Limoneira Co (LMNR) Risk Analysis

Our revolving and non-revolving credit facilities contain various restrictive covenants that limit our ability to take certain actions. In particular, these agreements limit our ability to, among other things: - incur additional indebtedness;- make certain investments or acquisitions;- create certain liens on our assets;- engage in certain types of transactions with affiliates;- merge, consolidate or transfer substantially all our assets; and - transfer and sell assets. Our revolving and non-revolving credit facility with the Lender contains a financial covenant that requires us to maintain compliance with a specific debt service coverage ratio on an annual basis. At October 31, 2024 we were in compliance with the debt service coverage ratio of 1.25:1.0. In September 2025, the Lender modified the annual debt service coverage ratio covenant to defer measurement as of October 31, 2025. In December 2025, the Lender modified the annual debt service coverage ratio covenant to defer measurement as of October 31, 2026 and resume a debt service coverage ratio of 1.25:1.0 measured as of October 31, 2027 and for any fiscal year ending thereafter. We were also subject to a quarterly financial covenant that required us to maintain compliance with a specific total net leverage ratio as of the end of any fiscal quarter beginning July 31, 2026. In December 2025, the Lender modified this quarterly financial covenant to defer measurement through July 31, 2027 and resume measurement as of October 31, 2027. Additionally, in December 2025, the Lender added a new quarterly financial covenant effective for the period from January 31, 2026 through July 31, 2027 which requires us to maintain a specific debt to capitalization ratio. Any or all of these covenants could have a material adverse effect on our business by limiting our ability to take advantage of financing, merger and acquisition or other corporate opportunities and to fund our operations. Any future debt could also contain financial and other covenants more restrictive than those imposed under our line of credit facilities. A breach of a covenant or other provision in any credit facility governing our current and future indebtedness could result in a default under that facility and, due to cross-default and cross-acceleration provisions, could result in a default under our other credit facilities. Upon the occurrence of an event of default under any of our credit facilities, the applicable lender(s) could elect to declare all amounts outstanding to be immediately due and payable and, with respect to our revolving credit facility, terminate all commitments to extend further credit. If we were unable to repay those amounts, our lenders could proceed against the collateral granted to them to secure the indebtedness. If the lenders under our current or future indebtedness were to accelerate the payment of the indebtedness, we cannot assure you that our assets or cash flow would be sufficient to repay in full our outstanding indebtedness.

Subject to the restrictions in our credit facilities, we may incur significant additional indebtedness. If new debt is added to our current debt levels, the related risks that we now face could increase. In January 2018, LLCB entered into a $45.0 million unsecured Line of Credit Loan Agreement and Promissory Note (the "Loan") with Bank of America, N.A. to fund early development activities. Effective as of February 22, 2023, the maximum borrowing amount was reduced to $35.0 million. The obligations under the Loan were guaranteed by certain principals from Lewis and us. In May 2024, the Loan and corresponding guarantee were cancelled. Our real estate development activities could require future loans that may result in future guarantees.

Our AgWest Farm Credit Facility is subject to variable rates, which generally change as interest rates change. We bear the risk that the rates we are charged by our lender will increase faster than the earnings and cash flow of our business, which could reduce profitability, adversely affect our ability to service our debt, cause us to breach covenants contained in our AgWest Farm Credit Facility, which could materially adversely affect our business, financial condition and results of operations. Our Company's debt agreement with AgWest Farm Credit uses the Secure Overnight Financing Rate ("SOFR").

Higher interest rates generally impact the real estate industry by making it harder for buyers to qualify for financing, which can lead to a decrease in the demand for residential, commercial or industrial sites. Any decrease in demand will negatively impact our proposed developments. During 2025 and 2024, the Board of Governors of the Federal Reserve System took actions in easing the monetary policy by cutting interest rates. Market interest rates may increase in the future and the increase may materially and negatively affect us. Lack of available credit to finance real estate purchases can also negatively impact demand. Any downturn in the economy or consumer confidence can also be expected to result in reduced housing demand and slower industrial development, which would negatively impact the demand for land we are developing.

If the residential real estate market weakens or instability of the mortgage industry and commercial real estate financing exists, our residential real estate business could be adversely affected. An excess supply of homes available due to foreclosures or the expectation of deflation in house prices could also have a negative impact on our ability to sell our inventory when it becomes available.

The merging of our citrus sales and marketing operations into Sunkist reduces our ability to exercise control over the sales and marketing of our lemons. Sunkist marketing may be ineffective, which could result in decreased sales of citrus and, in particular, the sales of our lemons. Insufficient resources committed by Sunkist to the sales and marketing of citrus may reduce the sales of our lemons and adversely affect our operations and financial results. Consumer and institutional recognition of Sunkist trademarks and related brands and the association of these brands with high quality and safe citrus is an integral part of the Sunkist business. The occurrence of any events or rumors that cause consumers and/or institutions to no longer associate those brands with high quality and safe citrus may materially affect the value of their brand names and the demand for fresh citrus. As a Sunkist-licensed packinghouse, we are required to purchase the majority of our packing supplies from Fruit Growers Supply Company ("FGS"), a manufacturing and supply cooperative affiliated with Sunkist. Increased costs for packing supplies from FGS or an extended interruption in the shipping of packing supplies could negatively affect our operating income. Sunkist cybersecurity risks, data protection breaches, cyber-attacks and system integration issues could disrupt Sunkist internal operations or services provided to end customers, and such disruption could reduce our expected revenue, increase our expenses, damage our reputation and adversely affect our business.