Commitments and Contingencies

9 Months Ended

Sep. 30, 2022

Commitments and Contingencies Disclosure [Abstract]

(a)Leases

For the three and nine months ended September 30, 2022 the Company recognized $247 and $743, respectively, of operating lease expense in SG&A within the unaudited condensed consolidated statement of operations and comprehensive loss compared to $109 and $324, for the three and nine months ended September 30, 2021, respectively.

The future minimum rental payments required under the leases for each year of the next five years and in the aggregate thereafter are as follows:


	Operating leases
Remainder of 2022	$	164
2023	591
2024	525
2025	515
2026	520
2026 and thereafter	467
Total minimum payments required	2,782
Less: imputed interest costs(1)	(412)
Present value of net minimum lease payments(2)	$	2,370
Weighted-average imputed interest rate	6.71		%
Weighted-average remaining lease term (in years)	4.9

____________________________

(1)Represents the amount necessary to reduce net minimum lease payments to present value using actual rate in the lease agreement or the Company’s incremental borrowing rate at lease inception.

(2)Included in the unaudited condensed consolidated balance sheet as of September 30, 2022 as current and non-current lease liability of $472 and $1,898, respectively.

Supplemental cash flow information related to leases is as follows:


	Period Ended September 30,
	2022		2021
Cash paid for amounts included in the measurement of operating lease liabilities	$	777	$	378
Operating lease right-of-use assets obtained in exchange for new operating lease liabilities	$	169	$	1,055
Operating lease right-of-use assets surrendered with the early termination of operating lease liabilities	$	(3,031)	$	—

(b) Litigation

The Company is involved in various lawsuits, claims and other legal matters from time to time that arise in the ordinary course of business. The Company records a liability when a particular contingency is probable and estimable.

On September 24, 2021, the first of two federal securities class action lawsuits (captioned Ragan v. AppHarvest, Inc.) was filed by a purported stockholder of the Company in the United States District Court for the Southern District of New York on behalf of a proposed class consisting of those who acquired the Company’s securities between May 17, 2021 and August 10, 2021. On December 13, 2021, the court consolidated the two cases, and appointed a lead plaintiff. An amended complaint was filed on March 2, 2022. The amended complaint was brought as a purported class action on behalf of purchasers of the Common Stock between February 1, 2021 to August 10, 2021. The amended complaint names the Company and certain of its current officers as defendants, and alleges that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, by making materially false and misleading statements regarding the Company’s operations at the Morehead CEA Facility in the first half of 2021. In particular, plaintiffs allege that defendants’ public statements during the class period were false and misleading because defendants failed to disclose issues related to the Company’s tomato harvest and employee training and retention. The amended complaint seeks unspecified monetary damages on behalf of the putative class

and an award of costs and expenses, including reasonable attorneys’ fees. On May 2, 2022, defendants filed a motion to dismiss the amended complaint. On July 25, 2022, the plaintiff filed a second amended complaint. On September 23, 2022, defendants filed a motion to dismiss the second amended complaint.

Additionally, on March 11, 2022, a derivative complaint (captioned Michael Ross v. Kiran Bhatraju, et al.) was filed in the U.S. District Court for the Southern District of New York against certain of AppHarvest’s officers and directors. The derivative complaint restyles the federal securities class action allegations as a purported derivative claim on behalf of the Company against its officers and Board members for their alleged breaches of fiduciary duties in allowing the purported disclosure violations to occur. The derivative complaint seeks unspecified monetary restitution and disgorgement of profits, benefits, or compensation obtained by the defendants, an award of costs and expenses, including reasonable attorneys’ fees, and that the Court direct the Company to reform its corporate governance procedures. On June 15, 2022, another derivative complaint (captioned Zach Wester v. Kiran Bhatraju, et al.) was filed in the U.S. District Court for the Southern District of New York against certain of AppHarvest’s officers and directors. The Wester derivative complaint is substantially similar to the Ross derivative complaint. On July 22, 2022, the Ross and Wester derivative cases were consolidated, and are stayed until (1) the securities class action is dismissed with prejudice and all appeals related thereto are exhausted; (2) defendants file an answer in the securities class action; or (3) any party in the derivative cases no longer consents to the stay.

On August 31, 2022, a third derivative complaint (captioned Kennedy v. AppHarvest, Inc. et al) was filed in the U.S. District Court for the District of Delaware against certain officers and directors of the Company. The Kennedy derivative complaint is substantially similar to the Ross and Wester derivative complaints.

The Company does not believe the claims have merit, intend to defend against them vigorously, and have not recorded a liability related to these lawsuits because, at this time, the Company is unable to estimate reasonably possible losses or determine whether unfavorable outcomes are probable.

There were no material changes to the Company’s purchase commitments, outside the ordinary course of business, from those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.