ALICO, INC. 10-K

Item 8. Financial Statements and Supplementary Data 37 Table of Content s Index to Consolidated Financial Statements Page Report of Independent Registered Public Accounting Firm F o r T he Y ear E nded Sep t e mber 30, 2024 (PCAOB ID 248 ) 39 Report of Independent Registered Public Accounting Firm For The Year Ended September 30, 2023 (PCAOB ID 49) 41 Consolidated Financial Statements: Consolidated Balance Sheets 42 Consolidated Statements of Operations 43 Consolidated Statements of Changes in Equity 44 Consolidated Statements of Cash Flows 45 Notes to Consolidated Financial Statements 46 All schedules are omitted for the reason that they are not applicable or the required information is included in the financial statements or notes. 38 Table of Content s Report of Independent Registered Public Accounting Firm Board of Directors and Stockholders Alico, Inc. Opinion on the financial statements We have audited the accompanying consolidated balance sheet of Alico, Inc. (a Florida corporation) (and subsidiaries (the “Company”) as of September 30, 2024, the related consolidated statements of operations, changes in equity, and cash flows for the year ended September 30, 2024, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2024, and the results of its operations and its cash flows for the year ended September 30, 2024, in conformity with accounting principles generally accepted in the United States of America. Basis for opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. Critical audit matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Net Realizable Value of Unharvested Fruit Crop on the Trees As described further in note 3 to the financial statements, the Company values inventory at the lower of cost or net realizable value. At September 30, 2024, the consolidated inventory balance included unharvested fruit crop on the trees of $28,921,000. The Company assesses the carrying value of unharvested fruit crop on the trees, including the determination of adjustments to net realizable value, by applying judgment in developing estimates for the expected future crop yield. We identified management’s estimate of the net realizable value of unharvested fruit crop on the trees as a critical audit matter. The principal considerations for our determination that net realizable value of unharvested fruit crop on the trees is a critical audit matter are the significant judgments utilized by management in developing the accounting estimate. Auditing management’s estimates and assumptions required a high degree of auditor judgment and increased audit effort due to the impact these assumptions have on the net realizable value of unharvested fruit crop on the trees. Our audit procedures related to the net realizable value of unharvested fruit crop on the trees included the following, among others: • We obtained an understanding and evaluated the design and implementation of management’s controls related to the evaluation of the net realizable value of unharvested fruit crop on the trees, including the evaluation of the expected future crop yield. • We tested the accumulated production costs of the unharvested fruit crop on the trees that were subject to net realizable value adjustments. • We recalculated the mathematical accuracy of the net realizable value of unharvested fruit crop on the trees. 39 Table of Content s • We performed a retrospective review of management’s prior year expected future crop yield to actual results in the current year. • We performed site observations and obtained industry data to evaluate the reasonableness of management's estimates of future crop yield. /s/ GRANT THORNTON LLP We have served as the Company’s auditor since 2023. Tampa, Florida December 2, 2024 40 Table of Content s Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Alico, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheet of Alico, Inc. (the Company) as of September 30, 2023, the related consolidated statements of operations, changes in equity and cash flows, for the year then ended, and the related notes (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2023, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. /s/ RSM US LLP We served as the Company’s auditor from 2007 to 2023. Orlando, Florida December 6, 2023 41 Table of Content s ALICO, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share amounts) September 30, 2024 September 30, 2023 ASSETS Current assets: Cash and cash equivalents $ 3,150 $ 1,062 Accounts receivable, net 771 712 Inventories 30,084 52,481 Income tax receivable 1,958 1,200 Assets held for sale 3,106 1,632 Prepaid expenses and other current assets 1,558 1,718 Total current assets 40,627 58,805 Restricted cash 248 2,630 Property and equipment, net 352,733 361,849 Goodwill 2,246 2,246 Other non-current assets 2,865 2,823 Total assets $ 398,719 $ 428,353 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 3,362 $ 6,311 Accrued liabilities 5,366 5,363 Current portion of long-term debt 1,410 2,566 Other current liabilities 513 825 Total current liabilities 10,651 15,065 Long-term debt, net 82,313 101,410 Lines of credit 8,394 24,722 Deferred income tax liabilities, net 40,873 36,410 Other liabilities 193 369 Total liabilities 142,424 177,976 Commitments and Contingencies (Note 14) Stockholders' equity: Preferred stock, no par value, 1,000,000 shares authorized; none issued — — Common stock, $ 1.00 par value, 15,000,000 shares authorized; 8,416,145 shares issued and 7,628,639 and 7,610,551 shares outstanding at September 30, 2024 and September 30, 2023, respectively 8,416 8,416 Additional paid in capital 20,184 20,045 Treasury stock, at cost, 787,506 and 806,341 shares held at September 30, 2024 and September 30, 2023, respectively ( 26,694 ) ( 27,274 ) Retained earnings 249,253 243,804 Total Alico stockholders’ equity 251,159 244,991 Noncontrolling interest 5,136 5,386 Total stockholders’ equity 256,295 250,377 Total liabilities and stockholders’ equity $ 398,719 $ 428,353 See accompanying notes to the consolidated financial statements. 42 Table of Content s ALICO, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) Years Ended September 30, 2024 2023 Operating revenues: Alico Citrus $ 45,059 $ 38,145 Land Management and Other Operations 1,584 1,701 Total operating revenues 46,643 39,846 Operating expenses: Alico Citrus 102,628 32,959 Land Management and Other Operations 398 441 Total operating expenses 103,026 33,400 Gross (loss) profit ( 56,383 ) 6,446 General and administrative expenses 11,071 10,643 Loss from operations ( 67,454 ) ( 4,197 ) Other income (expense), net: Interest income 385 58 Interest expense ( 3,538 ) ( 4,911 ) Gain on sale of property & equipment 81,559 11,509 Total other income, net 78,406 6,656 Income before income taxes 10,952 2,459 Income tax provision 4,597 801 Net income 6,355 1,658 Net loss attributable to noncontrolling interests 618 177 Net income attributable to Alico, Inc. common stockholders $ 6,973 $ 1,835 Per share information attributable to Alico, Inc. common stockholders: Earnings per common share: Basic $ 0.91 $ 0.24 Diluted $ 0.91 $ 0.24 Weighted-average number of common shares outstanding: Basic 7,622 7,602 Diluted 7,622 7,602 Cash dividends declared per common share $ 0.20 $ 0.20 See accompanying notes to the consolidated financial statements . 43 Table of Content s ALICO, INC. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (in thousands) Common stock Additional Paid-In Capital Treasury Stock Retained Earnings Total Alico, Inc. Equity Non- controlling Interest Total Equity Shares Amount Shares Amount Balance at September 30, 2022 8,416 $ 8,416 $ 19,784 829 $ ( 27,948 ) $ 243,490 $ 243,742 $ 5,123 $ 248,865 Net income (loss) — — — — — 1,835 1,835 ( 177 ) 1,658 Dividends — — — — — ( 1,521 ) ( 1,521 ) — ( 1,521 ) Capital contribution received from noncontrolling interest — — — — — — — 440 440 Stock-based compensation — — 261 ( 23 ) 674 — 935 — 935 Balance at September 30, 2023 8,416 $ 8,416 $ 20,045 806 $ ( 27,274 ) $ 243,804 $ 244,991 $ 5,386 $ 250,377 Net income (loss) — — — — — 6,973 6,973 ( 618 ) 6,355 Dividends — — — — — ( 1,524 ) ( 1,524 ) — ( 1,524 ) Capital contribution received from noncontrolling interest — — — — — — — 368 368 Stock-based compensation — — 139 ( 18 ) 580 — 719 — 719 Balance at September 30, 2024 8,416 $ 8,416 $ 20,184 788 $ ( 26,694 ) $ 249,253 $ 251,159 $ 5,136 $ 256,295 See accompanying notes to the consolidated financial statements . 44 Table of Content s ALICO, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Year Ended September 30, 2024 2023 Net cash (used in) provided by operating activities: Net income $ 6,355 $ 1,658 Adjustments to reconcile net income to net cash used in operating activities: Depreciation, depletion and amortization 15,010 15,487 Debt issue costs expense 209 141 Deferred income tax provision (benefit) 4,463 821 Gain on sale of property and equipment ( 81,559 ) ( 11,509 ) Inventory net realizable value adjustment 48,099 1,616 Loss on disposal of property and equipment 6,990 9,624 Stock-based compensation expense 719 935 Other, net 59 ( 2 ) Changes in operating assets and liabilities: Accounts receivable ( 59 ) ( 388 ) Inventories ( 26,258 ) ( 26,415 ) Prepaid expenses 160 ( 294 ) Income tax receivable ( 758 ) ( 84 ) Other assets ( 142 ) 235 Accounts payable and accrued liabilities ( 3,369 ) 2,420 Other liabilities ( 416 ) ( 499 ) Net cash used in operating activities ( 30,497 ) ( 6,254 ) Cash flows from investing activities: Purchases of property and equipment ( 17,871 ) ( 16,656 ) Acquisition of citrus groves — ( 77 ) Proceeds from sale of property and equipment 86,444 11,359 Proceeds from property and casualty insurance — 839 Other, net ( 395 ) 412 Net cash provided by (used in) investing activities 68,178 ( 4,123 ) Cash flows from financing activities: Repayments on revolving lines of credit ( 53,262 ) ( 59,458 ) Borrowings on revolving lines of credit 36,934 79,252 Principal payments on term loans ( 20,491 ) ( 2,098 ) Capital contribution received from noncontrolling interest 368 441 Dividends paid ( 1,524 ) ( 4,933 ) 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 Cash and cash equivalents and restricted cash at beginning of the period 3,692 865 Cash and cash equivalents and restricted cash at end of the period $ 3,398 $ 3,692 Supplemental disclosure of cash flow information: Cash paid for interest, net of amount capitalized $ 3,848 $ 4,433 Cash paid for income taxes, net of refunds $ 890 $ — Supplemental disclosure of non-cash investing and financing activities: Dividends declared but unpaid $ 381 $ 381 See accompanying notes to the consolidated financial statements. 45 Table of Content s ALICO, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share and per acre amounts) Note 1. Description of Business and Basis of Presentation Description of Business Alico, Inc., together with its subsidiaries (collectively, “Alico”, the “Company”, “we”, “us” or “our”), is a Florida agribusiness and land management company owning approximately 53,371 acres of land and approximately 48,700 acres of oil, gas and mineral rights throughout Florida. Alico holds these mineral rights on substantially all its owned acres, with additional mineral rights on other acres. The Company manages its land based upon its primary usage, and reviews its performance based upon two primary classifications: (i) Alico Citrus and (ii) Land Management and Other Operations. Financial results are presented based upon these two business segments (Alico Citrus and Land Management and Other Operations). Basis of Presentation The Company has prepared the accompanying financial statements on a consolidated basis. These accompanying Consolidated Financial Statements, which are referred to herein as the “Financial Statements,” have been prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). All significant intercompany transactions and account balances between the consolidated businesses have been eliminated. Segments Operating segments are defined in the criteria established under the Financial Accounting Standards Board – Accounting Standards Codification (“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 John E. Kiernan, the Company’s President and Chief Executive Officer and chief operating decision maker (“CODM”), in deciding how to assess performance and allocate resources. The Company’s CODM assesses performance and allocates resources based on two reportable segments: (i) Alico Citrus and (ii) Land Management and Other Operations. Principles of Consolidation The Financial Statements include the accounts of Alico and the accounts of all the subsidiaries in which a controlling interest is held by the Company. Under U.S. GAAP, consolidation is generally required for investments of more than 50% of the outstanding voting stock of an investee, except when control is not held by the majority owner. The Company’s subsidiaries include: Alico Land Development, Inc., Alico-Agri, Ltd., Alico Plant World, LLC, Alico Fruit Company, LLC, Alico Citrus Nursery, LLC, Alico Chemical Sales, LLC, 734 Citrus Holdings, LLC and subsidiaries, Alico Skink Mitigation, LLC and Citree Holdings 1, LLC (“Citree”). The Company considers the criteria established under FASB ASC Topic 810, “Consolidations” in its consolidation process. All significant intercompany balances and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities as of the date of the accompanying Financial Statements, the disclosure of contingent assets and liabilities in the Financial Statements and the accompanying Notes, and the reported amounts of revenues and expenses and cash flows during the periods presented. Actual results could differ from those estimates. The Company evaluates estimates on an ongoing basis. The estimates are based on current and expected economic conditions, historical experience, the experience and judgment of the Company’s management and various other specific assumptions that the Company believes to be reasonable. Noncontrolling Interest in Consolidated Subsidiary The Financial Statements include all assets and liabilities of the less-than-100%-owned subsidiary the Company controls, Citree. Accordingly, the Company has recorded a noncontrolling interest in the equity of such entity. Citree had a net loss of $ 1,261 and $ 361 for the years ended September 30, 2024 and 2023, respectively, of which a net loss of $ 643 and $ 184 were attributable to the Company for the years ended September 30, 2024 and 2023, respectively. The net loss for the year ended September 30, 2024 was primarily due to lower revenue as Citree's trees continue to recover from the impact of Hurricane Ian. The net loss for the year ended September 30, 2023 was primarily due to lower revenue as a result of the fruit drop from Hurricane Ian. 46 Table of Content s Recent Accounting Pronouncements In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (“ASC 326”): Measurement of Credit Losses on Financial Instruments to introduce a new model for recognizing credit losses on financial instruments based on estimated current expected credit losses (" CECL"). Under the new standard, an entity is required to estimate CECL on trade receivables at inception, based on historical information, current conditions, and reasonable and supportable forecasts. The guidance is effective for the Company for annual periods beginning after December 15, 2022, including interim periods within those fiscal years. Early application is permitted. The Company adopted ASC 326 on October 1, 2023, and it did not have a material impact on the Company’s consolidated statements of operations, balance sheets, or cash flows in its Consolidated Financial Statements upon adoption. In November 2023, the FASB issued ASU 2023-07, “Improvements to Reportable Segment Disclosures,” which amends Topic 280 primarily through enhanced disclosures about significant segment expenses. The amendments are effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. ASU 2023-07 will become effective for us on October 1, 2024. The Company is currently evaluating this guidance. The adoption will modify disclosures but will not have an impact on the Company's consolidated statements of operations, balance sheets, or cash flows in its Consolidated Financial Statements. In December 2023, the FASB issued ASU 2023-09, “Improvements to Income Tax Disclosures,” which amends Topic 740 primarily through enhanced disclosures about an entity’s tax risks and tax planning. The amendments are effective for public business entities in annual periods beginning after December 15, 2024, with early adoption permitted on a prospective or retrospective basis. ASU 2023-09 will become effective for us on October 1, 2025. The Company is currently evaluating the impact of the adoption of this accounting pronouncement on its tax disclosures but it will not impact the Company's consolidated statements of operations, balance sheets or cash flows in its Consolidated Financial Statements. The Company has reviewed other recently issued accounting standards which have not yet been adopted to determine their potential effect, if any, on the results of operations or financial condition. Based on the review of these other recently issued standards, the Company does not currently believe that any of those accounting pronouncements will have a significant effect on its current or future financial position, results of operations, cash flows or disclosures. Reclassifications Certain prior year amounts have been reclassified in the accompanying notes to the Financial Statements for consistent presentation to the current period. These reclassifications had no impact on the Company's consolidated statements of operations, balance sheets, cash flows or working capital as previously reported. Seasonality The Company is primarily engaged in the production of fruit for sale to citrus markets, which is of a seasonal nature, and subject to the influence of natural phenomena and wide price fluctuations. Historically, the second and third quarters of Alico’s year produce most of the Company’s annual revenue. 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 this fiscal year. Working capital requirements are typically greater in the first and fourth quarters of the year, coinciding with harvesting cycles. Because of the seasonality of the business, results for any quarter are not necessarily indicative of the results that may be achieved for the full year ended September 30. Note 2. Summary of Significant Accounting Policies Revenue Recognition Revenues are derived from the sale of processed fruit, fresh fruit, other citrus revenue, revenues from grove management services, leasing revenue and other resource revenues. Most of the revenue is generated from the sale of citrus fruit to processing facilities, fresh fruit sales and grove management services. For fruit sales, the Company recognizes revenue in the amount it expects to be entitled to be paid, determined when control of the products or services is transferred to its customers, which occurs upon delivery of and acceptance of the fruit by the customer and when the Company has a right to payment. 47 Table of Content s For the sale of fruit, the Company has identified one performance obligation, which is the delivery of fruit to the processing facility of the customer (or harvesting of the citrus in the case of fresh fruit) for each separate variety of fruit identified in the respective contract with the respective customer. The Company initially recognizes revenue in an amount which is estimated based on contractual and market prices, if such market price falls within the range (known as “floor” and “ceiling” prices) identified in the specific respective contracts. Additionally, the Company also has a contractual agreement whereby revenue is determined based on applying a cost-plus structure methodology. As such, since all these contracts contain elements of variable consideration, the Company recognizes this variable consideration by using the expected value method. On a quarterly basis, management reviews the reasonableness of the revenues accrued based on buyers’ and processors’ advances to growers, cash and futures markets and experience in the industry. Adjustments are made throughout the year to these estimates as more current relevant industry information becomes available. Differences between the estimates and the final realization of revenues at the close of the harvesting season can result in either an increase or decrease to reported revenues. (in thousands) September 30, 2024 2023 Revenue recognized at a point-in-time $ 42,233 $ 36,911 Revenue recognized over time 4,410 2,935 Total $ 46,643 $ 39,846 Receivables under contracts, whereby pricing is based on contractual and market prices, are primarily paid at the floor amount and are collected within seven days after the harvest week. Any adjustments to pricing as a result of changes in market prices are generally collected or paid thirty to sixty days after final market pricing is published. Receivables under those contracts where pricing is based off a cost-plus structure methodology are paid at the final prior year rate. Any adjustments to pricing because of the cost-plus calculation are collected or paid upon finalization of the calculation and agreement by both parties. As of September 30, 2024, and September 30, 2023, the Company had total receivables relating to sales of citrus of $ 444 and $ 394 , respectively, recorded in Accounts Receivable, net, in the Consolidated Balance Sheets. For grove management services, the Company has identified one performance obligation, which is the management of the third party’s groves. Grove management services include caretaking of the citrus groves, harvesting and hauling of citrus, management and coordination of citrus sales and other related activities. The Company is reimbursed for expenses incurred in the execution of its management duties and the Company receives a per acre management fee. The Company recognizes operating revenue, including a management fee, and corresponding operating expenses when such services are rendered and consumed. On October 30, 2023, the Company entered into the Grove Management Agreement with an unaffiliated group of third parties to provide citrus grove caretaking services for approximately 3,300 acres owned by such third parties. Under the terms of the Agreement, the Company is reimbursed by the third parties for all its costs incurred related to providing these services and receives a management fee based on acres covered under this agreement. The Agreement may be terminated with written notice provided at least 60 days prior to the commencement of the next fiscal year, occurring subsequent to September 30, 2024 and with shorter notice under certain conditions. On September 20, 2024, the Grove Management Agreement was extended until December 31, 2024. 48 Table of Content s Disaggregated Revenue Revenues disaggregated by significant products and services for the years ended September 30, 2024 and 2023 are as follows: (in thousands) Years Ended September 30, 2024 2023 Alico Citrus Early and Mid-Season $ 14,534 $ 11,954 Valencias 26,925 23,906 Fresh Fruit and Other 774 1,051 Grove Management Services 2,826 1,234 Total $ 45,059 $ 38,145 Land Management and Other Operations Land and Other Leasing $ 1,284 $ 1,327 Other 300 374 Total $ 1,584 $ 1,701 Total Revenues $ 46,643 $ 39,846 Fair Value Measurements The Company categorizes its financial instruments measured at fair value into a fair value hierarchy that prioritizes the inputs used in pricing the asset or liability into a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows: • Level 1 – Observable inputs such as quoted market prices for identical assets and liabilities in active markets; • Level 2 – Inputs, other than the quoted prices for identical assets and liabilities in active markets, for which significant other observable market inputs are readily available; and • Level 3 – Unobservable inputs in which there is little or no market data, such as internally developed valuation models which require the reporting entity to develop its own assumptions. The carrying amounts of the Company’s 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. The carrying amounts and estimated fair values (Level 2) of debt instruments (see Note 7. Long-Term Debt and Lines of Credit for further information) are as follows: (in thousands) September 30, 2024 September 30, 2023 Carrying Amount Estimated Fair Value Carrying Amount Estimated Fair Value Debt Current long-term debt $ 1,410 $ 1,420 $ 2,566 $ 2,325 Long-term debt and lines of credit $ 91,141 $ 86,987 $ 126,753 $ 115,851 As of September 30, 2024 and 2023, the Company did not have any assets held for sale that had been measured at fair value on a non-recurring basis. Cash and Cash Equivalents The Company considers cash in banks and highly liquid instruments with an original maturity of three months or less to be cash and cash equivalents. At various times throughout the year ended September 30, and as of September 30, 2024, some 49 Table of Content s accounts held at financial institutions were in excess of the federally insured limit of $ 250 . The Company has not experienced any losses on these accounts and believes credit risk to be minimal. Restricted Cash Restricted cash of $ 248 at September 30, 2024 represents Cash-Secured Irrevocable Standby Letters of Credit to secure certain contractual obligations. Restricted cash of $ 2,630 at September 30, 2023 is comprised of cash received from the sale of certain assets in which the use of funds is restricted. For certain sales transactions, the Company sells property which serves as collateral for specific debt obligations and/or for which the Company intends to complete a (“1031 Exchange”) under section 1031 of the Internal Revenue Code. A 1031 Exchange allows a taxpayer to defer all or a portion of income taxes on the sale of real property provided it can identify replacement real property within 45 days and close on the purchase of the replacement real property within 180 days after the closing of the initial sale. If an acceptable transaction is not consummated within this time period, the Company will need to pay income taxes on the gain from the sales transaction. (in thousands) September 30, 2024 2023 Cash and cash equivalents $ 3,150 $ 1,062 Restricted cash 248 2,630 Cash and cash equivalents and restricted cash $ 3,398 $ 3,692 Accounts receivable, net Accounts receivable from customers are generated from revenues based on the sale of citrus, grove management, leasing and other transactions. The Company grants credit in the course of its operations to third party customers. Accounts receivable is presented in accordance with the CECL impairment model as required under ASC 326. The Company estimates a reserve for expected credit losses based on existing contractual payment terms, actual payment patterns of its customers, current and future economic and market conditions and individual customer circumstances. The Company has determined that the reserve for expected credit losses at September 30, 2024 and 2023 was $( 73 ) and $( 14 ), respectively, and write-offs for the years ended September 30, 2024 and 2023 were not material. The Company performs periodic credit evaluations of its customers’ financial condition and generally does not require collateral. The Company provides an allowance for credit losses for amounts which are not probable of collection. The estimate, evaluated quarterly by the Company, is based on historical collection experience, current macroeconomic climate and market conditions and a review of the current status of each customer’s account. Changes in the financial viability of significant customers and worsening of economic conditions may require changes to its estimate of the recoverability of the receivables. Such changes in estimates are recorded in the period in which these changes become known. The credit loss is included in general and administrative expenses in the Consolidated Statements of Operations. The following table presents accounts receivable, net, as of September 30, 2024 and 2023: (in thousands) September 30, 2024 2023 Accounts receivable $ 844 $ 726 Allowance for credit losses ( 73 ) ( 14 ) Accounts receivable, net $ 771 $ 712 Concentrations Accounts receivable from the Company’s major customer as of September 30, 2024 and 2023, and revenue from such customer for the years ended September 30, 2024 and 2023, which is included in the Alico Citrus segment, are as follows: (in thousands) Accounts Receivable Revenue % of Total Revenue 2024 2023 2024 2023 2024 2023 Tropicana $ — $ — $ 40,466 $ 32,403 86.8 % 81.3 % 50 Table of Content s The citrus industry is subject to various factors over which growers have limited or no control, including weather conditions, disease, pestilence, water supply and market price fluctuations. Market prices are highly sensitive to aggregate domestic and foreign crop sizes, as well as factors including, but not limited to, weather and competition from foreign countries. The overall increase in Tropicana revenue, as a percentage of sales, was primarily due to an increase in pound solids produced during the year ended September 30, 2024, as we began to recover from Hurricane Ian which negatively impacted our harvest during the year September 30, 2023. Accounting for government grants The Company recognizes government grants when there is reasonable assurance that: (1) the grant will be received and (2) all conditions will be met. For income-based grants, the Company recognizes the income on a systemic basis over the periods in which it recognizes as expense the related costs for which the grant was intended to compensate. In the year ended September 30, 2024, the Company received $ 2,962 of grant money from the Citrus Research and Field Trial Foundation’s (“CRAFT”) program to assist citrus growers in the State of Florida using Oxytetracycline (“OTC”) and other approved therapies to combat the effect of “greening” of their citrus trees. These funds (including $ 35 received in October 2024) were recognized as a component of Inventories ($ 1,192 at September 30, 2024) in the Company’s Consolidated Balance Sheet and as a reduction of Operating expenses ($ 1,805 during the year ended September 30, 2024) in its Consolidated Statement of Operations as the fruit was sold, in order to align it to the period over which the expense related to the OTC treatments is recognized. These grant monies were received in exchange for providing certain historical data to the CRAFT Foundation about the Company’s citrus groves. The $ 1,805 of CRAFT funds received in January of 2024 covered substantially all of the costs of the OTC application for 2023-2024 harvest, $ 1,192 of CRAFT funds recognized in Inventories on the balance of the year ended September 30, 2024 covers approximately 35 % of the cost of OTC treatment for the 2024-2025 harvest season. The Company may continue, but is not obligated, to participate in future CRAFT programs on the effects of the use of OTC on its Citrus Trees. Real Estate In February 2017, the FASB issued ASU 2017-05, “ Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets ” (ASC 610-20): This standard clarified the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets and clarified the scope and application of ASC 610-20 on the sale, transfer, and derecognition of nonfinancial assets and in substance nonfinancial assets to non-customers, including partial sales. The standard provided guidance on how gains and losses on transfers of nonfinancial assets and in substance nonfinancial assets to non-customers are recognized. The Company recognizes a gain on the sale of real estate as outlined by ASC 610-20. Inventories The costs of growing crops, including but not limited to labor, fertilization, fuel, crop nutrition, irrigation, and depreciation, are capitalized into inventory throughout the respective crop year. Such costs are expensed as cost of sales when the crops are harvested and are recorded as operating expenses in the Consolidated Statements of Operations. Inventories are stated at the lower of cost or net realizable value. The cost for unharvested citrus crops is based on accumulated production costs incurred during the period from January 1 through the balance sheet date. Property and Equipment Property and equipment are stated at cost, net of accumulated depreciation, depletion and amortization. Major improvements are capitalized while expenditures for maintenance and repairs are expensed when incurred. Costs related to the development of citrus groves through planting of trees are capitalized. Such costs include land clearing, excavation and construction of ditches, dikes, roads, and reservoirs, among other costs. After the planting, caretaking costs or pre-productive maintenance costs are capitalized for 4 years. After 4 years, a planting is considered to have reached maturity and the accumulated costs are depreciated over 25 years, except for land clearing and excavation, which are considered costs of land and not depreciated. Real estate costs incurred for the acquisition, development and construction of real estate projects are capitalized. Depreciation is provided on a straight-line basis over the estimated useful lives of the depreciable assets, with the exception of leasehold improvements and assets acquired through finance leases, which are depreciated over their estimated useful lives if the lease transfers ownership or contains a bargain purchase option. 51 Table of Content s The estimated useful lives for property and equipment are primarily as follows: Citrus trees 25 years Equipment and other facilities 3 - 20 years Buildings and improvements 15 - 39 years Changes in circumstances, such as technological advances, or changes to our business model or capital strategy could result in the actual useful lives differing from the original estimates. In those cases where the Company determines that the useful life of property and equipment should be shortened, Alico depreciates the asset over its revised estimated remaining useful life, thereby increasing depreciation expense (see Note 5. Property and Equipment, Net for further information). Impairment of Long-Lived Assets The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. The Company records impairment losses on long-lived assets used in operations, or asset group, when events and circumstances indicate that the assets might be impaired and the estimated cash flows (undiscounted and without interest charges) to be generated by those assets or asset group over the remaining lives of the assets or asset group are less than the carrying amounts of those assets. In calculating impairments and the estimated cash flows, the Company assigns its asset groups by determining the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of the other Company assets. The net carrying values of assets or asset group not recoverable are reduced to their fair values. Alico’s cash flow estimates are based on historical results adjusted to reflect best estimates of future market conditions and operating conditions. For the years ended September 30, 2024 and 2023, the Company did not recognize any impairment of long-lived assets. As of September 30, 2024 and 2023, long-lived assets were comprised of property and equipment. Goodwill and Intangible Assets Goodwill represents the excess of the purchase price of acquired businesses over the fair value of the assets acquired less liabilities assumed in connection with such acquisition. In accordance with the provisions of ASC 350, Intangibles-Goodwill and Other, goodwill and intangible assets with indefinite useful lives acquired in an acquisition are not amortized, but instead are tested for impairment at least annually, on the same date, or more frequently, should an event occur or circumstances indicate that the carrying amount may be impaired. Such events or circumstances may be a significant change in business climate, economic and industry trends, legal factors, negative operating performance indicators, significant competition, changes in strategy or disposition of a reporting unit or a portion thereof. The carrying value of goodwill is tested for impairment annually as of September 30, and, additionally on an interim basis, whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The accounting standards for goodwill allow for the assessment of qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company does not utilize a qualitative assessment approach, then the quantitative goodwill impairment test is utilized to identify potential impairments. The Company identifies any potential impairment by comparing the carrying value of a reporting unit to its fair value. The Company typically determines the fair value of its reporting units using a market approach. If a potential impairment is identified, the Company will determine the amount of goodwill impairment by comparing the fair value of a reporting unit with its carrying amount. As of September 30, 2024 and 2023, no impairment was required. Other Non-Current Assets Other non-current assets primarily include intangible assets relating to mineral rights, water permits, right-of-use assets relating to lease obligations, investments owned in agricultural cooperatives, cash surrender value on life insurance, and deposits on the purchase of citrus trees. Investments in stock related to agricultural cooperatives are carried at cost. Income Taxes The Company uses the asset and liability method of accounting for deferred income taxes. 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 52 Table of Content s 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. A valuation allowance is provided to reduce deferred tax assets to the amount of future tax benefit when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Projected future taxable income and ongoing tax planning strategies are considered and evaluated when assessing the need for a valuation allowance. Any increase or decrease in a valuation allowance could have a material adverse or beneficial impact on the Company’s income tax provision and net income or loss in the period the determination is made. See Note 8. Income Taxes for detail of valuation allowances recognized during the year ended September 30, 2024 and 2023. The Company recognizes interest and/or penalties related to income tax matters in income tax expense. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which a change in judgment occurs. The Company records interest related to unrecognized tax benefits in income tax expense. Earnings per Share Basic earnings per share for the Company’s common stock is calculated by dividing net income attributable to Alico common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted earnings per common share is similarly calculated, except that the calculation includes the dilutive effect of the assumed issuance of shares of common stock issuable under equity-based compensation plans in accordance with the treasury stock method, or any other type of securities convertible into common stock, except where the inclusion of such common shares would have an anti-dilutive effect. The following table presents a reconciliation of basic to diluted weighted average common shares outstanding for the years ended September 30, 2024 and 2023: (in thousands) Years Ended September 30, 2024 2023 Weighted Average Common Shares Outstanding – Basic 7,622 7,602 Effect of dilutive securities – stock options and unrestricted stock — — Weighted Average Common Shares Outstanding – Diluted 7,622 7,602 Non-vested restricted shares of common stock entitle the holder to receive non-forfeitable dividends upon issuance and are included in the calculation of diluted earnings per common share. Stock-Based Compensation Stock-based compensation is measured based on the fair value of the equity award at the grant date and is expensed on a straight-line basis over the vesting period. Upon the vesting of restricted stock, the Company issues common stock from common shares held in treasury. The Company recognizes the impact of forfeitures as they occur. See Note 9. Stock-based Compensation for a discussion of the Company’s stock-based compensation plans. Note 3. Inventories Inventories consist of the following at September 30, 2024 and 2023: (in thousands) September 30, 2024 2023 Unharvested fruit crop on the trees $ 28,921 $ 50,699 Other 1,163 1,782 Total inventories $ 30,084 $ 52,481 The Company records its inventory at the lower of cost or net realizable value. 53 Table of Content s During the years ended September 30, 2024 and 2023 the Company recorded $ 48,099 and $ 1,616 , respectively, for adjustments to reduce inventory to net realizable value, within Operating expenses, which includes $ 19,549 recognized at September 30, 2024. The incremental inventory adjustment is the result of expectations for a significantly lower than anticipated harvest of the Early and Mid-Season and Valencia crops for the 2024-2025 season. The remainder of the adjustment for the year ended September 30, 2024 was due to significantly lower than anticipated harvests of the Early and Mid-Season and Valencia crops, during the 2023/2024 crop seasons as a result of the continued recovery from the impacts of Hurricane Ian. The adjustment for the year ended September 30, 2023 was due to the premature drop of unharvested fruit as a result of Hurricane Ian in September 2022. In the year ended September 30, 2024 the Company received insurance proceeds relating to Hurricane Ian of $ 299 for crop claims, as part of a final true-up of amounts due. In the year ended September 30, 2023, the Company received insurance proceeds relating to Hurricane Ian of $ 27,389 for crop claims and $ 839 relating to property and casualty damage claims, all of which have been recorded as a reduction in operating expenses in the Consolidated Statements of Operations. The Company was eligible for Hurricane Irma federal relief programs for block grants that were being administered through the State of Florida in 2023. During the year ended September 30, 2023, the Company received $ 1,315 , under the Florida Citrus Recovery Block Grant (“CRBG”) program. No further federal relief proceeds are expected related to Hurricane Irma. These federal relief proceeds are included as a reduction to operating expenses in the Consolidated Statements of Operations. On October 9, 2024, Hurricane Milton hit Florida and the Company's citrus groves sustained hurricane or tropical storm force winds for varying durations of time. Based on observations to date, the Company sustained minimal tree damage; however, there was measurable fruit drop from trees in our northern groves, particularly in Polk and Hardee County. The Company will continue to evaluate the impact of the Hurricane on its anticipated harvest in assessing any incremental write-down to be recognized at December 31, 2024. However, an estimate of the amount of any incremental write-down to inventory cannot be made at this time. Note 4. Assets Held for Sale In accordance with its strategy to dispose of non-core and under-performing assets, the following assets have been classified as assets held for sale as of September 30, 2024 and September 30, 2023: (in thousands) Carrying Value Years Ended September 30, 2024 2023 Ranch $ 69 $ 1,632 Alico Citrus $ 3,037 $ — Total assets held for sale $ 3,106 $ 1,632 On April 19, 2024, the Company entered into an agreement to sell 798 acres of citrus land, which were not producing as expected, for $ 7,183 ($ 9,000 per acre). This agreement includes an option to purchase approximately 680 additional acres within ten months of the closing date of the sale, at the same price per acre. The 798 acre sale closed on June 28, 2024 (included in the September 30, 2024 land sales below). In addition, the Company has a purchase option agreement to sell 899 acres of ranch and citrus land for $ 10,333 ($ 11,494 per acre) that expires on January 13, 2025. During the year ended September 30, 2024, we sold approximately 18,354 acres of land for approximately $ 86,217 and recognized 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 . The Company recorded no impairment loss during the years ended September 30, 2024 and 2023. 54 Table of Content s During the year ended September 30, 2024, the Company used a portion of the proceeds from these various asset sales to pay down debt (see Note 7. Long-Term Debt and Lines of Credit for further information) and for general corporate purposes. During the year ended September 30, 2023, these proceeds were used for general corporate purposes. Note 5. Property and Equipment, Net Property and equipment, net consists of the following at September 30, 2024 and September 30, 2023: (in thousands) September 30, 2024 2023 Citrus trees $ 319,149 $ 328,421 Equipment and other facilities 58,293 57,779 Buildings and improvements 6,515 7,081 Total depreciable properties 383,957 393,281 Less: accumulated depreciation and depletion ( 146,086 ) ( 144,150 ) Net depreciable properties 237,871 249,131 Land and land improvements 114,862 112,718 Property and equipment, net $ 352,733 $ 361,849 For the years ended September 30, 2024 and 2023 the Company recognized a loss on the disposal of property and equipment of $ 6,990 and $ 9,624 , respectively, due to tree clippings, which has been recognized within Operating expenses. These losses were principally driven by a decision not to continue to provide caretaking for certain groves which were under performing and a decision to enter a lease with a third-party to remove certain trees in exchange for allowing them to utilize a portion of the grove for other agricultural development during the years ended September 30, 2024 and 2023, respectively. For the years ended September 30, 2024 and 2023 depreciation expense was $ 14,959 and $ 15,444 , respectively and depletion expense was $ 51 and $ 43 , respectively. Note 6. Accrued Liabilities Accrued liabilities consist of the following at September 30, 2024 and September 30, 2023: (in thousands) September 30, 2024 2023 Ad valorem taxes $ 1,898 $ 2,134 Accrued interest 554 1,102 Accrued employee wages and benefits 1,727 1,007 Accrued dividends 381 381 Accrued insurance 124 345 Professional fees 275 307 Other accrued liabilities 407 87 Total accrued liabilities $ 5,366 $ 5,363 55 Table of Content s Note 7. Long-Term Debt and Lines of Credit The following table summarizes long-term debt at September 30, 2024 and September 30, 2023: (in thousands) September 30, 2024 September 30, 2023 Long-term debt, net of current portion: Met fixed-rate term loans $ 70,000 $ 70,000 Met variable-rate term loans — 19,094 Met Citree term loan 3,700 3,888 Pru loans A & B 10,457 11,615 Deferred financing fees ( 434 ) ( 621 ) 83,723 103,976 Less current portion of long-term debt 1,410 2,566 Long-term debt, net $ 82,313 $ 101,410 The following table summarizes amounts outstanding under lines of credit and related deferred financing costs, net of accumulated amortization at September 30, 2024 and September 30, 2023: (in thousands) September 30, 2024 September 30, 2023 Lines of Credit: RLOC $ 8,394 $ — WCLC — 24,722 Deferred financing fees (1) ( 671 ) ( 95 ) Lines of Credit, net $ 7,723 $ 24,627 1- Represents deferred financing fees on the RLOC, included within Other non-current assets in the consolidated balance sheets. Future maturities of long-term debt and lines of credit as of September 30, 2024 are as follows: (in thousands) September 30, 2024 Due within one year $ 1,410 Due between one and two years 1,410 Due between two and three years 1,410 Due between three and four years 1,410 Due between four and five years 1,137 Due beyond five years 85,774 Total future maturities $ 92,551 Interest costs expensed and capitalized were as follows: (in thousands) Years Ended September 30, 2024 2023 Interest expense $ 3,538 $ 4,911 Interest capitalized 1,260 1,439 Total $ 4,798 $ 6,350 56 Table of Content s Debt The Company’s credit facilities originally consisted of fixed interest rate term loans originally in the amount of $ 125,000 (“Met Fixed-Rate Term Loans”), variable interest rate term loans originally in the amount of $ 57,500 (“Met Variable-Rate Term Loans”), a $ 25,000 revolving line of credit (“RLOC”) with Metropolitan Life Insurance Company ( “Met”) and a $ 70,000 working capital line of credit (“WCLC”) with Rabo Agrifinance, Inc. (“Rabo”). On September 17, 2024, the Company amended the credit agreement with Met (the "Amended Credit Agreement") and the term loans and RLOC (the "Amended RLOC"). The primary terms of the amendments include an increase in the capacity of the Amended RLOC to $ 95,000 and an extension of its maturity to May 1, 2034. In connection with entrance into the Amended Credit Agreement, the Company also repaid current borrowings under the WCLC with Rabo and there were no available borrowings under this facility at September 30, 2024, which was cancelled in October 2024. As a result of the Amended Credit Agreement, the credit facilities now include the Met Fixed-Rate Term Loans and the Amended RLOC. The term loans and RLOC are secured by real property. The security for the term loans and RLOC as of the most recent amendment, consists of approximately 36,800 gross acres of citrus groves. The Met Fixed-Rate Term Loans are interest-only, with a balloon payment to be paid at maturity on November 1, 2029. The interest rate on these Met Fixed-Rate Term Loans, is 3.85 %. The Met Variable-Rate Term Loans were subject to quarterly principal payments of $ 406 and bore an interest rate equal to One Month Term Secured Overnight Financing Rate ("SOFR") plus 175 basis points (the “SOFR spread”). The SOFR spread was subject to adjustment by Met every 2 years beginning May 1, 2023, until maturity. Interest on the term loans was payable quarterly. The interest rates on the Met Variable-Rate Term Loans were 7.52 % per annum as of September 30, 2023. Effective February 17, 2023, the Company agreed to defer the next three quarterly principal payments which were previously due May 2023, August 2023 and November 2023 to the maturity date of the loan on November 1, 2029. On December 26, 2023, the Company repaid the outstanding balance of $ 19,094 , plus accrued interest, and no further borrowings are possible on these loans. With respect to the RLOC, for the year ended September 30, 2023, the interest rate was SOFR plus 175 basis points. The SOFR spread was subject to adjustment by lender every 2 years beginning May 1, 2023, until maturity on November 1, 2029 and was subject to an annual commitment fee of 25 basis points on the unused portion of the line of credit, which was available for funding general corporate purposes. The Amended RLOC bears interest rate at SOFR plus 220 basis points (the "Amended SOFR Spread), with a SOFR floor of 5.00 % and a minimum balance of $ 2,500 . The SOFR spread and SOFR floor are subject to adjustment by lender every 2 years beginning January 1, 2026 and every two years thereafter until maturity. The RLOC is subject to an annual commitment fee of 25 basis points on the unused portion of the line of credit and is available for funding general corporate purposes. At September 30, 2024 and 2023, $ 86,606 and $ 25,000 , was available under the RLOC, respectively, and $ — and $ 45,030 was available under the WCLC, respectively. The variable interest rate on the Amended RLOC and the RLOC, respectively, was 7.30 % per annum and 7.52 % per annum as of September 30, 2024 and September 30, 2023, respectively. The WCLC was a revolving credit facility which is available for funding working capital and general corporate requirements. As of September 30, 2024 no borrowings were available borrowings under the WCLC and the agreement and was terminated in October 2024, once the accrued interest was paid. T he WCLC 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. This spread was adjusted quarterly, based on the Company’s debt service coverage ratio for the preceding quarter and can vary from 175 to 250 basis points . The variable interest rate was 4.31 % per annum as of September 30, 2023. The WCLC provided for Rabo to issue up to $ 2,000 in letters of credit on the Company’s behalf, of which $ 248 were issued as of September 30, 2023. The WCLC was collateralized by the Company’s current assets and certain other personal property owned by the Company. These credit facilities noted above are subject to various 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 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 .625 to 1.00; and (v) solely in the case of the WCLC, a limit on capital expenditures of $ 30,000 per year ended September 30. As of September 30, 2024, the 57 Table of Content s Company was in compliance with all of the financial covenants. There were no changes to the covenants in the Amended Credit Agreement, except to include a 55 % Loan To Value Cap (the "LTV CAP") on the value of the term loans and RLOC capacity. At September 30, 2024, the Company was able to draw the entire amount of the RLOC, less current borrowings, and remain under the LTV Cap. Credit facilities also include a Met Life term loan collateralized by 1,200 gross acres of citrus grove owned by Citree (“Met Citree Loan”). This is a $ 5,000 credit facility that bears interest at a fixed rate of 5.28 % per annum. Principal and interest payments are made on a quarterly basis. Effective February 17, 2023, the Company agreed to defer the next three quarterly principal payments which were previously due May 2023, August 2023 and November 2023 to the maturity date of the loan. The loan matures in February 2029. Silver Nip Citrus Debt There are two fixed-rate term loans, with an original combined balance of $ 27,550 , bearing interest at 5.35 % per annum (“Pru Loans A & B”). Principal of $ 290 is payable quarterly, together with accrued interest. The loans are collateralized by approximately 5,700 acres of citrus groves in Collier, Hardee, Highlands and Polk Counties, Florida and mature on June 1, 2029 and June 1, 2033, respectively. The Pru Loans A & B are subject to a financial covenant whereby the consolidated current ratio requirement is 1.00 to 1.00. Silver Nip Citrus was in compliance with the current ratio covenant as of September 30, 2024. Deferred Financing Costs Costs incurred to obtain financing are deferred and amortized to "Interest expense" in the consolidated statement of operations over the related financing period using the effective interest method. The Company records debt issuance costs as a direct reduction of the carrying value of the related debt. Financing costs related to the undrawn RLOC are included in "Other non-current assets" in the consolidated balance sheets. Note 8. Income Taxes The Federal and State filings remain subject to examination by tax authorities for tax periods ending after September 30, 2018. The income tax provision for the years ended September 30, 2024 and 2023 consists of the following: (in thousands) Years Ended September 30, 2024 2023 Current: Federal income tax $ 99 $ ( 18 ) State income tax 34 ( 2 ) Total current 133 ( 20 ) Deferred: Federal income tax 2,260 630 State income tax 616 330 Valuation allowance 1,588 ( 139 ) Total deferred 4,464 821 Income tax provision $ 4,597 $ 801 Income tax provision attributable to income before income taxes differed from the amount computed by applying the statutory federal income tax rate of 21% to income before income taxes for each of the years ended September 30, 2024 and September 30, 2023, respectively, as a result of the following: 58 Table of Content s (in thousands) Years Ended September 30, 2024 2023 Amount Tax Rate Amount Tax Rate Income tax at the statutory federal rate $ 2,300 21.0 % $ 516 21.0 % Increase (decrease) resulting from: State income taxes, net of federal benefit 514 4.7 % 265 10.8 % Permanent reconciling items, net 13 0.1 % 16 0.7 % Officer life insurance ( 16 ) ( 0.1 %) 11 0.4 % Non-Controlling Interest - Citree 130 1.2 % 37 1.5 % Valuation allowance 1,588 14.5 % ( 139 ) ( 5.7 %) Other 68 0.6 % 95 3.9 % Income tax provision $ 4,597 42.0 % $ 801 32.6 % The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of September 30, 2024, and 2023 are presented below: (in thousands) September 30, 2024 2023 Deferred tax assets: Goodwill $ 8,986 $ 10,836 Inventories 194 1,307 Stock compensation 190 279 Accrued bonus 145 29 Intangibles 288 345 Charitable contribution carryforward 5,800 5,809 Net operating loss 4,576 3,762 Interest expense limitation 1,605 1,599 Other 115 129 Total deferred tax assets 21,899 24,095 Deferred tax liabilities: Property and equipment 55,954 55,163 Investment in Citree 846 943 Prepaid insurance 215 229 Total deferred tax liabilities 57,015 56,335 Valuation allowance 5,757 4,170 Net deferred income tax liabilities $ ( 40,873 ) $ ( 36,410 ) The Company has a federal net operating loss carryforward of $ 20,013 and state net operating loss carryforward of $ 8,321 at September 30, 2024, which resulted in deferred tax assets of $ 4,203 and $ 372 , respectively. Both the federal and state net operating losses have an indefinite life. The Company has a partial valuation allowance on our charitable contribution carryforward as of September 30, 2024 and 2023. The valuation allowance at September 30, 2024 and 2023 was $ 5,757 and $ 4,170 , respectively. Note 9. Stock-based Compensation Effective January 27, 2015, the Company’s Board of Directors adopted the 2015 Stock Incentive Plan (the “2015 Plan”), which provides for up to 1,250,000 common shares available for issuance to provide a long-term incentive plan for officers, employees, directors and/or consultants to directly link incentives to stockholder value, with 1,127,000 remaining available for issuance under the 2015 Plan. The 2015 Plan was approved by the Company’s stockholders in February 2015. The Company’s 2015 Plan provides for grants to executives in various forms including restricted shares of the Company’s common stock and stock options. Awards are discretionary and are determined by the Compensation Committee of the 59 Table of Content s Board of Directors. Awards vest based upon service conditions. Non-vested restricted shares generally vest over requisite service periods of one to six years from the date of grant. The Company recognizes stock-based compensation expense for (i) Board of Directors fees (generally paid in treasury stock); and (ii) other awards under the 2015 Plan (paid in restricted stock and stock options). Stock-based compensation expense is recognized in general and administrative expenses in the Consolidated Statements of Operations. Stock Compensation – Board of Directors The Board of Directors can either elect to receive stock compensation or cash for their fees for services provided. Stock-based compensation expense relating to the Board of Directors fees was $ 493 and $ 588 for the years ended September 30, 2024, and 2023, respectively. Restricted Stock Awards (“RSAs”) The following table represents a summary of the status of the Company’s RSAs: Restricted Stock Awards Shares Weighted- Average Grant Date Fair Value Outstanding at September 30, 2023 17,540 $ 37.82 Vested during year 2024 (a) ( 35 ) 32.30 Forfeited during year 2024 ( 5 ) 32.30 Outstanding and expected to vest at 2024 (b) 17,500 $ 37.82 a. The total fair value of all RSAs vested in year 2024 and 2023 was $ 1 and $ 417 , respectively. b. The weighted average remaining contractual term is 0.8 years and the aggregate intrinsic value of RSAs expected to vest is $ 489 . Stock compensation expense related to the RSAs totaled $ 226 and $ 329 for the years ended September 30, 2024 and 2023, respectively. There was $ 150 of total unrecognized stock compensation costs related to RSAs at September 30, 2024. Stock Options All outstanding stock options are fully vested at September 30, 2024. The following table represents a summary of the Company’s stock option activity: Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term (years) Aggregate Intrinsic Value Vested and outstanding – September 30, 2024 38,000 $ 33.75 2.3 — Stock compensation expense related to the options totaled $ 0 and $ 18 for the years ended September 30, 2024 and 2023, respectively. Forfeitures of RSAs and stock options were recognized as incurred. At September 30, 2024 and September 30, 2023, there was no unrecognized stock compensation costs related to unvested share-based compensation for the option grants. Total stock-based compensation expense for the years ended September 30, 2024 and 2023, which was recognized in general and administrative expense, was $ 719 and $ 935 , respectively. Note 10. Segment Information Segments Operating segments are defined in the criteria established under the 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 60 Table of Content s information is available and which is evaluated regularly by the Company’s chief operating decision maker (“CODM”) in deciding how to assess performance and allocate resources. The Company’s CODM assesses performance and allocates resources based on two reportable segments: Alico Citrus and Land Management and Other Operations. Total revenues represent sales to unaffiliated customers, as reported in the Consolidated Statements of Operations. Goods and services produced by these segments are sold to wholesalers and processors in the United States who prepare the products for consumption. The Company evaluates the segments’ performance based on direct margins (gross profit) from operations before general and administrative expenses, interest expense, other income (expense) and income taxes, not including nonrecurring gains and losses. Information by reportable segment is as follows: (in thousands) Years Ended September 30, 2024 2023 Revenues: Alico Citrus $ 45,059 $ 38,145 Land Management and Other Operations 1,584 1,701 Total operating revenues $ 46,643 $ 39,846 Operating expenses: Alico Citrus $ 102,628 $ 32,959 Land Management and Other Operations 398 441 Total operating expenses $ 103,026 $ 33,400 Gross profit (loss) Alico Citrus $ ( 57,569 ) $ 5,186 Land Management and Other Operations 1,186 1,260 Total (loss) profit $ ( 56,383 ) $ 6,446 General and administrative expenses 11,071 10,643 Total other income, net 78,406 6,656 Income before income taxes $ 10,952 $ 2,459 Capital expenditures: Alico Citrus $ 17,871 $ 16,733 Total capital expenditures $ 17,871 $ 16,733 Depreciation, depletion and amortization: Alico Citrus $ 14,742 $ 14,999 Land Management and Other Operations 58 67 Other Corporate Assets 210 421 Total depreciation, depletion and amortization $ 15,010 $ 15,487 Assets: Alico Citrus $ 383,777 $ 415,030 Land Management and Other Operations 13,134 11,722 Other Corporate Assets 1,808 1,601 Total Assets $ 398,719 $ 428,353 61 Table of Content s Note 11. Leases The Company determines whether an arrangement is a lease at inception. The Company’s leases consist of operating lease arrangements for certain office space, tractor leases and IT facilities. When these lease arrangements include lease and non-lease components, the Company accounts for lease components and non-lease components (e.g., common area maintenance) separately based on their relative standalone prices. Any lease arrangements with an initial term of 12 months or less are not recorded on the Company’s Consolidated Balance Sheets, and it recognizes lease cost for these lease arrangements on a straight-line basis over the applicable lease term. Many lease arrangements provide the options to exercise one or more renewal terms or to terminate the lease arrangement. When the options are reasonably certain to be exercised the Company includes these options when it will be reasonably certain to exercise them in the lease term used to establish the right-of-use assets and lease liabilities. Generally, lease agreements do not include an option to purchase the leased asset, residual value guarantees or material restrictive covenants. As most of our lease arrangements do not provide an implicit interest rate, the Company applies an incremental borrowing rate based on the information available at the commencement date of the lease arrangement to determine the present value of lease payments. No lease costs associated with finance leases and sale-leaseback transactions occurred and our lease income associated with lessor and sublease arrangements are not material to our Consolidated Financial Statements. Our operating leases are reported in our Consolidated Balance Sheets as follows: (in thousands) Classification September 30, 2024 September 30, 2023 Operating lease components Right-of-use assets – non-current Other non-current assets $ 293 $ 523 Current lease liabilities Other current liabilities $ 153 $ 254 Non-current lease liabilities Other liabilities $ 170 $ 305 Our operating leases cost components are reported in our Consolidated Statements of Operations as follows: (in thousands) Classification September 30, 2024 September 30, 2023 Operating lease components Operating lease costs General and administrative expenses $ 148 $ 128 Future maturities of our operating lease obligations as of September 30, 2024, by year, are as follows: (in thousands) 2025 $ 159 2026 145 2027 31 2028 — 2029 — Total noncancelable future lease obligations $ 335 Less: Interest ( 12 ) Present value of lease obligations $ 323 62 Table of Content s September 30, 2024 Weighted-average remaining lease term 1.90 years Weighted-average discount rate 5.46 % Cash flow information related to leases consists of the following: (in thousands) September 30, 2024 September 30, 2023 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 155 $ 211 Right-of-use assets obtained in exchange for lease obligations: Operating leases $ — $ 184 Note 12. Employee Benefit Plans Profit Sharing and 401(k) Plans The Company maintains a 401(k) employee savings plan for eligible employees, which provides up to a 4 % matching contribution payable on employee payroll deferrals. The Company’s matching funds vest to the employee immediately, pursuant to a safe harbor election effective in October 2012. The Company’s contributions to the plan were $ 347 and $ 384 for the years ended September 30, 2024 and 2023, respectively. The Company also maintains a Profit Sharing Plan (“Plan”) that is fully funded by contributions from the Company. Contributions to the Plan are discretionary and determined annually by the Company’s Board of Directors. Contributions to employee accounts are based on the participant’s compensation. The Company did not contribute to the Plan for the years ended September 30, 2024 and 2023, respectively. Note 13. Related Party Transactions Capital Contribution On June 10, 2024, all operating partners of Citree received a funding notice relating to an additional Cash Capital Contribution (“Contribution”) requirement of $ 750 , as a result of trees producing limited revenue as they continue to recover from Hurricane Ian. The Company’s and noncontrolling parties’ portions of the Contribution of $ 382 and $ 368 , respectively, were funded on July 11, 2024. On June 6, 2023, all operating partners of Citree received a funding notice relating to an additional Contribution requirement of $ 900 as a result of trees producing limited revenue due to the severity of the fruit drop resulting from Hurricane Ian, which negatively impacted both the box production and pounds solids. The Company’s portion of the Contribution was $ 460 and was funded on June 22, 2023. The remaining portion of the Contribution of $ 440 was funded by the noncontrolling parties. Lease Agreement On January 1, 2022, Mr. Kiernan, the Company’s President and CEO, entered into a Hunting Lease Agreement and Real Estate Purchase and Sale Option Agreement with the Company (the “Kiernan Lease Agreement”). Under the Kiernan Lease Agreement, the Company leased approximately 93 acres of Company-owned, largely unimproved land (the “Land”) to Mr. Kiernan for a three-year term commencing on January 1, 2022, and ending on January 1, 2025, with a yearly rent of $ 1,860 (in whole dollars). Additionally, under the terms of the Kiernan Lease Agreement, the Company granted to Mr. Kiernan an option to purchase the Land from the Company, exercisable only during the one-year period January 1, 2022, through January 1, 2023, and at a price of $ 480 ($ 5,161 per acre), which price was based on an independent appraisal obtained by the Company. On January 5, 2022, Mr. Kiernan exercised his option to purchase the land. Pursuant to exercise of the option, the Company sold approximately 85 acres to Mr. Kiernan on October 20, 2022 for $ 439 ($ 5,161 per acre). 63 Table of Content s Note 14. Commitments and Contingencies Purchase Commitments The Company enters into contracts for the purchase of citrus trees during the normal course of its business. As of September 30, 2024, the Company had $ 3,069 relating to outstanding commitments for these purchases that will be paid upon delivery of the remaining citrus trees. Letters of Credit The Company had outstanding standby letters of credit in the total amount of $ — and $ 248 at September 30, 2024 and September 30, 2023, respectively, to secure its various contractual obligations (see Note 2. Summary of Significant Accounting Policies for further information on current letters of credit). Legal Proceedings From time to time, Alico has been, and may in the future be, involved in litigation relating to claims arising out of its operations in the normal course of business. There are no current legal proceedings to which the Company is a party or of which any of its property is subject that it believes will have a material adverse effect on its financial position, results of operations or cash flows. Note 15. Subsequent Events On November 21, 2024, the Florida Citrus Commission passed an emergency rule, based on requests from the Florida Citrus Processors Association and Florida Citrus Mutual, to reduce the minimum Brix value (a measurement of sugar content) for oranges harvested for the period beginning on November 21, 2024 and ending on May 23, 2025 from 8.5 to 7.0 and to eliminate the minimum ratio of total soluble solids to anhydrous citric acid (a measure of maturity). While it is not possible for the Company to estimate the potential impact of this ruling, it may increase the amount of the Company's fruit that would be acceptable at the processors. 64 Table of Content s Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.