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Item 7. Management’s Discussion and Analysis

2024-12-02 compared with 2023-12-06 · 93 added, 97 removed, 182 unchanged (51% of the section changed)

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Our actual results of operations may differ materially from those discussed in forward-looking statements as a result of various factors, including, but not limited to, those included in Part I, Item 1A, “Risk Factors” and other portions of this Annual Report.

A discussion regarding our financial condition and results of operations for the year ended September 30, 2022, as compared to 2021, has been reported previously and may be found under Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended September 30, 2022, filed with the SEC on December 13, 2022.

In the following discussion and analysis, dollars are in thousands, except, per share and per acre amounts.

Business Overview

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We operate as two business segments, and all of our operating revenues are generated in the United States.

For the year ended September 30, 2023, we generated operating revenues of $39,846 thousand, loss from operations of $4,197 thousand, and net income attributable to common stockholders of $1,835 thousand.

Net cash used in operating activities was $6,254 thousand for the year ended September 30, 2023.

See Part I, Item 1, Business , included in this Annual Report for a discussion of our year highlights.

For the years ended September 30, 2024 and 2023 we generated operating revenues of $46,643 and $39,846, respectively, a loss from operations of $67,454 and $4,197, respectively, and net income attributable to common stockholders of $6,973 and $1,835, respectively.

Net cash used in operating activities was $30,497 and $6,254, respectively, for the years ended September 30, 2024 and 2023, respectively.

See Part I, Item 1, Business , included in this Annual Report for a discussion of our year highlights and our evolving business strategy.

Business Segments

Operating segments are defined in the criteria established under FASB ASC Topic 280 as components of public entities that engage in business activities from which they may earn revenues and incur expenses for which separate financial information is available and which is evaluated regularly by our CODM in deciding how to assess performance and allocate resources.

Our CODM assesses performance and allocates resources based on its reportable segments.

The Company has two segments as follows:

• Alico Citrus includes activities related to planting, owning, cultivating and/or managing citrus groves to produce fruit for sale to fresh and processed citrus markets, including activities related to the purchase and resale of fruit and value-added services, which include contracting for the harvesting, marketing and hauling of citrus;

• Land Management and Other Operations includes activities related to native plant sales, grazing and hunting leasing, management and/or conservation of unimproved native pastureland and activities related to rock mining royalties and other insignificant lines of business.

• Land Management and Other Operations includes activities related to grazing and hunting leasing, management and/or conservation of unimproved native pastureland and activities related to rock mining royalties and other insignificant lines of business.

Also included are activities related to owning and/or leasing improved farmland.

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For the year ended September 30, 2024, the Alico Citrus segment generated 96.6% of our consolidated revenues and the Land Management and Other Operations segment generated 3.4% of our consolidated revenues.

For the year ended September 30, 2023, the Alico Citrus segment generated 95.7% of our consolidated revenues and the Land Management and Other Operations segment generated 4.3% of our consolidated revenues.

Consolidated Results of Operations

The following discussion presented below provides an analysis of our results of operations for the year ended September 30, 2023, as compared to 2022, and the year ended September 30, 2022, as compared to 2021.

(in thousands) Years Ended

September 30, Change Years Ended

September 30, Change

The following discussion provides an analysis of our results of operations for the year ended September 30, 2024, as compared to the year ended September 30, 2023.

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(in thousands) September 30, Change

2024 2023 $ %

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Land Management and Other Operations 1,186 1,260 (74) (5.9) %

Total gross profit (loss) 6,446 (14,765) 21,211 (143.7) % (14,765) 23,893 (38,658) NM

Total gross (loss) profit (56,383) 6,446 (62,829) NM

General and administrative expenses 11,071 10,643 428 4.0 %

(Loss) income from operations (4,197) (24,844) 20,647 (83.1) % (24,844) 14,440 (39,284) NM

Total other income, net 6,656 37,799 (31,143) (82.4) % 37,799 31,947 5,852 18.3 %

Loss from operations (67,454) (4,197) (63,257) NM

Total other income, net 78,406 6,656 71,750 NM

Income before income taxes 10,952 2,459 8,493 345.4 %

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Net income 6,355 1,658 4,697 283.3 %

Net loss attributable to noncontrolling interests 177 573 (396) (69.1) % 573 39 534 NM

Net loss attributable to noncontrolling interests 618 177 441 249.2 %

Net income attributable to Alico, Inc.

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The following table presents our operating revenues, by segment, as a percentage of total operating revenues for the years ended September 30, 2024 and 2023:

Years Ended September 30,

2023 2022 2021

September 30,

Operating revenues:

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Total operating revenues 100.0 % 100.0 %

The following discussion provides an analysis of our operating segments:

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The following discussion provides an analysis of our reportable segments:

(in thousands, except per box and per pound solids data)

September 30, Change Years Ended

September 30, Change

2023 2022 Unit % 2022 2021 Unit %

2024 2023 Unit %

Operating Revenues:

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Harvesting and Hauling 11,843 10,573 1,270 12.0 %

Fresh Fruit and other (29,326) (2,264) (27,062) NM (2,264) (3,773) 1,509 (40.0) %

Fresh Fruit and other (229) (29,326) 29,097 (99.2) %

Grove Management Services 1,593 751 842 112.1 %

Total $ 102,627 $ 32,959 $ 69,668 211.4 %

NM - Not Meaningful

Components of Results of Operations for Alico Citrus Segment

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Historically, the second and third quarters of our year produce the majority of the annual revenues and working capital requirements are typically greater in the first and fourth quarters of our year, coinciding with the growing cycles.

We sell our Early and Mid-Season and Valencia oranges to processors that convert the majority of the citrus crop into orange juice.

However, due to the timing of the harvest for the year ended September 30, 2024, more of the citrus crop was harvested in the first and second quarters of that fiscal year.

We sell our Early and Mid-Season and Valencia oranges to orange juice processors.

The processors generally buy the citrus crop on a pound solids basis, which is the measure of the soluble solids (sugars and acids) contained in one box of fruit.

Our fresh fruit is generally sold to packing houses that purchase

citrus on a per box basis.

We also provide citrus grove caretaking and harvest and haul management services to third parties from which revenues are generated, including a management fee.

Other revenues consist of the purchase and reselling of fruit.

Our operating expenses consist primarily of cost of sales, harvesting and hauling costs and grove management service costs.

Our Fresh Fruit revenue is derived from sales to packing houses that purchase the citrus on a per box basis.

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provide citrus grove caretaking and harvest and haul management services to third parties from which revenues recorded as Grove management Services are generated, including a management fee.

Other revenues principally consist of the purchase and reselling of fruit.

Operating expenses for our Alico Citrus segment consist primarily of Cost of Sales, Harvesting and Hauling costs and Grove Management Services costs.

Cost of sales represents the cost of maintaining the citrus groves for the preceding calendar year and does not vary in relation to production.

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Grove management services include those costs associated with citrus grove caretaking and harvest and haul management services provided to third parties.

Other expenses include the period costs of reselling third-party fruit.

Other expenses include the period costs of third-party grove caretaking and the purchase and reselling third-party fruit.

Comparison of the year ended September 30, 2024 and 2023 for the Alico Citrus Segment

The decrease in revenue for the year ended September 30, 2023, compared to the year ended September 30, 2022, was primarily due to an increase in fruit drop caused by the impact of Hurricane Ian, which in turn reduced our harvest of both the Early and Mid-Season and Valencia fruit.

In addition, we had a decrease in Grove Management Services revenues, from $11,928 thousand for the year ended September 30, 2022, to $1,234 thousand for the year ended September 30, 2023, due to the termination of the Property Management Agreement (see “The Land We Manage” in Item 1.

The increase in revenue for the year ended September 30, 2024, as compared to the year ended September 30, 2023, was primarily due to a 10.8% increase in pound solids produced as the trees continue to recover from the effects of Hurricane Ian and an increase in the blended price per pound solids of 4.2% for the Early and Mid-season and Valencia crops as a result of more favorable pricing in one of our contracts with Tropicana.

The aggregate decrease in pound solids per box of 3.6% during the year ended September 30, 2024, as compared to the year ended September 30, 2023, was mainly due to the internal quality of the fruit not being as strong as it had been in the previous year.

This decrease in pound solids per box was also due in part to a further acceleration of the harvesting of the Early and Mid-Season and Valencia crops to maximize the box production and avoid additional fruit drop.

We recognized an increase in Grove Management Services revenues for the year ended September 30, 2024, as compared to the year ended September 30, 2023 of $1,592, which was due to the signing of the Grove Management Agreement in the current year (see “Recent Developments” in Item 1.

Business for further details).

We recorded approximately $751 thousand and $10,547 thousand of operating expenses relating to grove management services for the Grove Owners for the years ended September 30, 2023 and 2022, respectively.

The decrease in Early and Mid-Season and Valencia fruit harvested was primarily driven by a decrease in processed box production and a decrease in pound solids per box.

The processed box production for the year ended September 30, 2023 decreased by 51.4%, as compared to the same period in the prior year, primarily due to greater fruit drop attributed to disease and weather conditions.

The aggregate decrease in pound solids per box of 5.8% during the year ended September 30, 2023, as compared to the prior year ended September 30, 2022, was mainly due to the internal quality of the fruit not being as strong as it had been in the previous year.

This decrease in pound solids per box was also due in part to an acceleration of the harvesting of the Early and Mid-Season and Valencia crops to maximize the box production and avoid additional fruit drop as a result of the impact of Hurricane Ian.

Partially offsetting the decrease in processed box production and pound solids per box for the year ended September 30, 2023, compared to the year ended September 30, 2022, was an increase in the price per pound solid of 2.6%.

The increase, in large part, was due to production being down in Florida, as well as in Brazil, and due to the continued strong consumption of Not from Concentrate Orange Juice (“NFC”), both of which have led to continued low inventory levels.

We also recorded a decrease in revenue from sales of Fresh Fruit.

The decrease in sales of Fresh Fruit was primarily due to a decrease in both boxes sold and pricing per box.

The USDA, in its October 12, 2023 Citrus Crop Forecast Report for the 2023-24 harvest season, indicated the overall Florida orange crop decreased from approximately 41,200,000 boxes for the 2021-22 crop year to approximately 15,800,000 boxes for the 2022-23 crop year, a decrease of 61.7%.

We experienced a decline in total box production in the 2022-2023 harvest season crop of 51.5%.

We believe this lower rate of decline, as compared to the state forecast, is due to the efficiencies of our comprehensive grove management program, as well as certain precautionary measures we took to minimize the impact of the freeze event on its groves and production.

The decrease in operating expenses for the year ended September 30, 2023, as compared to the year ended September 30, 2022, primarily relates to the inventory adjustments recorded at September 30, 2022 on the ending inventory balance, as a result of the impact of Hurricane Ian, which effectively lowered the inventory to be expensed in the year ended September 30, 2023, as well as the receipt of approximately $27,389 thousand in crop insurance and $839 thousand in property and casualty reimbursements for Hurricane Ian.

We experienced significant cost increases in fertilizer, herbicide, labor and fuel in maintaining our groves.

These cost increases, coupled with the timing of the harvest, and the lower box production for both our Early and Mid-Season and Valencia harvest, resulted in a higher cost of sales per box for the year ended September 30, 2023, as compared to the same period in the prior year.

In addition, we incurred additional costs related to the clean-up and repairs as a result of Hurricane Ian.

We also recorded an increase in our Harvesting and Hauling expense per box, which is directly related to an increase in the harvesting labor costs, as well as the increased time spent by the harvesters to fill the boxes as a result of the increased fruit drop caused by Hurricane Ian for the year ended September 30, 2023, when compared to the prior year.

The decrease in Grove Management Services expense is directly related to the termination of the Property Management Agreement by the Grove Owners in June 2022.

The credit amounts shown in “Fresh Fruit and other” in operating expenses above primarily represent insurance proceeds of approximately $27,389 thousand in crop insurance and $839 thousand in property and casualty reimbursements for Hurricane Ian received in the year ended September 30, 2023, and federal relief proceeds received under the CRBG program in the years ended September 30, 2023 and 2022 of approximately $1,315 thousand and $1,123 thousand, respectively.

We also recorded a decrease in revenue from sales of Fresh Fruit and other.

This decrease, compared to the same period in the prior year, was principally due to a decrease in the amount of fruit that was resold on behalf of grove owners.

The USDA, in its October 11, 2024 Citrus Crop Forecast for the 2023-24 harvest season, indicated the overall Florida orange crop increased from approximately 15,820 boxes for the 2022-23 crop year to approximately 17,960 boxes for the 2023-24 crop year, an increase of 13.5%.

We experienced an increase in total box production in the 2023-2024 harvest season crop of 14.7% compared to the 2022-23 crop year.

The increase in Operating expenses for the year ended September 30, 2024, as compared to the year ended September 30, 2023, primarily relates to the inventory adjustments recorded at September 30, 2022 on the ending inventory balance, as a result of the impact of Hurricane Ian, which effectively lowered the inventory to be expensed in the year ended September 30, 2023, $27,389 in crop insurance proceeds and $839 in property and casualty insurance reimbursements for Hurricane Ian and $1,315 in proceeds from federal relief proceeds received under the Florida Citrus Recovery Block Grant (“CRBG”) program in the year ended September 30, 2023, all of which were recognized within Operating expenses under Fresh Fruit and other.

By comparison, we only recognized $299 in crop insurance proceeds during the year ended September 30, 2024.

No further insurance of federal relief program proceeds are expected to be received.

In addition, we recognized an inventory impairment charge of $19,549 in the fourth quarter of the year ended September 30, 2024 related to our 2024-2025 estimated harvest (see Note 3.

Inventories to the Consolidated Financial Statements included in this Annual Report for further information).

Furthermore, our Harvesting and Hauling expenses increased 12.0% driven by an increase in the total number of boxes harvested in the year ended September 30, 2024, when compared to the prior year and a $842 increase in operating expenses relating to the Grove Management Agreement.

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Land Management and Other Operations

The table below presents key operating measures for the years ended September 30, 2023, 2022 and 2021:

The table below presents key operating measures for the years ended September 30, 2024 and 2023 for the Land Management and Other Operations segment:

(in thousands)

September 30, Change Years Ended

September 30, Change

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Components of Results of Operations for Land Management and Other Operations Segment

Land and other leasing include lease income from leases for grazing rights, hunting leases, a farm lease, a lease to a third party of an aggregate mine, leases of oil extraction rights to third parties, and other miscellaneous income.

Land and Other Leasing operating expenses include real estate, property taxes, and general and administrative expenses, including salaries, benefits and legal and professional fees.

Land and Other Leasing include lease income from leases for grazing rights, hunting leases, farm leases, a lease to a third party of an aggregate mine, leases of oil extraction rights to third parties, and other miscellaneous income.

Land and Other Leasing operating expenses includes real estate, property taxes, and general and administrative expenses, including legal and professional fees.

Comparison of the year ended September 30, 2024 and 2023 for the Land Management and Other Operations Segment

The decrease in revenues from Land Management and Other Operations for the year ended September 30, 2023, as compared to the prior year, was primarily due to a decrease in grazing and hunting lease revenue due to the sales of portions of the Alico Ranch, which resulted in the reduction of land covered under our grazing and hunting lease contracts.

Additionally, the modification to the grazing leases resulted in a reduction in the ad valorem taxes due from the lessees, as we revised the grazing lease agreements due to the sale of certain of the ranch acres previously covered under the agreement.

The decrease in operating expenses from Land Management and Other Operations for the year ended September 30, 2023, as compared to the prior year, was primarily due to the reduction of the ad valorem tax expense as a result of us owning fewer ranch acres due to the sale of ranch land.

The decrease in revenues from Land Management and Other Operations for the year ended September 30, 2024, as compared to the prior year, was primarily due to a decrease in hunting and grazing lease revenue due to the sales of portions of the Alico Ranch, which resulted in the reduction of land covered under our hunting and grazing lease contracts.

The decrease in operating expenses from Land Management and Other Operations for the year ended September 30, 2024, as compared to the prior year, was primarily due to the reduction of the ad valorem tax expense as a result of us owning fewer ranch acres due to the sale of the Alico Ranch.

The following discussion provides an analysis of our results of operation, as a whole:

General and Administrative

General and administrative expenses for the year ended September 30, 2023 was $10,643 thousand, compared to $10,079 thousand for the year ended September 30, 2022.

The increase was principally attributable to an increase in legal and professional fees, as compared to the same period last year.

General and administrative expenses for the year ended September 30, 2024 was $11,071, compared to $10,643 for the year ended September 30, 2023.

The increase was principally attributable to an increase in personnel costs, partially offset by lower depreciation, lower legal and professional fees due to the dismissal of the stockholder litigation in 2023 and lower insurance costs, as compared to the same period last year.

Other Income, net

Other income, net, for the years ended September 30, 2023 and 2022 was $6,656 thousand and $37,799 thousand, respectively.

The decrease in other income, net was primarily due to less ranch land sales, which resulted in lower gains on sales of $11,509 thousand during the year ended September 30, 2023, compared to $41,102 thousand for the prior year period.

For the years ended September 30, 2023 and 2022, the provision for income taxes was $801 thousand and $1,069 thousand, respectively, and the related effective income tax rates were 32.6% and 8.3%, respectively.

The effective tax rate for the year ended September 30, 2023 is higher than the statutory tax rate due to the deferred rate change and return-to-provision adjustments, which was partially offset by a reduction in the valuation allowance.

The effective tax rate for the year ended September 30, 2022 was lower than the statutory tax rate due to the bargain sale of 1,638 acres of land to the state of Florida at a price below market value, which resulted in a charitable contribution carryover for tax purposes.

The bargain sale generated a tax benefit of $6,300 thousand, of which $500 thousand was utilized in the prior year, none of which was used in the current year.

We do not anticipate that we will be able to recognize the entire charitable deduction carryover before it expires in 2027.

A valuation allowance of $4,309 thousand was recorded on September 30, 2022, resulting in a net benefit of $1,468 thousand.

As of September 30, 2023 the valuation allowance was reduced to $4,170 thousand, resulting in a benefit of $139 thousand.

Other income, net, for the years ended September 30, 2024 and 2023 was $78,406 and $6,656, respectively.

The increase in other income, net was primarily due to the sale of 18,354 acres of land for approximately $86,217 which resulted in a gain of $81,416 (including 17,229 acres of the Alico Ranch to the State of Florida for approximately $77,631 in gross proceeds).

During the year ended September 30, 2023 we sold approximately 2,225 acres of ranch land for $12,000 and recognized a gain of $11,432.

These gains on land sales are partially offset by interest expense during the years ended September 30, 2024 and 2023.

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For the years ended September 30, 2024 and 2023, the provision for income taxes was $4,597 and $801, respectively, and the related effective income tax rates were 42.0% and 32.6%, respectively.

The effective tax rate for the year ended September 30, 2024 is higher than the statutory tax rate principally due to an increase in the valuation allowance on our charitable deduction carryforward and state income taxes.

The effective tax rate for the year ended September 30, 2023 is higher than the statutory tax rate due to the deferred rate change and return-to-provision adjustments, which were partially offset by a reduction in the valuation allowance.

During the year ended September 30, 2022, a bargain sale of land to the State of Florida, at a price below market value, resulted in a charitable contribution carryover for tax purposes and generated a tax benefit of $6,300, of which $500 was utilized immediately, $8 was recognized during the year ended September 30, 2024 and nothing was recognized in 2023.

We do not anticipate that we will be able to recognize any of the charitable deduction carryover before it expires in 2027.

As of September 30, 2024 and 2023, the valuation allowance was $5,757 and $4,170, respectively, resulting in a provision (benefit) of $1,588 and $(139), respectively.

Liquidity and Capital Resources

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(in thousands) September 30,

2023 September 30,

2024 2023 Change

Cash and cash equivalents $ 3,150 $ 1,062 $ 2,088

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Current ratio 3.81 to 1 3.90 to 1

Debt ratio 0.30 to 1 0.27 to 1

Debt to total assets ratio 0.23 to 1 0.30 to 1

Debt to equity ratio 0.37 to 1 0.53 to 1

Sources and Uses of Liquidity and Capital

Our business has historically generated positive net cash flows from operating activities.

In light of recent hurricanes, costs of maintaining the citrus groves and harvesting and hauling of citrus products continue to increase, and we continue to evaluate the short and long-term use of our land.

Sources of cash primarily include cash flows from operations, sales of under-performing land and other assets, amounts available under our credit facilities and access to capital markets.

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operating expenses including employee costs, the cost of maintaining the citrus groves, harvesting and hauling of citrus products, capital expenditures, stock repurchases, dividends, debt service costs including interest and principal payments on term loans and other credit facilities and acquisitions.

Management believes that a combination of cash-on-hand, cash generated from operations, asset sales (see “Recent Developments” in Item 1.

Business for further details) and availability under our lines of credit will provide sufficient liquidity to service the principal and interest payments on our indebtedness and will satisfy working capital requirements and capital expenditures for at least the next twelve months and over the long term.

Management believes that a combination of cash-on-hand, cash generated from operations, asset sales and availability under our line of credit will provide sufficient liquidity to service the principal and interest payments on our indebtedness and will satisfy working capital requirements and capital expenditures for at least the next twelve months and over the long term.

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Borrowing Facilities and Long-term Debt

We have a $70,000 thousand working capital line of credit, of which $45,030 thousand is available for general use as of September 30, 2023, and a $25,000 thousand revolving line of credit, all of which is available for general use as of September 30, 2023 (see Note 6.

We have a $95,000 revolving line of credit ("RLOC"), of which $86,606 is available for general corporate purposes as of September 30, 2024 (see Note 7.

Long-Term Debt and Lines of Credit to the Consolidated Financial Statements included in this Annual Report for further information).

The working capital line of credit agreement was amended on October 27, 2022, and the primary terms of the amendment were an extension of the maturity to November 1, 2025, and the conversion of the interest rate from LIBOR plus a spread to SOFR plus a spread, which is adjusted quarterly, based on our debt service coverage ratio for the preceding quarter and can vary from 175 to 250 basis points, effective October 1, 2022.

There were no changes to the commitment amount.

investments, capital expenditures, working capital, business activities and other general corporate requirements, and limiting flexibility in planning for, or reacting to, changes in our business and industry.

The RLOC was amended on September 17, 2024, and the primary terms of the amendment were an extension of the maturity date to May 1, 2034, an increase in the amount available under the RLOC from $25,000 to $95,000 and securing the RLOC by real property, consisting of approximately 36,800 gross acres of citrus land.

We also repaid current borrowings under the $70,000 working capital line of credit ("WCLC") with Rabo Agrifinance, Inc., (“Rabo”) and there were no available borrowings under this facility at September 30, 2024, which was cancelled in October 2024.

The level of debt could have important consequences on our business, including, but not limited to, increasing our vulnerability to general adverse economic and industry conditions, limiting the availability of cash flow to fund future investments, capital expenditures, working capital, business activities and other general corporate requirements, and limiting flexibility in planning for, or reacting to, changes in our business and industry.

Our credit facilities are subject to various debt covenants, including the following financial covenants:

(i) minimum debt service coverage ratio of 1.10 to 1.00;

(ii) tangible net worth of at least $160,000 thousand increased annually by 10% of consolidated net income for the preceding years, or $174,628 thousand applicable for the year ended September 30, 2023;

(ii) tangible net worth of at least $160,000 increased annually by 10% of consolidated net income for the preceding years, or $174,628 applicable for the year ended September 30, 2024;

(iii) minimum current ratio of 1.50 to 1.00;

(iv) debt to total assets ratio not greater than 0.625 to 1.00;

and (v) solely in the case of the WCLC (as defined below), a limit on capital expenditures of $30,000 thousand per year.

and (iv) debt to total assets ratio not greater than 0.625 to 1.00.

As of September 30, 2024, we were in compliance with all of the financial covenants.

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The following table details the items contributing to the changes in cash and cash equivalents and restricted cash for the years ended September 30, 2024 and 2023:

(in thousands) Years Ended September 30,

2023 2022 2021

Net cash (used in) provided by operating activities $ (6,254) $ 6,523 $ 16,504

Net cash (used in) provided by investing activities (4,123) 22,468 (3,268)

Net cash provided by (used in) financing activities 13,204 (29,012) (32,037)

Net increase (decrease) in cash and cash equivalents and restricted cash $ 2,827 $ (21) $ (18,801)

Net Cash (Used In) Provided By Operating Activities

The decrease in net cash used in operating activities for the year ended September 30, 2023, as compared to the year ended September 30, 2022, was primarily due to lower revenues as a result of the fruit drop caused by Hurricane Ian.

Net Cash (Used In) Provided By Investing Activities

The shift to net cash used in investing activities for the year ended September 30, 2023, from net cash provided by investing activities for the year ended September 30, 2022, was driven by lower proceeds from ranch land sales.

Net Cash Provided By (Used In) Financing Activities

The shift to net cash provided by financing activities for the year ended September 30, 2023, from net cash used in financing activities for the year ended September 30, 2022, was primarily due to a net increase in borrowing under the working capital line of credit (“WCLC”) with Rabo Agrifinance, Inc.

(“Rabo”), and lower repayments of term loans.

The WCLC agreement provides for Rabo to issue up to $2,000 thousand in letters of credit on our behalf.

As of September 30, 2023, there was $248 thousand in outstanding letters of credit, which correspondingly reduced our availability under the line of credit.

(in thousands) September 30,

Net cash (used in) operating activities $ (30,497) $ (6,254)

Net cash provided by (used in) investing activities $ 68,178 (4,123)

Net cash (used in) provided by financing activities $ (37,975) 13,204

Net (decrease) increase in cash and cash equivalents and restricted cash $ (294) $ 2,827

Net Cash (Used In) Operating Activities

The increase in net cash used in operating activities for the year ended September 30, 2024, as compared to the year ended September 30, 2023, was primarily due to $27,389 in crop insurance proceeds and $839 in property and casualty insurance reimbursements for Hurricane Ian and $1,315 in proceeds under the CRBG program in the year ended September 30, 2023, partially offset by a decrease in accounts payable at September 30, 2024 driven by timing of spending.

Net Cash Provided By (Used In) Investing Activities

The shift to net cash provided by investing activities for the year ended September 30, 2024, from net cash used in investing activities for the year ended September 30, 2023, was driven by the sale of 18,354 acres of land for approximately $86,217 for the year ended September 30, 2024 as compared to the sale of 2,225 acres of ranch land for $12,000 in the prior year period.

Net Cash (Used In) Provided By Financing Activities

The shift to net cash used in financing activities for the year ended September 30, 2024, from net cash provided by financing activities for the year ended September 30, 2023, was primarily due to the repayment of borrowings under the WCLC and the $19,094 in outstanding borrowings under the Met Life Variable-Rate Term Loan with the proceeds from the sale of the Alico Ranch, as compared to net borrowings under the under the WCLC for the year ended September 30, 2023.

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Contractual Obligations

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The provision for income taxes includes income taxes currently payable and those deferred as a result of temporary differences between the financial statements and the income tax basis of assets and liabilities.

Deferred income tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

Deferred income tax assets and liabilities are measured using enacted income

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tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect of a change in income tax rates on deferred income tax assets and liabilities is recognized in income or loss in the period that includes the enactment date.

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Any increase or decrease in a valuation allowance could have a material adverse or beneficial impact on our income tax provision and net income or loss in the period the determination is made.

For the years ended September 30, 2023 and September 30, 2022, we recorded a valuation allowance of $4,170 thousand and $4,309 thousand, respectively.

For the years ended September 30, 2024 and September 30, 2023, we recorded a valuation allowance of $5,757 and $4,170, respectively.

We recognize interest and/or penalties related to income tax matters in income tax expense.

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The carrying amounts of our financial instruments, including cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities approximate their fair values due to the short term and immediate nature of these financial instruments.

S u mmary of S i gnificant Accounting Policies to our Consolidated Financial Statements included in this Annual Report for additional information about the fair value of our debt.

Summary of Significant Accounting Policies to our Consolidated Financial Statements included in this Annual Report for additional information about the fair value of our debt.

As of September 30, 2024 and 2023, we did not have any assets held for sale that had been measured at fair value on a non-recurring basis.

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Description of Business and Basis of Presentation to our Consolidated Financial Statements included in this Annual Report for additional information about the impact of accounting pronouncements.

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Quantitative and Qualitative Disclosures about Market Risk

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

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What changed 10-K

Item 7. Management’s Discussion and Analysis