-19. This reduced demand for Kalera’s products from these customers as the hospitality industry was forced to close for months and was not able to receive orders.
COVID-19 has significantly impacted the foodservice industry in Central Florida and beyond resulting in lower production needs. As a consequence, Kalera had to slow down the ramp-up of its production from the large-scale facility in Orlando and reconfigure the facility to service the retail market. Since January 2021, sales from the Orlando facility have rapidly increased particularly driven by the recovery in Orlando’s food service market as the economy reopened after the COVID-19 shutdown.
Kalera’s on-site HyCube installation supplying Marriott’s Orlando World Center resort has been affected due to a slow-down of hotel activities.
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While Kalera is currently working on scaling up its operations, the COVID-19 crisis is continuously changing, and new laws and regulations that could directly, or indirectly, affect its operations may enter into force. The effects of the COVID-19 pandemic could in turn negatively affect its revenue and operations going forward, where the severity of the COVID-19 pandemic and the exact impacts for it are highly uncertain. The extent of COVID-19’s effect on Kalera’s operational and financial performance will depend on future developments, including the duration, spread and intensity of the pandemic, all of which are uncertain and difficult to predict considering the rapidly evolving landscape. As a result, it is not currently possible to ascertain the overall impact of COVID-19 on Kalera’s business. However, if the pandemic continues to persist as a severe worldwide health crisis, the disease could negatively impact Kalera’s business, financial condition results of operations and cash flows, and may also have the effect of heightening many of the other risks described in this “Risk Factors” section. In addition, similar risks to those described for COVID-19 may occur in case of a future outbreak of another pandemic or a similar global health threat.
Kalera relies on information technology systems and any inadequacy, failure, interruption or security breaches of those systems, including a cybersecurity incident or other technology disruptions, may harm its ability to effectively operate its business.
Kalera uses computers, software and technology in almost all critical parts of our business operations. Such use gives rise to cybersecurity risks, including security breaches, espionage, system disruption, theft and inadvertent release of information. Cybersecurity incidents are increasing in their frequency, sophistication and intensity, with third-party phishing and social engineering attacks in particular increasing in connection with the COVID-19 pandemic. Kalera’s business involves sensitive information and intellectual property, including technological know-how, private information about employees and financial and strategic information about it and its current and targeted business partners.
Kalera is dependent on various information technology systems, including, but not limited to, networks, applications and outsourced services in connection with the current and planned operation of its business. A failure of these information technology systems to perform as anticipated could cause Kalera’s business to suffer. For example, Kalera uses Cloud-based and IoT-based automation and “big data” analytics and AI for precise control of air and water quality, temperature and humidity, light, and nutrients in our operations. If this software does not perform as anticipated, Kalera’s equipment used in production may receive inadequate or erroneous information about the condition of the vegetables being grown, which may result in increased mitigation expenses, waste, additional labor expenses and partial or full loss of the produce.
While Kalera has implemented and updates its measures to prevent security breaches and cyber incidents, Kalera has experienced certain cyber incidents in the past and its preventative measures and incident response efforts are not a guarantee that cyber incidents or breaches will not occur in the future. The theft, destruction, loss, misappropriation or release of sensitive information or intellectual property, or interference with Kalera’s information technology systems or the technology systems of third parties on which Kalera relies, could result in business disruption, negative publicity, brand damage, violation of privacy laws, loss of customers and distributors, potential liability and competitive disadvantage all of which could negatively impact Kalera’s business, financial condition, results of operations and/or prospects.
In addition, Kalera’s information technology systems may be vulnerable to damage or interruption from circumstances beyond our control, including fire, natural disasters, systems failures, viruses and security breaches. Any such damage or interruption could negatively impact Kalera’s business, financial condition, results of operations, cash flows, and/or prospects.
Conducting business internationally, and international geopolitical events and economic factors, create operational, financial and tax risks for Kalera’s business.
Kalera’s business plan includes operations in international markets, including North America, Europe the Middle East and South-East Asia, and the eventual expansion into other international markets. Conducting and launching operations on an international scale requires close coordination of activities across multiple jurisdictions and time zones and consumes significant management resources. If Kalera fails to coordinate and manage these
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activities effectively, its business, financial condition, prospects or results of operations could be adversely affected. International sales entail a variety of risks, including currency exchange fluctuations, challenges in staffing and managing foreign operations, tariffs and other trade barriers, unexpected changes in legislative or regulatory requirements of foreign countries into which Kalera sells its products and services, difficulties in obtaining export licenses or in overcoming other trade barriers, laws and business practices favoring local companies, political and economic instability, difficulties protecting or procuring intellectual property rights, and restrictions resulting in delivery delays and significant taxes or other burdens of complying with a variety of foreign laws.
Further, global geopolitical events and international conflicts, including the ongoing military conflict between Russia and Ukraine, as well as the economic sanctions implemented by the United States and other countries against Russia in response thereto, may negatively impact markets, increase energy and transportation costs, and cause weaker macro-economic conditions. Although the length and impact of the ongoing military conflict is highly unpredictable, the conflict between Russia and Ukraine could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions, all of which could impact Kalera’s business, financial condition and results of operations.
In addition, the corporate structure of Kalera and its subsidiaries have entities in several jurisdictions such as Luxembourg, Ireland and the Cayman Islands. Conducting operations in international markets as described above, subject to tax risk. The expected tax treatment of Kalera and its subsidiaries relies on current tax laws and regulations, as well as certain tax treaties between the aforementioned different jurisdictions. As such, unexpected changes, interpretation, application or enforcement practice in respect of legislative or regulatory requirements of such tax laws in foreign countries in which Kalera or any of its subsidiaries is incorporated, tax resident and/or conducting operations and sales in, including but not limited to, changes in treatment of sales and results of operations earned in foreign and offshore jurisdictions, value added tax, cessation of tax treaties and recognition of tax law principles in other jurisdictions, as well as other changes in corporate tax law, may adversely affect Kalera’s business, financial conditions, prospects or result of operations.
Kalera’s management has limited experience in operating a public company and the requirements of being a public company may strain Kalera’s resources, divert management’s attention and affect the ability to attract and retain qualified board members and officers.
Kalera’s executive officers have limited experience in the management of a publicly traded company. Kalera’s management team may not successfully or effectively manage its transition to a U.S. public company that will be subject to significant regulatory oversight and reporting obligations under U.S. federal securities laws. Their limited experience in dealing with the increasingly complex laws pertaining to public companies could be a significant disadvantage in that it is likely that an increasing amount of their time may be devoted to these activities which will result in less time being devoted to the management and growth of the combined company, which could harm Kalera’s business, prospects and results of operations. Kalera may not have adequate personnel with the appropriate level of knowledge, experience, and training in the accounting policies, practices or internal controls over financial reporting required of public companies in the United States. The development and implementation of the standards and controls necessary for the combined company to achieve the level of accounting standards required of a public company in the United States may require costs greater than expected. It is possible that the combined company will be required to expand its employee base and hire additional employees to support its operations as a public company, which will increase its operating costs in future periods. Compliance with these rules and regulations will increase Kalera’s legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on Kalera’s systems and resources.
Risks Relating to Financing and Market Risk
Fluctuations in currency exchange rates and changes to international trade agreements, tariffs, import and excise duties, taxes or other governmental rules and regulations may impact Kalera’s capital expenses and operational income.
Through the acquisition of &ever, Kalera has expanded its operations to beyond the United States to also include Germany, Kuwait and Singapore (large-scale facility under construction), and Kalera may also establish
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operations in additional countries. Hence, Kalera will earn revenues, pay expenses, own assets and incur liabilities in currencies other than the U.S. Dollar. Kalera’s consolidated financial statements are presented in U.S. Dollars, hence revenues, income and expenses, as well as assets and liabilities arising from any international operations must be converted into U.S. Dollars at exchange rates in effect during or at the end of each reporting period. Increases or decreases in the value of the U.S. Dollar against other currencies and changes to international trade agreements, tariffs, import and excise duties, taxes or other governmental rules and regulations will accordingly affect Kalera’s operating revenues, operating income and the value of balance sheet items.
The Farm Credit Loan and Security Agreement imposes significant operating and financial restrictions, which may have a material adverse effect on Kalera’s business.
The loan and security agreement dated April 14, 2022, by and among Kalera, Inc., (a wholly owned subsidiary of Kalera SA), as borrower, the guarantors party thereto from time to time, and Farm Credit of Central Florida, ACA, as lender (the “Farm Credit Loan and Security Agreement”), imposes significant operating and financial restrictions, including, but not limited to:
incurring additional debt;
making investments;
merging, dissolving, liquidating or consolidating, or selling, transferring, licensing, leasing or disposing of all or substantially all of our assets;
making dividends and distributions;
entering into transactions with affiliates;
selling, transferring, licensing, leasing or disposing of certain assets;
engaging in any material line of business substantially different from those lines of business conducted by us on the date of the Farm Credit Loan and Security Agreement;
agreeing to certain restrictions on the ability of subsidiaries to make payments to our company, to transfer property to our company, to guarantee our indebtedness or to become a loan party under the Farm Credit Loan and Security Agreement;
agreeing to certain restrictions on the ability to create liens; and
creating liens or using assets as security in other transactions.
As a result of such agreement, Kalera is limited as to how it may conduct business and accordingly, such agreement may result in a material adverse effect on Kalera’s financial condition and results of operations. Kalera or its subsidiaries may enter into additional agreements which may include similar restrictions as those referenced above. The terms of any future indebtedness could include more restrictive covenants. There can be no assurance that Kalera will be able to maintain compliance with these covenants or the debt service obligations associated with its indebtedness, and, if it fails to do so, there can be no assurances that it will be able to obtain waivers from the applicable lenders or investors and/or amend any of these arrangements. Moreover, the obligations under the Farm Credit Loan and Security Agreement are secured and the lender thereunder will have a claim against the assets securing the related debt obligations of Kalera, Inc. that will have priority to claims of Kalera equity securityholders generally. Additionally, the Farm Credit Loan and Security Agreement is required to be guaranteed by certain subsidiaries of Kalera (excluding Kalera Real Estate Holdings, LLC), effectively providing for claims against such subsidiaries which are structurally senior to Kalera equity securityholders generally. Future financing arrangements will likely have similar guarantee, collateral and other restrictive terms that may have a material adverse impact on the value of Kalera’s securities.
For more information see “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources-Farm Credit Loan and Security Agreement.”
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The terms of the Secured Convertible Bridge Promissory Note may have a negative impact on Kalera’s business and the value of Kalera’s securities and may result in substantial dilution to Kalera’s equity securityholders.
On March 4, 2022, Kalera SA entered into the Secured Convertible Bridge Promissory Note. The agreement provides for certain terms which may have a negative impact on Kalera’s business. Obligations under such agreement mature within one year of the applicable drawdown date and carry a 10% pre-payment premium, if the pre-payment is effected prior to the consummation of the Business Combination.
The obligations under the Secured Convertible Bridge Promissory Note are secured and the creditors thereunder will have a claim against the assets securing the related debt obligations that will have priority to claims of Kalera equity securityholders generally. Additionally, the Secured Convertible Bridge Promissory Note is guaranteed by certain subsidiaries of Kalera, effectively providing for claims against such subsidiaries which are structurally senior to Kalera equity securityholders generally.
The Secured Convertible Bridge Promissory Note is convertible into Kalera ordinary shares, subject to certain terms and conditions, which may result in dilution to Kalera equity securityholders.
For more information, please see “Certain Relationships and Related Person Transactions-Kalera Related Person Transactions-Secured Convertible Bridge Promissory Note” for more information.
Risks Relating to Finance and Accounting
Agrico has identified a material weakness in its internal control over financial reporting. This material weakness could continue to adversely affect Agrico’s and/or Kalera’s ability to report results of operations and financial condition accurately and in a timely manner.
Agrico is responsible for establishing and maintaining adequate internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Agrico’s management is likewise required to disclose any changes and material weaknesses identified through such evaluation in those internal controls. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis.
On November 15, 2021, the audit committee of the board of directors of Agrico concluded, after discussion with Agrico’s management, that Agrico’s audited balance sheet as of July 12, 2021 filed as Exhibit 99.1 to the Agrico’s Current Report on Form 8-K filed with the SEC on July 21, 2021, should no longer be relied upon due to the restatement of Agrico Class A ordinary shares as temporary equity.
Agrico’s Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of Agrico’s disclosure controls and procedures. Based upon their re-evaluation, Agrico’s Chief Executive Officer and Chief Financial Officer concluded that Agrico’s disclosure controls and procedures were not effective during the period of time the error described above persisted, due to a material weakness in internal controls over financial reporting in analyzing complex financial instruments. In light of this material weakness, Agrico performed additional analysis as deemed necessary to ensure that Agrico’s unaudited interim financial statements were prepared in accordance with U.S. generally accepted accounting principles. Agrico reflected the restatements in Note 2 of the financial statements included in Agrico’s Quarterly Report on Form 10-Q for the period ended September 30, 2021, filed with the SEC on November 15, 2021.
Any failure to maintain internal controls could adversely impact Agrico’s and/or Kalera’s ability to report its financial position and results of operations on a timely and accurate basis. If Agrico’s and/or Kalera’s financial statements are not accurate, investors may not have a complete understanding of its operations. Likewise, if Agrico’s and/or Kalera’s financial statements are not filed on a timely basis, Agrico and/or Kalera could be subject to sanctions or investigations by the stock exchange on which its securities are listed, the SEC or other regulatory authorities. In either case, there could result a material adverse effect on Agrico’s and/or Kalera’s business.
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Ineffective internal controls could also cause investors to lose confidence in reported financial information, which could have a negative effect on the trading price of Agrico and/or Kalera’s securities.
There can be no assurance that the measures Agrico has taken and plans to take in the future will remediate the material weakness identified or that any additional material weaknesses or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls. In addition, even if Agrico and/or Kalera is successful in strengthening its controls and procedures, in the future those controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of financial statements.
Kalera has identified a material weakness in its internal control over financial reporting and may identify additional material weaknesses in the future or fail to maintain an effective system of internal control over financial reporting, which may result in material misstatements of the Kalera consolidated financial statements or cause Kalera to fail to meet its periodic reporting obligations.
As a private limited liability company incorporated in Norway, Kalera has not been required to document and test its internal controls over financial reporting, nor has management been required to certify the effectiveness of its internal controls, and its auditors have not been required to opine on the effectiveness of its internal control over financial reporting. Similarly, Kalera has not been subject to the SEC’s internal control reporting requirements. Kalera is subject to the requirement for management to certify the effectiveness of its internal controls and, in due course, will become subject to the requirement with respect to auditor attestation on internal control effectiveness.
In connection with the audit of Kalera’s consolidated financial statements as of and for the year ended December 31, 2021, Kalera and its independent registered public accounting firm identified a material weakness in Kalera’s internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
The material weakness that Kalera and its independent registered public accounting firm identified, occurred because Kalera did not have sufficient resources with the adequate technical skills to identify and evaluate significant accounting positions, estimates and conclusions and relied upon third party experts for the annual calculation of its tax provisions due to global acquisitions with complex tax structures. Due to inadequate procedures resulting from the loss of key accounting personnel at year end, timely reviews were not completed to ensure an appropriate level of precision in such calculations and overall financial statement presentation disclosures.
Management, with oversight from the Audit Committee and Board of Directors is in the process of implementing a remediation plan for this material weakness, including, among other things, hiring additional tax accounting and financial reporting personnel and implementing process level and management review controls to ensure the income tax provision calculations and overall financial statement presentation disclosures are complete and accurate and to identify and address emerging risks.
There can be no assurance that Kalera’s efforts will remediate this deficiency in internal control over financial reporting or that additional material weaknesses in Kalera’s internal control over financial reporting will not be identified in the future. Kalera’s failure to implement and maintain effective internal control over financial reporting could result in errors in its or Kalera’s consolidated financial statements that could result in a restatement of Kalera and/or Kalera’s financial statements, may subject Kalera and/or Kalera to litigation and investigations, and could cause Kalera and/or Kalera to fail to meet our reporting obligations, any of which could diminish investor confidence in Kalera and/or Kalera, cause a decline in the price of Kalera’s common stock and limit Kalera’s ability to access capital markets.
If Kalera discovers a material weakness in its internal control over financial reporting or otherwise fails to maintain effective internal control over financial reporting, Kalera’s ability to report its financial results on a timely and accurate basis and the market price of its ordinary shares may be adversely affected.
The Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) requires, among other things that Kalera evaluate the effectiveness of its internal control over financial reporting and disclosure controls and procedures. Prior to the
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completion of the Business Combination, Kalera was a company not subject to the Sarbanes-Oxley Act and did not have the necessary business processes and related internal controls formally designed and implemented, coupled with the appropriate resources with the appropriate level of experience and technical expertise, to oversee Kalera’s business processes and controls. To comply with the Sarbanes-Oxley Act, Kalera may incur substantial cost, expend significant management time on compliance-related issues and hire additional accounting, financial and internal audit staff with appropriate public company experience and technical accounting knowledge. Moreover, if Kalera is not able to comply with the requirements of the Sarbanes-Oxley Act in a timely manner or if Kalera or its independent registered public accounting firm identify deficiencies in Kalera’s internal control over financial reporting that are deemed to be material weaknesses, Kalera could be subject to sanctions or investigations by the stock exchange on which its securities are listed, the SEC or other regulatory authorities, which would require additional financial and management resources. Any failure to maintain effective disclosure controls and procedures or internal control over financial reporting could have a material adverse effect on Kalera’s business, prospects and operating results, and cause a decline in the price of Kalera’s securities.
If Kalera is unable to establish and maintain an effective internal control environment, and build its finance infrastructure, investors may lose confidence in the accuracy of Kalera’s financial reports.
As a U.S. public company, Kalera will operate in an increasingly demanding regulatory environment, which requires it to comply with the Sarbanes-Oxley Act, the regulations of Nasdaq, the rules and regulations of the SEC, expanded disclosure requirements, accelerated reporting requirements and more complex accounting rules. Company responsibilities required by the Sarbanes-Oxley Act include establishing corporate oversight and adequate internal control over financial reporting and disclosure controls and procedures. Effective internal controls are necessary for Kalera to produce reliable financial reports and are important to help prevent financial fraud. Commencing with its fiscal year ending the year in which the Business Combination was completed, Kalera must perform system and process evaluation and testing of its internal controls over financial reporting to allow management to report on the effectiveness of its internal controls over financial reporting in its Form 10-K filing for that year, as required by Section 404 of the Sarbanes-Oxley Act. Prior to Closing of the Business Combination, Kalera had never been required to test its internal controls within a specified period and, as a result, it may experience difficulty in meeting these reporting requirements in a timely manner.
Kalera anticipates that the process of building its accounting and financial functions and infrastructure will require significant additional professional fees, internal costs and management efforts. Kalera expects that it will need to implement a new internal system to combine and streamline the management of its financial, accounting, human resources and other functions. However, such a system would likely require Kalera to complete many processes and procedures for the effective use of the system or to run its business using the system, which may result in substantial costs. Any disruptions or difficulties in implementing or using such a system could adversely affect Kalera’s controls and harm its business. Moreover, such disruption or difficulties could result in unanticipated costs and diversion of management’s attention. In addition, Kalera may discover additional weaknesses in its system of internal financial and accounting controls and procedures that could result in a material misstatement of its financial statements. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected.
Kalera may fail to establish and maintain effective internal control over financial reporting, in which case Kalera’s internal control over financial reporting may not prevent or detect all errors and all fraud. Kalera also may not be able to detect errors and fraud on a timely basis and its financial statements may be materially misstated. Although, the process of identifying the resources that Kalera will need to ensure the establishment and maintenance of effective internal controls for its current business has begun, there is no guarantee that such assessment will be accurate and post-Closing of the Business Combination, the complexity of Kalera’s business is likely to increase as it implements its business strategy and its business grows, and such increase in complexity will increase the difficulty of maintaining effective internal controls. If Kalera fails to establish and maintain effective internal control over financial reporting, its business and results of operations could be harmed, and investors may lose confidence in the accuracy and completeness of its financial reports, which could cause the price of its securities to decline. In
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addition, Kalera could become subject to investigations by Nasdaq, the SEC or other regulatory authorities, which could require additional management attention and which could adversely affect Kalera’s business.
The market price of Kalera’s securities has been and may continue to be volatile and fluctuate substantially, which could result in substantial losses for Kalera’s investors and may subject Kalera to securities litigation suits.
The price of the Kalera Ordinary Shares and Kalera Warrants has been and may continue to be volatile. From June 29, 2022, the date Kalera securities began trading on Nasdaq, through August 17, 2022, the price of the Kalera Ordinary Shares fluctuated from low of $2.25 to a high of $13.30, and the price of the Kalera Warrants fluctuated from a low $0.13 to a high of $0.49.
Fluctuations in the price of Kalera’s securities could contribute to the loss of all or part of your investment. The trading price of Kalera’s securities could continue to be volatile and subject to wide fluctuations in response to various factors, some of which are beyond Kalera’s control. Any of the factors listed below could have a material adverse effect on your investment in Kalera’s securities and Kalera’s securities may trade at prices significantly below the price you paid for them. In such circumstances, the trading price of Kalera’s securities may not recover and may experience a further decline.
In addition to the other risks described in this “Risk Factors” section, the following factors could also cause Kalera’s financial condition and results of operations to fluctuate on a quarterly basis:
actual or anticipated fluctuations in Kalera’s quarterly financial results or the quarterly financial results of companies perceived to be similar to it;
changes in the market’s expectations about Kalera’s operating results;
success of competitors;
Kalera’s operating results failing to meet the expectation of securities analysts or investors in a particular period;
changes in financial estimates and recommendations by securities analysts concerning Kalera or the vertical farming or agriculture industry in general;
operating and share price performance of other companies that investors deem comparable to Kalera;
Kalera’s ability to bring its products and technologies to market on a timely basis, or at all;
changes in laws and regulations affecting Kalera’s business;
Kalera’s ability to meet compliance requirements;
commencement of, or involvement in, litigation involving Kalera;
changes in Kalera’s capital structure, such as future issuances of securities or the incurrence of additional debt;
the volume of Kalera’s shares available for public sale, including the significant percentage of securities being offered for resale pursuant to this prospectus;
any major change in the Kalera board of directors or management;
amounts of Kalera’s shares by Kalera’s directors, executive officers or significant shareholders or the perception that such sales could occur; and
general economic and political conditions such as recessions, interest rates, fuel prices, international currency fluctuations, pandemic such as COVID-19 and acts of war or terrorism.
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Fluctuations in Kalera’s operating results and cash flow could, among other things, give rise to short-term liquidity issues. In addition, its revenue, key operating metrics and other operating results in future quarters may fall short of the expectations of investors and financial analysts, which could have an adverse effect on the price of Kalera’s securities.
Kalera’s ability to utilize its U.S. federal net operating loss and tax credit carryforwards may be limited under Sections 382 and 383 of the Code
The limitations apply if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50 percentage point change (by value) in its equity ownership by certain stockholders over a three-year period. If Kalera has experienced an ownership change at any time since its incorporation, it may already be subject to limitations on its ability to utilize its existing U.S. federal income tax net operating losses and other tax attributes to offset taxable income. In addition, future changes in Kalera’s stock ownership, which may be outside of its control, may trigger an ownership change and, consequently, Section 382 and 383 limitations. Similar provisions of state tax law may also apply to limit Kalera’s use of accumulated state tax attributes. As a result, if we earn net taxable income, Kalera’s ability to use its pre-change net operating loss carryforwards and other tax attributes to offset such taxable income may be subject to limitations, which could potentially result in increased future income tax liability to Kalera.
Risks Relating to Share Ownership
Sales of a substantial number of Kalera’s securities could adversely affect the market price of its securities.
The sale of Kalera’s securities in the public market or otherwise, including sales pursuant to this prospectus, or the perception that such sales could occur, could harm the prevailing market price of such securities. These sales, or the possibility that such sales could occur, also might make it more difficult for Kalera to sell equity securities in the future at a time and at a price that it deems appropriate. Resales of Kalera’s securities may cause the market price of such securities to drop significantly, even if Kalera’s business is doing well.
1,796,875 Kalera Ordinary Shares and 6,171,875 Kalera Warrants held by the Sponsor are subject to a lock up restriction beginning on the First Closing Date and ending on the date that is the earliest of (A) one year after the completion of the Second Closing Date and (B) the date on which (1) the closing price of the Kalera Ordinary Shares equals or exceeds $12.00 per share (as adjusted for share sub-divisions, share capitalizations, share consolidations, reorganizations, recapitalizations and the like) for any twenty (20) trading days within a thirty (30)-trading day period commencing at least one-hundred and fifty (150) days after the Second Closing or (2) the per share price implied in a change of control transaction is greater than or equal to $12.00 per share (as adjusted for share sub-divisions, share capitalizations, share consolidations, reorganizations, recapitalizations and the like). After the lock-up period expires, these securities will become eligible for sale in the public market. Sales of a significant number of these securities in the public market, or the perception that such sales could occur, could reduce the market price of securities.
Due to the significant number of securities that were redeemed in connection with the Business Combination, the number of Kalera’s securities that the Selling Securityholders can sell into the public markets pursuant to this prospectus will constitute a considerable percentage of Kalera’s public float. This impact may be heighted by the fact that, as described in the table below, certain of the Selling Securityholders purchased Kalera’s securities at prices well below the current trading price of such securities. The 31,181,250 Kalera Ordinary Shares that may be resold and/or issued into the public markets pursuant to this prospectus represent approximately 69.8% of the 44,679,328 Kalera Ordinary Shares outstanding as of August 19, 2022 (after giving effect to the exercise of all outstanding Kalera Warrants, Kalera Options and Armistice Warrants) and the Kalera Warrants that may be resold into the public markets pursuant to this prospectus represent approximately 42.8% of the 14,437,500 Kalera
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Warrants outstanding as of August 19, 2022. As a result, the resale of Kalera Ordinary Shares pursuant to this prospectus could have a significant negative impact on the trading price of the Kalera Ordinary Shares.
SecurityPurchase Price% of shares/warrants outstandingPotential profit per security
PIPE Shares
(2,300,000 shares)
$4.00 per shareApproximately 5.2%N/A
Shares underlying Pre-Funded Warrants
(200,000 shares)
Warrant exercise price of $4.00 per share that has been pre-paid to the amount of $3.9999, such that $0.0001 of the exercise price remains payable on exerciseApproximately 0.5%N/A
Shares underlying Series A Warrants and Series B Warrants
(5,000,000 shares)
Warrant exercise price of $4.41 per shareApproximately 11.2%N/A
Sponsor Ordinary Shares
(1,796,875 shares)
$25,000, or approximately $0.005 per share (originally for 5,000,000 Class B ordinary shares)
Approximately 4%$5,203,906.25
Shares issuable upon exercise of Sponsor Warrants
(6,171,875 shares)
Warrant exercise price of $11.50 per shareApproximately 13.8%N/A
Maxim Ordinary Shares
(275,000 shares)
Partial equity consideration in relation to a settlement agreement, for a value equivalent to approximately $7.93 per shareApproximately 0.6%N/A
Shares issuable to Former Kalera SA Security Holders
(1,000,000 shares)
$10.00 per shareApproximately 2.2%N/A
Sponsor Warrants
(6,171,875 warrants)
$1.00 per warrantApproximately 42.8%N/A
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*     Calculations based on (i) 44,679,328 Kalera Ordinary Shares and 14,437,500 Kalera Warrants outstanding, in each case as of August 19, 2022 and (ii) sales of Kalera Ordinary Shares at a price of $2.91 per share and sales of Kalera Warrants at a price of $0.14 per warrant, which reflect the closing price of the Kalera Ordinary Shares and Kalera Warrants as of August 17, 2022. Unless otherwise noted, assumes no issuance of Kalera Warrants, Kalera Options and Armistice Warrants.
The Selling Securityholders will determine the timing, pricing and rate at which they sell such shares into the public market. Although the current trading price of Kalera Ordinary Shares is significantly below the sales price in the Agrico IPO, certain of the Selling Securityholders have an incentive to sell because they purchased shares and/or warrants at prices below the IPO price and/or below the recent trading prices of our securities. Sales by such investors may prevent the trading price of our securities from exceeding the Agrico IPO price and may cause the trading prices of our securities to experience a further decline.
The issuance of the CVR Shares could materially dilute Kalera Shareholders
As additional consideration for the Second Merger and the Company Capital Reduction certain Kalera security holders received the CVRs. Each CVR represents a contingent right to receive additional Kalera Ordinary Shares, issuable upon the achievement of certain milestones, including: (i) Kalera Ordinary Shares trading at or over a market price of $12.50; and (ii) Kalera Ordinary Shares trading at or over a market price of $15.00, in each case, for 20 trading days within a 30 trading-day period, based on volume-weighted average trading prices. The amount of
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shares issuable to each CVR holder for the achievement of each milestone is, in each case, a pro rata portion of an amount of Kalera Ordinary Shares equivalent to approximately 5% of the amount of Kalera SA Shares outstanding as of immediately following the Kalera Capital Reduction on a fully diluted basis. If the CVR Shares are issued, the ownership of Kalera Shareholders will be diluted. The foregoing description of the CVRs is not complete and is qualified in its entirety by reference to the Business Combination Agreement and the form of CVR Agreement annexed thereto.
The price of Kalera’s securities in the public market may fluctuate significantly and could result in investors’ losing all or a part of their investment.
The trading volume and price of Kalera’s securities may fluctuate significantly in response to a number of factors beyond Kalera’s control, including but not limited to:
actual or anticipated fluctuations in Kalera’s revenue, financial condition and operating results, including fluctuations in Kalera’s quarterly and annual results;
announcements of innovations by Kalera or Kalera’s competitors;
overall conditions in Kalera’s industry and the markets in which Kalera operates;
market conditions or trends in the food sales industry or in the economy as a whole;
addition or loss of significant customers or other developments with respect to significant customers;
adverse developments concerning Kalera’s suppliers;
changes in laws or regulations applicable to Kalera’s products and changes in the regulatory environment in which Kalera operates;
Kalera’s ability to effectively manage its growth;
announcements by Kalera or Kalera’s competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;
changes in management and additions or departures of key personnel;
negative publicity or announcements, including those relating to any of Kalera’s substantial shareholders or key personnel, whether or not justifiable, including involvement in insolvency proceedings and failed attempts in takeovers or joint ventures;
competition from existing products or new products that may emerge;
fluctuations in the valuation of companies perceived by investors to be comparable to Kalera;
litigation or regulatory matters;
changes in tax laws;
announcement or expectation of additional financing efforts;
Kalera’s cash position;
share price and volume fluctuations attributable to inconsistent trading volume levels of the shares;
the expiration of contractual lock-up agreements with directors and certain members of management;
changes in accounting practices;
effectiveness of Kalera’s internal controls; and
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other events or factors, many of which are beyond Kalera’s control and other unforeseen events and liabilities.
Furthermore, stock markets experience price fluctuations that affect market prices of equity securities of many companies, including early stage growth companies. These fluctuations may or may not be related to the direct operating performance of those companies. These broad market and industry fluctuations, as well as general economic, political and market conditions such as recessions, interest rate changes, tariffs or international currency fluctuations, may negatively impact the market price of Kalera’s securities.
No assurance can be given that an active and liquid trading market for Kalera’s securities will develop or be maintained. The market value of Kalera’s securities could be substantially affected by the extent to which a strong secondary market develops for Kalera’s securities.
Kalera may be a passive foreign investment company, or “PFIC,” which could result in adverse U.S. federal income tax consequences to U.S. investors.
If Kalera is a PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S. Holder (as defined in the section of this registration statement captioned “Certain Material U.S. Tax Consequences”) of Kalera securities, the U.S. Holder may be subject to adverse U.S. federal income tax consequences and may be subject to additional reporting requirements. Based on the current and anticipated composition of the income, assets and operations of Kalera and its subsidiaries, it is not expected that Kalera will be a PFIC for U.S. federal income tax purposes for the current taxable year or in foreseeable future taxable years. However, this is a factual determination that depends on, among other things, the composition of Kalera’s income and assets, and the market value of its shares and assets, including the composition of income and assets and the market value of shares and assets of its subsidiaries, from time to time. Kalera’s actual PFIC status for its current taxable year or any future taxable year will not be determinable until after the end of such taxable year. Accordingly, there can be no assurances with respect to Kalera’s status as a PFIC for its current taxable year or any subsequent taxable year. U.S. Holders are urged to consult their own tax advisors regarding the possible application of the PFIC rules to holders of Kalera securities. For a more detailed explanation of the tax consequences of PFIC classification to U.S. Holders, see “Certain Material U.S. Tax Consequences-U.S. Federal Income Tax Considerations of Owning Kalera Ordinary Shares and Warrants-Passive Foreign Investment Company Considerations.
The IRS may not agree that Kalera should be treated as a non-U.S. corporation for U.S. federal income tax purposes.
Under current U.S. federal income tax law, a corporation generally will be considered to be a U.S. corporation for U.S. federal income tax purposes if it is created or organized in the United States or under the law of the United States or of any State. Accordingly, under generally applicable U.S. federal income tax rules, Kalera, which is incorporated and treated as a tax resident in Ireland, would generally be classified as a non-U.S. corporation for U.S. federal income tax purposes. Section 7874 of Code and the Treasury regulations promulgated thereunder, however, contain specific rules that may cause a non-U.S. corporation to be treated as a U.S. corporation for U.S. federal income tax purposes. If it were determined that Kalera is treated as a U.S. corporation for U.S. federal income tax purposes under Section 7874 of the Code and the Treasury regulations promulgated thereunder, Kalera would be liable for U.S. federal income tax on its income in the same manner as any other U.S. corporation and certain distributions made by Kalera to holders of Kalera Ordinary Shares who are not U.S. Holders may be subject to U.S. withholding tax.
Based on the terms of the Business Combination and certain factual assumptions, Kalera does not currently expect that it should be treated as a U.S. corporation for U.S. federal income tax purposes under Section 7874 of the Code after the Business Combination. However, the application of Section 7874 of the Code is complex, subject to detailed regulations (the application of which is uncertain in various respects and would be impacted by changes in such U.S. Treasury regulations with possible retroactive effect) and subject to certain factual uncertainties Accordingly, there can be no assurance that the IRS will not challenge the status of Kalera as a non-U.S. corporation for U.S. federal income tax purposes under Section 7874 of the Code or that such challenge would not be sustained by a court.
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If the IRS were to successfully challenge under Section 7874 of the Code Kalera’s status as a non U.S. corporation for U.S. federal income tax purposes, Kalera and certain Kalera shareholders may be subject to significant adverse tax consequences, including a higher effective corporate income tax rate on Kalera and the application of U.S. withholding taxes on dividends paid on Kalera shares to non-U.S. shareholders, subject to reduction under an applicable income tax treaty.
Investors should consult their own tax advisors regarding the application of Section 7874 of the Code to the Business Combination and the tax consequences to Kalera and its shareholders if the classification of Kalera as a non-U.S. corporation is not respected.
Concentration of ownership among Kalera’s existing executive officers, directors and their affiliates may prevent new investors from influencing significant corporate decisions.
Kalera’s directors and executive officers and their affiliates as a group own approximately 28.8% of Kalera outstanding ordinary shares. As a result, these shareholders are able to exercise a significant level of influence over all matters requiring shareholder approval, including the election of directors, any amendment of the amended and restated articles of association and approval of significant corporate transactions. This influence could have the effect of delaying or preventing a change of control or changes in management and will make the approval of certain transactions difficult or impossible without the support of these shareholders.
Kalera qualifies as an “emerging growth company” and benefits from reduced disclosure requirements. Kalera cannot be certain if such reduced disclosure requirements will make its ordinary shares less attractive to investors and make it more difficult to compare Kalera’s performance with other public companies.
Kalera qualifies as an “emerging growth company,” as defined in the JOBS Act, and intends to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. Kalera may take advantage of these exemptions for so long as it is an “emerging growth company,” which is until the earliest of (i) the last day of the fiscal year in which the market value of Kalera Ordinary Shares that are held by non-affiliates equals or exceeds $700 million as of June 30 of that fiscal year, (ii) the last day of the fiscal year in which it has total annual gross revenue of $1.07 billion or more during such fiscal year (as indexed for inflation), (iii) the date on which it has issued more than $1 billion in non-convertible debt in the prior three-year period or (iv) the last day of the fiscal year following the fifth anniversary of the date of the first sale of Agrico’s Units in the Agrico IPO. Kalera cannot predict if investors will find its ordinary shares less attractive because it will rely on these exemptions. If some investors find Kalera Ordinary Shares less attractive as a result, there may be a less active trading market for Kalera Ordinary Shares and its stock price may be more volatile.
As an “emerging growth company”, Kalera will elect to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the JOBS Act, that allows Kalera to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, Kalera’s financial statements may not be comparable to companies that comply with public company effective dates.
Kalera does not expect to declare any dividends in the foreseeable future.
Kalera does not anticipate declaring any cash dividends to holders of its common equity in the foreseeable future. Consequently, investors may need to rely on sales of their shares after price appreciation, which may never occur, as the only way to realize any future economic gains on their investment.
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There is no guarantee that Kalera Warrants will be in-the-money at the time they become exercisable, and they may expire worthless.
The exercise price for the Kalera Warrants is $11.50 per Kalera Ordinary Share. There is no guarantee that any of the Kalera Warrants will be in-the-money following the time they become exercisable and prior to their expiration, and as such, the Kalera Warrants may expire worthless.
Kalera may redeem the unexpired warrants prior to their exercise at a time that is disadvantageous to warrant holders, thereby making their warrants worthless, and exercise of a significant number of the warrants could adversely affect the market price of Kalera Ordinary Shares.
Kalera will have the ability to redeem outstanding Kalera Warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the last reported sales price of Kalera Ordinary Shares equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) on each of twenty (20) trading days within any thirty (30) trading day period commencing after the Kalera Warrants become exercisable and ending on the third (3rd) trading day prior to the date on which notice of redemption is given and provided that there is an effective registration statement covering Kalera Ordinary Shares issuable upon exercise of the Kalera Warrants. If and when the warrants become redeemable by Kalera, Kalera may not exercise the redemption right if the issuance of the Kalera Ordinary Shares upon exercise of the warrants is not exempt from registration or qualification under applicable state blue sky laws or Kalera is unable to effect such registration or qualification. Redemption of the outstanding Kalera Warrants could force you to: (i) exercise your Kalera Warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so, (ii) sell your Kalera Warrants at the then-current market price when you might otherwise wish to hold your Kalera Warrants or (iii) accept the nominal Redemption Price which, at the time the outstanding Kalera Warrants are called for redemption, is likely to be substantially less than the market value of your Kalera Warrants. Additionally, if a significant number of Kalera Warrant holders exercise their Kalera Warrants instead of accepting the nominal Redemption Price, the issuance of these shares would dilute other equity holders, which could reduce the market price of the Kalera Ordinary Shares. Because the $18.00 trading price referred to above substantially exceeds the current trading price of $2.91 of the Kalera Ordinary Shares and Kalera has registered for resale a substantial number of Kalera Ordinary Shares, the sale of which could cause the price of the Kalera Ordinary Shares to decrease, Kalera may be unable to redeem the Kalera Warrants and such warrants may expire worthless.
Risks Relating to Legal and Regulatory Compliance
Kalera’s operations are subject to FDA, FTC, USDA, EPA and OSHA governmental regulation and state regulation and Kalera is exposed to risks related to regulatory processes and changes in regulatory environment, including, but not limited to the Produce Safety Rule, GMPs and the Preventative Controls Rule.
The manufacture and marketing of food products is highly regulated in the United States, and Kalera is subject to a variety of laws and regulations. These laws and regulations apply to many aspects of its business, including the manufacture, packaging, labeling, distribution, advertising, sale, quality, and safety of its products, as well as the health and safety of its employees and the protection of the environment. Following the acquisition of &ever, Kalera is also subject to laws and regulations in international jurisdictions, including, but not necessarily limited to, Germany, Kuwait and Singapore.
In the United States, Kalera is subject to regulation by various government agencies, including the U.S. Food and Drug Administration (“FDA”), the Federal Trade Commission (“FTC”), the Occupational Safety and Health Administration (“OSHA”), the Environmental Protection Agency (“EPA”), and U.S. Department of Agriculture (“USDA”), as well as various state and local agencies. Further, regulations outside the United States, Germany, Kuwait and Singapore by various international regulatory bodies could also apply in the future as Kalera, under its current roll-out plan, is seeking to establish its business internationally. In addition, Kalera could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act, or FCPA, and similar worldwide anti-bribery laws, which generally prohibit companies and their intermediaries from making improper payments to non-U.S. officials or other third parties for the purpose of obtaining or retaining business. While Kalera has policies that mandate compliance with these anti-bribery laws, its internal control policies and procedures may not protect it from reckless
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or criminal acts committed by its employees or agents. Violations of these laws, or allegations of such violations, could disrupt its business and result in a material adverse effect on our results of operations, cash flows and financial condition.
In addition, depending on customer specification, Kalera may be subject to certain voluntary, third-party standards, such as Global Food Safety Initiative, or GFSI, standards and review by voluntary organizations, such as the Council of Better Business Bureaus’ National Advertising Division. Kalera could incur costs, including fines, penalties and third-party claims, because of any violations of, or liabilities under, such requirements, including any competitor or consumer challenges relating to compliance with such requirements. The loss of third-party accreditation could result in lost sales and customers, and may adversely affect Kalera’s business, results of operation, and financial condition. In connection with the marketing and advertisement of our products, Kalera could be the target of claims relating to false or deceptive advertising, including under the auspices of the FTC and the consumer protection statutes of some states.
The regulatory environment in which we operate could change significantly and adversely in the future. Any change in manufacturing, labeling or packaging requirements for our products may lead to an increase in costs or interruptions in production, either of which could adversely affect our operations and financial condition. New or revised government laws and regulations could result in additional compliance costs, mandate significant and costly changes to the way Kalera implements its products, and threaten its ability to serve certain markets, and, in the event of non-compliance, civil remedies, including fines, injunctions, withdrawals, recalls, or seizures and confiscations, warning letters, restrictions on the marketing or manufacturing of products, or refusals to permit the import or export of products, as well as potential criminal sanctions, any of which may adversely affect its business, results of operations, cash flows, financial condition, operating revenue, profitability and/or prospects.
Food safety and foodborne illness incidents or advertising or product mislabeling may materially adversely affect Kalera’s business by exposing it to lawsuits, product recalls, or regulatory enforcement actions, increasing its operating costs and reducing demand for Kalera’s product offerings.
Selling food for human consumption involves inherent legal and other risks, and there is increasing governmental scrutiny of and public awareness regarding food safety. Unexpected side effects, illness, injury or death related to allergens, foodborne illnesses or other food safety incidents caused by products that Kalera sells could result in the discontinuance of sales of these products, or otherwise result in increased operating costs, regulatory enforcement actions, or harm to its reputation. Shipment of adulterated or misbranded products, even if inadvertent, can result in criminal or civil liability. Such incidents could also expose Kalera to product liability, negligence, or other lawsuits, including consumer class action lawsuits. Any claims brought against Kalera may exceed or be outside the scope of our existing or future insurance policy coverage or limits. Any judgment against Kalera that is more than its policy limits or not covered by its policies or not subject to insurance would have to be paid from its cash reserves, which would reduce its capital resources.
The occurrence of foodborne illnesses or other food safety incidents could also adversely affect the price and availability of affected raw materials, resulting in higher costs, disruptions in supply and a reduction in sales. Furthermore, any instances of food contamination or regulatory noncompliance, whether or not caused by its actions, could compel Kalera or its customers, depending on the circumstances, to conduct a recall in accordance with FDA regulations, and comparable state laws. Food recalls could result in significant losses due to their costs, the destruction of product inventory, lost sales due to the unavailability of the product for a period of time and potential loss of existing distributors or customers and a potential negative impact on our ability to attract new customers due to negative consumer experiences or because of an adverse impact on our brand and reputation. The costs of a recall could be outside the scope of its existing or future insurance policy coverage or limits.
In addition, food companies have been subject to targeted, large-scale tampering as well as to opportunistic, individual product tampering, and we, like any food company, could be a target for product tampering. Forms of tampering could include the introduction of foreign material, chemical contaminants, and pathogenic organisms into consumer products as well as product substitution. FDA regulations require businesses like ours to analyze, prepare, and implement mitigation strategies specifically to address tampering designed to inflict widespread public health harm. If Kalera does not adequately address the possibility, or any actual instance, of product tampering, Kalera
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could face possible seizure or recall of its products, suspension of its facilities’ registrations, and/or the imposition of civil or criminal sanctions, which could materially adversely affect its business, financial condition, cash flows, operating results and/or prospects.
Litigation or legal proceedings could expose Kalera to significant liabilities and have a negative impact on its reputation or business.
Kalera may become subject to claims, litigation, disputes and other legal proceedings from time to time. Kalera evaluates these claims, litigation, disputes and other legal proceedings to assess the likelihood of unfavorable outcomes and to estimate, if possible, the amount of potential losses. Based on these assessments and estimates, Kalera may establish reserves, as appropriate. These assessments and estimates are based on the information available to management at the time and involve a significant amount of management judgment. Actual outcomes or losses may differ materially from our assessments and estimates.
Under the terms of the engagement letter executed between BofA Securities and Kalera, Kalera agreed to indemnify and hold harmless BofA Securities and its officers, directors, employees and agents from and against any losses and claims arising in any manner out of or in connection with the services that BofA Securities provided to Kalera thereunder. Accordingly, if any claims, litigation, disputes or other legal proceedings are brought by third parties against BofA Securities in relation to the services it provided to Kalera, Kalera will be liable to pay for or reimburse BofA Securities for the losses and costs it incurs unless the losses and costs are finally judicially determined to have resulted from the gross negligence or willful misconduct of BofA or its officers, directors, employees and agents.
Even when not merited or whether or not Kalera ultimately prevails, the defense of these lawsuits may divert management’s attention, and Kalera may incur significant expenses in defending these lawsuits. The results of litigation and other legal proceedings are inherently uncertain, and adverse judgments or settlements in some of these legal disputes may result in adverse monetary damages, penalties or injunctive relief against Kalera, which could negatively impact its financial position, cash flows or results of operations. An unfavorable outcome of any legal dispute could imply that Kalera becomes liable for damages or will have to modify its business model. Further, any product liability or negligence claim against Kalera in US courts may, if successful, result in damages being awarded that contain punitive elements and therefore may significantly exceed the loss or damage suffered by the successful claimant. Any claims or litigation, even if fully indemnified or insured, could damage our reputation and make it more difficult to compete effectively or to obtain adequate insurance in the future. A settlement or an unfavorable outcome in a legal dispute could have an adverse effect on Kalera’s business, financial condition, results of operations, cash flows, time to market and/or prospects.
Furthermore, while Kalera maintains insurance for certain potential liabilities, such insurance does not cover all types and amounts of potential liabilities and is subject to various exclusions as well as caps on amounts recoverable. Even if Kalera believes a claim is covered by insurance, insurers may dispute its entitlement to recovery for a variety of potential reasons, which may affect the timing and, if the insurers prevail, the amount of our recovery.
Kalera is subject to stringent environmental regulation and could therefore become subject to environmental litigation, proceedings, and investigations.
Kalera’s past and present business operations and ownership/leasing and operation of real property are subject to stringent federal, state, and local environmental laws and regulations pertaining to the discharge of materials into the environment, and the handling and disposition of wastes (including solid and hazardous wastes) or otherwise relating to protection of the environment. Compliance with these laws and regulations, and the ability to comply with any modifications to these laws and regulations, is material to Kalera’s business. New matters or sites may be identified in the future that will require additional investigation, assessment, or expenditures. Future discovery of contamination of property underlying or in the vicinity of our present properties or facilities could require us to incur additional expenses. The occurrence of any of these events, the implementation of new laws and regulations, or stricter interpretation of existing laws or regulations, could adversely affect its business, financial condition, results of operations, cash flows, time to market and/or prospects.
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Changes in tax laws may materially adversely affect Kalera’s or any of its subsidiaries’ business, prospects, financial condition and operating results.
New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could adversely affect our business, prospects, financial condition and operating results. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to Kalera or any of its subsidiaries. For example, U.S. federal tax legislation enacted in 2017, informally titled the Tax Cuts and Jobs Act, enacted many significant changes to the U.S. tax laws. Additional tax legislation is currently pending in the United States Congress. We are unable to predict what tax proposals may be proposed or enacted in the future or what effect such changes would have on Kalera’s business, but such changes, to tax legislation, regulations, policies or practices, could affect Kalera’s financial position and overall or effective tax rates in the future in countries where we have operations and where Kalera is organized or a resident of for tax purposes, and increase the complexity, burden and cost of tax compliance. We urge investors to consult with their legal and tax advisers regarding the implication of potential changes in tax laws on an investment in Kalera’s securities.
Risks Relating to Irish Law
Kalera is incorporated in Ireland; Irish law differs from the laws in effect in the United States and may afford less protection to our shareholders.
Kalera is an Irish incorporated public limited company. There is some uncertainty as to whether the courts of Ireland would recognize or enforce judgments of U.S. courts obtained against us or our directors or officers based on the civil liabilities provisions of the U.S. federal or state securities laws or hear actions against us or those persons based on those laws. The U.S. and Ireland do not currently have a treaty providing for the reciprocal recognition and enforcement of judgments (other than arbitration awards) in civil and commercial matters, and, accordingly, common law rules apply in determining whether a judgment obtained in a U.S. court is enforceable in Ireland. Although there are processes under Irish law for enforcing a judgment of a U.S. court, including by seeking summary judgment in a new action in Ireland, those processes are subject to certain established principles and conditions, and there can be no assurance that an Irish court would enforce a judgment of a U.S. court in this way and thereby impose civil liberty on us or our directors or officers.
As an Irish company, we are governed by the Irish Companies Act and the common law of Ireland, which differs in some material respects from laws generally applicable to U.S. corporations and shareholders, including, among others, differences relating to interested director and officer transactions and shareholder lawsuits. Likewise, the duties of directors and officers of an Irish company generally are owed to the company only. Shareholders of Irish companies generally do not have a personal right of action against directors or officers of the company and may exercise such rights of action on behalf of the company only in limited circumstances. Accordingly, holders of our securities may have more difficulty protecting their interests than would holders of securities of a corporation incorporated in a jurisdiction of the U.S.
In certain limited circumstances, dividends paid by Kalera may be subject to Irish dividend withholding tax.
Kalera does not intend to pay dividends on Kalera Ordinary Shares in the foreseeable future. If Kalera were to declare and pay dividends, in certain limited circumstances, Irish dividend withholding tax (currently at a rate of 25%) may arise in respect of dividends paid on the Kalera Ordinary Shares. A number of exemptions from dividend withholding tax exist such that shareholders resident in the U.S. and other exempt countries may be entitled to exemptions from dividend withholding tax.
Submission will be made to the Irish Revenue Commissioners to confirm that shareholders resident in the U.S. that hold their Kalera Ordinary Shares through DTC will not be subject to dividend withholding tax, provided the addressees of the beneficial owners of such Kalera Ordinary Shares in the records of the brokers holding such Kalera Ordinary Shares are recorded as being in the U.S. (and such brokers have further transmitted the relevant information to a qualifying intermediary appointed by Kalera). It is expected that this confirmation should be granted. However, other holders of Kalera Ordinary Shares may be subject to dividend withholding tax, which could adversely affect the price of their Kalera Ordinary Shares.
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After the transactions, dividends received by Irish residents and certain other shareholders may be subject to Irish income tax.
Shareholders entitled to an exemption from Irish dividend withholding tax on dividends received from Kalera will not be subject to Irish income tax in respect of those dividends unless they have some connection with Ireland other than their shareholding in Kalera (for example, they are resident in Ireland). Shareholders who receive dividends subject to Irish dividend withholding tax will generally have no further liability to Irish income tax on those dividends.
Kalera Ordinary Shares or Kalera Warrants received by means of a gift or inheritance could be subject to Irish capital acquisitions tax.
Irish capital acquisitions tax (“CAT”) could apply to a gift or inheritance of Kalera Ordinary Shares or Kalera Warrants irrespective of the place of residence, ordinary residence or domicile of the parties. This is because Kalera Ordinary Shares and Kalera Warrants will be regarded as property situated in Ireland. The person who receives the gift or inheritance has primary liability for CAT. Gifts and inheritances passing between spouses are exempt from CAT. Children have a tax-free threshold of €335,000 in respect of taxable gifts or inheritances received from their parents.
It is recommended that each shareholder consult his or her own tax advisor as to the tax consequences of holding Kalera Ordinary Shares and Kalera Warrants in, and receiving distributions from, Kalera.
Provisions in the Kalera Articles and under Irish law could make an acquisition of Kalera more difficult, may limit attempts by Kalera shareholders to replace or remove Kalera’s management, may limit shareholders’ ability to obtain a favorable judicial forum for disputes with Kalera or Kalera’s directors, officers, or employees, and may limit the market price of the Kalera Ordinary Shares and/or Kalera Warrants.
Provisions in the Kalera Articles may have the effect of delaying or preventing a change of control or changes in Kalera’s management. The Kalera Articles include provisions that:
require that Kalera’s board of directors is classified into three classes of directors with staggered three-year terms;
permit the board of directors to establish the number of directors and fill any vacancies and newly created directorships; and
prohibit shareholder action by written consent without unanimous approval of all holders of Kalera Ordinary Shares.
The Kalera Articles contain exclusive forum provisions for certain claims, which could limit Kalera’s shareholders’ ability to obtain a favorable judicial forum for disputes with Kalera or Kalera’s directors, officers or employees.
The Kalera Articles provide that unless Kalera consents in writing to the selection of an alternative forum, the federal district courts of the United States of America shall, to the fullest extent permitted by law, be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Exchange Act or the Securities Act (the “Federal Forum Provision”). Moreover, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all claims brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. Kalera’s decision to adopt the Federal Forum Provision followed a decision by the Supreme Court of the State of Delaware holding that such provisions are facially valid under Delaware law. While there can be no assurance that federal or state courts will follow the holding of the Delaware Supreme Court or determine that the Federal Forum Provision should be enforced in a particular case, application of the Federal Forum Provision means that suits brought by Kalera’s shareholders to enforce any duty or liability created by the Securities Act must be brought in federal court and cannot be brought in state court.
Section 27 of the Exchange Act creates exclusive federal jurisdiction over all claims brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder and the Kalera Articles confirm
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that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Exchange Act. Accordingly, actions by Kalera’s shareholders to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder must be brought in federal court.
Any person or entity purchasing or otherwise acquiring or holding any interest in any of Kalera’s securities shall be deemed to have notice of and consented to Kalera’s exclusive forum provisions, including the Federal Forum Provision. Additionally, Kalera’s shareholders cannot waive compliance with the federal securities laws and the rules and regulations thereunder. These provisions may lead to Kalera’s shareholders incurring increased costs if they were to bring a claim against Kalera, and may limit Kalera’s shareholders’ ability to bring a claim in a judicial forum they find favorable for disputes with Kalera or Kalera’s directors, officers, or other employees, which may discourage lawsuits against Kalera and Kalera’s directors, officers, and other employees and agents. Alternatively, if a court were to find the choice of forum provision contained in the Kalera Articles to be inapplicable or unenforceable in an action, Kalera may incur additional costs associated with resolving such action in other jurisdictions, which may have an adverse effect on Kalera’s business, financial condition and results of operations.
As a matter of Irish law, Kalera’s shareholders are bound by the provisions of the Kalera Articles. An Irish court would be expected to recognize the exclusive jurisdiction of the federal district courts of the United States of America in respect of causes of action arising under the Exchange Act or the Securities Act.
As an Irish public limited company, certain capital structure decisions regarding Kalera will require the approval of the shareholders of Kalera, which may limit Kalera’s flexibility to manage its capital structure.
Irish law generally provides that a board of directors may allot and issue shares (or rights to subscribe for or convert into shares) if authorized to do so by a company’s constitution or by an ordinary resolution. Such authorization may be granted for up to the maximum of a company’s authorized but unissued share capital and for a maximum period of five years, at which point it must be renewed by another ordinary resolution. The Kalera Articles authorizes the Board of Directors of Kalera to allot shares up to the maximum of Kalera’s authorized but unissued share capital for a period of five years from the date of adoption of such articles. This authorization will need to be renewed by ordinary resolution upon its expiration and at periodic intervals thereafter. Under Irish law, an allotment authority may be given for up to five years at each renewal, but governance considerations may result in renewals for shorter periods or for less than the maximum permitted number of shares being sought or approved.
While Irish law also generally provides shareholders with pre-emptive rights when new shares are issued for cash, it is possible for the Kalera Articles, or for shareholders of Kalera in a general meeting, to exclude such pre-emptive rights. The Kalera Articles exclude pre-emptive rights for a period of five years from the date of adoption of such articles. This exclusion will need to be renewed by special resolution upon its expiration and at periodic intervals thereafter. Under Irish law, a disapplication of pre-emption rights may be authorized for up to five years at each renewal, but governance considerations may result in renewals for shorter periods or for less than the maximum permitted number of unissued shares being sought or approved.
Irish law requires Kalera to have available “distributable profits” to pay dividends to shareholders and generally to make share repurchases and redemptions.
Under Irish law, Kalera may only pay dividends and make other distributions (and, generally, make share repurchases and redemptions) only out of distributable reserves. Distributable reserves, broadly means, the accumulated realized profits of Kalera, so far as not previously utilized in a distribution or capitalization less accumulated realized losses, so far as not previously written off in a reduction or reorganization of capital, and include reserves created by way of a reduction of capital. In addition, no dividend may be paid or other distribution, share repurchase or redemption made by Kalera unless the net assets of Kalera are equal to, or exceed, the aggregate of Kalera’s called up share capital plus its un-distributable reserves and the dividend or other distribution, share repurchase or redemption does not reduce Kalera’s net assets below such aggregate. Un-distributable reserves include the un-denominated capital, the capital redemption reserve fund and the amount by which Kalera accumulated unrealized profits, so far as not previously utilized by any capitalization exceed Kalera’s accumulated
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unrealized losses, so far as not previously written off in a reduction or reorganization of capital and any other reserve that Kalera is prohibited from distributing by applicable law.
The determination as to whether or not Kalera has sufficient distributable reserves to fund a dividend must be made by reference to the “relevant financial statements” of Kalera. The “relevant financial statements” are either the last set of unconsolidated annual audited financial statements or unaudited financial statements properly prepared in accordance with the Irish Companies Act, which give a “true and fair view” of Kalera’s unconsolidated financial position in accordance with accepted accounting practice in Ireland. The “relevant financial statements” must be filed in the Companies Registration Office (the official public registry for companies in Ireland) prior to the making of the distribution.
Kalera, as a new parent company with no operational history, has no distributable profits of its own. Accordingly, in order to pay dividends or make other distributions, share repurchases or redemptions, Kalera will need to generate distributable profits from its business activities or otherwise create distributable profits by alternative means, including a reduction of capital.
Creation of distributable reserves requires the approval of Kalera shareholders by special resolution passed at a general meeting of shareholders, together with the sanction of the High Court of Ireland. Although the creation of distributable reserves in this manner is an established mechanism, the sanction of the High Court of Ireland is discretionary and there is no guarantee it will be granted.
In the event that distributable reserves of Kalera are not, for whatever reason, generated from its business activities or created by alternative means, no dividends may be paid or other distributions, share repurchases or redemptions made by Kalera. Kalera does not anticipate paying any dividends for the foreseeable future. There can be no assurances that Kalera will ever pay any dividend or other distribution to shareholders, regardless of whether Kalera has sufficient distributable reserves.
Attempted takeovers of Kalera are subject to the Irish Takeover Rules and will be under the supervisory jurisdiction of the Irish Takeover Panel.
Kalera is subject to the Irish Takeover Rules, which regulate the conduct of takeovers of, and certain other relevant transactions affecting, Irish incorporated public limited companies listed on certain stock exchanges, including Nasdaq. The Irish Takeover Rules are administered by the Irish Takeover Panel, which has supervisory jurisdiction over such transactions. Among other matters, the Irish Takeover Rules operate to ensure that no offer is frustrated or unfairly prejudiced and, in situations involving multiple bidders, that there is a level playing field. For example, pursuant to the Irish Takeover Rules, the Kalera board will not be permitted, without shareholder approval, to take certain actions which might frustrate an offer for Kalera shares once the Kalera board has received an approach that might lead to an offer or has reason to believe that an offer is, or may be, imminent.
Under the Irish Takeover Rules, a person, or persons acting in concert, who acquire(s), or consolidate(s), control of Kalera may be required to make a mandatory cash offer for the remaining shares of Kalera.
Under the Irish Takeover Rules, in certain circumstances, a person, or persons acting in concert, who acquire(s), or consolidate(s), control of Kalera may be required to make a mandatory cash offer for the remaining shares of Kalera at a price not less than the highest price paid for the shares by that person or its concert parties during the previous 12 months. Save with the consent of the Irish Takeover Panel, this mandatory offer requirement is triggered: (i) if an acquisition of shares would result in a person or persons acting in concert holding shares representing 30% or more of the voting rights of Kalera and (ii) where a person, or persons acting in concert, already hold(s) shares representing between 30% and 50% of the voting rights of Kalera, if an acquisition of shares would result in the percentage of the voting rights of Kalera held by such person, or persons acting in concert, increasing by more than 0.05% within a 12-month period. In the case of an issuance of new shares, the Irish Takeover Panel will typically waive the mandatory offer requirement in circumstances where the issuance has been approved in advance by simple majority vote given at a general meeting of independent Kalera shareholders convened in accordance with the requirements (including as to disclosure) of the Irish Takeover Rules. The mandatory offer requirements do not apply to a single holder, holding shares representing more than 50% of the voting rights of Kalera.
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Anti-takeover provisions in the Kalera constitution could make an acquisition of Kalera ordinary shares more difficult.
The Kalera Articles contain provisions that may delay or prevent a change of control, discourage bids at a premium over the market price of Kalera ordinary shares, adversely affect the market price of Kalera ordinary shares, and adversely affect the voting and other rights of holders of Kalera ordinary shares. These provisions include: (i) permitting the Kalera board of directors to issue preference shares without the approval of holders of Kalera ordinary shares, with such rights, preferences and privileges as they may designate and (ii) allowing the Kalera board of directors to adopt a shareholder rights’ plan upon such terms and conditions as it deems expedient in the interests of Kalera.
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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Defined terms included below shall have the same meaning as terms defined and included elsewhere in this prospectus.
Introduction
At Closing, Kalera SA (f/k/a Kalera AS), a société anonyme existing under the laws of the Grand Duchy of Luxembourg, having its registered office at 15, boulevard Franklin D. Roosevelt, L-2450 Luxembourg, Grand Duchy of Luxembourg, registered with the Luxembourg Trade and Companies Register (Registre de Commerce et des Sociétés, Luxembourg) under number B256011 incorporated pursuant to a deed on 11 June 2021, consummated the Business Combination pursuant to that certain Business Combination Agreement, dated January 30, 2022, by and among (i) Agrico, (ii) Kalera, (iii) Cayman Merger Sub, (iv) Lux Merger Sub and (v) Kalera AS, a Norwegian private limited liability company.
The Merger Subs were formed solely as vehicles for consummating the Business Combination, and the Merger Subs were direct wholly owned subsidiaries of Kalera. As of Closing, the Merger Subs ceased to have a separate legal existence and Kalera SA became a wholly owned subsidiary of Kalera. As soon as reasonably practicable after Closing, Agrico will elect to be treated as a “disregarded entity” for U.S. federal income tax purposes, and its process of liquidation will start. Pursuant to the Business Combination Agreement:
a.On June 27, 2022, Cayman Merger Sub merged with and into Agrico, with Agrico continuing as the surviving entity and as a wholly owned subsidiary of Kalera (the “First Merger”). Agrico issued Agrico Class A ordinary shares to Kalera (the “Agrico Share Issuance”), and, in each case as consideration for the First Merger and the Agrico Share Issuance:
i.Agrico Shareholders received shares in the capital of Kalera, and
ii.the holders of Agrico Warrants (as defined below) had their Agrico Warrants assumed by Kalera and automatically adjusted to become exercisable for shares in the capital of Kalera.
b.On June 28, 2022, by way of the Kalera Capital Reduction pursuant to the Luxembourg Companies Act, and in each case as consideration for the ordinary shares of Kalera SA and the Kalera SA options being cancelled and ceasing to exist or being assumed (as applicable) upon completion of the Second Merger:
c.Kalera SA shareholders (except Kalera) received shares in the capital of Kalera,
i.The holders of in-the-money Kalera SA options received options in the capital of Kalera, and
ii.Kalera SA options that were out-of-the money were cancelled.
iii.Immediately following the Kalera Capital Reduction, on June 28, 2022, Lux Merger Sub merged with and into Kalera SA, with Kalera SA as the surviving entity of the Second Merger. Kalera SA issued shares to Kalera.
Accounting for the Business Combination
The Business Combination is accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded, in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”). Under this method of accounting, Agrico is treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the Business Combination is treated as the equivalent of the Company issuing stock for the net assets of Agrico, accompanied by a recapitalization. The net assets of Agrico are stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination are those of the Company.
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The Company has been determined to be the accounting acquirer based on evaluation of the following facts and circumstances:
Members of Kalera’s senior management and Board of Directors will comprise all key management positions and more than 90% of the Board of Directors of the combined company;
Kalera will have the majority voting interest in the combined company
Kalera will have the ability to appoint the majority of the new Board and elect those directors through its majority voting power;
The Company’s subsidiaries will comprise the ongoing operations of the combined company;
The Company is larger in relative size to that of Agrico; and
The combined company will continue to operate under the Kalera trade name.
Basis of Pro Forma Presentation
The adjustments presented on the unaudited pro forma condensed statements of operations and comprehensive loss for the six months ended June 30, 2022 and year ended December 31, 2021, have been identified and presented to provide relevant information necessary for an accurate understanding of the combined company upon consummation of the Business Combination. The unaudited pro forma condensed combined statement of operations and comprehensive loss for the six months ended June 30, 2022 combines the historical unaudited consolidated statement of operations of Kalera for the six months ended June 30, 2022 and the historical unaudited statement of operations of Agrico for the period ended June 28, 2022 and has been prepared to reflect the Business Combination as if it occurred on January 1, 2021. The unaudited pro forma combined statement of operations and comprehensive loss for the year ended December 31, 2021 combines the historical audited consolidated statement of operations of Kalera for the year ended December 31, 2021 and the historical audited statement of operations of Agrico for the year ended December 31, 2021 and has been prepared to reflect the Business Combination as if it occurred on January 1, 2021.
The unaudited pro forma adjustments are based on information currently available. Assumptions and estimates underlying the unaudited pro forma adjustments are described in the accompanying notes. Actual results may differ materially from the assumptions used to present the accompanying unaudited pro forma condensed combined financial information.
The unaudited pro forma condensed combined statements of operations do not necessarily reflect what the combined Company’s results of operations would have been had the Business Combination occurred on the date indicated. The unaudited pro forma condensed combined statements of operations also may not be useful in predicting the future results of operations of the combined company. The actual financial results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors.
The unaudited pro forma condensed combined financial information should be read in conjunction with the accompanying notes. See Note 1, Basis of Presentation, to the Unaudited Pro Forma Condensed Combined Financial Information for information about the sources used to derive the unaudited pro forma financial information. In addition, the unaudited pro forma condensed combined financial information was based on and should be read in conjunction with the following historical financial statements and the accompanying notes, which are included in this proxy statement:
historical audited financial statements of Agrico as of and for the year ended December 31, 2021
historical audited combined financial statements of Kalera SA as of and for the year ended December 31, 2021
historical unaudited condensed financial statements of Agrico as of and for the three months ended March 31, 2022
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historical unaudited combined financial statements of Kalera Public Limited Company as of and for the six months ended June 30, 2022
Further, unaudited pro forma condensed combined financial information should be read in conjunction with the sections of this proxy statement entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “The Company’s Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The unaudited pro forma condensed combined financial information may have footing differences resulting from decimal numbers not presented herein.
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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2022
(in thousands, except share and per share data)
Kalera PLC (Previously Kalera AS)Agrico Acquisition Corp. (Historical)Transaction Accounting AdjustmentsNotesPro Forma Combined
Net sales$2,766 $— $— $2,766 
Cost of goods sold (exclusive of depreciation and amortization shown separately below)(11,279)(11,276)
Selling, general, and administrative expenses(35,012)7,533 (b)(24,479)
Depreciation and amortization(5,516)(5,516)
Impairment loss(64,252)(64,252)
Formation, operating and transaction cost— (1,111)(7,533)(b)(8,644)
Operating loss(113,293)(1,111)— (114,404)
Interest (expense) income, net(817)189 (189)(a)(817)
Change in fair value of earnout liabilities17,250 17,250 
Other income647 647 
Loss from operations before income tax(96,213)(922)(189)(97,324)
Income tax benefit1,288 — 1,288 
Loss before equity in net earnings loss of affiliate(94,925)(922)(189)(96,036)
Equity in net loss of affiliate48 48 
Net loss$(94,973)$(922)$(189)$(96,084)
Net loss per share - basic and diluted$(5.02)
Weighted average common shares outstanding – basic and diluted19,124,944 
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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2021
(in thousands, except share and per share data)
Kalera AS (Historical)Kalera GmbH (Historical) (Euro)Kalera GmbH (Historical) (USD)Kalera GmbH Acquisition Transactions Accounting AdjustmentsNotesKalera AS (Pro Forma)Agrico Acquisition Corp. (Historical)Transaction Accounting AdjustmentsNotesPro Forma Combined
Net sales$2,855 $$— $2,855 $— $— $2,855 
Cost of goods sold (exclusive of depreciation and amortization shown separately below)(9,634)— — (9,634)(9,634)
Selling, general, and administrative expenses(28,621)(12,646)(15,079)430 (l)(43,270)(43,270)
Depreciation and amortization(4,009)(113)(135)(3,055)(m)(7,199)(7,199)
Impairment loss(1,051)— — — (1,051)(1,051)
Formation, operating and transaction cost— — — (430)(l)(430)(393)— (p)(823)
Operating loss(40,460)(12,759)(15,214)(3,055)(58,729)(393)— (59,122)
Interest (expense) income, net(1,634)(543)(647)— (1,634)20 (20)(o)(1,634)
Other income (expense)780 635 757 — 1,538 1,538 
Loss from operations before income tax(41,314)(12,667)(15,104)(3,055)(58,825)(373)(20)(59,218)
Income tax benefit1,331 — — 483 (n)1,814 9,374 (q)11,188 
Loss before equity in net earnings loss of affiliate(39,983)(12,667)(15,104)(2,572)(57,011)(373)9,354 (48,030)
Equity in net loss of affiliate74 762 909 — 982 982 
Net loss$(40,057)(13,429)$(16,013)$(2,572)$(57,994)$(373)$9,354 $(49,012)
Net loss per share - basic and diluted$2.59 
Weighted average common shares outstanding – basic and diluted18,946,567 
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1.Basis of Presentation
The unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.” Release No. 33-10786 replaces the existing pro forma adjustment criteria with simplified requirements to depict the accounting for the transaction (“Transaction Accounting Adjustments”) and present the reasonably estimable synergies and other transaction effects that have occurred or are reasonably expected to occur (“Management’s Adjustments”) in the notes to the Unaudited Pro Forma Condensed Combined Financial Information. Kalera AS (“Kalera” or “Successor”) has elected not to present Management’s Adjustments and is only presenting Transaction Accounting Adjustments in the unaudited pro forma condensed combined financial information.
Management has made significant estimates and assumptions in its determination of the pro forma adjustments. As the pro forma combined financial information has been prepared based on these preliminary estimates and assumptions, the final amounts recorded may differ materially from the information presented.
The unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2022 and year ended December 31, 2021, presents pro forma effects to the Business Combination as if they had been completed on January 1, 2021.
The unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2022 and the audited statement of operations for the year ended December 31, 2021, have been prepared using and should be read in conjunction with the following, which are included in this proxy statement:
Agrico’s unaudited condensed statement of operations for the three months ended March 31, 2022, and the related notes;
Kalera’s unaudited consolidated statement of operations for the six months ended June 30, 2022, and the related notes;
Agrico’s historical audited statement of operations for the year ended December 31, 2021, and the related notes;
Kalera’s historical audited combined statement of operations for the year ended December 31, 2021, and the related notes;
Kalera GmbH’s historical audited statement of operations for the period January 1, 2021, through September 30, 2021, and the related notes.
The unaudited pro forma condensed combined financial information has been prepared to give effect to the redemption for cash of 14,347,974 or 99.81% shares of Agrico Common Stock for an aggregate redemption payment of $146,349,335.
The unaudited pro forma condensed combined financial information does not give effect to any anticipated synergies, operating efficiencies, tax savings, or cost savings that may be associated with the Business Combination. The combined company will incur additional costs after the Business Combination in order to satisfy its obligations as a reporting public company with the Securities Exchange Commission (“SEC”). No adjustment to the unaudited pro forma condensed combined statement of operations has been made for these items as the amounts are not yet known.
The pro forma adjustments reflecting the consummation of the Business Combination are based on certain currently available information at the Closing of the transaction and certain assumptions and methodologies that Kalera believes are reasonable under the circumstances. The unaudited condensed pro forma adjustments, which are described in the accompanying notes, may be revised as additional information becomes available and is evaluated. Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments, and it is possible the differences may be material. Kalera believes that its assumptions and methodologies provide a reasonable basis for presenting all of the significant effects of the Business Combination contemplated based on information available to
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management at the time and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed combined financial information.
The unaudited pro forma condensed combined financial information is not necessarily indicative of what the actual results of operations and financial position would have been had the Business Combination taken place on the date indicated, nor are they indicative of the future consolidated results of operations or financial position of the combined company.
2.Accounting Policies
Since Agrico had substantially no business operations as a blank check company, its limited accounting policies were not in conflict with those of Kalera. Accordingly, the combined company uses the accounting policies of Kalera as described in Note 2 to Kalera’s audited consolidated financial statements as of December 31, 2021, and for the year ended December 31, 2021, included by reference in this filing. As a result, the unaudited pro forma condensed combined financial information does not assume any differences in accounting policies.
Adjustments to Unaudited Pro Forma Condensed Combined Statements of Operations
The historical financial statements have been adjusted in the unaudited pro forma condensed combined statement of operations to reflect the effects of the Kalera GmbH Acquisition, and the Business Combination on Kalera’s historical financial statements. The unaudited pro forma condensed combined statements of operations have been prepared for informational purposes only.
The pro forma condensed combined provision for income taxes does not necessarily reflect the amounts that would have resulted had the combined company filed consolidated income tax returns during the periods presented.
Management has made significant estimates and assumptions in its determination of the pro forma adjustments. As the unaudited pro forma condensed combined financial information has been prepared based on these preliminary estimates, the final amounts recorded may differ materially from the information presented.
The pro forma basic and diluted earnings (loss) per share amounts presented in the unaudited pro forma condensed combined statements of operations are based upon the number of the combined company’s weighted average shares outstanding, assuming the Business Combination had occurred on January 1, 2021.
The Business Combination pro forma Transaction Accounting Adjustments included in the unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2022, are as follows:
a)Adjustment to remove interest income on cash and cash equivalents held in Trust Account.
b)One-time, non-recurring transaction cost related to acquisition previously included in selling, general, and administrative expenses.
c)through (k) – Not used
The &ever Acquisition, pro forma Transaction Accounting Adjustments included in the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2021, are as follows:
d)One-time, non-recurring transaction cost related to acquisition previously included in selling, general, and administrative expenses.
e)Adjustment to include pre-acquisition depreciation and amortization on the fair value of the acquired tangible and intangible assets.
f)Adjustment for income taxes, applying a statutory tax rate of 15.83% for the year ended December 31, 2021.
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The Business Combination pro forma Transaction Accounting Adjustments included in the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2021 are as follows:
g)Adjustment to remove interest income on cash and cash equivalents held in Trust Account.
h)Adjustment for income taxes, applying a statutory tax rate of 15.83% for the year ended December 31, 2021.
3.Net Loss per Share
Represents the unaudited loss per share calculated based on the recapitalization resulting from the Business Combination, assuming the shares were outstanding since January 1, 2021. As the Business Combination is being reflected as if it had occurred at the beginning of the periods presented, the calculation of weighted average shares outstanding for basic and diluted net earnings (loss) per share assumes that the shares issuable relating to the Business Combination have been outstanding for the entire periods presented. The following tables set forth the computation of pro forma basic and diluted earnings (loss) per share for the six months ended June 30, 2022 and for the year ended December 31, 2021; amounts are stated in thousands of U.S. Dollars, except for share and per share amounts.
Six months ended June 30, 2022
Pro Forma
Common Stock
Numerator:
Net Loss$(96,084)
Denominator:
Weighted average shares outstanding - basic and diluted19,125 
Net loss per ordinary share:
Basic and diluted$(5.02)
Year ended December 31, 2021
Pro Forma
Common Stock
Numerator:
Net Loss$(49,012)
Denominator:
Weighted average shares outstanding - basic and diluted18,947 
Net loss per ordinary share:
.
Basic and diluted$(2.59)
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USE OF PROCEEDS
All of the Securities offered by the Selling Securityholders pursuant to this prospectus will be sold by the Selling Securityholders for their respective accounts. We will not receive any of the proceeds from the sale of the Securities hereunder. All proceeds from the sale of the Securities will be paid directly to the Selling Securityholders. We will, however, receive up to an aggregate of approximately $166,031,250 from the exercise of the Kalera Warrants covered by this registration statement assuming the exercise in full of all such Kalera Warrants for cash. We expect to use the net proceeds, if any, from the exercise of these Kalera Warrants for general corporate purposes. Because the exercise price of $11.50 of the Kalera Warrants substantially exceeds the current trading price of $2.91 of the Kalera Ordinary Shares, there is no assurance that the Kalera Warrants will be in the money prior to their expiration and it is unlikely that holders of the Kalera Warrants will be able to exercise such warrants in the near future, if at all. As a result, we are unlikely to receive any proceeds from the exercise of the Kalera Warrants in the near future, if at all. No assurances can be given that any Kalera Warrants will be exercised or that we will receive any cash proceeds upon such exercise if cashless exercise is available.
With respect to the registration of all Securities offered by the Selling Securityholders pursuant to this prospectus, the Selling Securityholders will pay any underwriting discounts and commissions and expenses incurred by them for brokerage, accounting, tax or legal services or any other expenses incurred by them in disposing of the Securities. We will bear all other costs, fees and expenses incurred in effecting the registration of the Securities covered by this prospectus, including, without limitation, all registration and filing fees, Nasdaq listing fees, and fees of our counsel and our independent registered public accountants.
In considering our capital requirements and sources of liquidity, we have not relied on the receipt of proceeds from the exercise of the Kalera Warrants. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” for more information.
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MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT’S SECURITIES AND
RELATED STOCKHOLDER MATTERS
Market Information and Holders
Kalera Ordinary Shares and the Kalera Warrants are currently listed on Nasdaq under the symbols KAL and KALWW, respectively.
On July 15, there were 4 holders of record of Kalera Ordinary Shares and 3 holders of record of Kalera Warrants.
The outstanding Ordinary Shares as of August 19, 2022, are as follows:
23,677,828 Ordinary Shares prior to any exercise of outstanding Kalera Warrants, Kalera Options or Armistice Warrants.
44,679,328 Ordinary Shares after giving effect to the exercise of all outstanding Kalera Warrants, Kalera Options and Armistice Warrants.
Dividend Policy
We have never declared or paid any cash dividends on our ordinary shares, and we do not currently intend to pay any cash dividends on our ordinary shares in the foreseeable future. We currently intend to retain all available funds and any future earnings to support operations and to finance the growth and development of our business. Any future determination to pay dividends will be made at the discretion of our board of directors subject to applicable laws and will depend upon, among other factors, our operating results, financial condition, contractual restrictions and capital requirements. Our future ability to pay cash dividends on our capital stock may be limited by any future debt instruments or preferred securities.
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INDUSTRY OVERVIEW
This section provides an overview of the industry in which Pubco currently operates. References in this section to “we,” “us” or “Kalera” refer to Kalera and its consolidated subsidiaries.
The United Nations forecasts that global food production will need to increase at least 70% by 2050 to feed the growing global population, far outstripping the growth in arable land given that 80% of arable land is already in use today and stretching the planet’s water resources even further. Climate change is redistributing water resources around the world, and traditional farming areas are being displaced. By producing products in tailored production facilities, vertical farming uses less water, grows plants faster, is not affected by seasonality, and yields significantly more crops per square foot than traditional farming methods. This benefits the environment - with lower water usage, no reliance on arable land, and lower carbon emissions as a result of growing crops closer to where they are consumed rather than having them transported - and also our health. The availability of clean water is shrinking due to a combination of environmental, industrial, political, and social factors. A big part of our growing water imbalance comes from traditional farming methods - it is estimated that 70% of the world’s total water withdrawals come from agriculture, and this increases up to 90% for developing nations. Our recirculated irrigation system consumes on average 95% less water than traditional field farming, helping to enable a more water sustainable future for food.
Vertical Farming Landscape
We mainly operate in the lettuce and chicory market. According to IndexBox, the global market volume for lettuce and chicory was around 27 million tons in 2017, exhibiting a stable average annual rate of increase of 1.2% between 2007 and 2017. The lettuce and chicory market is projected to continue its stable development, growing at over 1% per annum from 2019 to 2025, resulting in an estimated market volume of 29 million tons in 2025. The global lettuce and chicory market, excluding logistics costs, retail marketing costs and margins, amounted to over $30 billion in 2017, representing an increase of 16% against the preceding year.
Additionally, according to Research Nester, the United States microgreens market is projected to register a CAGR of 10.1% from 2020 to 2025. According to Research Nester, in terms of value, the U.S. microgreens market of $185 million forecasted in 2020 is projected to grow to $307 million by 2025. By sales channel, the restaurant market segment dominates the market owing to the fact that microgreens are likely to influence produce shopping requirements in the near future. Microgreens are increasingly being treated as a culinary trend across the country’s cuisines. The ongoing culinary trend for microgreen preference across United States cuisines together with the increasing supply to the hospitality market segment is likely to enhance the sale of microgreens in the future.
We believe that we are well positioned to take advantage of these macro- and micro-trends by building high-tech sustainable lettuce, microgreens and herb production capacity in the United States and internationally. We seek to expand in certain markets and communities that do not have accessibility to local and fresh produce. We believe that our revenue growth will allow us to capture an increased share of the broader U.S. lettuce and chicory and microgreens categories. This is supported by a number of key drivers, including the growing mainstream acceptance of our products, heightened consumer awareness of the role that food and nutrition play in long-term health and wellness, and increasing awareness of the reduced negative impact that vertical farming has on the environment as compared to traditional farming.
Geographically, we primarily operate in the US, which is the world’s second largest producer of lettuce with approximately 8.6 billion heads of lettuce produced in 2020 according to the United States Department of Agriculture (USDA). The US lettuce production is concentrated around Arizona and California. Hence, supply to many of the largest US cities implies transportation, often by trucks, which increases costs and results in average spoilage of over 20%, according to the USDA. Today, shipping to the East Coast of the US translates to a $6-8/case transportation cost for California and Arizona-sourced produce. Depending on variety and packaging, transportation costs can average between $0.3-0.6/lbs. By deploying our production facilities close to our markets, we can significantly reduce transportation costs. In addition, earlier store arrival of our products adds approximately ten to 14 days longer shelf life than traditional farmed products, providing significant potential to reduce costs from waste.
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We focus our product varieties on the leafy and romaine lettuce market and not traditional head (Iceberg) lettuce. According to the USDA, in 2020, leafy and romaine lettuce production totaled approximately 4.6 billion heads - approximately the same as traditional head (Iceberg) lettuce volume. Produce attributes, such as higher nutrition and more prominent taste, as well as consumer awareness, has resulted in leafy and romaine lettuce steadily taking market share from traditional head lettuce.
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INFORMATION ABOUT KALERA
Shareholders should read this section in conjunction with the more detailed information about Kalera contained in this prospectus, including Kalera’s audited and unaudited financial statements and the other information appearing in the section titled “Management’s Discussion & Analysis of Financial Condition and Results of Operations.” In this section, references to “we,” “us,” “Kalera” and “our” are intended to refer to Kalera and its consolidated subsidiaries.
Overview
Kalera is a leading vertical farming company. We utilize proprietary technology and plant and seed science to sustainably grow local, delicious, nutrient-rich, pesticide-free, non-GMO leafy greens year-round. In contrast to produce that requires costly and extended long-haul supply chains, our leafy greens are delivered within hours of harvesting, always fresh, and maintain a longer shelf life. Our high-yield, automated, data-driven hydroponic production facilities have been designed for rapid roll-out with attractive unit economics to grow leafy greens faster, cleaner and in a manner that is better for the environment than traditional farming. Given our cost-efficient production process from seed to harvest and capital discipline, we are able to sell our “better than organic” produce at competitive prices. With our mission to serve humanity, wherever we are, fresh, safe, sustainable and affordable nourishment, we aim to become a global leader in controlled-environment agriculture (“CEA”) for leafy greens addressing an estimated $50 billion addressable market opportunity for vertical farming products. As of December 31, 2021, Kalera’s market share was estimated at about 0.01%. For more information, see “Risks Relating to Kalera’s Business and the Industry in Which it Operates-Kalera lacks useful financial information for the accurate estimation of its future capital expenditures and unit economics” and “Risks Relating to Kalera’s Business and the Industry in Which it Operates-Kalera is an early stage company with a history of losses and expects to continue to incur losses going forward” for more information.
We currently have four large-scale facilities operating in the US in Orlando, Atlanta, Houston and Denver, and one in Kuwait through our October 2021 acquisition of vertical farming company &ever. Additionally, we have five farms in development in Seattle, Honolulu, St. Paul, Columbus and Singapore. Our indoor production facilities are strategically located proximate to population and distribution centers, including markets isolated from farmland that have traditionally struggled to secure local and reliable sources of food. Given our expanding facility footprint, we expect to be the first truly pan-US vertical farming company able to serve both regional and national accounts. In addition, our acquisition of &ever has allowed us to establish beachheads in attractive international markets for vertical farming. Our sustainably grown and locally sourced high quality leafy greens, marketed under our Kalera brand, appeal to a broad range of customers across the foodservice, grocery, resort, hospitality, cruise line, airline and restaurant industries. Our key customers include US Foods, Gordon Food Service, Harvill’s Produce, Marriott, Levy, FreshPoint (a Sysco company), Publix, Kroger, H-E-B, Walmart, Disney and Universal Studios.
Our facilities are designed to achieve strong unit economics driven by our proprietary technology to optimize yields and our cost and investment discipline. Our vertically integrated platform and innovative production methods facilitate precise control of seed development, nutrients and environmental variables to accelerate grow cycles and generate high yields of leafy greens per square foot. We use certain standardized equipment to avoid costly over-engineering, adhering to an ROI-driven approach to automation that instills discipline with respect to capital investment. We prioritize utilizing existing warehouses that we retrofit and lease or purchase and our highly customizable growing layouts, modular and replicable structural designs minimize costs while affording us rapid scaling capabilities. As a consequence, we believe we are one of the leaders in vertical farming in terms of yield and capital expenditures per square foot and the first and only one to be vertically integrated from seed to harvest. Underpinning our innovative production process are our proprietary plant and seed science, production system automation, and our Internet of Things (“IoT”), big data and AI capabilities that we have perfected through over 12 years of research and development and have been complemented by the acquisitions of Vindara and &ever. Our technology allows us to optimize nutrient mixtures, light recipes, temperature and humidity, resulting in nutrient- dense greens with consistent high quality year-round. Our clean room technology includes advanced air and water filtration and decontamination adapted from semiconductor and biomedical industries. We also utilize cultivation methods that avoid contamination of hardware, seeds, and media. As a result, we are able to eliminate the use of
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harmful chemicals and pesticides from our production process to generate consistent, high yields of pristine, crisp, flavorful, and nutritious produce.
By the nature of our business, we have a strong ESG profile. We are at the forefront of CEA, which is transforming produce farming, addressing mounting global challenges with regard to water stress, arable land erosion, fresh produce availability, quality and safety, and the climate impact of traditional, long-distance perishable food supply chains. Our hydroponic facilities produce several hundred times more output per square foot than traditional farming, use 99% less land and without seasonal and regional limitations. In addition, our advanced recirculated irrigation systems consume on average 95% less water than traditional field farming and with significantly reduced risk of environmentally harmful runoffs. Our advanced plant and seed science and cleanroom technology ensure that our produce is free of contamination and bacteria, including human pathogens, without the use of harmful chemicals and pesticides. We are committed to developing ESG indicator tracking and reporting processes and systems, in accordance to accepted reporting standards. As our expanding list of production facilities becomes fully operational, data collection will expand in support of ESG KPI reporting. We believe that vertical farming will be a major contributor towards a more sustainable future and we aim to be a global leader in that endeavor.
Our first large-scale operating facility in Orlando has a production capacity of approximately 0.8 million lbs. per year, our other large-scale operating facilities in Atlanta and Houston each have a production capacity of approximately 2.6 and 3.3 million lbs. per year, respectively, and our large-scale operating facility in Denver has a production capacity of approximately 2.9 million lbs. of leafy greens and 50 thousand lbs. of microgreens per year. Going forward, we intend to continue to invest in the construction of new facilities, plant and seed science, operational improvements and technology for CEA as we believe demand for our products will continue to accelerate across our distribution channels.
Kalera Hydroponics
Hydroponics is a soil-less method of growing plants using mineral nutrients dissolved in water. If a plant is given exactly what it needs, when it needs it, and in the amount that it needs, the plant should be as healthy as is genetically possible and can be grown in a very efficient way. There are several benefits of our use of hydroponics compared to traditional farming, with a high degree of sustainability and resource efficiency, summarized as follows:
Clean and safe
Free of contamination and bacteria: E-coli outbreaks have been linked to traditional romaine lettuce growers
No harmful chemicals, hormones, additives, pesticides, fungicides or insecticides
Non-GMO seeds
Healthy
Consistent quality, rich in minerals, vitamins and antioxidants
Avoids the loss of nutritional value found with traditional (US West Coast grown) fresh produce, which can be significant for certain nutritive elements
Sustainable
Produced locally and safe, reducing transportation emissions and extending shelf-life ten to 14 days
Approximately 95% reduction in water consumption and 99% less land
No seasons
Reducing unpredictability from changing climates, product becomes available 365 days a year
Product categories by choice, not by market availability or seasonality
Space efficient
Significantly better yields due to growth environment and vertical distribution
Several hundred times more output per square foot than traditional farming
Branding potential
Product seen by us as “better than organic” which increases our ability to develop strong customer engagement
A notable advantage of hydroponics compared to field grown produce is the isolation of the crop from the soil, which often introduces problems such as diseases, pests, salinity, poor structure and/or drainage. Furthermore, all our hydroponic systems are enclosed to provide temperature control, reduce evaporative water loss, and to reduce disease and pest infestations.
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Industry and Market Opportunity
The United Nations forecasts that global food production will need to increase at least 70% by 2050 to feed the growing global population, far outstripping the growth in arable land given that 80% of arable land is already in use today and stretching the planet’s water resources even further. Climate change is redistributing water resources around the world, and traditional farming areas are being displaced. By producing products in tailored production facilities, vertical farming uses less water, grows plants faster, is not affected by seasonality, and yields significantly more crops per square foot than traditional farming methods. This benefits the environment - with lower water usage, no reliance on arable land, and lower carbon emissions as a result of growing crops closer to where they are consumed rather than having them transported - and also our health. The availability of clean water is shrinking due to a combination of environmental, industrial, political, and social factors. A big part of our growing water imbalance comes from traditional farming methods - it is estimated that 70% of the world’s total water withdrawals come from agriculture, and this increases up to 90% for developing nations. Our recirculated irrigation system consumes on average 95% less water than traditional field farming, helping to enable a more water sustainable future for food.
We mainly operate in the lettuce and chicory market. According to IndexBox, the global market volume for lettuce and chicory was around 27 million tons in 2017, exhibiting a stable average annual rate of increase of 1.2% between 2007 and 2017. The lettuce and chicory market is projected to continue its stable development, growing at over 1% per annum from 2019 to 2025, resulting in an estimated market volume of 29 million tons in 2025. The global lettuce and chicory market, excluding logistics costs, retail marketing costs and margins, amounted to over $30 billion in 2017, representing an increase of 16% against the preceding year.
Additionally, according to Research Nester, the United States microgreens market is projected to register a CAGR of 10.1% from 2020 to 2025, and, in terms of value, the U.S. microgreens market of $185 million forecasted in 2020 is projected to grow to $307 million by 2025. By sales channel, the restaurant market segment dominates the market because microgreens are likely to influence produce shopping requirements in the near future. Microgreens are increasingly being treated as a culinary trend across the country’s cuisines. The ongoing culinary trend for microgreen preference across United States cuisines together with the increasing supply to the hospitality market segment is likely to enhance the sale of microgreens in the future.
We believe that we are well positioned to take advantage of these macro- and micro-trends by building high-tech sustainable lettuce, microgreens and herb production capacity in the United States and internationally. We seek to expand in certain markets and communities that do not have accessibility to local and fresh produce. We believe that our revenue growth will allow us to capture an increased share of the broader U.S. lettuce and chicory and microgreens categories. This is supported by a number of key drivers, including the growing mainstream acceptance of our products, heightened consumer awareness of the role that food and nutrition play in long-term health and wellness, and increasing awareness of the reduced negative impact that vertical farming has on the environment as compared to traditional farming.
Geographically, we primarily operate in the US, which is the world’s second largest producer of lettuce with approximately 8.6 billion heads of lettuce produced in 2020 according to the United States Department of Agriculture (USDA). United States lettuce production is concentrated around Arizona and California. Hence, supply to many of the largest US cities implies transportation, often by trucks, which increases costs and results in average spoilage of over 20%, according to the USDA. Today, shipping to the East Coast of the US translates to a $6-8/case transportation cost for California and Arizona-sourced produce. Depending on variety and packaging, transportation costs can average between $0.3-0.6/lbs. By deploying our production facilities close to our markets, we can significantly reduce transportation costs. In addition, earlier store arrival of our products adds approximately ten to 14 days longer shelf life than traditional farmed products, providing significant potential to reduce costs from waste.
We focus our product varieties on the leafy and romaine lettuce market and not traditional head (Iceberg) lettuce. According to the USDA, in 2020, leafy and romaine lettuce production totaled approximately 4.6 billion heads - approximately the same as traditional head (Iceberg) lettuce volume. Produce attributes, such as higher nutrition and more prominent taste, as well as consumer awareness, has resulted in leafy and romaine lettuce steadily taking market share from traditional head lettuce.
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Our Strengths and Competitive Advantages
We believe that the following strengths and competitive advantages position us to generate significant growth and pursue our objective to become the leader in CEA for leafy greens.
Portfolio of Fresh, Great-tasting, Healthy and Sustainable Products Supported by a Leading Technology Stack
We sustainably grow premium, fresh, clean, nutrient-rich leafy greens that are sold at competitive prices. We produce various types of lettuces, baby leaves, microgreens, and other leafy greens and herbs that are grown from non-GMO seeds and are marketed as “better than organic” as some organic produce may use small amounts of pesticides. Due to our meticulous and clean approach to growing, our product is safer, tastier, richer in minerals, vitamins and other beneficial nutrients than conventionally farmed produce. For example, our unique “Local Living Lettuce” is harvested with its root ball intact and remains alive until the buyer twists off its roots resulting in a great tasting and nutrient dense product. Important from a sustainability standpoint, our products have a longer shelf life than traditional farmed produce, and combined with earlier store arrival, this provides significant potential to reduce the cost and environmental damage generated from food waste.
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Underpinning our ability to produce high quality greens in a sustainable manner is our proprietary plant and seed science, production process automation, clean room technology adapted from semiconductor and biomedical industries, and our IoT, big data and AI capabilities that we have perfected through over 12 years of research and development. The acquisitions of Vindara and &ever have further bolstered our technology stack from seed to harvest. Our technology allows us to optimize seed development, nutrient mixtures, light recipes, and temperature and humidity controls resulting in accelerated grow cycles and highly nutritious greens with consistent high quality year-round. We currently have custom optimized recipes for over 150 produce varieties. Our plant and seed science and engineering know-how are protected or in process thereof by a portfolio of 43 granted, 10 published and 38 pending patents.
Scalable Business Model Accessing Local Markets with a Global Footprint
We have a proven approach to rolling out new large-scale vertical farming facilities in retrofitted, leased or purchased warehouses with an expected construction time of under one year. With established supply chains for key technology and equipment, modular designs based on components that can be reused in various configurations and pre-tested software, we can efficiently replicate facility design and processes. This gives us visibility with respect to expected capital expenditures and timing involved for a new facility roll-out.
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Our indoor production facilities are strategically situated close to our target markets which allow us to significantly reduce the length of time and costs inherent in the conventional produce value chain. This enables our produce to be sold to the consumer within hours of harvest, as opposed to over two weeks that is typical of conventionally farmed products that may need to travel thousands of miles before arriving in the hands of the final consumer. With our expanding facility footprint, we expect to be the first truly pan-US vertical farming company able to serve both regional and national accounts. In addition, our acquisition of &ever has allowed us to establish beachheads in attractive global markets like Kuwait and Singapore. Our largest and most recently opened production facilities in Atlanta and Houston continue to operate reliably and are on track to meet production capacity targets and throughput yields.
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Large and Actionable Pipeline of New Facilities
Our intention is to have eight large-scale operating facilities in operation by the end of 2022 under a well-defined roll-out schedule. We intend to place our facilities in locations that are close to population and distribution centers, including areas isolated from farmland (such as islands) so that communities without access to local, fresh produce will be able to enjoy a stable year-round supply of leafy greens. In addition to plans to unlock additional capacity domestically, we aim to open facilities outside the US, including our large-scale Singapore facility which is currently under construction and expected to open in the first half of 2022, to enable us to supply regional, national and global customers. As we continue to open our facilities, expand our footprint and bolster our customer relationships, we expect to be able to decrease the duration of a facility’s full sales ramp.
Compelling Economic Profile
Our facilities are designed to achieve strong unit economics driven by our proprietary technology to optimize yields and our cost and capital expenditure discipline. Our innovative production methods facilitate precise control of nutrients and environmental variables to generate higher yields of leafy greens per square foot. We have carefully standardized the specifications of key equipment to avoid costly over-engineering. We prioritize utilization of existing warehouses that we retrofit and lease and our highly customizable growing layouts, modular and replicable structural designs minimize costs while affording us rapid scaling capabilities. We adhere to an ROI-driven approach to automation that focuses on automating the most-labor intensive operations first and only after a careful cost-benefit analysis, while still leveraging our existing technology to the fullest extent. As a consequence, we believe we are one of the leaders in vertical farming in terms of yield (lbs. of production output per square foot) and capital expenditures per lb. of annual output.
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Furthermore, we expect the acquisitions of Vindara and &ever to be accretive to our unit economics beginning in 2022 by significantly increasing the output from our current and future facilities by reducing the grow cycle and increasing yields, in addition to additional revenue streams from the sale of customized seeds and baby leaf products. While we already have advanced operating systems in place, the acquisition of Vindara allows us to improve our products and capabilities, not through complex technical changes but through the input-the seeds. Vindara’s seeds are better suited to our growing environments and generate substantially better results with amplified appearance, nutrition, flavor, and increased yields.
World Class Leadership Team Fully Committed to the Highest ESG Standards
We are led by a proven and experienced executive management team with global experience that are poised to accelerate US and international growth at Kalera in the coming years. Our highly experienced corporate and facility management team has more than 175 years of combined management experience. This includes 20 years of combined senior level experience managing supply chains, sales, marketing and operations in the food industry, and 12 years of sustainable agriculture experience. We have also assembled a world-class CEA operations team that is complemented by our experienced executives. The team’s experience, focus and enthusiasm for our mission is the foundation for the growth and success of the Company.
Sound environmental and sustainability practices are core to who we are at Kalera. We believe that vertical farming will be a major contributor towards a more sustainable future and we aim to be a global leader in that endeavor. We are committed to developing ESG indicator tracking and reporting processes and systems, in accordance to accepted reporting standards. As our expanding list of production facilities becomes fully operational, data collection will expand in support of ESG KPI reporting.
Our Strategies
We intend to achieve our growth plan and build sustainable competitive advantages through the following strategies:
Roll-out of New Production Facilities in the United States and Internationally
We are committed to prioritizing investment in our infrastructure and capabilities in order to support our strategic expansion plans so we can capture as much of the $30 billion total global addressable market opportunity for lettuce and chicory as possible. After the success of the Orlando, Atlanta, and Houston large-scale facilities, we opened a new large-scale facility in Denver in April 2022, and we plan to open two additional large-scale facilities across the US in 2022 in Seattle and St. Paul, and one large-scale facility internationally in Singapore. Our intention is to have eight large-scale operating facilities in operation globally by the end of 2022 and we expect our network of facilities to become more dense as demand for our products grows.
Staying at the Forefront of Plant and Seed Science and Technology
We spent more than 12 years perfecting our plant and seed science so that our produce is great tasting, healthy and sustainable. As of the date of this prospectus, we believe that we are one of the most advanced CEA companies. We believe that our focus on continuous improvement to further enhance our nutrient management algorithms, light recipes, product varieties, and expertise will allow us to continue to maintain competitive advantages in the sector. In addition, we believe inorganic initiatives, such as acquisitions, will provide further opportunities to bolster our capabilities. For example, in March 2021 Kalera completed the acquisition of Vindara, which was the first company to develop seeds specifically designed for use in vertical indoor farm environments as well as other CEA farming methods. Vindara seeds offer growers the opportunity to capitalize on significantly higher yield potential, production efficiencies and product customization in a fraction of the time through reducing the grow cycle. Vindara’s breeding process shortens development time from the usual five to seven years to just one to one-and-a-half years and shaves several days off of the plant grow cycle, resulting in increased output and optimizing yield and profitability. As a result, we expect Kalera’s growth rates, yields and seed costs will improve as Vindara’s seed technology is implemented.
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Expansion of Product Lines
We intend to strengthen our product offerings by improving the formulations of our existing portfolio of products and by creating new products that expand our portfolio. We are continuously refining our products to improve their color, texture, flavor, firmness and nutritional value and testing new produce varieties and recipes to enhance all the benefits of our products. In addition, we believe we can further differentiate ourselves in the sector by growing custom plants that are unique to each customer.
Our acquisition of Vindara is also expected to accelerate our product development both within our existing market segment as well as in other lettuce and leafy greens varieties including high yield basil and spinach, and in entirely new categories such as strawberries. Vindara has already demonstrated substantial yield improvements in indoor-grown Romaine, with more varieties and crops in the pipeline. The acquisition of Vindara also gives us the option of generating value through the development of custom seed for the indoor farming industry at large, eliminating the limitations of traditional seeds and providing customers greater control over their produce. In addition, our acquisition of vertical farming company &ever will allow us to develop our baby leaf products including spinach, arugula, kale, pak choi, mesclun and mustard, among others. Combined with Vindara seed technology, we believe we are a worldwide leader in the vertical farming industry with global reach and an international brand.
Partnerships and Acquisitions
We are constantly reviewing opportunities for partnerships and acquisitions. Driven by the successful transaction with Vindara to accelerate development of seeds internally and for the Agtech industry, and our acquisition of &ever, we continue to evaluate opportunities to acquire companies with unique technologies to improve our portfolio of precision agriculture products and capabilities.
We have spent years perfecting and fine-tuning our technology to position the Company as one of the industry leaders in CEA and development of advanced technology for food production. Driven by all internal research initiatives, we also collaborate with leading academic and research institutions in plant science for specific niche projects within advanced agriculture techniques. As we accelerate our growth over the next few years, we will seek continue to develop such strategic relationships and projects related to enhancing and expanding our capabilities and development of technologies for indoor farming.
Our Products
We produce various types of lettuces, baby leaves, microgreens, and other leafy greens and herbs. These products are grown from non-GMO seeds and are marketed as “better than organic” as traditional organic produce may use small amounts of pesticides. Our flagship product is Kalera Krunch, and we also sell other kinds of lettuce such as Butter Lettuce, Red Oak Leaf, Baby Romaine, and Frisée. Our products are excellent sources of several beneficial minerals such as potassium, calcium, phosphorous, and magnesium and are packed with vitamins A, C, and K, folates, phenols, and antioxidants. We also grow specialized microgreens from non-GMO seeds. These microgreens are delicate, colorful, and tasty, and include, cilantro, red sorrel, pea shoots and basil.
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Our Facilities
In 2021, we expanded our operations through our acquisition of &ever and our announcements of additional production facilities from our existing operating facilities in Orlando (Florida), Atlanta (Georgia) and Houston (Texas), with our expansion to Denver (Colorado) in April 2022, and planned expansion to Honolulu (Hawaii), Seattle (Washington), Columbus (Ohio), and St Paul (Minnesota). These facilities will make us the first pan-US vertical farming company with an ability to serve customers at the regional and national level. Other than the HyCube facility, which we own (except for the land on which it is located), all of the buildings for the current and new production facilities are leased pursuant to long-term lease agreements with an average of ten years with an
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option to extend these up to an additional ten years. Through our acquisition of &ever, we also operate a farm in Kuwait and have one farm under construction in Singapore. Our production facilities in operation and under construction are depicted below:
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Orlando Facility
Driven by the success of the HyCube system discussed below, we started construction of our first large-scale facility by retrofitting an existing warehouse in Orlando in July 2019. The Orlando facility was completed in early 2020 and started farming operations in February 2020. This was the first time a vertical farm was completed in less than nine months while having a total production capacity of approximately 0.8 million lbs. per year, which was a record for the vertical farming industry. The Orlando facility has received much attention from both local and national dignitaries, including a visit from U.S. Secretary of Agriculture, Sonny Perdue in June 2020.
Atlanta Facility
Having successfully opened the Orlando facility in February 2020, we announced in April 2020 that we would open a new state-of-the-art farming facility in Atlanta, Georgia. The Atlanta facility complements our domestic and international expansion plan focused on growing an abundance of leafy greens in close proximity to our consumers. We began construction in 2020 and the facility began farming operations in March 2021 with total capacity of approximately 2.6 million lbs. per year. Atlanta is our third largest operating facility as of the date of this prospectus.
Houston Facility
Construction began on our Houston facility in July 2020 and was completed in the third quarter of 2021. Houston is currently our largest facility with a total capacity of 3.3 million lbs. per year. The Houston facility is focused on production and growing enhancements, including latest generation of lighting, improved airflow, and increased automation of the production lines meant to increase yield and efficiency.
Denver Facility
We announced our plan to open a facility in Denver, Colorado in October 2020. Construction on the nearly 90,000-square-foot facility was completed and the facility officially started operations in April 2022. The Denver facility, with the addition of microgreens, allows us to expand our portfolio beyond full head and cut leaf to better serve our customers with clean, nutrition-dense leafy greens. This large-scale facility uses cutting edge technology and has a production capacity of approximately 2.9 million lbs. of leafy greens and 50 thousand lbs. of microgreens per year. This facility will generate more than 60 employment opportunities for the local community.
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Kuwait City Facility
Our facility located in Kuwait City, Kuwait, which was acquired as part of the &ever acquisition, was a partnership with NOX Management, an investment arm of IFA Group which owns food markets, restaurant chains, retail chains, and food distributors. The Kuwait City facility started operations in March 2020, with ramp-up resuming in October 2021 after Kuwait’s international travel ban had been lifted, and has a total capacity of approximately 280 thousand lbs. of baby leaf products per year. As part of the &ever acquisition agreement, the Company was granted an option to acquire 100% of the joint venture in the future, and the Company exercised that option on October 13, 2021.
Orlando Headquarters and R&D Center
Our corporate headquarters and R&D center are located at 7455 Emerald Dunes Drive, Suite 2100, Orlando FL 32822, where we occupy a newly retrofitted space of approximately 19,000 square feet of office, laboratory, and warehouse. The R&D center includes multiple climate controlled research grow rooms, laboratories and other additional dedicated areas.
HyCube at Orlando World Center Marriott
We decided in 2016 to expand into commercial operations by partnering with Marriott Hotels at their Orlando World Center Marriott, a hotel and convention center near Orlando and which it is now the largest Marriott in the world with 2,008 rooms, 28-story building, houses Hawk’s Landing Golf Center and the Marriott Vacation Club resorts of Marriott’s Sabal Palms, Marriott’s Royal Palms, and Marriott’s Imperial Palm Villages. The 200-acre resort property is home to our HyCube, a small-scale hydroponic farming facility that can produce up to 90,000 lbs. per year which are sold to Marriott which then serves them in the resorts’ restaurants. We continue to operate this facility and it has become an icon for our marketing efforts due to its modern visual appearance in addition to its value proposition of supplying guests with fresh, on-site grown greens that are served within hours of harvesting.
New Facilities
New facilities that will open in 2022 and 2024 will allow us to continue extending our geographic footprint in order to serve regional and national customers. These include Seattle (Washington), Columbus (Ohio), Honolulu (Hawaii), St Paul (Minnesota) and Singapore.
Our Proprietary Technology Platform
Our hydroponic production systems and processes have been developed over 12 years in several areas: advanced plant and seed science, clean room technologies and procedures, and precision hydroponics through data science and distributed control systems.
Over the years we have developed and continue to perfect optimized hydroponic nutrient solution formulations and methods for controlling their balance throughout the growing cycle. In a closed irrigation and fertilization system like ours, the perfect balance of nutrients in an optimized formulation degrades progressively throughout the grow cycle due to differing rates of nutrient uptake for the various essential elements present in the liquid. As a consequence, many closed-system hydroponics operators simply dump the unbalanced nutrient solution and start with a fresh solution for each batch. This traditional approach has two major drawbacks: first, the nutrient solution is perfectly balanced only at the beginning of the grow cycle, leading to lower marketable yields; and second, it has a greater environmental impact from both higher water usage and from nutrient-rich effluents ending up in the water table. By contrast, our approach overcomes these drawbacks by implementing an element-specific monitoring program in which the concentration of fourteen individual essential elements is tracked during the grow cycle using ion-specific measurements, followed by adjustments of individual element concentrations in order to maintain an optimal nutrient balance at all times. Using this approach, we avoid runoffs of nutrient rich liquid to the water table, while maintaining optimal control of the nutrient solution balance. We have also designed proprietary nutrient distribution systems, certain aspects of which are protected by one US patent.
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An additional objective of our plant and seed science work is the enhancement of the nutritive value of our produce for the benefit of the consumer. For example, we have conducted research in collaboration with University of Florida resulting in optimized light recipes leading to significantly higher levels of antioxidants in red leaf lettuce, and anthocyanins, compounds in plants that may offer health-promoting benefits by protecting cells from free radicals.
With the recent acquisition of Vindara, we have added the ability to develop seeds optimized for CEA, without the use of genetic editing or modification. Vindara’s big data analytics and machine learning approach allows for the accelerated development of plant varieties optimized not only for yield, but also targeting certain taste, color, shape and texture characteristics demanded by the market. With Vindara, we have the ability to create customer-defined varieties. This capability is currently unique in CEA, and we are at the leading edge of addressing the plant genetics optimization aspects of precision agriculture without the use of gene editing or genetic modification.
Additionally, with the recent acquisition of &ever, we have expanded our technology base, patents and IP - especially in advanced production process automation and optimized grow media, management team, and customer base. This acquisition also allows Kalera to offer a broad range of products in the industry, including: whole head, teen and baby leaf, cut leaf, and microgreens.
We have selected and adapted clean room technologies and procedures from the semiconductor and biomedical industries for use in vertical farming, including air and water filtration and decontamination, surface sanitation, and cleaning in place of irrigation piping. We use nanofiltration and advanced oxidization technologies, and residual free sanitation to achieve these goals. Access to production, harvest and post-harvest areas is highly controlled: personnel must wear protective clothing, hair covers, beard nets, and gloves and sanitized shoes. Incoming materials and supplies are sanitized prior to being introduced to the protected environment. By relying on this multi-faceted approach, we are able to eliminate the use of pesticides, as well as eliminate sources of human pathogen contamination such as E-Coli.
We have developed the HyCubeOS, an advanced distributed automation and process data collection system based on a hybrid Cloud architecture, and on IoT sensors. Essential plant growing variables (temperature, humidity, carbon dioxide levels, lights, nutrients, and maintenance events) are under strict control and monitored around the clock over the internet. Compared to most existing commercial systems that cannot meet precise vertical farming parameters, our system integrates large arrays of IoT sensors (as opposed to a few centralized sensors), uses adaptive ion-specific nutrient dosing controls (as opposed to traditional controls using global measures of nutrient concentrations), and is deployed via a distributed, resilient and scalable cluster-based hybrid Cloud architecture (as opposed to traditional centralized process control systems). Unlike most IoT-based sensing applications, which tend to send the sensor data directly to the Cloud for further processing, we have implemented an IoT architecture that leverages edge computers as well as the Cloud. Our approach sidesteps the latency issues specific to device-to-Cloud communications and is more robust with respect to data security. We have designed our own IoT sensors for collecting climate and carbon dioxide level data and our own edge computers, together with the software that controls them, such that we do not need to rely on external suppliers of such systems.
We are integrating the HyCubeOS with our Enterprise Resource Planning (“ERP”) system via a data warehouse. While the HyCubeOS records and controls production process inputs, the ERP system tracks process, the ERP system tracks process outputs, i.e., production yields. By integrating the HyCubeOS with the ERP system,
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we are creating a Machine Learning platform for predictive analytics, outlier detection, and complex data visualization.
https://cdn.kscope.io/2b141e98322f3cee444c983edacf2662-kal-20220819_g5.jpg
Regulatory Environment
We are subject to extensive laws and regulations in the US administered by various federal, state and local government agencies in the United States, such as the FDA, the Federal Trade Commission (the “FTC”), the Environmental Protection Agency (the “EPA”), the Occupational Safety and Health Administration (“OSHA”), and the U.S. Department of Agriculture. These laws and regulations apply to the processing, packaging, distribution, sale, marketing, labeling, quality, safety, and transportation of our products, as well as our occupational safety and health practices. Under various federal statutes and implementing regulations, these agencies, among other things, prescribe the requirements and establish the standards for quality and safety and regulate our products and the manufacturing, labeling, marketing, promotion, and advertising thereof.
Among other regulatory requirements, the facilities in which our products are grown, packed or processed may be required to register with the FDA (depending on specific growing, packing, and processing operations), comply with regulatory schemes including Standards for the Growing, Harvesting, Packing, and Holding of Produce for Human Consumption (the “Produce Safety Rule”), Current Good Manufacturing Practices (“GMPs”), Hazard Analysis, and Risk-Based Preventive Controls for Human Food (the “Preventive Controls Rule”) and FDA and USDA labeling and marketing requirements, as amended by the Food Safety Modernization Act of 2011 (“FSMA”), the Organic Food Production Act, among other laws and regulations implemented by the FDA, the USDA, and other regulators. FSMA regulations are still being developed and implemented, including product traceability requirements recently proposed, which would be directly applicable to our products. The FDA and the USDA have the authority to inspect facilities depending on the type of product and operations involved. The FDA and the USDA also require that certain nutrition and product information appear on product labels and, more generally, that labels and labeling be truthful and non-misleading. Similarly, the FTC requires that our marketing and advertising be truthful, non-misleading, not deceptive to consumers, and not otherwise an unfair means of competition. We are also restricted by FDA and USDA from making certain types of claims about our products, including nutrient content claims, health claims, organic claims, and claims regarding the effects of our products on any structure or function of the body, whether express or implied, unless we satisfy certain regulatory requirements. We are also subject to parallel state and local food safety regulation, including registration and licensing requirements for our facilities, enforcement of standards for our products and facilities by state and local health agencies, and regulation of our trade practices in connection with selling our products.
In addition to federal regulatory requirements in the United States, certain states impose their own manufacturing and labeling requirements. For example, every state in which our products are manufactured requires facility registration with the relevant state food safety agency, and those facilities are subject to state inspection as well as federal inspection. Further, states can impose state-specific labeling requirements.
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We are also subject to labor and employment laws, laws governing advertising, privacy laws, safety regulations and other laws, including consumer protection regulations that regulate retailers or govern the promotion and sale of merchandise. Our operations, and those of our distributors and suppliers, are subject to various laws and regulations relating to environmental protection and worker health and safety matters. Further, when we start operating or selling internationally, we will be subject to the regulatory agencies and requirements of the relevant countries.
Competitive Landscape
We operate in the highly competitive organic and natural foods market segment. Our competition includes large-scale conventional operations both domestically and internationally. In this market, competitive positioning is based on, among other things, product quality, brand recognition and loyalty, product variety, taste, product packaging and package design, shelf space, reputation, price, promotion and nutritional claims.
We are able to compete successfully with imported goods, including from Canada and Mexico with high quality produce that addresses U.S. consumer preferences for higher quality, improved product safety, year-round availability, and product innovation at reasonable prices. We also face competition from domestic and international greenhouse operators, as well as from other emerging high-tech agricultural startups such as vertical farms. Vertical farming has received increased interest in recent years with several competitors emerging. Some of our key competitors include, but are not limited to, AeroFarms, Bowery Farming, Infarm, Plenty, and Spread.
Employees
As of December 31, 2021, we had approximately 438 full-time employees. We have never experienced a labor-related work stoppage. We consider our relations with our employees to be very strong. Moving forward, we expect to employ approximately 60 employees for each new standard facility that we put in operation.
We are a technology-driven company, but people will always remain at the heart of our purpose and practices. Our culture is based on empowering people to play a key role in accelerating innovation and cooperation in the work environment. Our model is built on entrusting our teams at each facility and location to shape a worldwide organization. Our core values are: “Do the Right Thing, Always!”, “Own it, All of It!”, and “Grow the Future!”. We implemented these core values to help foster an ownership and responsibility oriented culture. We also implemented a number of policies including diversity, equality, cooperation, and dignity in the work place. With the hiring of our Head of Human Resources, we implemented these core values during 2020 so that every employee embraces our culture and values at the time of joining Kalera.
Intellectual Property Rights
Our intellectual property mainly relates to production processes and methods, plant nutrient mixture formulas, custom hardware and software code as well as our trademarks and is an inherent part of our business strategy. The U.S. Patents and Trademark Office issued a patent on November 24, 2020 for our application “Hydroponics Apparatus, System and Method”. The German Patent and Trademark Office issued a patent on January 18, 2018 to &ever GmbH (f/k/a Farmers Cut GmbH) titled “Climatically Sealed Climate Cell for Cultivating Plants Indoors”. Kalera (including through its acquisition of &ever GmbH) and Vindara currently have applications for 16 patent families. Our main trademarks are “Kalera”, “HyCube”, “HyTaste” and “Pick-to-Plate”. We believe our success depends, at least in part, on our ability to further develop and protect our intellectual property and we rely on a combination of patents, trade secrets and know-how which are protected through limiting access to key information, confidentiality provisions in agreements, confidentiality procedures and IT security. We have 43 granted patents throughout the United States, Europe, Turkey, Hong Kong and Australia. These granted patents will expire between 2036 and 2038. We also have 10 published patents in the United States, Europe, Canada, China and the Republic of Korea. Further, we have 38 pending patent applications throughout Europe and Asia.
Research and Development
We perform internal R&D activities to perfect our nutrient, light, and environment recipes for all varieties growing in our system. We also have research initiatives for trialing plant varieties suitable or optimized for our We are also subject to labor and employment laws, laws governing advertising, privacy laws, safety regulations and
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other laws, including consumer protection regulations that regulate retailers or govern the promotion and sale of merchandise. Our operations, and those of our distributors and suppliers, are subject to various laws and regulations relating to environmental protection and worker health and safety matters. Further, when we start operating or selling internationally, we will be subject to the regulatory agencies and requirements of the relevant countries.
Competitive Landscape
We operate in the highly competitive organic and natural foods market segment. Our competition includes large-scale conventional operations both domestically and internationally. In this market, competitive positioning is based on, among other things, product quality, brand recognition and loyalty, product variety, taste, product packaging and package design, shelf space, reputation, price, promotion and nutritional claims.
We are able to compete successfully with imported goods, including from Canada and Mexico with high quality produce that addresses U.S. consumer preferences for higher quality, improved product safety, year-round availability, and product innovation at reasonable prices. We also face competition from domestic and international greenhouse operators, as well as from other emerging high-tech agricultural startups such as vertical farms. Vertical farming has received increased interest in recent years with several competitors emerging. Some of our key competitors include, but are not limited to, AeroFarms, Bowery Farming, Infarm, Plenty, and Spread.
Employees
As of December 31, 2021, we had approximately 438 full-time employees. We have never experienced a labor-related work stoppage. We consider our relations with our employees to be very strong. Moving forward, we expect to employ approximately 60 employees for each new standard facility that we put in operation.
We are a technology-driven company, but people will always remain at the heart of our purpose and practices. Our culture is based on empowering people to play a key role in accelerating innovation and cooperation in the work environment. Our model is built on entrusting our teams at each facility and location to shape a worldwide organization. Our core values are: “Do the Right Thing, Always!”, “Own it, All of It!”, and “Grow the Future!”. We implemented these core values to help foster an ownership and responsibility oriented culture. We also implemented a number of policies including diversity, equality, cooperation, and dignity in the work place. With the hiring of our Head of Human Resources, we implemented these core values during 2020 so that every employee embraces our culture and values at the time of joining Kalera.
Intellectual Property Rights
Our intellectual property mainly relates to production processes and methods, plant nutrient mixture formulas, custom hardware and software code as well as our trademarks and is an inherent part of our business strategy. The U.S. Patents and Trademark Office issued a patent on November 24, 2020 for our application “Hydroponics Apparatus, System and Method”. The German Patent and Trademark Office issued a patent on January 18, 2018 to &ever GmbH (f/k/a Farmers Cut GmbH) titled “Climatically Sealed Climate Cell for Cultivating Plants Indoors”. Kalera (including through its acquisition of &ever GmbH) and Vindara currently have applications for 16 patent families. Our main trademarks are “Kalera”, “HyCube”, “HyTaste” and “Pick-to-Plate”. We believe our success depends, at least in part, on our ability to further develop and protect our intellectual property and we rely on a combination of patents, trade secrets and know-how which are protected through limiting access to key information, confidentiality provisions in agreements, confidentiality procedures and IT security. We have 43 granted patents throughout the United States, Europe, Turkey, Hong Kong and Australia. These granted patents will expire between 2036 and 2038. We also have 10 published patents in the United States, Europe, Canada, China and the Republic of Korea. Further, we have 38 pending patent applications throughout Europe and Asia.
Research and Development
We perform internal R&D activities to perfect our nutrient, light, and environment recipes for all varieties growing in our system. We also have research initiatives for trialing plant varieties suitable or optimized for our growing systems. We are developing advanced plant nutrient management algorithms and procedures, as well as data analytics and Machine Learning methods for advanced plant production process control on an ongoing basis.
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Legal Proceedings
From time to time, we may become involved in litigation, disputes and other legal proceedings arising in the course of our business. As at the date of this prospectus, we are not, nor have we been during the course of the preceding 12 months, involved in any legal, governmental or arbitration proceedings which may have or have had a material adverse effect on our business, financial condition, results of operations or cash flows.
Corporate Information and History
Kalera S.A. is a public limited company (société anonyme) organized under the laws of Luxembourg which has was incorporated on June 11, 2021. Kalera AS is a private limited liability company organized under the laws of Norway, which was incorporated on March 6, 2013. Kalera PLC is a public limited company organized under the laws of Ireland, which was incorporated on June 19, 2017 as Figgreen Limited, a private limited company. Kalera PLC was reregistered as an Irish public limited company on March 29, 2022 and changed its name from “Figgreen Public Limited Company” to “Kalera Public Limited Company” on April 4, 2022. Kalera, Inc. is a US private C-corp company and is the operating entity for Kalera’s business. Kalera, Inc. was incorporated in 2010 in the state of Delaware. Kalera has entered into all customer and lease agreements pertaining to Kalera’s vertical farming business. The company’s offices are located in Orlando, Florida.
Organizational Structure
The following chart depicts our organizational structure prior to giving effect to the Business Combination and the related transactions. The subsidiaries identified below as owned by Kalera AS in the pre-Business Combination organizational chart remained owned by Kalera S.A. following the Business Combination.
https://cdn.kscope.io/2b141e98322f3cee444c983edacf2662-kal-20220819_g6.jpg
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The following chart depicts our organizational structure after giving effect to the Business Combination and the related transactions (3).
https://cdn.kscope.io/2b141e98322f3cee444c983edacf2662-kal-20220819_g7.jpg
__________________
(1)Does not include Kalera ordinary shares expected to be issuable to former warrant holders of Agrico pursuant to warrants to be issued or assumed by Kalera in connection with the Business Combination.
(2)Does not include Kalera ordinary shares expected to be issuable to optionholders of Kalera pursuant to options assumed by Kalera in connection with the Business Combination. As of August 19, 2022, there was an aggregate of 364,000 Kalera employee stock options outstanding.
(3)Upon closing of the Business Combination, Agrico became be a wholly owned subsidiary of Kalera. The voluntary winding-up of Agrico is expected to commence, and voluntary liquidators are expected to be appointed, by the passing of a special shareholder resolution. Upon the appointment of a voluntary liquidator, the powers of the directors are expected to cease and the business of Agrico is expected to be discontinued except to the extent necessary to facilitate the winding-up. During the winding-up process, liabilities of Agrico are expected to be assumed by Kalera. The liquidator is expected to notify the Cayman Islands Registrar of Companies of the commencement of the winding-up and publish a notice in the Cayman Islands Government Gazette informing creditors of the same. Notice must be published in the Cayman Islands Government Gazette prior to the final general meeting of Agrico at which the accounts of the liquidation and the conduct of the liquidation will be presented for shareholder approval. This notice must be published at least 21 days in advance of the meeting. Notice of the final meeting must also be given to all shareholders. Following such notice, final general meeting of Agrico is expected to be held, following which, the liquidator is expected to make a final return to the Cayman Islands Registrar of Companies. Three months later, Agrico is expected to be deemed formally dissolved.
Kalera has limited activity other than being the ultimate holding company. In addition to Kalera, Inc., Kalera has four other wholly owned subsidiaries:
Iveron Materials Inc.
Vindara, Inc.
Kalera Real Estate Holdings LLC
&ever GmbH
Iveron Materials Inc.
Iveron Materials Inc. is a US private C-corp company established for our geopolymer concrete business (which is conducted separately from our vertical farming business). As of the date of this prospectus, Iveron Materials Inc. holds a license to patented technology related to geopolymer concrete, however no revenue generating activities are carried out. Iveron Materials Inc.’s offices are located in Orlando, Florida.
Vindara, Inc.
On March 10, 2021 we acquired Vindara, the first company to deliver genetic seed varieties bred exclusively for use in fast growing, high-tech indoor farming and other types of CEA operations. CEA farms no longer have to
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utilize standard outdoor seeds that have been bred for resistance to disease and pests at the expense, in many cases, of rich flavor, texture, and high nutritional content. Founded in 2018 and originally based in the North Carolina Research Triangle, the company utilizes machine learning to breed tailor-made seeds in a compressed timeframe of only 12 to 18 months rather than traditional breeding methods that need five to seven years to achieve similar results. Vindara breeds the seeds entirely through analytics rather than gene-editing or GMOs. This acquisition by Kalera represents what we believe to be the first instance of a combination between a leading vertical farming platform and the scientific leader in indoor seed development. Vindara is operating out of our headquarters in Orlando and Vindara’s Co-Founder and President, Dr. Jade Stinson, has joined our senior management team in Orlando as part of the transaction. We expect this acquisition to bring significant improvements to our operations and a new revenue stream through the selling of customized seeds to other farming companies to complement our precision agriculture portfolio of products.
Kalera Real Estate Holdings, LLC
On February 11, 2021, we incorporated Kalera Real Estate Holdings, LLC in the state of Delaware as the main legal entity to consolidate all real estate operations. On March 12, 2021, Kalera Real Estate Holdings, LLC completed the acquisition of a property in St. Paul, Minnesota to be converted into a vertical farm. Kalera Real Estate Holdings, LLC will manage all real estate operations separately from our leafy greens production operations. By developing or purchasing select real estate facilities through low-cost real estate financing structures, we expect to reduce our operating expenses and improve our unit economics.
Kalera GmbH (formerly &ever GmbH)
On October 1, 2021, we acquired all of the shares in &ever, a global leader in baby leaf indoor farming, for a total consideration reflecting an enterprise value for &ever GmbH of EUR 130 million on a cash and debt free basis as of July 1, 2021. Prior to the acquisition, &ever was a vertical farm company headquartered in Germany with operations in the Middle East, Asia and Europe. Founded in 2015, &ever focuses on the highly automated production of baby leaf products including spinach, arugula and cilantro using proprietary technology and operations, enabling output of various scale from in-store grow-towers to mega-farms.
We believe this transformational acquisition not only accelerates Kalera’s geographical footprint with a farm operating in Kuwait and one under construction in Singapore, but expands our technology base, patents and IP, management team, and customer base. It also allows Kalera to offer a broad range of products in the industry, including: whole head, teen and baby leaf, cut leaf, and microgreens. Combined with Vindara seed technology from our previous Vindara acquisition, we believe Kalera is now a worldwide leader in the vertical farming industry with a truly global reach and international brand.
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The table below shows our key milestones and important events from our incorporation and to the date of this prospectus:
YearEvent
2010Established Kalera, Inc.
2014Tradeport R&D facility became operational.
2017Started construction of Orlando World Center Marriott (HyCube) facility.
2018Commenced operations at the Orlando World Center Marriott (HyCube) facility.
2019Started construction for the first large-scale facility by retrofitting an existing warehouse in Orlando.
2020The large-scale facility in Orlando was completed and started to operate.
2020Started construction of three new large-scale facilities in Atlanta, Houston and Denver.
2020Registered and traded on the NOTC-list in Norway.
2020Completed several private placements raising net proceeds over $145 million.
2020Announced expansion to three new locations: Honolulu, Seattle and Columbus.
2021Acquired Vindara, Inc. a seed development company for indoor farms.
2021Incorporated Kalera Real Estate Holdings, LLC and acquired a property in St Paul, Minnesota that will be converted into a vertical farm.
2021The large-scale facilities in Atlanta and Houston were completed and started to operate.
2021Additional blue chip customers added, including Kroger, Disney, Walmart and H-E-B.
2021Acquired &ever GmbH.
2022The large-scale facility in Denver was completed and started to operate.
2022The Business Combination with Agrico was completed.
2022Kalera Ordinary Shares started trading on Nasdaq.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following “Management’s Discussion and Analysis of Financial Condition and Results of Operation” should be read in conjunction with the “Information about Kalera” and “Selected Historical Financial Information” sections and the consolidated financial statements of Kalera SA (f/k/a Kalera AS) which are included elsewhere in this prospectus. The financial information contained herein is taken or derived from such consolidated financial statements, unless otherwise indicated. The following discussion and analysis set forth below contains forward-looking statements. Kalera’s actual results could differ materially from those that are discussed in these forward-looking statements as a result of many factors. The factors that could cause or contribute to such differences include those discussed below and elsewhere in this prospectus, particularly under “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements”. Amounts presented in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are presented in thousands of U.S. dollars, except per share, percentage and ratio figures. Unless the context otherwise requires, all references in this section to “Kalera” refer to Kalera SA prior to the Closing and to Kalera following the Closing of the Business Combination.
Overview
We are a hydroponics company combining plant science, clean room technology, and big data analytics. We grow clean, high quality, nutrient rich greens in a cost efficient and sustainable way near the point of consumption.
We produce, sell, and distribute a diverse portfolio of leafy green vegetables, microgreens and herbs under the global Kalera brand. We sell our products to foodservice companies, resorts, hospitality, cruise lines, airlines, grocery chains and restaurant chains. The product is beneficial for customers, retailers, foodservices and chefs, as it is healthy and fresh. It has a longer shelf life than conventional farmed produce, consistent quality, and is available at an affordable price.
We utilize unique growing methods that combine optimized nutrients and light recipes, clean room standards and precise environmental controls to produce our safe, nutrient rich, clean, pesticide free, non-GMO products with consistent high quality throughout the entire year.
Because of our controlled environment, and vertical growing methodology, we are able to produce 300 times more volumes per square feet than conventional farming. In addition, we produce our leafy greens all year round, regardless of outdoor growing seasons.
With indoor facilities situated right where the demand is, we are able to supply an abundance of product locally, eliminating the need to travel long distances when shipping perishable products and ensuring the highest quality and freshness.
Our Assets and Operations
We currently have announced eight large-scale indoor hydroponic facilities in the US, including our Orlando, Atlanta, Houston and Denver facilities which have commenced operations in 2020, 2021 and 2022. Internationally, we have announced two large-scale indoor hydroponic facilities, including our Kuwait facility which has commenced operations, and our Singapore facility which is under construction. Our indoor production facilities are strategically located proximate to population and distribution centers, including markets isolated from farmland. In contrast to produce that requires costly and extended long-haul supply chains, our leafy greens are delivered within hours of harvesting, always fresh, and maintain a longer shelf life. Given our expanding facility footprint, we expect to be the first truly pan-US vertical farming company able to serve both regional and national accounts.
Our sustainably grown and locally sourced high-quality leafy greens, currently marketed under our Kalera brand, appeal to a broad range of customers across the foodservice, grocery, resort, hospitality, cruise line, airline and restaurant industries. Some of our key customers include US Foods, Gordon Food Service, Harvill’s Produce, Marriott, Levy, FreshPoint (a Sysco company), Publix, Kroger, H-E-B, King Soopers, Disney and Universal Studios.
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Overall Trends and Outlook
Business Trends
Net revenue for the three and six months ended June 30, 2022 were $1,289 thousand and $2,766 thousand, respectively, compared to $489 thousand and $828 thousand for the comparable prior year periods. We have generated losses since inception. Our net loss in the three and six months ended June 30, 2022 were approximately $(78,655) thousand and $(94,973) thousand, respectively, compared to $(7,676) thousand and $(12,580) thousand for the comparable prior year periods as we invested in key talent acquisition and operating expenses during each of the periods ended June 30, 2022 and 2021 as we continue to expand our facility footprint. As of June 30, 2022, Kalera has five operation large-scale facilities in Orlando, Atlanta, Houston, Denver and Kuwait with aggregate production capacity of approximately 9.9 million lbs. and 50 thousand lbs. of microgreens per year. Going forward, we intend to continue to invest in the construction of new facilities, plant and seed science, operational improvements and technology for Controlled Environment (“CEA”) as we believe demand for our products will continue to accelerate across our distribution channels.
Strategy
We believe that we are well positioned to take advantage of macro- and micro-trends by building high-tech sustainable lettuce, microgreens and herb production capacity in the United States and internationally. We seek to expand in certain markets and communities that do not have accessibility to local and fresh produce. We believe that our revenue growth will allow us to capture an increased share of the broader U.S. lettuce and chicory and microgreens categories. This is supported by a number of key drivers, including the growing mainstream acceptance of our products, heightened consumer awareness of the role that food and nutrition play in long-term health and wellness, and increasing awareness of the reduced negative impact that vertical farming has on the environment as compared to traditional farming.
Kalera seeks to achieve its growth plan through five main avenues, namely:
Roll-out in additional US cities:
International growth;
Expansion of business line;
Expansion of product line; and
M&A and partnerships
During 2020 and 2021, Kalera opened seven new facilities in the U.S. (certain of which are currently under construction):
Atlanta, Georgia
Houston, Texas
Denver, Colorado
Columbus, Ohio
Honolulu, Hawaii
Seattle, Washington
St. Paul, Minnesota
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During 2021, Kalera had opened two new international facilities following the acquisition of Kalera GmbH (formerly &ever GmbH):
Kuwait
Singapore (currently under construction)
Kalera aims to continue its growth plan in domestic markets, as well as in new, international markets. As of June 30, 2022, Kalera has five large-scale facilities in operation and announced five additional large-scale facilities. In connection with its expansion plans, the Company has a strong pipeline of new potential locations over the next 18 months. In addition, Kalera seeks to continue investing in its organization, to support the increased production footprint.
To address this sustained expansion plan, Kalera has developed rapid roll-out capabilities related to design, buildout and installation, centered around the following key aspects:
Established supply chains for key technology and equipment;
Replicable experience on design, installation, lease agreements and work relationships with architects and design companies;
A proven ability to manage multiple construction projects at a time;
Using general contractors and sub-contractors to provide supervision, manpower and materials to cover construction project workloads as needed;
Modular designs – based on components that can be reused in various configurations; and
Standardization – shorten lead times and internal review by design teams to create streamlined franchise style builds.
We have a proven approach to rolling out new vertical farming facilities in retrofitted, leased warehouses with an expected construction time of under one year for facilities up to approximately 75,000 square feet. With established supply chains for key technology and equipment, modular designs based on components that can be reused in various configurations and pre-tested software, we can efficiently replicate facility design and processes. This gives us visibility with respect to expected capital expenditures and timing involved for a new facility roll-out. In addition, four facilities are currently under construction and incorporate multiple design improvements over our first large-scale facility in Orlando and are expected to deliver unit cost savings of around 5% comparatively.
In addition to the roll-out plan, Kalera also has a keen focus on capital productivity and unit economics, aiming to deliver strong return on capital.
Our growth strategy includes the expansion of our product line. We intend to strengthen our product offerings by improving the formulations for our existing portfolio of products and by creating new products that expand our portfolio. We are continuously refining our products to improve their color, texture, flavor, firmness and nutritional value. In addition, we are continually testing new varieties and recipes to enhance all the benefits of our products in addition to bringing a differentiation factor to the sector by growing custom plants that are unique to each customer.
Demand
We mainly operate in the lettuce and chicory market. The global market volume for lettuce and chicory was around 27 million tons in 2017. This market has seen relatively stable growth with a CAGR of 1.2% from 2007 to 2017 according to IndexBox. This market is projected to continue its stable development, growing at over 1% per annum from 2019 to 2025 , resulting in an estimated market volume of 29 million tons in 2025. The global lettuce and chicory market, excluding logistics costs, retail marketing costs and margins, amounted to over $30 billion in 2017, representing an increase of 16% against the preceding year.
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Additionally, according to Research Nester, the United States microgreens market is projected to register a CAGR of 10.1% from 2020 to 2025. According to Research Nester, in terms of value, the U.S. microgreens market is projected to grow to $307 million by 2025. By sales channel, the restaurant market segment dominates the market owing to the fact that microgreens are likely to influence produce shopping requirements in the near future. Microgreens are increasingly being treated as a culinary trend across the country’s cuisines. The ongoing culinary trend for microgreen preference across United States cuisines together with the increasing supply to the hospitality market segment is likely to enhance the sale of microgreens in the future.
Pricing
Foodservice and retail pricing remains firm and in-line with expectations. We continue to price our products competitively compared to competing organic products and other CEA produce based on our retail surveys and buyer conversations.
Acquisitions
Vindara
On March 10, 2021 Kalera acquired a leading indoor seed developer, Vindara. Founded in 2018 in the North Carolina Research Triangle, Vindara is the first company to deliver seed varieties bred explicitly for use in fast growing, high-tech indoor farming operations and for other types of CEA operations.
This transaction provided Kalera with a vertically integrated structure by combining a scientific leader in indoor seed development with a leading vertical farming platform.
We expect this deal to be accretive to our unit economics starting in 2022 by:
Significantly increasing the output from Kalera’s current and future facilities by reducing the grow cycle and providing Kalera benefits of higher yields;
Lowering cost of goods sold by reducing seed costs and improving energy efficiency/automation;
Significantly improving Kalera’s future unit economics;
Further differentiating Kalera’s products and giving us improved ability to optimize color, texture, flavor, firmness and nutrient profile;
Accelerating and expanding Vindara’s seed research and development programs focused on the indoor farming sectors to support overall CEA market share growth;
Developing a strong product pipeline beyond leafy greens to include high yield basil, spinach, and strawberries;
Accelerating the development cycle of proprietary products with and for customers while also generating value through the development of custom seed for the indoor farming industry at large;
Providing additional revenue generation opportunities to the CEA global market.
Vindara has already demonstrated substantial yield improvements in indoor-grown romaine, with more varieties and crops in the pipeline.
The acquisition will accelerate Kalera’s product development both within its existing market segment to other lettuce varieties and leafy greens including basil and spinach, and to entirely new categories such as strawberries.
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Kalera GmbH (formerly &ever GmbH)
On October 1, 2021, Kalera acquired 100% of the shares of &ever for a total of $33,610 thousand in cash and 27,856,081 Kalera shares.
Founded in 2015, &ever focuses on the highly automated production of baby leaf products including spinach, arugula and cilantro using proprietary technology and operations, enabling output of various scale from in-store grow-towers to mega-farms.
This transaction represents the first instance of consolidation between vertical farmers: it combines a leader in plant science and unit economics for full head leafy greens with a leader in baby leaf production and technology to create a global vertical farming leader.
The transaction is complementary to Vindara’s acquisition, increasing Vindara’s market reach and positioning worldwide.
On October 13, 2021, Kalera completed the acquisition of the remaining 50% of &ever ME for a total of $1,899 thousand in cash and 2,724,499 shares of Kalera common stock.
Kalera operating expenses increased during the six and three months ended June 30, 2022, compared to prior year periods due to a higher research and development expenses related to the acquired seed varieties for indoor farming and automated production technologies.
Update Regarding Impact and Expected Future Impact of COVID-19 on Our Company
The spread of the COVID-19 pandemic drove the decision to modify our business strategy to meet the demand for our products in the retail sector. The foodservice sector, our core target market, was closed or operating at less than normal capacity for example, less than 25% capacity in Central Florida during 2020. During 2021, the foodservices industry gradually recovered with large venues such as convention centers and entertainment centers re-opening during the third quarter of year-ending December 31, 2021. This affected our ability to increase sales.
As we seek to continue to rapidly grow our net revenues, we face several challenges. The extent of COVID-19’s effect on our operational and financial performance will depend on future developments, including the duration, spread and intensity of COVID-19 (including any resurgences), impact of the new COVID-19 variants and the rollout and uptake of COVID-19 vaccines, and the level of social and economic restrictions imposed in the United States and abroad in an effort to curb the spread of the virus, all of which are uncertain and difficult to predict considering the rapidly evolving landscape.
How We Generate Revenue
Kalera recognizes revenue through the sale of various varieties of lettuce and micro-greens which are sold to food retail and distribution customers. Kalera recognizes revenue for the sale of the product upon shipment or delivery to the customer based on terms of the sale. Revenue is measured as the amount of consideration Kalera expects to receive in exchange for delivering products. In the six months ended June 30, 2022, our largest customers in terms of their respective percentage of our sales included the following: Publix (26%), H-E-B Grocery (16%), Kroger (10%), Sysco (9%), Harvill’s Produce Co. (6%), and US Foods (5%). We expect that most of our sales will be made through a core number of distributors and large retailers for the foreseeable future. We do not have short-term or long-term commitments or minimum purchase volumes in our contracts with them that ensure future sales of our products.
How We Evaluate Our Operations
Net Loss
We measure performance based on our overall return to shareholders based on consolidated net income or net loss. We do not review a measure of operating result at a lower level than the consolidated company and we only have one reportable segment.
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EBITDA and Adjusted EBITDA
We view EBITDA as an important indicator of performance. We define EBITDA as net income/(loss) plus net interest expense, income taxes, depreciation and amortization. We define Adjusted EBITDA as EBITDA further adjusted for any foreign exchange gains/(losses), share-based compensation expense and non-recurring items if identified. EBITDA and Adjusted EBITDA are supplemental measure utilized by our management and other users of our financial statements such as investors, research analysts and others, to assess the financial performance of our assets without regard to financing methods, capital structure or historical cost basis. Adjusted EBITDA is a key performance measure that our management uses to assess our operating performance. It facilitates internal comparisons of our operating performance on a more consistent basis. We use these performance measure for business planning purposes and forecasting. We believe that EBITDA and Adjusted EBITDA enhances an investor’s understanding of our financial performance as they are useful in assessing our operating performance from period-to-period by excluding certain items that we believe are not representative of our core business.
Note Regarding Non-GAAP Financial Measures
EBITDA and Adjusted EBITDA are not financial measures presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). We believe that the presentation of these non-GAAP financial measures will provide useful information to investors in assessing our financial condition and results of operations. Net loss is the GAAP measure most directly comparable to EBITDA and Adjusted EBITDA. Our non-GAAP financial measures should not be considered as alternatives to the most directly comparable GAAP financial measure. Each of these non-GAAP financial measures has important limitations as analytical tools because they exclude some but not all items that affect the most directly comparable GAAP financial measures. You should not consider EBITDA or Adjusted EBITDA in isolation or as substitutes for analysis of our results as reported under GAAP. Because EBITDA and Adjusted EBITDA may be defined differently by other companies in our industry, our definitions of these non-GAAP financial measures may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.
Risk Factors Affecting Operating Results
We are subject to a number of challenges that may adversely affect our businesses. These challenges are discussed under the headings “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.
Factors Impacting Comparability of Our Financial Results
During 2021 and the six months ended June 30, 2022 we opened Atlanta, Houston and Denver large-scale facilities that increased our production capacity by a total of 8.8 million lbs. of lettuce per year and 50 thousands lbs. of microgreens. This represents an increase in total production capacity of 1,000% when compared to our Orlando facility which was the only fully operating large scale facility during the six months ended June 30, 2021 following by the Atlanta facility that opened in May 2021.
During 2021, we also completed three acquisitions in the plant science and seed sectors including Vindara, a developer of seeds that are specifically designed for indoor farms; &ever GmbH, a developer of technology and vertical farms based out of Germany with operations in Kuwait and Singapore. Driven by the three acquisitions Kalera’s operating expenses increased during the three and six months ended June 30, 2022, compared to the prior year periods.
On June 28, 2022, Kalera completed the business combination with Agrico which increased the operating expenses during the three months ended June 30, 2022.
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Results of Operations
Comparison of the Three and Six Months Ended June 30, 2022 and June 30, 2021
The following table sets forth our historical operating results for the periods indicated:
(In thousands, except percentages)
Unaudited Three Months Ended June 30,Unaudited Six Months Ended June 30,
20222021$ Change20222021$ Change
Net sales$1,289 $489 $800 $2,766 $828 $1,938 
Cost of goods sold (exclusive of depreciation and amortization shown separately below)(6,271)(1,702)(4,569)(11,279)(2,645)(8,634)
(4,982)(1,213)(3,769)(8,513)(1,817)(6,696)
Operating expenses:
Selling, general, and administrative expenses(24,612)(5,947)(18,665)(35,012)(10,234)(24,778)
Depreciation and amortization(2,963)(607)(2,356)(5,516)(775)(4,741)
Impairment loss(64,252)— (64,252)(64,252)— (64,252)
Total operating expenses(91,827)(6,554)(85,273)(104,780)(11,009)(93,771)
Operating loss(96,809)(7,767)(89,042)(113,293)(12,826)(100,467)
Interest (expense) income, net(588)11 (599)(817)166(983)
Change in fair value of earnout liabilities17,250 — 17,250 17,250 — 17,250 
Other income982 80 902 647 80 567 
Loss from operations before income tax(79,165)(7,676)(71,489)(96,213)(12,580)(100,883)
Income tax benefit533 — 533 1,288 — 1,288 
Loss before equity in net loss of affiliate(78,632)(7,676)(70,956)(94,925)(12,580)(99,595)
Equity in net loss of affiliate23 — 23 48 — 48 
Net loss$(78,655)$(7,676)$(70,979)$(94,973)$(12,580)$(99,643)
The following sections discuss and analyze the changes in the significant line items in our unaudited condensed consolidated statements of operations for the comparison period identified.
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Reconciliation of GAAP to Non-GAAP
The following table presents a reconciliation of net loss, the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted EBITDA:
Three Months Ended
June 30,
Six Months Ended
June 30,
(Dollars in thousands)2022202120222021
Net loss for the period$(78,655)$(7,676)$(94,973)$(12,580)
Interest expense588 (11)817 (166)
Income tax benefit(533)— (1,288)— 
Depreciation and amortization2,963 607 5,516 775 
EBITDA(75,637)(7,080)(89,928)(11,971)
Loss on equity method investment23 — 48 — 
Impairment loss64,252 — 64,252 — 
Change in fair value of earnout liabilities(17,250)— (17,250)— 
Other income(982)— (647)— 
Share-based compensation expense7,985 568 8,797 1,002 
One time accounting, consulting, and legal fees7,533 153 7,533 153 
Adjusted EBITDA
$(14,076)$(6,359)$(27,195)$(10,816)
Net Sales
Net sales for the three and six months ended June 30, 2022 were $1,289 thousand and $2,766 thousand, respectively, compared to $489 thousand and $828 thousand for the comparable prior year periods. The net sales increase is reflective of the opening of new farming facilities in 2022 in addition to facilities opened in the second half of 2021 that were fully operational in the first six months of 2022.
Cost of Goods Sold (exclusive of depreciation and amortization)
Cost of goods sold for the three and six months ended June 30, 2022 increased 268.4% and 326.4% to $(6,271) thousand and $(11,279) thousand, respectively, compared to $(1,702) thousand and $(2,645) thousand for the comparable prior year periods. This includes all fixed (roughly 86%) and variable costs (roughly 14%) for the Orlando, Atlanta, Houston, Denver, and Kuwait farms. Inventory costs include the costs of producing our products which include direct material costs such as seeds and nutrients, salaries and wages of the employees directly involved in farming production, farming facility costs including utility costs, insurance, maintenance, and other costs directly attributed to the vertical farming process and facilities.
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Selling, General & Administrative Expense
Selling, general and administrative expenses, for the three and six months ended June 30, 2022 increased 313.9% and 242.1% to $(24,612) thousand and $(35,012) thousand, respectively, compared to $(5,947) thousand and $(10,234) thousand for the comparable prior year periods. The increase in selling, general and administrative expenses was primarily due to increases in the number of corporate employees and related employee expenses required to manage the growing business and also expenses related to three acquisitions during 2021. The increase in the three months ended June 30, 2022 was driven mainly by approximately $7,500 thousand legal and accounting expenses related to the business combination that closed on June 28, 2022 and stock based compensation expenses of $7,200 thousand for the three and six months ended June 30, 2022 to reflect the unrecognized fair market value of the cancelled options under the Business Combination Agreement.
Depreciation & Amortization Expense
Depreciation and amortization expense for the three and six months ended June 30, 2022 increased 388.1% and 611.7% to $(2,963) thousand and $(5,516) thousand, respectively, compared to $(607) thousand and $(775) thousand for the comparable prior year periods. The increase in depreciation and amortization expense was due to the increase in property, plant, and equipment primarily put into service in order to operate the new farming facilities and amortization expense of intangible assets acquired during the three acquisitions in 2021.
Impairment loss
Because of the June 30, 2022 stock price decrease, reporting of losses and decline in current market valuation of companies in our industry, management concluded that impairment indicators were present and thus performed a detailed quantitative analysis of our long-lived assets and goodwill. Based on the difference between the Company’s market capitalization versus the Company computed value on June 30, 2022, the Company recognized a goodwill impairment loss of $(64,252) thousand for the three and six months ended June 30, 2022 compared to $0 thousand in the comparable prior year periods.
Net Interest Expense
Interest expense, net consists of expenses related farm credit debt and convertible debt less income received as interest on our cash deposits. Net interest expense for the three and six months ended June 30, 2022 were $(588) thousand and $(817) thousand, respectively, compared to net interest income of $11 thousand and $166 thousand for the comparable prior year periods. The change in net interest expense was due to the interest incurred on finance obligation related to our failed sale-leaseback transaction that included building and equipment for failed sale-leaseback transaction, interest incurred on our convertible debt arrangement that we entered into in March 2022 and interest incurred on our farm credit facility we entered into in April 2022.   
Change in fair market value
 A gain of $17,250 thousand was recorded in the three months and six months ended June 30, 2022 for the change in the fair market value of the earnout liability compared to $0 thousand in the comparable prior year periods.
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Other Income
Other income for the three and six months ended June 30, 2022 were $982 thousand and $647 thousand, respectively, compared to $80 thousand and $80 thousand for the comparable prior year periods. The change in other income was due to insurance reimbursement received in June 2022 off set by other expenses related our failed sale-leaseback transaction.
Income Taxes
An income tax benefit of $533 thousand and $1,288 thousand were recorded during the three and six months ended June 30, 2022, respectively, due to the recognition of deferred tax benefits for intangible asset amortization associated with our acquired businesses. No income tax benefit or expense was recorded for the three and six months ended June 30, 2021. A valuation allowance was recorded as of June 30, 2022 and 2021, on substantially all of our domestic and foreign deferred tax assets. Management does not anticipate that the benefits from these deferred tax assets will be realized in the near term.
Net Loss
As a result of the foregoing, net losses for the three and six months ended June 30, 2022 was $(78,655) thousand and $(94,973) thousand, respectively, compared to net losses of $(7,676) thousand and $(12,580) thousand for the comparable prior year periods.
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Liquidity and Capital Resources
Our primary liquidity requirements are for operating expenses, working capital, and capital expenditures to support the growth in our business. Historically, we have funded our operations and growth through debt and equity raises. In 2021, we received $61,696 thousand in net proceeds from our capital raises. In the first half of 2022 we have received total of 30,000 thousand in new debt by $10,000 convertible debt and $20,000 thousand farm credit loan. There was no conversion of loans to equity through June 30, 2022. In July 2022, we received $9,250 thousand in net proceeds as consideration for the issuance and sale of 2,300,000 Kalera Ordinary Shares, 200,000 Pre-Funded Warrants, 2,500,000 Series A Warrants and 2,500,000 Series B Warrants to Armistice. In the second half of 2022 we expect further issuances of debt and/or equity to meet our expected liquidity needs.
Our ability to raise additional capital through the sale of equity or convertible debt securities could be significantly impacted by the resale of securities of Kalera by Selling Securityholders pursuant to this prospectus. The sale of our securities in the public market or otherwise, including sales pursuant to this prospectus, or the perception that such sales could occur, could harm the prevailing market price of such securities. Resales of our securities may cause the market price of such securities to drop significantly, even if our business is doing well, and potentially hinder our ability to raise capital at terms that are acceptable to us, or at all.
Due to the significant number of securities that were redeemed in connection with the Business Combination, the number of our securities that the Selling Securityholders can sell into the public markets pursuant to this prospectus will constitute a considerable percentage of our public float. This impact may be heightened by the fact that certain of the Selling Securityholders purchased our securities at prices well below their current trading price. The 31,181,250 Kalera Ordinary Shares that may be resold and/or issued into the public markets pursuant to this prospectus represent approximately 69.8% of the 44,679,328 Kalera Ordinary Shares outstanding as of August 10, 2022 (after giving effect to the exercise of all outstanding Kalera Warrants, Kalera Options and Armistice Warrants) and the Kalera Warrants that may be resold into the public markets pursuant to this prospectus represent approximately 42.8% of the 14,437,500 Kalera Warrants outstanding as of August 10, 2022. As a result, the resale of Kalera Ordinary Shares pursuant to this prospectus could have a significant negative impact on the trading price of the Kalera Ordinary Shares. The Selling Securityholders will determine the timing, pricing and rate at which they sell such shares into the public market. Although the current trading price of Kalera Ordinary Shares is significantly below the sales price in the Agrico IPO, certain of the Selling Securityholders have an incentive to sell because they purchased shares and/or warrants at prices below the IPO price and/or below the recent trading prices of our securities. Sales by such investors may prevent the trading price of our securities from exceeding the Agrico IPO price and may cause the trading prices of our securities to experience a further decline. If the trading price of the Kalera Ordinary Shares does not recover or experiences a further decline, sales of Kalera Ordinary Shares may be a less attractive source of capital and/or may not allow us to raise capital at rates that would be possible if the trading price of the Kalera Ordinary Shares were higher. See “Risk Factors-Sales of a substantial number of Kalera’s securities could adversely affect the market price of its securities.”
The large-scale high-tech CEA business is capital-intensive, and we expect to continue to expend significant resources related to our expansion plans. These expenditures are expected to include working capital, costs associated with planting and harvesting, such as the purchase of seeds and growing supplies, and the cost of attracting and retaining a skilled labor force. Financial projections for the year ended December 31, 2022 provided by us to Agrico on December 21, 2021 were premised on certain assumptions that relied on trading conditions during Q3 2021, which no longer apply. In light of the net loss incurred in H1 2022 as well as current trading conditions, including increases in inflation and interest rates, volatility in financial and credit markets, the ongoing COVID-19 pandemic, the ongoing military conflict involving Russia and Ukraine, and the impact thereof on the global supply chain and the global economy, revenue and therefore cash flows from operating activities for 2022 are expected to be less than what had been projected and provided to the board of Agrico on December 21, 2021.
In connection with the Business Combination, approximately 14.4 million Agrico Class A Shares were redeemed which represented a significant portion of the publicly traded shares outstanding immediately prior to the Business Combination and resulted in only $276,058 of cash from the Agrico trust account becoming available to us in connection with the Closing of the Business Combination. In addition, the Business Combination produced liabilities that had previously been incurred by Agrico and which have become payable by us. The above have
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resulted in the deterioration of our liquidity position in the short term. In considering our capital requirements and sources of liquidity, we have not relied on the receipt of proceeds from the exercise of Kalera Warrants and, since the exercise price of Kalera Warrants exceeds the recent trading prices for Kalera Ordinary Shares, it is unlikely that we will receive significant proceeds, if any, from the exercise of Kalera Warrants in the near future. As a result of the above, we expect further issuances of debt and/or equity to meet our expected capital requirements.
The amount and timing of our future funding requirements, if any, will depend on many factors, including the timing and costs of completion of our large-scale high-tech CEA facilities. We are currently in discussions for a sale leaseback transaction with a third-party lender, and additional equipment financing that could bring up to $22 million for future capital expenditures. While we are exploring this and other funding options, including through possible debt and equity raises, we may be unable to obtain any such additional financing on reasonable terms or at all.
We could potentially use our available financial resources sooner than we currently expect and may incur additional indebtedness to meet future financing needs. Adequate additional funding may not be available to use on acceptable terms or at all. In addition, although we anticipate being able to obtain additional financing through non-dilutive means, we may be unable to do so. Our failure to raise capital as and when needed could have significant negative consequences for our business, financial condition and results of consolidated operations. Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth in “Risk Factors-Sales of a substantial number of Kalera’s securities could adversely affect the market price of its securities.”
Summary of Cash Flows
A summary of our cash flows from operating, investing and financing activities is presented in the following table:
(Dollars in thousands)Six Months Ended June 30,
20222021
Net cash used in operating activities$(32,432)$(6,992)
Net cash used in investing activities(20,921)(51,236)
Net cash provided by financing activities39,641 29,158 
Cash and cash equivalents, beginning of year16,146 113,353 
Effect of exchange rate changes on cash901 — 
Cash and cash equivalents, end of period$3,335 $84,283 
Net Cash Used by Operating Activities. Net cash used by operating activities was at $(32,432) thousand for the six months ended June 30, 2022, compared to $(6,992) thousand for the six months ended June 30, 2021. The increase in cash used in operating activities was primarily due to expenses from new facilities that opened in the second half of 2021 and during 2022 and the expenses related to the closing of Business Combination on June 28, 2022.
Net Cash Used in Investing Activities. Net cash used in investing activities was at $(20,921) thousand for the six months ended June 30, 2022, compared to $(51,236) thousand for the six months ended June 30, 2021. Net cash used in investing activities for the six months ended June 30, 2022, was primarily driven by investments in the Denver, Seattle and St. Paul farming production facilities. Net cash in investing activities for the six months ended June 30, 2021, was primarily driven by investments in the Atlanta, Houston, Denver, and Seattle farming production facilities in addition to the acquisition of Vindara.
Net Cash Provided by Financing Activities. Net cash provided by financing activities was at $39,641 thousand for the six months ended June 30, 2022, compared to $29,158 thousand for the six months ended June 30, 2021. The change was primarily driven by issuance of convertible debt, sale of property, plant and equipment for failed sale-leaseback and farm credit loan during the six months ended June 30, 2022 compared to private placements to finance the cash consideration of the Vindara acquisition during the six months ended June 30, 2021.
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Secured Convertible Bridge Promissory Note
On March 4, 2022, Kalera entered into the Secured Convertible Bridge Promissory Note. For more information, please see “Certain Relationships and Related Person Transactions—Kalera Related Person Transactions—Secured Convertible Bridge Promissory Note” for more information.
Farm Credit Loan and Security Agreement
On April 14, 2022, Kalera, Inc. (a wholly owned subsidiary of Kalera AS), as borrower, entered into the Farm Credit Loan and Security Agreement with Farm Credit of Central Florida, ACA (“Farm Credit”), under which Farm Credit agreed to make (i) revolving loans in an aggregate principal amount up to $10 million and (ii) one or more term loans in an aggregate principal amount up to $20 million.
Farm Credit Eligibility/Farm Credit Equity.
The Farm Credit Loan and Security Agreement requires that the borrower maintain its status as an entity eligible to borrow from a federally chartered farm credit system lending institution organized under the Farm Credit Act of 1971, as the same may be amended or supplemented from time to time.
The Farm Credit Loan and Security Agreeme