This Quarterly Report on Form 10-Q ("Quarterly Report") contains statements that
may constitute "forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that
involve substantial risks and uncertainties. All statements contained in this
Quarterly Report other than statements of historical fact, including statements
regarding our future results of operations and financial position, our business
strategy and plans, and our objectives for future operations, are
forward-looking statements. The words "believes," "expects," "intends,"
"estimates," "projects," "anticipates," "will," "plan," "design," "may,"
"should," or similar language are intended to identify forward-looking
statements.

It is routine for our internal projections and expectations to change throughout
the year, and any forward-looking statements based upon these projections or
expectations may change prior to the end of the next quarter or year. Readers of
this Quarterly Report are cautioned not to place undue reliance on any such
forward-looking statements. As a result of a number of known and unknown risks
and uncertainties, our actual results or performance may be materially different
from those expressed or implied by these forward-looking statements. Risks and
uncertainties are identified under "Risk Factors" in Item 1A herein and in our
other filings with the Securities and Exchange Commission (the "SEC"). The
impact of COVID-19 and its variants, as well as geopolitical tensions, such as
Russia's incursion into Ukraine, including related decades-high inflation and
rising interest rates, may also exacerbate these risks, any of which could have
a material effect on us. All forward-looking statements included herein are made
only as of the date hereof. Unless otherwise required by law, we do not
undertake, and specifically disclaim, any obligation to update any
forward-looking statement, whether as a result of new information, future
events, or otherwise after the date of such statement.

You should read the following discussion and analysis of our financial condition
and results of operations together with our unaudited condensed consolidated
financial statements and related notes included elsewhere in this Form 10-Q, and
our audited consolidated financial statements and related notes for the year
ended December 31, 2021, included in our Annual Report on Form 10-K filed with
the SEC on March 1, 2022 ("Form 10-K"). As used in this section, unless the
context suggests otherwise, "we," "us," "our," "Company," and "AppHarvest" refer
to AppHarvest, Inc. and its consolidated subsidiaries.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations



Overview

We were founded on January 19, 2018. Together with our subsidiaries, we are a
sustainable food company in Appalachia developing and operating some of the
world's largest high-tech indoor farms with robotics and artificial intelligence
to build a reliable, climate-resilient food system. Our farms are designed to
grow produce using sunshine, rainwater and up to 90% less water than open-field
growing, all while producing yields up to 30 times that of traditional
agriculture and preventing pollution from agricultural runoff. We combine
conventional agricultural techniques with cutting-edge technology, including
artificial intelligence and robotics, to improve access to nutritious food,
farming more sustainably, building a domestic food supply, and increasing
investment in Appalachia.

Prior to October 2020, our operations were limited to the "start-up" concerns of
organizing and staffing, business planning, raising capital, and acquiring and
developing properties for CEA. In October 2020, we partially opened our first
CEA facility in Morehead, Kentucky (the "Morehead CEA facility"), which we
estimate can cultivate approximately 720,000 tomato plants with an approximate
yield of 40 million pounds per year. We harvested our first crop of beefsteak
tomatoes and tomatoes on the vine in January 2021 and March 2021, respectively.
In May 2021, we opened production of the full 60 acres at the Morehead CEA
facility and, in August 2021, concluded the first harvest. We completed planting
of our second crop at the Morehead CEA facility in September 2021, and began
harvest of the crop in the fourth quarter of 2021. We concluded the second
harvest at the end of July 2022.

We currently have four other CEA facilities under various stages of
construction, a salad greens facility in Berea, Kentucky (the "Berea salad
greens facility"), a tomato facility in Richmond, Kentucky (the "Richmond tomato
facility"), a facility in Somerset, Kentucky designed to grow berries (the
"Somerset facility") and a salad green facility located adjacent to the Morehead
CEA facility (the "Morehead salad green facility").

As of the date hereof, construction on the Berea salad greens facility is
approximately 91% complete; the Richmond tomato facility is approximately 86%
complete, and the Somerset facility is approximately 84% complete. All three CEA
facilities are expected to be operational by the end of 2022, with approximately
165 acres under production, though our construction timeline may be affected by
the COVID-19 pandemic and related supply-chain disruptions.

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To incorporate design and other insights we gained from construction of the
Berea salad greens facility, and to maintain flexibility in the allocation of
capital resources, we have temporarily paused development of the Morehead salad
green facility, with resumption of construction contingent upon financing. We
expect to develop additional CEA facilities only after obtaining the necessary
capital, assuming, among other things, that we are able to obtain necessary
capital when needed and on acceptable terms. For a discussion of possible
adverse supply chain disruptions related to our construction timeline, please
refer to Part II, Item 1A. Risk Factors, "Our business could be adversely
affected by economic downturns, inflation, increases in interest rates, natural
disasters, public health crises such as the COVID-19 pandemic, political crises,
geopolitical events, such as the crisis in Ukraine, or other macroeconomic
conditions, which have in the past and may in the future negatively impact our
business and financial performance." and "We build CEA facilities, which may be
subject to unexpected costs and delays due to reliance on third parties for
construction, material delivery, supply-chains and fluctuating material prices."

For a discussion of our future funding requirements, please refer to Part II,
Item 1A. Risk Factors, "We will require significant additional financing to
achieve our goals, and a failure to obtain this necessary capital when needed on
acceptable terms, or at all, may force us to delay, limit, reduce or terminate
our operations and future growth."

The Company is organized as a single operating segment. Substantially all of the assets and operations of the Company are located in the United States ("U.S.").

Basis of Presentation

Currently, we conduct business through one operating segment. We began generating sales during the first quarter of 2021 and conduct our operations solely in the U.S.

For more information about our basis of presentation, refer to Note 1 - Description of Business of our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.

Environmental, Social and Governance ("ESG")

AppHarvest is both a public benefit corporation ("PBC") and a certified B
Corporation because we believe in collective benefit over individual gain. We
believe growing healthy fruits and vegetables are good business, and new
technologies can deliver cleaner produce with safer growing methods, which we
believe benefits all stakeholders. We are all in this together, for good.

Public benefit corporations are for-profit corporations and, under Delaware law,
our directors have a duty to balance the financial interests of stockholders,
the best interests of those materially affected by our conduct (including our
stockholders, employees, communities, customers and suppliers), and the specific
public benefits identified in our second amended and restated certificate of
incorporation (the "amended and restated certificate of incorporation") when
making decisions. Our amended and restated certificate of incorporation includes
three specific public benefit goals:

•Goal 1 Drive positive environmental change in agriculture
•Goal 2 Empower individuals in Appalachia
•Goal 3 Improve the lives of our employees and the communities in which we
operate

In early 2021, we launched our first Materiality Assessment with Business for Social Responsibility ("BSR") to further assess which ESG issues are most important to AppHarvest's stakeholders and our business success. Our stakeholders include farmers, employees, regional economic development organizations, retailers, sustainability experts at BSR, suppliers, local communities, and our internal senior management and board members.



More information on our key ESG programs, goals and commitments, and key metrics
can be found in our sustainability report, which is available on our website
https://www.appharvest.com/. Website references throughout this document are
provided for convenience only, and the content on the referenced websites is not
incorporated by reference into this Quarterly Report.

While we believe all of our ESG goals align with our long-term growth strategy
and financial and operational priorities, they are aspirational and may change,
and there is no guarantee or promise that they will be met or that they will not
hinder financial or operational performance.

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Rabo Loan

On June 15, 2021, we entered into a master credit agreement with Rabo
AgriFinance LLC (the "Lender") for a real estate term loan in the original
principal amount of $75 million (the "Rabo Loan"). The Rabo Loan matures on
April 1, 2031, with quarterly interest payments commencing on July 1, 2021 and
quarterly principal payments, commencing on January 1, 2022, with the remaining
balance of principal and interest due upon maturity. Payments are based on one
month LIBOR plus 2.500% per annum. The Rabo Loan is collateralized by the
business assets of the first Morehead CEA facility and requires compliance with
financial covenants. The financial covenants generally begin to be measured on
December 31, 2022, except for the working capital ratio. On July 29, 2022, we
obtained a waiver from the Lender whereby we are no longer required to measure
or report the current ratio for the June 30, 2022 reporting period but will
begin to report the current ratio covenant compliance for the December 31, 2022,
reporting period. The change aligns all measurements of material financial
covenants to begin with the December 31, 2022, measurement date. In exchange, we
agreed to fund an additional $2.0 million to a reserve account. At June 30,
2022, the Company would not have met the current ratio requirement for the
Morehead CEA subsidiary. The Company's liability under the Rabo Loan was $73.1
million at June 30, 2022.

Factors Affecting Our Financial Condition and Results of Operations

We have expended, and expect to continue to expend, substantial resources as we:



•continue the build-out of the four CEA facilities currently under construction
in Richmond, Berea, Somerset and Morehead, Kentucky and invest in additional CEA
facilities in the future;

•conclude our second growing season, which concluded at the end of July 2022, and plant and harvest new crops in our future growing seasons;

•implement the Purchase and Marketing Agreement with Mastronardi Produce Limited ("Mastronardi") and fulfill our obligations under that agreement;

•identify and invest in future growth opportunities, including new or expanded facilities and new product lines;

•invest in sales and marketing efforts to increase brand awareness, engage customers and drive sales of our products;

•invest in product innovation and development; and



•incur additional general and administrative expenses, including increased
finance, legal and accounting expenses, associated with being a public company
and expanding operations.

Business Combination and Public Company Costs



On January 29, 2021, we consummated a business combination and plan of
reorganization with a special purpose acquisition company ("Business
Combination"). Upon consummation of the Business Combination and the closing of
the concurrent private placement of the 37,500 shares of the Company's Common
Stock (the "PIPE"), the most significant change in our reported financial
position and results of operations was an increase in cash and cash equivalents
of approximately $435.2 million, including $375.0 million in gross proceeds from
the PIPE.

As a consequence of the Business Combination, we became the successor to an
SEC-registered and Nasdaq-listed company, which requires us to hire additional
personnel and implement procedures and processes to address public company
regulatory requirements and customary practices. We expect to incur additional
annual expenses as a public company for, among other things, directors' and
officers' liability insurance, director fees and additional internal and
external accounting, legal and administrative resources, including increased
audit and legal fees.

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Key Components of Statement of Operations

Non-GAAP Financial Measures



To supplement our unaudited condensed consolidated financial statements, which
are prepared and presented in accordance with United States generally accepted
accounting principles ("GAAP"), we use certain non-GAAP measures, such as
Adjusted EBITDA, to understand and evaluate our core operating performance. We
define and calculate Adjusted EBITDA as net loss before the impact of interest
income or expense, income tax expense or benefit, depreciation and amortization,
adjusted to exclude: stock-based compensation expense, Business Combination
transaction-related costs, restructuring and impairment costs, remeasurement of
warrant liabilities, start-up costs for new CEA facilities, Root AI acquisition
related costs and certain other non-core items. We believe this non-GAAP measure
of financial results provides useful information to management and investors
regarding certain financial and business trends relating to our financial
condition and results of operations. Our management uses this non-GAAP measure
for trend analyses and for budgeting and planning purposes.

We believe that the use of this non-GAAP financial measure provides an
additional tool for investors to use in evaluating operating results and trends.
Other similar companies may present different non-GAAP measures or calculate
similar non-GAAP measures differently. Management does not consider this
non-GAAP measure in isolation or as an alternative to financial measures
determined in accordance with GAAP. The principal limitation of this non-GAAP
financial measure is that it excludes significant expenses that are required to
be presented in our GAAP financial statements. Because of this limitation, you
should consider Adjusted EBITDA alongside other financial performance measures,
including net loss and our other financial results presented in accordance with
GAAP.

Net sales

Substantially all of our net sales for the three and six months ended June 30,
2022, and 2021, were generated from the sale of tomatoes under an agreement with
one customer, Mastronardi. Net sales include revenues earned from the sale of
our products, less commissions, shipping, distribution and other costs incurred
as defined in our customer agreements.

Cost of Goods Sold



Cost of goods sold for the three and six months ended June 30, 2022, and 2021,
consisted of expenses incurred related to the production of inventory sold to
customers.

Selling, General and Administrative Expenses



Selling, general and administrative expenses ("SG&A") for the three and six
months ended June 30, 2022, and 2021, consisted of payroll and payroll related
expenses, stock-based compensation, professional services and legal fees,
licenses and registration fees, insurance, depreciation, rent and various other
personnel and office related costs. SG&A also included start-up expenses related
to pre-commencement commercial activities for tomatoes on the vine at the
Morehead CEA facility in 2021 and new CEA facilities under construction in 2022.

Interest Expense



Interest expense for the three and six months ended June 30, 2022 primarily
related to long-term debt to help finance the construction of our CEA
facilities. Interest expense from related parties for the three and six months
ended June 30, 2021, primarily related to the finance lease and financing
obligation for the Morehead CEA facility which were settled upon purchase of
Morehead Farm, LLC on March 1, 2021, and the convertible note that was converted
to Common Stock upon completion of the Business Combination on January 29, 2021.
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Results of Operations

Comparison of the Three and Six Months Ended June 30, 2022 and June 30, 2021



The following table sets forth our historical operating results for the periods
indicated:

                                                         Three Months Ended                                        Six Months Ended
(Dollars in thousands)                          June 30, 2022           June 30, 2021                    June 30, 2022           June 30, 2021
Net sales                                     $        4,358          $        3,138                   $        9,522          $        5,437
Cost of goods sold                                    14,121                  15,683                           27,675                  22,519
                                                      (9,763)                (12,545)                         (18,153)                (17,082)
Operating expenses:
Selling, general and administrative                   20,225                  27,467                           41,264                  58,956
expenses

Total operating expenses                              20,225                  27,467                           41,264                  58,956
Operating loss                                       (29,988)                (40,012)                         (59,417)                (76,038)

Interest expense from related parties                      -                       -                                -                    (658)
Interest expense                                           -                     (88)                               -                     (88)
Change in fair value of Private                        1,069                   6,488                             (260)                 16,314
Warrants
Other                                                     55                     105                               69                     461
Loss before income taxes                             (28,864)                (33,507)                         (59,608)                (60,009)
Income tax benefit (expense)                             159                   1,491                              268                    (522)
Net loss                                      $      (28,705)         $      (32,016)                  $      (59,340)         $      (60,531)

Reconciliation of GAAP to Non-GAAP



The following table presents a reconciliation of net loss, the most directly
comparable financial measure calculated and presented in accordance with GAAP,
to Adjusted EBITDA:

                                                                Three Months Ended                               Six Months Ended
(Dollars in thousands)                                 June 30, 2022           June 30, 2021           June 30, 2022           June 30, 2021
Net loss                                             $      (28,705)

$ (32,016) $ (59,340) $ (60,531) Interest expense from related parties

                             -                       -                       -                     658
Interest expense                                                  -                      88                       -                      88
Interest income                                                (154)                    (73)                   (255)                    (96)
Income tax (benefit) expense                                   (159)                 (1,491)                   (268)                    522
Depreciation and amortization expense                         3,064                   2,800                   6,176                   4,602
EBITDA                                                      (25,954)                (30,692)                (53,687)                (54,757)
Change in fair value of Private Warrants                     (1,069)                 (6,488)                    260                 (16,314)
Stock-based compensation expense                              5,993                  13,390                  12,028                  19,676
Transaction success bonus on completion of
Business Combination                                              -                       -                       -                   1,500
Restructuring and impairment costs                            2,256                       -                      4,246                    -
Start-up costs for new CEA facilities(1)                        923                       -                   1,278                       -
Business Combination transaction costs                            -                     543                       -                  13,804
Root AI acquisition costs(2)                                      -                     625                       -                   1,032
Adjusted EBITDA                                      $      (17,851)         $      (22,622)         $      (35,875)         $      (35,059)


(1) Start-up costs are related to the pre-commencement commercial activities for
tomatoes, salad greens and berries at the Richmond, Berea and Somerset CEA
facilities
(2) The acquisition of Root AI occurred on April 7, 2021

The following sections discuss and analyze the changes in the significant line
items in our unaudited condensed consolidated statements of operations for the
comparison periods identified.

Net Sales



Net sales for the three and six months ended June 30, 2022 were $4.4 million and
$9.5 million compared to $3.1 million and $5.4 million for the comparable prior
year period. For the three months ended June 30, 2022, the increase of $1.2
million
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was primarily attributable to higher average net sales prices and expanded
product variety, which was offset by lower yield. The $4.1 million increase
during the six months ended June 30, 2022, was primarily due to higher average
net sales prices and increased production as the Morehead CEA facility was not
fully harvesting until May of 2021, due to the phased initial opening, as well
as expanded product variety. Continued operational ramp-up at the facility,
including enhanced training and productivity improvements, resulted in a more
favorable mix of premium and non-premium tomatoes, which also drove higher net
sales for the three and six months ended June 30, 2022. Net sales during the
three and six months ended June 30, 2022 were negatively impacted by mitigation
efforts related to the plant health issue, which led us to remove some extra
rows in the affected area out of an abundance of caution and re-plant with new
seedlings.

While we initially expected our mitigation efforts would shift a portion of our
second quarter sales and production into the third quarter, upcoming maintenance
requirements and reduced quality during July led to diminishing pricing and we
decided to conclude the second harvest three weeks early, which we expect to
have a negative impact on our net sales during the three months ending September
30, 2022. We now expect the impact of the plant health issue to be toward the
higher end of 15% to 20% of 2022 yield, which is higher than our original
forecast of 10% to 15%.

Cost of Goods Sold



Cost of goods sold for the three and six months ended June 30, 2022 was $14.1
million and $27.7 million compared to $15.7 million and $22.5 million for the
comparable prior year periods. The decrease of $1.6 million for the three months
ended June 30, 2022 was primarily due to higher average net sales prices during
the three months ended June 30, 2022, which resulted in an increase to net
sellable inventory, as compared to the three months ended June 30, 2021. This
reduction was offset by increased costs related to higher production volume. See
"Critical Accounting Estimates" within this section of this Quarterly Report for
more information on the estimation, uncertainty and impact of the Company's
critical accounting estimates has had, or is reasonably likely to have, on the
Company's financial condition or results of operations.

The increase of $5.2 million, for the six months ended June 30, 2022, was primarily due to the Morehead CEA facility being fully operational for the six months ended June 30, 2022 versus the phased launch of production in the comparable prior year period.

Selling, General, and Administrative Expenses



SG&A for the three and six months ended June 30, 2022 was $20.2 million and
$41.3 million compared to $27.5 million and $59.0 million for the comparable
prior year periods. The $7.2 million decrease was primarily driven by a $7.4
million decrease in stock compensation expense for the three months ended
June 30, 2022, and decreased professional fees partially offset by restructuring
and impairment charges of $2.3 million. The $17.7 million decrease during the
six months ended June 30, 2022 was a result of $13.8 million of transaction
costs related to the Business Combination in the prior year, as well as a $7.7
million decrease in stock compensation expense, which was offset by $4.2 million
of restructuring and impairment charges. See Note 3 - Restructuring to our
unaudited condensed consolidated financial statements included elsewhere in this
Quarterly Report for more information on this expense.

We continue to anticipate a decrease in our annualized SG&A of approximately $16
million due to the restructuring initiative which occurred during the first
quarter. In addition, we expect annualized cost savings of approximately $12
million from our restructuring during the second quarter, as we reduced funding
towards technology that was not centered on core operations in order to focus
technology resources on support of improved production and quality as we expect
to quadruple the farm network. We have already realized savings of approximately
$3.9 million and $5.3 million for the three and six months ended June 30, 2022.
We do not expect any further costs associated with the restructurings.

Interest Expense



Interest expense during the three and six months ended June 30, 2022, was
incurred on debt used to finance the construction of our CEA facilities and was
capitalized as a component of the cost of those facilities. Interest expense of
$0.0 million and $0.7 million from related parties for the three and six months
ended June 30, 2021, respectively, primarily related to the finance lease and
financing obligation for the Morehead CEA facility which were settled upon
purchase of Morehead Farm, LLC on March 1, 2021, and the convertible note that
was converted to Common Stock upon completion of the Business Combination on
January 29, 2021.
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Income Taxes



We recorded an income tax benefit of $268 during the six months ended June 30,
2022, resulting in an effective income tax rate 0.4% for the six months ended
June 30, 2022. The variance from the U.S. federal statutory rate of 21% for the
six months ended June 30, 2022 was primarily attributable to increases in the
Company's valuation allowance largely driven by increases in our net operating
loss carryforwards.

Liquidity and Capital Resources



Cash and cash equivalents totaled $50.9 million and $150.8 million as of
June 30, 2022, and December 31, 2021, respectively. Currently, our primary
sources of liquidity are cash flows generated from the successful completion of
the Business Combination, the proceeds from debt and equity financings, our
common stock purchase agreement with B. Riley Principal Capital ("Purchase
Agreement") and revenues from the sale of our tomatoes. We have incurred losses
and generated negative cash flows from operations since our inception in 2018.
We expect to continue to incur losses and negative cash flows from operating
expenses for the foreseeable future as we ramp up operations and production at
our new CEA facilities. At June 30, 2022, we had an accumulated deficit of
$246.7 million.

We continue to expect that the restructuring initiatives, as well as the refocus
of technology on core operations, which were implemented in the three and six
months ended June 30, 2022, will increase our liquidity by reducing our
annualized SG&A expenses as we have already realized savings of $3.9 million and
$5.3 million for the three and six months ended June 30, 2022. See Note 3 -
Restructuring to our unaudited condensed consolidated financial statements
included elsewhere in this Quarterly Report for a discussion of these
restructuring initiatives.

Material Cash Requirements



As of June 30, 2022, there were no material changes in our cash requirements
from those disclosed in the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included in the Form 10-K.

Cash requirements for the remainder of the fiscal year are expected to consist
primarily of our current payroll, working capital requirements, planned capital
expenditure and debt service requirements. During the three and six months ended
June 30, 2022, we spent $48.6 million and $87.6 million, respectively on capital
expenditures. We expect to incur approximately $85 million to $90 million more
in capital expenditures during the remainder of the fiscal year based on the
continued availability of financing on acceptable terms.

We believe that our cash and cash equivalents on hand and available under our
loan agreements at June 30, 2022, as well as available proceeds from the
Purchase Agreement, are sufficient to meet our current payroll and working
capital requirements for a period of at least 12 months from the date of this
Quarterly Report, as well as our debt service requirements and currently planned
capital expenditure requirements as we continue to build out the Berea salad
greens facility, Richmond tomato facility and the Somerset facility this year.
We have the ability to defer and adjust our capital expenditures based on our
ability to secure additional funding. The amount and timing of our future
funding requirements, if any, will depend on many factors, including the timing
and costs of completion of our large-scale high-tech CEA facilities. We will
plan the timing of completion of our CEA facilities around available funding.

We could potentially use our available financial resources sooner than we
currently expect and may incur additional indebtedness to meet future financing
needs. Adequate additional funding may not be available to us on acceptable
terms or at all. In addition, although we anticipate being able to obtain
additional financing through non-dilutive means, we may be unable to do so. Our
failure to raise capital as and when needed could have significant negative
consequences for our business, financial condition and results of consolidated
operations. Our future capital requirements and the adequacy of available funds
will depend on many factors, including those set forth in the section titled
"Risk Factors".
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