trueQ3--12-31Local Bounti Corporation/DE0001840780MTLocal Bounti Corporation, formerly known as Leo Holdings III Corp (the “Company”) is filing this Amendment No. 1 to its Quarterly Report on this Form 10-Q/A for the three and nine month period ended September 30, 2021 (the “First Amendment”), as originally filed with the U.S. Securities and Exchange Commission (the “SEC”) on November 12, 2021 (the “Original Form 10-Q”) to amend and restate the Company’s September 30, 2021 Quarterly Report on Form 10-Q, as further described below. This amended and restated report on Form 10-Q/A is presented as of the filing date of the Original Form 10-Q and does not reflect events occurring after that date, or modify or update disclosures in any way other than as required to reflect the restatement as described below. Accordingly, this Amendment No. 1 on Form 10-Q/A should be read in conjunction with our filings with the SEC subsequent to the date on which we filed the Original Form 10-Q. The Company is filing this First Amendment on Form 10-Q/A to reflect a restatement of the Company’s financial statements as of March 2, 2021, as of and for the period ended March 31, 2021 and as of and for the period ended June 30, 2021 to correct errors in the Company’s classification of public shares as permanent equity, and a restatement related to the material weakness conclusion as of and for the period ended September 30, 2021 as further described below. On November 19, 2021, subsequent to the fiscal quarter ended September 30, 2021, Leo Holdings III Corp, our predecessor and a Delaware corporation (“Leo III”), consummated the previously announced business combination pursuant to the agreement and plan of merger, dated as of June 17, 2021 (the “Merger Agreement”), by and among Leo III, Longleaf Merger Sub, Inc., a Delaware corporation (“Merger Sub 1”), Longleaf Merger Sub II, LLC (“Merger Sub 2”) and Local Bounti Corporation, a Delaware corporation (“Legacy Local Bounti”). Pursuant to the Merger Agreement, Leo III acquired Legacy Local Bounti, by way of a series of mergers with Merger Sub 1 and Merger Sub 2, with Legacy Local Bounti becoming a direct subsidiary of Leo III as a result thereof (the “Business Combination”). On November 16, 2021, Leo III held an extraordinary general meeting of shareholders (the “Extraordinary General Meeting”), at which the Leo III shareholders considered and adopted, among other matters, a proposal to approve the Business Combination, including (a) adopting the Merger Agreement and (b) approving the other transactions contemplated by the Merger Agreement and related agreements described in the proxy statement/prospectus related thereto. Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, on November 19, 2021 (the “Closing Date”), the Business Combination was consummated (the “Closing”). On November 22, 2021, the business day following the Closing Date, the Company’s common stock and warrants began trading on the New York Stock Exchange under the symbols “LOCL” and “LOCL WS”. Leo III’s public units automatically separated into their component securities upon consummation of the Business Combination and, as a result, no longer trade as a separate security and were delisted from the New York Stock Exchange. Unless stated otherwise, this report contains information about NGA before the consummation of the Business Combination. 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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM
10-Q/A
 
 
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to            
 
 
LOCAL BOUNTI CORPORATION
(Exact name of registrant as specified in its charter)
 
 
 
Delaware
 
001-40125
 
98-1584830
(State or other jurisdiction of
incorporation or organization)
 
(Commission
File Number)
 
(IRS Employer
Identification No.)
 
490 Foley Lane
 
 
Hamilton, MT
 
59840
(Address Of Principal Executive Offices)
 
(Zip Code)
(406)
361-3711
Registrant’s telephone number, including area code
Not Applicable
(Former name or former address, if changed since last report)
 
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
 
Trading
Symbol
 
Name of each exchange
on which registered
Common Stock, par value of $0.0001 per share
 
LOCL
 
New York Stock Exchange
Warrants, each exercisable for one share of Common Stock for $11.50 per share
 
LOCL WS
 
New York Stock Exchange
 
 
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☐    No
  ☒

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Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule
12b-2
of the Exchange Act.
 
Large accelerated filer      Accelerated filer  
       
Non-accelerated
filer
     Smaller reporting company  
       
         Emerging growth company  
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act
).     Yes  
    No  ☐
As of 
December 7, 2021,
 86,344,881
 
shares of common stock, par value $0.0001 per share, were issued and outstanding.
 
 
 

Table of Contents
LOCAL BOUNTI CORPORATION (F/K/A LEO HOLDINGS III CORP)
Form
10-Q
Table of Contents
 
 
 
 
  
Page
 
PART I. FINANCIAL INFORMATION
  
Item 1.
 
  
 
1
 
 
  
 
1
 
 
  
 
2
 
 
  
 
3
 
 
  
 
4
 
 
  
 
5
 
Item 2.
 
  
 
18
 
Item 3.
 
  
 
21
 
Item 4.
 
  
 
21
 
PART II. OTHER INFORMATION
  
Item 1.
 
  
 
23
 
Item 1A.
 
  
 
23
 
Item 2.
 
  
 
23
 
Item 3.
 
  
 
23
 
Item 4.
 
  
 
23
 
Item 5.
 
  
 
23
 
Item 6.
 
  
 
23
 
 

Table of Contents
EXPLANATORY NOTE
Local Bounti Corporation, formerly known as Leo Holdings III Corp (the “Company”) is filing this Amendment No. 1 to its Quarterly Report on this Form
10-Q/A
for the three months ended September 30, 2021 and for the period from January 8, 2021 (inception) through September 30, 2021 (the “First Amendment”), as originally filed with the U.S. Securities and Exchange Commission (the “SEC”) on November 12, 2021 (the “Original Form
10-Q”)
to amend and restate the Company’s September 30, 2021 Quarterly Report on Form
10-Q,
as further described below.
This amended and restated report on Form
10-Q/A
is presented as of the filing date of the Original Form
10-Q
and does not reflect events occurring after that date, or modify or update disclosures in any way other than as required to reflect the restatement as described below. Accordingly, this Amendment No. 1 on Form
10-Q/A
should be read in conjunction with our filings with the SEC subsequent to the date on which we filed the Original Form
10-Q.
The Company is filing this First Amendment on Form
10-Q/A
to reflect a restatement of the Company’s financial statements as of March 2, 2021, as of and for the period ended March 31, 2021 and as of and for the period ended June 30, 2021 to correct errors in the Company’s classification of public shares as permanent equity, and a restatement related to the material weakness conclusion as of and for the period ended September 30, 2021 as further described below.
On November 19, 2021, subsequent to the fiscal quarter ended September 30, 2021, Leo Holdings III Corp, our predecessor and a Delaware corporation (“Leo III”), consummated the previously announced business combination pursuant to the agreement and plan of merger, dated as of June 17, 2021 (the “Merger Agreement”), by and among Leo III, Longleaf Merger Sub, Inc., a Delaware corporation (“Merger Sub 1”), Longleaf Merger Sub II, LLC (“Merger Sub 2”) and Local Bounti Corporation, a Delaware corporation (“Legacy Local Bounti”). Pursuant to the Merger Agreement, Leo III acquired Legacy Local Bounti, by way of a series of mergers with Merger Sub 1 and Merger Sub 2, with Legacy Local Bounti becoming a direct subsidiary of Leo III as a result thereof (the “Business Combination”).
On November 16, 2021, Leo III held an extraordinary general meeting of shareholders (the “Extraordinary General Meeting”), at which the Leo III shareholders considered and adopted, among other matters, a proposal to approve the Business Combination, including (a) adopting the Merger Agreement and (b) approving the other transactions contemplated by the Merger Agreement and related agreements described in the proxy statement/prospectus related thereto.
Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, on November 19, 2021 (the “Closing Date”), the Business Combination was consummated (the “Closing”).
On November 22, 2021, the business day following the Closing Date, the Company’s common stock and warrants began trading on the New York Stock Exchange under the symbols “LOCL” and “LOCL WS.” Leo III’s public units automatically separated into their component securities upon consummation of the Business Combination and, as a result, no longer trade as a separate security and were delisted from the New York Stock Exchange.
Unless stated otherwise, this report contains information about Leo III before the consummation of the Business Combination. References to the “Company” in this report refer to Leo III before the consummation of the Business Combination.
Background of Restatement
In the Company’s previously issued financial statements as of March 2, 2021, March 31, 2021 and June 30, 2021, a portion of the public shares were classified as permanent equity to maintain shareholders’ equity greater than $5,000,000 on the basis that the Company could consummate its initial business combination only if the Company has net tangible assets of at least $5,000,001 under the Company’s charter. Thus, the Company can only complete a merger and continue to exist as a public company if there are sufficient public shares that do not redeem at the merger and so it was deemed appropriate to classify the portion of its public shares required to keep its shareholders’ equity above the $5,000,000 threshold as “shares not subject to redemption.” Previously, the Company did not consider redeemable shares classified as temporary equity as part of net tangible assets. Effective with this First Amendment, the Company revised this interpretation to include temporary equity in net tangible assets.
Therefore, management
re-evaluated
the Company’s application of ASC
480-10-99
to its accounting classification of public shares. Upon
re-evaluation,
management determined that the public shares include certain provisions that require classification of the public shares as temporary equity.
The Company’s management and the audit committee of the Company’s Board of Directors concluded that it is appropriate to restate all of the Company’s previously issued financial statements to report all public shares as temporary equity as of March 2, 2021, as of and for the period ended March 31, 2021 and as of and for the period ended June 30, 2021, and the material weakness conclusion as of and for the period ended September 30, 2021.
This First Amendment on Form
10-Q/A
sets forth the Original Form
10-Q
in its entirety, as amended to reflect the restatement. Among other things, forward-looking statements made in the Original Form
10-Q
have not been revised to reflect events that occurred or facts that became known to the Company after the filing of the Original Form
10-Q,
and such forward-looking statements should be read in their historical context.
The following items have been amended as a result of the restatement:
Part I, Item 1, “Financial Statements”; and
Part I, Item 4, “Controls and Procedures.”
In accordance with applicable SEC rules, this First Amendment on Form
10-Q/A
includes an updated signature page and certifications of our Chief Executive Officer and Chief Financial Officer in Exhibits 31.1, 31.2 and 32.1 as required by Rule
12b-15.

Table of Contents
Refer to Note 2, Restatement of Previously Issued Financial Statements of this Form
10-Q/A
for additional information and for the summary of the accounting impacts of these adjustments to the Company’s financial statements as of March 2, 2021, as of and for the period ended March 31, 2021 and as of and for the period ended June 30, 2021.
The Company previously identified a material weakness in internal controls related to the accounting for warrants issued in connection with our initial public offering, which was remediated during the quarter ended September 30, 2021. As a result of the restatement described in this First Amendment on Form
10-Q/A,
the Company has concluded there was a material weakness in the Company’s internal control over financial reporting at the time the abovementioned financial statements were issued, and its disclosure controls and procedures were not effective at the time the abovementioned financial statements were issued.

Table of Contents
 
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
LOCAL BOUNTI CORPORATION (F/K/A LEO HOLDINGS III CORP)
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
 
    
September 30, 2021
 
Assets:
        
Current assets:
        
Cash
   $ 188,600  
Prepaid expenses
     771,931  
    
 
 
 
Total current assets
     960,531  
Investments held in Trust Account
     275,013,714  
    
 
 
 
Total Assets
  
$
275,974,245
 
    
 
 
 
Liabilities, Class A Ordinary Shares Subject to Possible Redemption and Shareholders’ Deficit:
        
Current liabilities:
        
Accounts payable—related party
   $ 26,176  
Accrued expenses
     451,547  
    
 
 
 
Total current liabilities
     477,723  
Deferred underwriting commissions
     9,625,000  
Warrant liabilities
     8,341,666  
    
 
 
 
Total liabilities
     18,444,389  
Commitments and Contingencies (Note
7
)
        
Class A ordinary shares subject to possible redemption, $0.0001 par value; 27,500,000 shares at $10.00 per share
     275,000,000  
Shareholders’ Deficit:
        
Preference shares, $0.0001 par value; 5,000,000 shares authorized; none issued and outstanding
     —    
Class A ordinary shares, $0.0001 par value; 500,000,000 shares authorized
         
Class B ordinary shares, $0.0001 par value; 50,000,000 shares authorized; 6,875,000 shares issued and outstanding
     688  
Accumulated deficit
     (17,470,832
    
 
 
 
Total shareholders’ deficit
     (17,470,144
    
 
 
 
Total Liabilities, Class A Ordinary Shares Subject to Possible Redemption and Shareholders’ Deficit
  
$
275,974,245
 
    
 
 
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
1

Table of Contents
LOCAL BOUNTI CORPORATION (F/K/A LEO HOLDINGS III CORP)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
  
For the Three Months Ended
September 30, 2021
 
 
For the Period from
January 8, 2021 (Inception)
through September 30, 2021
 
Operating expenses
  
 
General and administrative expenses
   $ 716,502     $ 1,302,878  
General and administrative expenses—related party
     46,177       83,738  
    
 
 
   
 
 
 
Loss from operations
     (762,679     (1,386,616
Other income (expenses):
                
Change in fair value of warrant liabilities
     4,225,000       811,667  
Offering costs associated with issuance of warrants
              (275,622
Net gain from investments held in Trust Account
     6,933       13,714  
    
 
 
   
 
 
 
Net income (loss)
   $ 3,469,254     $ (836,857
    
 
 
   
 
 
 
Weighted average shares outstanding of Class A ordinary shares, basic and diluted
     27,500,000       22,880,859  
    
 
 
   
 
 
 
Basic and diluted net income (loss) per share, Class A ordinary shares
   $ 0.10     $ (0.03
    
 
 
   
 
 
 
Weighted average shares outstanding of Class B ordinary shares, basic and diluted
     6,875,000       6,728,027  
    
 
 
   
 
 
 
Basic and diluted net income (loss) per share, Class B ordinary shares
   $ 0.10     $ (0.03
    
 
 
   
 
 
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
2

Table of Contents
LOCAL BOUNTI CORPORATION (F/K/A LEO HOLDINGS III CORP)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
 
 
  
Ordinary Shares
 
 
Additional
Paid-in

Capital
 
 
Accumulated
Deficit
 
 
Total
Shareholders’
Deficit
 
 
  
Class A
 
  
Class B
 
 
  
Shares
 
  
Amount
 
  
Shares
 
 
Amount
 
Balance—January 8, 2021 (inception)
  
 
  
 
  
$
  
 
  
 
  
 
 
$
  
 
 
$
  
 
 
$
  
 
 
$
  
 
Issuance of Class B ordinary shares to Sponsor
  
 
—  
 
  
 
—  
 
  
 
6,900,000
 
 
 
690
 
 
 
24,310
 
 
 
—  
 
 
 
25,000
 
Excess cash received over the fair value of the private warrants
  
 
—  
 
  
 
—  
 
  
 
—  
 
 
 
—  
 
 
 
3,466,667
 
 
 
—  
 
 
 
3,466,667
 
Accretion on Class A ordinary shares subject to possible redemption amount
  
 
—  
 
  
 
—  
 
  
 
—  
 
 
 
—  
 
 
 
(3,490,977
 
 
(16,633,977
 
 
(20,124,954
Net income
  
 
—  
 
  
 
—  
 
  
 
—  
 
 
 
—  
 
 
 
—  
 
 
 
998,092
 
 
 
998,092
 
  
 
 
 
  
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance—March 31, 2021 (unaudited
), as restated
  
 
  
 
  
 
  
 
  
 
6,900,000
 
 
 
690
 
 
 
  
 
 
 
(15,635,885
 
 
(15,635,195
Class B ordinary shares forfeited
  
 
—  
 
  
 
—  
 
  
 
(25,000
 
 
(2
 
 
2
 
 
 
—  
 
 
 
—  
 
Subsequent measurement of Class A ordinary shares subject to redemption against additional
paid-in
capital and accumulated deficit
  
  
  
 
 
 
(2
 
 
2
 
 
 
—  
 
Net loss
  
 
—  
 
  
 
—  
 
  
 
—  
 
 
 
—  
 
 
 
—  
 
 
 
(5,304,203
 
 
(5,304,203
  
 
 
 
  
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance—June 30, 2021 (unaudited
), as restated
  
 
  
 
  
 
  
 
  
 
6,875,000
 
 
 
688
 
 
 
  
 
 
 
(20,940,086
 
 
(20,939,398
Net income
  
 
—  
 
  
 
—  
 
  
 
—  
 
 
 
—  
 
 
 
—  
 
 
 
3,469,254
 
 
 
3,469,254
 
  
 
 
 
  
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance—September 30, 2021 (unaudited)
  
 
  
 
  
$
  
 
  
 
6,875,000
 
 
$
688
 
 
$
  
 
 
$
(17,470,832
 
$
(17,470,144
  
 
 
 
  
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents
LOCAL BOUNTI CORPORATION (F/K/A LEO HOLDINGS III CORP)
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
 
    
For the Period from
January 8, 2021 (Inception)
through September 30, 2021
 
Cash Flows from Operating Activities:
        
Net loss
   $ (836,857 )
Adjustments to reconcile net loss to net cash used in operating activities:
        
Change in fair value of warrant liabilities
     (811,667
Offering costs associated with issuance of warrants
     275,622  
Net gain from investments held in Trust Account
     (13,714
Changes in operating assets and liabilities:
        
Prepaid expenses
     (746,931
Accounts payable—related party
     26,176  
Accrued expenses
     366,547  
    
 
 
 
Net cash used in operating activities
     (1,740,824
    
 
 
 
Cash Flows from Investing Activities:
        
Cash deposited in Trust Account
     (275,000,000
    
 
 
 
Net cash used in investing activities
     (275,000,000
    
 
 
 
Cash Flows from Financing Activities:
        
Proceeds from note payable to related party
     111,835  
Repayment of note payable to related party
     (111,835
Proceeds received from initial public offering, gross
     275,000,000  
Proceeds received from private placement
     8,000,000  
Offering costs paid
     (6,070,576
    
 
 
 
Net cash provided by financing activities
     276,929,424  
    
 
 
 
Net increase in cash
     188,600  
Cash—beginning of the period
      
    
 
 
 
Cash—end of the period
  
$
188,600
 
    
 
 
 
Supplemental disclosure of noncash activities:
        
Prepaid expenses paid by Sponsor in exchange for issuance of Class B ordinary shares
   $ 25,000  
Offering costs included in accrued expenses
   $ 85,000  
Deferred underwriting commissions
   $ 9,625,000  
Forfeiture of Class B ordinary shares
   $ 2  
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
4

Table of Contents
LOCAL BOUNTI CORPORATION (F/K/A LEO HOLDINGS III CORP)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
Note 1—Description of Organization and Business Operations
Leo Holdings III Corp (the “Company”) was incorporated as a Cayman Islands exempted company on January 8. 2021. The Company was formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). Although the Company is not limited to a particular industry or sector for purposes of consummating a Business Combination, the Company intends to focus its search for a target business in the consumer sector. The Company is an emerging growth company and, as such, the Company is subject to all of the risks associated with emerging growth companies.
As of September 30, 2021, the Company had not commenced any operations. All activity for the period from January 8, 2021 (inception) through September 30, 2021 relates to the Company’s formation and the initial public offering (the “Initial Public Offering”) described below and since the Initial Public Offering, the search for a potential target. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company generates
non-operating
income in the form of interest income on investments held in trust account from the proceeds derived from the Initial Public Offering. The Company has selected December 31 as its fiscal year end.
The Company’s sponsor is Leo Investors III LP, a Cayman Islands exempted limited partnership (the “Sponsor”). The registration statement for the Company’s Initial Public Offering was declared effective on February 25, 2021. On March 2, 2021, the Company consummated its Initial Public Offering of 27,500,000 units (the “Units” and, with respect to the Class A ordinary shares included in the Units being offered, the “Public Shares”), including 3,500,000 additional Units to partially cover over-allotments (the “Over-Allotment Units”), at $10.00 per Unit, generating gross proceeds of $275.0 million, and incurring offering costs of approximately $15.8 million, of which approximately $9.6 million was for deferred underwriting commissions (Note
7
).
Simultaneously with the closing of the Initial Public Offering, the Company consummated the private placement (“Private Placement”) of 5,333,333 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”), at a price of $1.50 per Private Placement Warrant with the Sponsor, generating gross proceeds of $8.0 million, and incurring offering costs of approximately $11,000 (Note
5
).
Upon the closing of the Initial Public Offering and the Private Placement, $275.0 million ($10.00 per Unit) of the net proceeds of the Initial Public Offering and certain of the proceeds of the Private Placement were placed in a trust account (“Trust Account”), located in the United States with Continental Stock Transfer & Trust Company acting as trustee, and will be invested only in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 185
 
days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting the conditions of paragraphs (d)(2), (d) (3) and (d)(4) of Rule
2a-7
of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account as described below.
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete one or more initial Business Combinations having an aggregate fair market value of at least 80% of the assets held in the Trust Account (excluding the deferred underwriting commissions and taxes paid or payable on income earned on the Trust Account) at the time of the signing of the agreement to enter into the initial Business Combination. However, the Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act.
The Company
will provide its holders of the Public Shares (the “Public Shareholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a general meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek shareholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The Public Shareholders are entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $10.00 per Public Share). The
per-share
amount to be distributed to Public Shareholders who redeem their Public Shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriter (as discussed in Note
7
). These Public Shares are classified as temporary equity in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” In such case, the Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 upon such consummation of a Business Combination and a majority of the shares voted are voted in favor of the Business Combination. If a shareholder vote is not required by law and the Company does not decide to hold a shareholder vote for business or other legal reasons, the Company will, pursuant to its amended and restated memorandum and articles of association (the “Amended and Restated Memorandum and Articles of Association”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, shareholder approval of the transactions is required by law, or the Company decides to obtain shareholder approval for business or legal reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. Additionally, each Public Shareholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction. If the Company seeks shareholder approval in connection with a Business Combination, the initial shareholders (as defined below) agreed to vote their Founder Shares (as defined below in Note
5
) and any Public Shares purchased during or after the Initial Public Offering in favor of a Business Combination. Subsequent to the consummation of the Initial Public Offering, the Company will adopt an insider trading policy which will require insiders to: (i) refrain from purchasing shares during certain blackout periods and when they are in possession of any material
non-public
information and (ii) to clear all trades with the Company’s legal counsel prior to execution. In addition, the initial shareholders agreed to waive their redemption rights with respect to their Founder Shares and Public Shares in connection with the completion of a Business
Combination.
 
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Table of Contents
LOCAL BOUNTI CORPORATION (F/K/A LEO HOLDINGS III CORP)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
Notwithstanding
the foregoing, the Amended and Restated Memorandum and Articles of Association provides that a Public Shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15% or more of the Class A ordinary shares sold in the Initial Public Offering, without the prior consent of the Company.
The Company’s Sponsor, officers and directors (the “initial shareholders”) agreed not to propose an amendment to the Amended and Restated Memorandum and Articles of Association that would modify the substance or timing of the Company’s obligation to redeem 100% of its Public Shares if the Company does not complete a Business Combination, unless the Company provides the Public Shareholders with the opportunity to redeem their Class A ordinary shares in conjunction with any such amendment.
If the Company is unable to complete a Business Combination within 24 months from the closing of the Initial Public Offering, or March 2, 2023 (the “Combination Period”), the Company will (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a
per-share
price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to us to fund the Company’s regulatory compliance requirements, and other costs related thereto and/or to pay the Company’s income taxes, if any, (less up to $100,000 of interest to pay dissolution expenses) divided by the number of the then outstanding Public Shares, which redemption will completely extinguish Public Shareholders’ rights as shareholders (including the right to receive further liquidation distributions, if any); and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining shareholders and the Company’s board of directors, liquidate and dissolve, subject in the case of clauses (ii) and (iii), to the Company’s obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law.
The Sponsor agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the Sponsor or members of the Company’s management team acquire Public Shares in or after the Initial Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the Company fails to complete a Business Combination within the Combination Period. The underwriter agreed to waive their rights to their deferred underwriting commission (see Note 7) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be only
$10.00
 
per share initially held in the Trust Account. In order to protect the amounts held in the Trust Account, the Sponsor agreed to be liable to the Company if and to the extent any claims by a vendor for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account. This liability will not apply with respect to any claims by a third party who executed a waiver of any right, title, interest or claim of any kind in or to any monies held in the Trust Account or to any claims under the Company’s indemnity of the underwriter of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (except for the Company’s independent registered public accounting firm), prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
Proposed Business Combination
On June 17, 2021, the Company entered into an Agreement and Plan of Merger (the “merger agreement”) by and among Longleaf Merger Sub, Inc., a Delaware corporation (“Merger Sub 1”), Longleaf Merger Sub II, LLC (“Merger Sub 2”) and Local Bounti Corporation, a Delaware corporation (“Local Bounti”). Pursuant to the merger agreement, each issued and outstanding Class A and Class B ordinary share of the Company will be converted into one share of common stock, par value $0.0001 per share, of the Company (the “New Local Bounti Common Stock”); each issued and outstanding whole warrant to purchase Class A ordinary shares of the Company will automatically represent the right to purchase one share of New Local Bounti Common Stock at an exercise price of $11.50 per share on the terms and conditions set forth in the Company’s warrant agreement.
On the date of closing, subject to the conditions set forth in the merger agreement, Merger Sub 1 will merge with and into Local Bounti, which Local Bounti as the surviving company, followed immediately by the merger of the surviving company with and into Merger Sub 2, with Merger Sub 2 surviving the merger as a wholly-owned subsidiary of the Company and, after giving effect to the Mergers, Local Bounti will be a wholly-owned subsidiary of the Company.
On July 19, 2021, the Company filed a registration statement on Form
S-4
(File
No. 333-257997)
(as amended or supplemented, the “Registration Statement”) with the Securities and Exchange Commission (“SEC”) in connection with the Business Combination. On October 20, 2021, the Registration Statement was declared effective by the SEC, and the Company filed a definitive joint proxy statement/prospectus (the “definitive joint proxy statement/prospectus”) for the solicitation of proxies in connection with (i) an extraordinary general meeting of the Company’s shareholders to be held on November 16, 2021 to consider and vote on, among other proposals, a proposal to approve the Merger Agreement and the business combination and (ii) a special meeting of the Company’s public warrant holders to be held on November 16, 2021 to consider and vote on, among other proposals, a proposal to amend certain provisions of the Company’s outstanding warrants. Refer to the definitive joint proxy statement/prospectus for additional information.
Risks and Uncertainties
Management continues to evaluate the impact of the
COVID-19
pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these unaudited condensed consolidated financial statements. The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
6

Table of Contents
LOCAL BOUNTI CORPORATION (F/K/A LEO HOLDINGS III CORP)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
Liquidity and Capital Resources
As of September 30, 2021, the Company had approximately $189,000 in its operating bank account and working capital of approximately $483,000.
The Company’s liquidity needs through September 30, 2021 have been satisfied through a contribution of $25,000 from Sponsor to cover for certain expenses in exchange for the issuance of the Founder Shares, the loan of approximately $112,000 from the Sponsor pursuant to the Note (as defined in Note
6
), and the proceeds from the consummation of the Private Placement not held in the Trust Account. The Company repaid the Note in full on March 3, 2021. In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, provide the Company Working Capital Loans (as defined in Note
6
). As of September 30, 2021, there were no amounts outstanding under any Working Capital Loan.
Based on the foregoing, management believes that the Company will have sufficient working capital and borrowing capacity from the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors to meet its needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, the Company will be using these funds for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business
Combination.
Note 2—Restatement of Previously Reported Financial Statements
The Company concluded it should restate its previously issued financial statements to classify all Class A ordinary shares subject to redemption in temporary equity. In accordance with ASC
480-10-S99,
redemption provisions not solely within the control of the Company require shares subject to redemption to be classified outside of permanent equity. The Company had previously classified a portion of its Class A ordinary shares in permanent equity. Although the Company did not specify a maximum redemption threshold, its charter currently provides that the Company will not redeem its Public Shares in an amount that would cause its net tangible assets to be less than $5,000,001. Previously, the Company did not consider redeemable shares classified as temporary equity as part of net tangible assets. Effective with these condensed financial statements, the Company revised this interpretation to include temporary equity in net tangible assets.
In accordance with SEC Staff Accounting Bulletin No. 99, “Materiality,” and SEC Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,” the Company evaluated the corrections and has determined that the related impact was material to the previously filed financial statements that contained the error, reported in the Company’s Form
8-K
filed with the SEC on March 2, 2021 (the
“Post-IPO
Balance Sheet”) and the Company’s Form
10-Qs
for the quarterly periods ended March 31, 2021, and June 30, 2021 (the “Affected Quarterly Periods”). Therefore, the Company, in consultation with its Audit Committee, concluded that the
Post-IPO
Balance Sheet and the Affected Quarterly Periods should be restated to present all Class A ordinary shares subject to possible redemption as temporary equity and to recognize accretion from the initial book value to redemption value at the time of its Initial Public Offering and the Over-Allotment. As such, the Company is reporting these restatements to those periods in this quarterly report. The previously presented
Post-IPO
Balance Sheet and Affected Quarterly Periods should no longer be relied upon.
 
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Table of Contents
LOCAL BOUNTI CORPORATION (F/K/A LEO HOLDINGS III CORP)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
The change in the carrying value of the redeemable Class A ordinary shares in the
Post-IPO
Balance Sheet resulted in a reclassification of approximately 2.2 million Class A ordinary shares from permanent equity to temporary equity. The impact of the restatement to the
Post-IPO
Balance Sheet is as follows:
 
 
  
As of March 2, 2021
 
 
  
As Previously
Reported
 
 
Adjustment
 
 
As Restated
 
Balance Sheet
  
     
 
     
 
     
Total assets
  
$
277,526,800
 
 
$
  
 
 
$
277,526,800
 
 
  
 
 
 
 
 
 
 
 
 
 
 
Liabilities and shareholders’ equity (deficit)
  
     
 
     
 
     
Total current liabilities
  
$
710,251
 
 
$
  
 
 
$
710,251
 
Deferred underwriting commissions
  
 
9,625,000
 
 
 
  
 
 
 
9,625,000
 
Warrant liabilities
  
 
9,153,333
 
 
 
 
 
 
9,153,333
 
 
  
 
 
 
 
 
 
 
 
 
 
 
Total liabilities
  
 
19,488,584
 
 
 
 
 
 
19,488,584
 
Class A ordinary shares subject to possible redemption
  
 
253,038,210
 
 
 
21,961,790
 
 
 
275,000,000
 
Shareholders’ equity (deficit)
  
     
 
     
 
     
Preference shares
  
 
  
 
 
 
  
 
 
 
  
 
Class A ordinary shares
  
 
220
 
 
 
(220
 
 
  
 
Class B ordinary shares
  
 
690
 
 
 
  
 
 
 
690
 
Additional
paid-in-capital
  
 
5,327,593
 
 
 
(5,327,593
 
 
  
 
Accumulated deficit
  
 
(328,497
 
 
(16,633,977
 
 
(16,962,474
 
  
 
 
 
 
 
 
 
 
 
 
 
Total shareholders’ equity (deficit)
  
 
5,000,006
 
 
 
(21,961,790
 
 
(16,961,784
 
  
 
 
 
 
 
 
 
 
 
 
 
Total liabilities, Class A ordinary shares subject to possible redemption and shareholders’ equity (deficit)
  
$
277,526,800
 
 
$
  
 
 
$
277,526,800
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
  
   
 
 
   
 
 
   
 
The impact of the restatement on the financial statements for the Affected Quarterly Periods is presented below.
The change in the carrying value of the redeemable Class A ordinary shares at March 31, 2021 resulted in a reclassification of approximately 2.1 million Class A ordinary shares from permanent equity to temporary equity. The table below presents the effect of the financial statement adjustments related to the restatement discussed above of the Company’s previously reported unaudited balance sheet as of March 31, 2021:
 
 
  
As of March 31, 2021
 
 
  
As Previously
Reported
 
  
Adjustment
 
 
As Restated
 
Unaudited Condensed Balance Sheet
  
     
  
     
 
     
Total assets
  
$
276,867,209
 
  
$
  
 
 
$
276,867,209
 
 
  
 
 
 
  
 
 
 
 
 
 
 
Total liabilities
  
 
17,502,404
 
  
 
  
 
 
 
17,502,404
 
Class A ordinary shares subject to possible redemption
  
 
254,364,800
 
  
 
20,635,200
 
 
 
275,000,000
 
Shareholders’ equity (deficit)
  
     
  
     
 
     
Preference shares
  
 
  
 
  
 
  
 
 
 
  
 
Class A ordinary shares
  
 
206
 
  
 
(206
 
 
  
 
Class B ordinary shares
  
 
690
 
  
 
  
 
 
 
690
 
Additional
paid-in-capital
  
 
4,001,017
 
  
 
(4,001,017
 
 
  
 
Retained earnings (accumulated deficit)
  
 
998,092
 
  
 
(16,633,977
 
 
(15,635,885
 
  
 
 
 
  
 
 
 
 
 
 
 
Total shareholders’ equity (deficit)
  
 
5,000,005
 
  
 
(20,635,200
 
 
(15,635,195
 
  
 
 
 
  
 
 
 
 
 
 
 
Total liabilities, Class A ordinary shares subject to possible redemption and shareholders’ equity (deficit)
  
$
276,867,209
 
  
$
  
 
 
$
276,867,209
 
 
  
 
 
 
  
 
 
 
 
 
 
 
The Company’s unaudited statement of shareholders’ equity has been restated to reflect the changes to the impacted shareholders’ equity accounts described above.
 
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LOCAL BOUNTI CORPORATION (F/K/A LEO HOLDINGS III CORP)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
The table below presents the effect of the financial statement adjustments related to the restatement discussed above of the Company’s previously reported unaudited statement of cash flows for the period from January 8, 2021 (inception) through March 31, 2021:
 
 
  
For the Period from January 8, 2021 (Inception)
through March 31, 2021
 
 
  
As Previously
Reported
 
  
Adjustment
 
 
As Restated
 
Unaudited Condensed Statement of Cash Flows - Supplemental disclosure of noncash activities:
 
  
     
 
     
Initial value of Class A ordinary shares subject to possible redemption
  
$
 253,038,210
 
  
$
(253,038,210
 
$
  
 
Change in fair value of Class A ordinary shares subject to possible redemption
  
$
1,326,590
 
  
$
(1,326,590
 
$
  
 
Accretion of Class A ordinary shares subject to redemption amount
  
$
  
 
  
$
20,124,954
 
 
$
 20,124,954
 
The change in the carrying value of the redeemable Class A ordinary shares at June 30, 2021 resulted in a reclassification of approximately 2.6 million Class A ordinary shares from permanent equity to temporary equity. The table below presents the effect of the financial statement adjustments related to the restatement discussed above of the Company’s previously reported unaudited balance sheet as of June 30, 2021:
 
 
  
As of June 30, 2021
 
 
  
As Previously
Reported
 
 
Adjustment
 
 
As Restated
 
Unaudited Condensed Balance Sheet
  
     
 
     
 
     
Total assets
  
$
 276,386,096
 
 
$
  
 
 
$
 276,386,096
 
 
  
 
 
 
 
 
 
 
 
 
 
 
Total liabilities
  
 
22,325,494
 
 
 
  
 
 
 
22,325,494
 
Class A ordinary shares subject to possible redemption
  
 
249,060,600
 
 
 
25,939,400
 
 
 
275,000,000
 
Shareholders’ equity (deficit)
  
     
 
     
 
     
Preference shares
  
 
  
 
 
 
  
 
 
 
  
 
Class A ordinary shares
  
 
259
 
 
 
(259
 
 
  
 
Class B ordinary shares
  
 
688
 
 
 
  
 
 
 
688
 
Additional
paid-in-capital
  
 
9,305,166
 
 
 
(9,305,166
 
 
  
 
Accumulated deficit
  
 
(4,306,111
 
 
(16,633,975
 
 
(20,940,086
 
  
 
 
 
 
 
 
 
 
 
 
 
Total shareholders’ equity (deficit)
  
 
5,000,002
 
 
 
(25,939,400
 
 
(20,939,398
 
  
 
 
 
 
 
 
 
 
 
 
 
Total liabilities, Class A ordinary shares subject to possible redemption and shareholders’ equity (deficit)
  
$
276,386,096
 
 
$
  
 
 
$
276,386,096
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
  
   
 
 
   
 
 
   
 
The Company’s unaudited statement of shareholders’ equity has been restated to reflect the changes to the impacted shareholders’ equity accounts described above.
The table below presents the effect of the financial statement adjustments related to the restatement discussed above of the Company’s previously reported unaudited statement of cash flows for the period from January 8, 2021 (inception) through June 30, 2021:
 
 
  
For the Period from January 8, 2021 (Inception)
through June 30, 2021
 
 
  
As Previously
Reported
 
 
Adjustment
 
 
As Restated
 
Unaudited Condensed Statement of Cash Flows - Supplemental disclosure of noncash activities:
 
 
     
 
     
Initial value of Class A ordinary shares subject to possible redemption
  
$
 253,038,210
 
 
$
(253,038,210
 
$
  
 
Change in fair value of Class A ordinary shares subject to possible redemption
  
$
(3,977,610
 
$
3,977,610
 
 
$
  
 
Accretion of Class A ordinary shares subject to redemption amount
  
$
  
 
 
$
20,124,954
 
 
$
 20,124,954
 
 
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LOCAL BOUNTI CORPORATION (F/K/A LEO HOLDINGS III CORP)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
In connection with the change in presentation for the Class A ordinary shares subject to possible redemption, the Company has restated its earnings per share calculation to allocate income and losses shares pro rata between the two classes of shares. This presentation contemplates a Business Combination as the most likely outcome, in which case, both classes of shares participate pro rata in the income and losses of the Company. The impact to the reported amounts of weighted average shares outstanding and basic and diluted earnings per share is presented below for the Affected Quarterly Periods:
 
 
  
For the Period from January 8, 2021 (Inception)
through March 31, 2021
 
 
  
As Previously
Reported
 
  
Adjustment
 
  
As Restated
 
Unaudited Condensed Statement of Operations
  
     
  
     
  
     
Net income
  
$
998,092
 
  
$
  
 
  
$
998,092
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Weighted average shares outstanding of Class A ordinary shares, basic and diluted
  
 
27,500,000
 
  
 
(16,198,630
  
 
11,301,370
 
Basic and diluted net income per share, Class A ordinary shares
  
$
  
 
  
$
0.06
 
  
$
0.06
 
Weighted average shares outstanding of Class B ordinary shares, basic and diluted
  
 
6,316,265
 
  
 
43,324
 
  
 
6,359,589
 
Basic and diluted net income per share, Class B ordinary shares
  
$
0.16
 
  
$
(0.10
  
$
0.06
 
 
 
  
For the Three Months Ended June 30, 2021
 
 
  
As Previously
Reported
 
  
Adjustment
 
  
As Restated
 
Unaudited Condensed Statement of Operations
  
     
  
     
  
     
Net loss
  
$
(5,304,203
  
$
  
 
  
$
(5,304,203
 
  
 
 
 
  
 
 
 
  
 
 
 
Weighted average shares outstanding of Class A ordinary shares, basic and diluted
  
 
27,500,000
 
  
 
  
 
  
 
27,500,000
 
Basic and diluted net income (loss) per share, Class A ordinary shares
  
$
  
 
  
$
(0.15
  
$
(0.15
Weighted average shares outstanding of Class B ordinary shares, basic and diluted
  
 
6,875,000
 
  
 
  
 
  
 
6,875,000
 
Basic and diluted net income (loss) per share, Class B ordinary shares
  
$
(0.77
  
$
0.62
 
  
$
(0.15
 
 
  
For the Period from January 8, 2021 (Inception)
through June 30, 2021
 
 
  
As Previously
Reported
 
  
Adjustment
 
  
As Restated
 
Unaudited Condensed Statement of Operations
  
     
  
     
  
     
Net loss
  
$
(4,306,111
  
$
  
 
  
$
(4,306,111
 
  
 
 
 
  
 
 
 
  
 
 
 
Weighted average shares outstanding of Class A ordinary shares, basic and diluted
  
 
27,500,000
 
  
 
(7,210,366
  
 
20,289,634
 
Basic and diluted net income (loss) per share, Class A ordinary shares
  
$
  
 
  
$
(0.16
  
$
(0.16
Weighted average shares outstanding of Class B ordinary shares, basic and diluted
  
 
6,608,477
 
  
 
37,102
 
  
 
6,645,579
 
Basic and diluted net income (loss) per share, Class B ordinary shares
  
$
(0.65
  
$
0.49
 
  
$
(0.16
Note 3—Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for financial information and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP. In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments, which include normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. Operating results for the three months ended September 30, 2021 and for the period from January 8, 2021 (inception) through September 30, 2021 are not necessarily indicative of the results that may be expected through December 31, 2021 or any future periods thereafter.
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the prospectus filed by the Company with the SEC on March 2, 2021.
Principles of Consolidation
The condensed consolidated financial statements of the Company include its wholly-owned subsidiary in connection with the planned merger. All inter- company accounts and transactions are eliminated in consolidation.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
 
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LOCAL BOUNTI CORPORATION (F/K/A LEO HOLDINGS III CORP)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to
non-emerging
growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal Deposit Insurance Corporation coverage limit of $250,000. As of September
 
30, 2021, the Company has not experienced any losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.
Cash and Cash Equivalents
The Company
considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company had no cash equivalents as of September 30, 2021.
Investments Held in the Trust Account
The Company’s
portfolio of investments held in the Trust Account is comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities and generally have a readily determinable fair value, or a combination thereof. When the Company’s investments held in the Trust Account are comprised of U.S. government securities, the investments are classified as trading securities. When the Company’s investments held in the Trust Account are comprised of money market funds, the investments are recognized at fair value. Trading securities and investments in money market funds are presented on the balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities are included in net gain from investments held in Trust Account in the accompanying unaudited condensed statement of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.
Use of Estimates
The preparation
of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the unaudited condensed consolidated financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ from those estimates.
Fair Value of Financial Instruments
The
fair value of the Company’s assets and liabilities which qualify as financial instruments under the FASB ASC Topic 820, “Fair Value Measurements,” equal or approximate the carrying amounts represented in the condensed consolidated balance sheet.
Fair Value Measurements
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers consist of:
 
 
 
Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets;
 
 
 
Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
 
 
 
Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
 
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Table of Contents
LOCAL BOUNTI CORPORATION (F/K/A LEO HOLDINGS III CORP)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
Derivative Warrant Liabilities
The
Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to FASB ASC Topic 480 “Distinguishing Liabilities from Equity” (“ASC 480”) and FASB ASC Topic 815, “Derivatives and Hedging, Contracts in Entity’s Own Equity” (“ASC
815-40”).
The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is
re-assessed
at the end of each reporting period.
The Company accounts for its warrants issued in connection with its Initial Public and Private Placement, as derivative warrant liabilities in accordance with ASC
815-40.
Accordingly, the Company recognizes the warrant instruments as liabilities at fair value and adjusts the instruments to fair value at each reporting period. The liabilities are subject to
re-measurement
at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s statements of operations. The fair value of warrants issued in connection with the Private Placement has been estimated using a Monte-Carlo simulation at each balance sheet date. The fair value of the warrants issued in connection with the Initial Public Offering was initially measured using a Monte-Carlo simulation model and subsequently been measured based on the market price at each measurement date when separately listed and traded. The determination of the fair value of the warrant liability may be subject to change as more current information becomes available and accordingly the actual results could differ significantly. Derivative warrant liabilities are classified as
non-current
liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.
Offering Costs Associated with the Initial Public Offering
Offering
costs consisted of legal, accounting, underwriting fees and other costs incurred through the Initial Public Offering that were directly related to the Initial Public Offering. Offering costs are allocated to the separable financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared to total proceeds received. Offering costs associated with warrant liabilities are expensed as incurred, presented as
non-operating
expenses in the statement of operations. Offering costs associated with the Class A ordinary shares were charged against the carrying value of the Class A ordinary shares upon the completion of the Initial Public Offering. The Company classifies deferred underwriting commissions as
non-current
liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.
Class A Ordinary Shares Subject to Possible Redemption
The
Company accounts for its Class A ordinary shares subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Class A ordinary shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Conditionally redeemable Class A ordinary shares (including Class A ordinary shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, Class A ordinary shares are classified as shareholders’ equity. The Company’s Class A ordinary shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, 27,500,000 Class A ordinary shares subject to possible redemption are presented as temporary equity, outside of the shareholders’ equity section of the Company’s condensed consolidated balance sheet.
Effective with the closing of the Initial Public Offering, the Company recognized the accretion from initial book value to redemption amount, which resulted in charges against additional
paid-in
capital (to the extent available) and accumulated deficit.
Income Taxes
The
Company complies with the accounting and reporting requirements of ASC Topic 740, “Income Taxes”. ASC Topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be
more-likely-than-not
to be sustained upon examination by taxing authorities. The Company’s management determined that the Cayman Islands is the Company’s only major tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of September 30, 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
There is currently no taxation imposed on income by the Government of the Cayman Islands. In accordance with Cayman federal income tax regulations, income taxes are not levied on the Company. Consequently, income taxes are not reflected in the Company’s financial statements. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
Net Income (Loss) per Ordinary Share
The 
Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” The Company has two classes of shares, which are referred to as Class A ordinary shares and Class B ordinary shares. Income and losses are shared pro rata between the two classes of shares. Net income (loss) per ordinary share is calculated by dividing the net income (loss) by the weighted average number of ordinary shares outstanding for the respective period.
The calculation of diluted net income (loss) per ordinary share does not consider the effect of the warrants underlying the Units sold in the Initial Public Offering and the Private Placement Warrants to purchase 10,833,333 Class A ordinary shares in calculation of diluted income (loss) per share, because their exercise is contingent upon future events and their inclusion would be anti-dilutive under the treasury stock method. As a result, diluted net income (loss) per share is the same as basic net income (loss) per share for the three months ended September 30, 2021 and for the period from January 8, 2021 (inception) through September 30, 2021. Accretion associated with the redeemable Class A ordinary shares is excluded from earnings per share as the redemption value approximates fair
value.
 
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Table of Contents
LOCAL BOUNTI CORPORATION (F/K/A LEO HOLDINGS III CORP)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
The table below presents a reconciliation of the numerator and denominator used to compute basic and diluted net income (loss) per share for each class of ordinary shares:
 
 
  
For the Three Months Ended
September 30, 2021
 
  
For the Period from January 8,
2021 (Inception) through
September 30, 2021
 
 
  
Class A
 
  
Class B
 
  
Class A
 
  
Class B
 
Numerator:
  
     
  
     
  
     
  
     
Allocation of net income (loss)
   $ 2,775,403      $ 693,851      $ (646,698    $ (190,159
Denominator:
                                   
Weighted average ordinary shares outstanding, basic and diluted
     27,500,000        6,875,000        22,880,859        6,728,027  
    
 
 
    
 
 
    
 
 
    
 
 
 
Basic and diluted net income (loss) per ordinary share
   $ 0.10      $ 0.10      $ (0.03    $ (0.03
    
 
 
    
 
 
    
 
 
    
 
 
 
                                     
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU
No. 2020-06,
“Debt-Debt with Conversion and Other Options (Subtopic
470-20)
and Derivatives and Hedging- Contracts in Entity’s Own Equity (Subtopic
815-40):
Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU
2020-06”),
which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas. The Company adopted ASU
2020-06
on January 8, 2021 (inception) using the modified retrospective method for transition. Adoption of the ASU did not impact the Company’s financial position, results of operations or cash flows.
The Company’s management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying condensed consolidated financial statements.
Note 4—Initial Public Offering
On March
2, 2021, the Company consummated its Initial Public Offering of 27,500,000 Units, including 3,500,000 Over-Allotment Units to partially cover over-allotments, at $10.00 per Unit, generating gross proceeds of $275.0 million, and incurring offering costs of approximately $15.8 million, of which approximately $9.6 million was for deferred underwriting commissions. Each Unit consists of one Class A ordinary share, and
one-fifth
of one
redeemable warrant (each, a “Public Warrant”). Each Public Warrant entitles the holder to purchase one Class A ordinary share at a price of $11.50 per share, subject to adjustment (see Note
10
).
Note 5—Private Placement Warrants
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the Private Placement of 5,333,333 Private Placement Warrants, at a price of $1.50 per Private Placement Warrant with the Sponsor, generating gross proceeds of $8.0 million, and incurring offering costs of approximately $11,000.
Each whole Private Placement Warrant is exercisable for one whole Class A ordinary share at a price of $11.50 per share. A portion of the proceeds from the Private Placement Warrants was added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the Private Placement Warrants will expire worthless. The Private Placement Warrants will be
non-redeemable
and exercisable on a cashless basis so long as they are held by the Sponsor or its permitted transferees. The Sponsor and the Company’s officers and directors agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Warrants until 30 days after the completion of the initial Business Combination.
Note 6—Related Party Transactions
Founder Shares
On January
18, 2021, the Sponsor paid $25,000 to cover certain expenses of the Company in consideration of 5,750,000 Class B ordinary shares, par value $0.0001 (the “Founder Shares”). On February 25, 2021, the Company effected a share capitalization, resulting in an aggregate of 6,900,000 Class B ordinary shares outstanding. The Sponsor agreed to forfeit up to 900,000 Founder Shares to the extent that the over-allotment option was not exercised in full by the underwriter, so that the Founder Shares would represent 20.0% of the Company’s issued and outstanding shares after the Initial Public Offering. The underwriters partially exercised their over-allotment option on March 2, 2021 to purchase an addition of 3,500,000 Units, with the remaining portion of the over-allotment option expiring at the conclusion of the
45
-day
option period. As a result of the partial exercise of the over- allotment option
, 25,000 Founder Shares were forfeited.
The initial shareholders agreed, subject to limited exceptions, not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (A) one year after the completion of the initial Business Combination or (B) subsequent to the initial Business Combination, (x) if the last sale price of the Class A ordinary shares equals or exceeds
$12.00 per share (as adjusted for share
sub-divisions,
share dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any
30-trading
day period commencing at least 150 days after the initial Business Combination, or (y) the date on which the Company completes a liquidation, merger, share exchange or other similar transaction that results in all of the Company’s shareholders having the right to exchange their Class A ordinary shares for cash, securities or other property.
Related Party Loans
On January
13, 2021, the Sponsor agreed to loan the Company an aggregate of up to $300,000 to cover expenses related to the Initial Public Offering pursuant to a promissory note (the “Note”). This Note was
non-interest
bearing and payable upon the completion of the Initial Public Offering. As of March 2, 2021, the Company borrowed approximately $112,000 under the Note. The Company repaid the Note in full on March 3, 2021. Subsequent to the repayment, the facility was no longer available to the Company.
In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business
 
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Table of Contents
LOCAL BOUNTI CORPORATION (F/K/A LEO HOLDINGS III CORP)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
Combination does not close, the Company may use a portion of the proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lenders’ discretion, up to
$1.5 million of such Working Capital Loans may be convertible into warrants of the post Business Combination entity at a price of $1.50 per warrant. The warrants would be identical to the Private Placement Warrants. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. As of September 30, 2021, the Company had no borrowings under the Working Capital Loans.
Administrative Support Agreement
Commencing
on the date that the Company’s securities were first listed on the New York Stock Exchange, the Company agreed to pay the Sponsor a total of $10,000 per month for office space, secretarial and administrative services provided to the Company. Upon completion of the initial Business Combination or the Company’s liquidation, the Company will cease paying these monthly fees. The Company incurred and paid approximately $30,000 and $58,000 in expenses in connection with such services for the three months ended September 30, 2021 and for the period from January 8, 2021 (inception) through September 30, 2021, respectively, as reflected in the accompanying unaudited condensed consolidated statements of operations. As of September 30, 2021, approximately $16,000 in expenses in connection with compliance services with related party was outstanding, as reflected in the accompanying unaudited condensed consolidated balance sheet.
Note 7—Commitments and Contingencies
Registration and Shareholder Rights
The
holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any Class A ordinary shares issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans) were entitled to registration rights pursuant to a registration and shareholder rights agreement signed upon consummation of the Initial Public Offering. These holders were entitled to certain demand and “piggyback” registration rights. However, the registration and shareholder rights agreement provided that the Company will not permit any registration statement filed under the Securities Act to become effective until the termination of the applicable
lock-up
period for the securities to be registered. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The
Company granted the underwriter a
45-day
option from the final prospectus relating to the Initial Public Offering to purchase up to 3,600,000 additional Units to cover over-allotments, if any, at the Initial Public Offering price less the underwriting discounts and commissions. The underwriters partially exercised their over-allotment option on March 2, 2021 to purchase an additional 3,500,000 Over-Allotment Units. The remaining unexercised over-allotment option expired at the conclusion of the
45-day
option period.
 
The underwriter
was entitled to an underwriting discount of $0.20 per unit, or $5.5 million in the aggregate, paid upon the closing of the Initial Public Offering. In addition, $0.35 per unit, or approximately $9.6 million in the aggregate will be payable to the underwriter for deferred underwriting commissions. The deferred fee will become payable to the underwriter from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the
underwriting agreement.
Note 8—Warrants
As of
September 30, 2021, there were 5,500,000 Public Warrants and 5,333,333 Private Placement Warrants outstanding.
Public Warrants may only be exercised for a whole number of shares. No fractional Public Warrants will be issued upon separation of the Units and only whole Public Warrants will trade. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination or (b) 12 months from the closing of the Initial Public Offering; provided in each case that the Company has an effective registration statement under the Securities Act covering the Class A ordinary shares issuable upon exercise of the Public Warrants and a current prospectus relating to them is available (or the Company permits holders to exercise their Public Warrants on a cashless basis and such cashless exercise is exempt from registration under the Securities Act). The Company agreed that as soon as practicable, but in no event later than twenty business days, after the closing of a Business Combination, the Company will use its best efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the Class A ordinary shares issuable upon exercise of the Public Warrants. If the shares issuable upon exercise of the warrants are not registered under the Securities Act, the Company will be required to permit holders to exercise their warrants on a cashless basis. However, no warrant will be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder, or an exemption from registration is available. Notwithstanding the above, if the Company’s Class A ordinary shares are at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company elects, the Company will not be required to file or maintain in effect a registration statement, but the Company will use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or
liquidation.
 
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LOCAL BOUNTI CORPORATION (F/K/A LEO HOLDINGS III CORP)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
The Private Placement Warrants are identical to the Public
Warrants
underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants and the ordinary shares issuable upon exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be
non-redeemable
so long as they are held by the initial purchasers or such purchasers’ permitted transferees. If the Private Placement Warrants are held by someone other than the initial shareholders or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
Once the warrants become exercisable, the Company may redeem the Public Warrants:
 
   
in whole and not in part;
 
   
at a price of $0.01 per warrant;
 
   
upon a minimum of 30 days’ prior written notice of redemption;
 
   
if, and only if, the closing price of the Class A ordinary shares equals or exceeds $18.00 per share (as adjusted for share
sub-divisions,
share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within a
30-trading
day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders.
The Company
 
will not redeem the warrants unless an effective registration statement under the Securities Act covering the Class A ordinary shares issuable upon exercise of the warrants is effective and a current prospectus relating to those Class A ordinary shares is available throughout the
30-day
redemption period, except if the warrants may be exercised on a cashless basis and such cashless exercise is exempt from registration under the Securities Act.
In addition, commencing on the day the warrants become exercisable, the Company may redeem the outstanding warrants (except with respect to the Private Placement Warrants):
 
   
in whole and not in part;
 
   
$0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares determined by reference to an agreed table based on the redemption date and the “fair market value” of Class A ordinary shares;
 
   
if, and only if, the closing price of Class A ordinary shares equals or exceeds $10.00 per Public Share (as adjusted for adjustments) for any 20 trading days within the
30-trading
day period ending three trading days before the Company sends the notice of redemption to the warrant holders; and
 
   
if the closing price of the Class A ordinary shares for any 20 trading days within a
30-trading
day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders is less than $18.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a warrant as described under the heading “Description of Securities-Warrants-Public Shareholders’ Warrants-Anti-dilution Adjustments”), the Private Placement Warrants must also be concurrently called for redemption on the same terms as the outstanding Public Warrants, as described above.
The “fair market value” of Class A ordinary shares shall mean the average last reported sale price of Class A ordinary shares for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants.
If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. Additionally, in no event will the Company be required to net cash settle any Warrants. If the Company is unable to complete the initial Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
In addition, if (x) the Company issues additional Class A ordinary shares or equity-linked securities for capital raising purposes in connection with the closing of a Business Combination at an issue price or effective issue price of less than $9.20 per ordinary share (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of a Business Combination on the date of the consummation of a Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Class A ordinary shares during the 20 trading day period starting on the trading day prior to the day on which the Company consummates a Business Combination (such price, the “Market Value”) is below $9.20 per share, then the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, the $18.00 per share redemption trigger price and the “Redemption of Warrants for Class A ordinary shares” described above will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price, and the $10.00 per share redemption trigger price described above under “Redemption of Warrants for Class A ordinary shares” will be adjusted (to the nearest cent) to be equal to the higher of the Market Value and the Newly Issued Price.
Note 9—Class A Ordinary Shares Subject to Possible Redemption
The Company’s
Class A ordinary shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of future events. The Company is authorized to issue 500,000,000 Class A ordinary shares with a par value of $0.0001 per share. Holders of the Company’s Class A ordinary shares are entitled to one vote for each share. As of September 30, 2021, there were 27,500,000 Class A ordinary shares outstanding, which were all subject to possible redemption and are classified outside of permanent equity in the condensed consolidated balance
sheet.
 
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LOCAL BOUNTI CORPORATION (F/K/A LEO HOLDINGS III CORP)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
The Class A ordinary shares subject to possible redemption reflected on the condensed consolidated balance sheet is reconciled on the following table:
 
Gross proceeds received from Initial Public Offering
   $ 275,000,000  
Less:
        
Fair value of Public Warrants at issuance
     (4,620,000
Offering costs allocated to Class A ordinary shares
     (15,504,954
Plus:
        
Accretion on Class A ordinary shares to redemption value
     20,124,954  
    
 
 
 
Class A ordinary shares subject to possible redemption
   $ 275,000,000  
    
 
 
 
Note 10—Shareholders’ Deficit
Preference Shares - The
Company is authorized to issue 5,000,000 preference shares, with a par value of $0.0001 per share, with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. As of September 30, 2021, there were no preference shares issued or outstanding.
Class A Ordinary Shares—The
Company is authorized to issue 500,000,000 Class A ordinary shares with a par value of $0.0001 per share. As of September 30, 2021, there were 28,750,000 shares of Class A ordinary shares outstanding, and all of which were subject to possible redemption and included as temporary equity (see Note
9
).
Class B Ordinary
Shares-The
Company is authorized to issue 50,000,000 Class B ordinary shares with a par value of $0.0001 per share. As of September 30, 2021, there were 6,875,000 Class B ordinary shares were issued and outstanding.
Ordinary shareholders of record are entitled to one vote for each share held on all matters to be voted on by shareholders. Holders of the Class A ordinary shares and holders of the Class B ordinary shares will vote together as a single class on all matters submitted to a vote of the shareholders, except as required by law.
The Class B ordinary shares will automatically convert into Class A ordinary shares on the first business day immediately following the consummation of the initial Business Combination at a ratio such that the number of Class A ordinary shares issuable upon conversion of all Founder Shares will equal, in the aggregate, on an
as-converted
basis, 20% of the sum of (i) the total number of Class A ordinary shares issued and outstanding upon completion of the Initial Public Offering, plus (ii) the sum of the total number of Class A ordinary shares issued or deemed issued or issuable upon conversion or exercise of any equity-linked securities or rights issued or deemed issued, by the Company in connection with or in relation to the consummation of the initial Business Combination, excluding any Class A ordinary shares or equity-linked securities exercisable for or convertible into Class A ordinary shares issued, or to be issued, to any seller in the initial Business Combination and any private placement warrants issued to the Sponsor upon conversion of Working Capital Loans. In no event will the Class B ordinary shares convert into Class A ordinary shares at a rate of less than one to one.
Note 11—Fair Value Measurements
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2021 and indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value.
 
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LOCAL BOUNTI CORPORATION (F/K/A LEO HOLDINGS III CORP)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
    
Fair Value Measured as of September 30, 2021
 
    
Level 1
    
Level 2
    
Level 3
    
Total
 
Assets
                                   
Investments held in Trust Account - U.S. Treasury Securities
   $ 275,013,714      $ —        $ —        $ 275,013,714  
Liabilities:
                                   
Warrant liabilities - public warrants
   $ 4,235,000      $ —        $ —        $ 4,235,000  
Warrant liabilities - private warrants
   $ —        $ —        $ 4,106,666      $ 4,106,666  
Transfers to/from Levels 1, 2, and 3 are recognized at the beginning of the reporting period. The estimated fair value of the Public Warrants transferred from a Level 3 measurement to a Level 1 fair value measurement, when the Public Warrants were separately listed and traded in April 2021.
For periods where no observable traded price is available, the fair value of the Public Warrants has been estimated using a Monte-Carlo simulation model. For periods subsequent to the detachment of the Public Warrants from the Units, the fair value of the Public Warrants is based on the observable listed price for such warrants. The fair value of the Private Warrants is determined using a Monte-Carlo simulation model. For the three months ended September 30, 2021 and the period from January 8, 2021 (inception) through September 30, 2021, the Company recognized a decrease in the fair value of warrant liabilities of approximately $4.2 million and $812,000, respectively, presented on the accompanying condensed consolidated statements of operations.
The change in the fair value of the Level 3 derivative warrant liabilities for the three months ended September 30, 2021 and the period from January 8, 2021 (inception) through September 30, 2021 is summarized as follows:
 
Warrant liabilities at January 8, 2021 (inception)
   $     
Issuance of Public and Private Warrants
     9,153,333  
Change in fair value of warrant liabilities
     (1,408,333
Warrant liabilities at March 31, 2021
     7,745,000  
Public Warrants transferred to Level 1
     (3,905,000
Change in fair value of warrant liabilities
     2,346,666  
Warrant liabilities at June 30, 2021
     6,186,666  
Change in fair value of warrant liabilities
     (2,080,000
Warrant liabilities at September 30, 2021
   $ 4,106,666  
The estimated fair value of the Public and Private Placement Warrants, prior to the Public Warrants being traded in an active market, was determined using Level 3 inputs. Inherent in a Monte-Carlo simulation are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its ordinary shares based on historical volatility of select peer companies that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury
zero-coupon
yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates remaining at zero. Any changes in these assumptions can change the valuation significantly.
The following table provides quantitative information regarding Level 3 fair value measurements inputs at their measurement dates:
 
 
  
September 30, 2021
 
 
March 2, 2021
 
Exercise price
   $ 11.50     $ 11.50  
Stock Price
   $ 9.94     $ 9.83  
Term (in years)
     5.09       5.58  
Volatility
     12.90     15.10
Risk-free interest rate
     0.99     0.79
Dividend yield
     0.0     0.0
Note 12—Subsequent Events
The Company evaluated subsequent events and transactions that occurred up to the date the condensed consolidated financial statements were issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the condensed consolidated financial statements
, except as disclosed in Note 2 and below
.
The Company held an extraordinary general meeting of shareholders (the “extraordinary general meeting”) on November 16, 2021. At the extraordinary general meeting, the Company’s shareholders considered and adopted, among other matters, the merger agreement (See Note 1 for further detail).
On November 23, 2021, the Company consummated the previously announced business combination pursuant to that certain Agreement and Plan of Merger (the “merger agreement”) by and among Longleaf Merger Sub, Inc., a Delaware corporation (“Merger Sub 1”), Longleaf Merger Sub II, LLC (“Merger Sub 2”) and Legacy Local Bounti.(See Note 1 for further detail).
 
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
References to the “Company,” “Leo Holdings III Corp,” “Leo Holdings III,” “our,” “us” or “we” refer to Leo Holdings III Corp. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited interim condensed consolidated financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes
forward-looking
statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form
10-Q/A
includes
forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. We have based these
forward-looking
statements on our current expectations and projections about future events. These
forward-looking
statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such
forward-looking
statements. In some cases, you can identify
forward-looking
statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other SEC filings.
Overview
We are a blank check company incorporated as a Cayman Islands exempted company on January 8, 2021. We were formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). We are an emerging growth company and, as such, we are subject to all of the risks associated with emerging growth companies.
Our sponsor is Leo Investors III LP, a Cayman Islands exempted limited partnership (the “Sponsor”). The registration statement for our Initial Public Offering was declared effective on February 25, 2021. On March 2, 2021, we consummated our Initial Public Offering of 27,500,000 units (the “Units” and, with respect to the Class A ordinary shares included in the Units being offered, the “Public Shares”), including 3,500,000 additional Units to partially cover over-allotments (the “Over-Allotment Units”), at $10.00 per Unit, generating gross proceeds of $275.0 million, and incurring offering costs of approximately $15.8 million, of which approximately $9.6 million was for deferred underwriting commissions.
Simultaneously with the closing of the Initial Public Offering, the Company consummated the private placement (“Private Placement”) of 5,333,333 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”), at a price of $1.50 per Private Placement Warrant with the Sponsor, generating gross proceeds of $8.0 million, and incurring offering costs approximately $11,000.
Upon the closing of the Initial Public Offering and the Private Placement, $275.0 million ($10.00 per Unit) of the net proceeds of the Initial Public Offering and certain of the proceeds of the Private Placement were placed in a trust account (“Trust Account”), located in the United States with Continental Stock Transfer & Trust Company acting as trustee, and will be invested only in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting the conditions of paragraphs (d)(2), (d) (3) and (d)(4) of Rule
2a-7
of the Investment Company Act, as determined by us, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account as described below.
Our management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that we will be able to complete a Business Combination successfully. We must complete one or more initial Business Combinations having an aggregate fair market value of at least 80% of the assets held in the Trust Account (excluding the deferred underwriting commissions and taxes paid or payable on income earned on the Trust Account) at the time of the signing of the agreement to enter into the initial Business Combination. However, we will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act.
If we are unable to complete a Business Combination within the Combination Period, we will (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to us to pay our taxes that were paid by us or are payable by us, if any (less up to $100,000 of interest to pay dissolution expenses), divided by the number of the then-outstanding Public Shares, which redemption will completely extinguish Public Shareholders’ rights as shareholders (including the right to receive further liquidation distributions, if any); and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining shareholders and the board of directors, liquidate and dissolve, subject in the case of clauses (ii) and (iii) to the Company’s obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law.
Restatement to Previously Reported Financial Statements
We concluded we should restate our previously issued financial statements to classify all Class A ordinary shares subject to redemption in temporary equity. In accordance with ASC 480-10-S99, redemption provisions not solely within the control of the Company require shares subject to redemption to be classified outside of permanent equity. We had previously classified a portion of our Class A ordinary shares in permanent equity. Although we did not specify a maximum redemption threshold, our charter currently provides that we will not redeem our Public Shares in an amount that would cause our net tangible assets to be less than $5,000,001. Previously, we did not consider redeemable shares classified as temporary equity as part of net tangible assets. Effective with these condensed financial statements, we have revised this interpretation to include temporary equity in net tangible assets.
 
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In accordance with SEC Staff Accounting Bulletin No. 99, “Materiality,” and SEC Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,” we evaluated the corrections and have determined that the related impact was material to the previously filed financial statements that contained the error, reported in our Form 8-K filed with the SEC on March 2, 2021 (the “Post-IPO Balance Sheet”) and our Form 10-Qs for the quarterly periods ended March 31, 2021, and June 30, 2021 (the “Affected Quarterly Periods”). Therefore, we, in consultation with our Audit Committee, concluded that the Post-IPO Balance Sheet and the Affected Quarterly Periods should be restated to present all Class A ordinary shares subject to possible redemption as temporary equity and to recognize accretion from the initial book value to redemption value at the time of our Initial Public Offering and the Over-Allotment. As such, we are reporting these restatements to those periods in this quarterly report. The previously presented Post-IPO Balance Sheet and Affected Quarterly Periods should no longer be relied upon.
The change in the carrying value of the redeemable Class A ordinary shares in the Post-IPO Balance Sheet resulted in a reclassification of approximately 0.9 million Class A ordinary shares from permanent equity to temporary equity.
Proposed Business Combination
On June 17, 2021, we entered into an Agreement and Plan of Merger (the “merger agreement”) by and among Longleaf Merger Sub, Inc., a Delaware corporation (“Merger Sub 1”), Longleaf Merger Sub II, LLC (“Merger Sub 2”) and Local Bounti Corporation, a Delaware corporation (“Local Bounti”). Pursuant to the merger agreement, each issued and outstanding Class A and Class B ordinary share of us will be converted into one share of common stock, par value $0.0001 per share, of us (the “New Local Bounti Common Stock”); each issued and outstanding whole warrant to purchase Class A ordinary shares of us will automatically represent the right to purchase one share of New Local Bounti Common Stock at an exercise price of $11.50 per share on the terms and conditions set forth in our warrant agreement.
On the date of closing, subject to the conditions set forth in the merger agreement, Merger Sub 1 will merge with and into Local Bounti, which Local Bounti as the surviving company, followed immediately by the merger of the surviving company with and into Merger Sub 2, with Merger Sub 2 surviving the merger as a wholly-owned subsidiary of us and, after giving effect to the Mergers, Local Bounti will be a wholly-owned subsidiary of us.
Refer to the proxy statement/consent solicitation statement/prospectus, as filed in Form
S-4
with the Securities and Exchange Commission on October 7, 2021 for additional information.
Liquidity and Capital Resources
As of September 30, 2021, we had approximately $189,000 in its operating bank account and working capital of approximately $483,000.
Our liquidity needs to date have been satisfied through a contribution of $25,000 from Sponsor to cover for certain expenses in exchange for the issuance of the Founder Shares, the loan of approximately $112,000 from the Sponsor pursuant to a promissory note. We repaid the note in full on March 3, 2021. Subsequent from the consummation of the Initial Public Offering, our liquidity has been satisfied through the net proceeds from the consummation of the Private Placement not held in the Trust Account. In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of our officers and directors may, but are not obligated to, provide us Working Capital Loans. To date, there were no amounts outstanding under any Working Capital Loan.
Based on the foregoing, management believes that we will have sufficient working capital and borrowing capacity from our Sponsor or an affiliate of our Sponsor, or certain of our officers and directors to meet its needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, we will be using these funds for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.
Management continues to evaluate the impact of the
COVID-19
pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on our financial position, results of our operations and/or search for a target company, the specific impact is not readily determinable as of the date of the unaudited condensed consolidated financial statements. The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Results of Operations
Our entire activity since inception up to September 30, 2021 was in preparation for our formation and the Initial Public Offering. We will not be generating any operating revenues until the closing and completion of our initial Business Combination at the earliest.
For the three months ended September 30, 2021, we had net income of approximately $3.5 million, which consisted of approximately $4.2 million in change in the fair value of warrant liabilities and approximately $7,000 of net gain on the investments held in the Trust Account, partially offset by approximately $717,000 general and administrative expenses and approximately $46,000 in related party general and administrative fee.
For the period from January 8, 2021 (inception) through September 30, 2021, we had net loss of approximately $837,000, which consisted of approximately $1.3 million general and administrative expenses, approximately $84,000 in related party general and administrative fee and approximately $276,000 of offering costs associated with issuance of warrants, partially offset by approximately $812,000 in change in the fair value of warrant liabilities and approximately $14,000 of net gain on the investments held in the Trust Account.

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Contractual Obligations
Administrative Support Agreement
Commencing on the date that the Company’s securities were first listed on the New York Stock Exchange, the Company agreed to pay the Sponsor a total of $10,000 per month for office space, secretarial and administrative services provided to the Company. Upon completion of the initial Business Combination or the Company’s liquidation, the Company will cease paying these monthly fees. We incurred and paid approximately $30,000 and $58,000 in expenses in connection with such services for the three months ended September 30, 2021 and for the period from January 8, 2021 (inception) through September 30, 2021, respectively, as reflected in the accompanying unaudited condensed consolidated statements of operations. As of September 30, 2021, approximately $16,000 in expenses in connection with compliance services with related party was outstanding, as reflected in the accompanying unaudited condensed consolidated balance sheet.
Registration and Shareholder Rights
The holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any Class A ordinary shares issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans) were entitled to registration rights pursuant to a registration and shareholder rights agreement signed upon consummation of the Initial Public Offering. These holders were entitled to certain demand and “piggyback” registration rights. However, the registration and shareholder rights agreement provided that we will not permit any registration statement filed under the Securities Act to become effective until the termination of the applicable
lock-up
period for the securities to be registered. We will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
We granted the underwriter a
45-day
option from the final prospectus relating to the Initial Public Offering to purchase up to 3,600,000 additional Units to cover over-allotments, if any, at the Initial Public Offering price less the underwriting discounts and commissions. The underwriters partially exercised their over-allotment option on March 2, 2021 to purchase an additional 3,500,000 Over-Allotment Units. The remaining unexercised over- allotment option expired at the conclusion of the
45-day
option period.
The underwriter was entitled to an underwriting discount of $0.20 per unit, or $5.5 million in the aggregate, paid upon the closing of the Initial Public Offering. In addition, $0.35 per unit, or approximately $9.6 million in the aggregate will be payable to the underwriter for deferred underwriting commissions. The deferred fee will become payable to the underwriter from the amounts held in the Trust Account solely in the event that we complete a Business Combination, subject to the terms of the underwriting agreement.
Critical Accounting Policies
Class A ordinary shares subject to possible redemption
We account for its Class A ordinary shares subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Class A ordinary shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Conditionally redeemable Class A ordinary shares (including Class A ordinary shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, Class A ordinary shares are classified as shareholders’ equity. Our Class A ordinary shares feature certain redemption rights that are considered to be outside of our control and subject to the occurrence of uncertain future events. Accordingly, as of September 30, 2021, 27,500,000 Class A ordinary shares subject to possible redemption are presented as temporary equity, outside of the shareholders’ equity section of the Company’s condensed consolidated balance sheet.
Net Income (loss) per Ordinary Share
We comply with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” We have two classes of shares, which are referred to as Class A ordinary shares and Class B ordinary shares. Income and losses are shared pro rata between the two classes of shares. Net income (loss) per ordinary share is calculated by dividing the net income (loss) by the weighted average number of ordinary shares outstanding for the respective period.
The calculation of diluted net income (loss) per ordinary share does not consider the effect of the warrants underlying the Units sold in the Initial Public Offering and the Private Placement Warrants to purchase 10,833,333 Class A ordinary shares in calculation of diluted income (loss) per share, because their exercise is contingent upon future events and their inclusion would be anti-dilutive under the treasury stock method. As a result, diluted net income (loss) per share is the same as basic net income (loss) per share for the three months ended September 30, 2021 and for the period from January 8, 2021 (inception) through September 30, 2021. Accretion associated with the redeemable Class A ordinary shares is excluded from earnings per share as the redemption value approximates fair value.
Derivative Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC
815-40.
The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is
re-assessed
at the end of each reporting period.
We account for its warrants issued in connection with its Initial Public and Private Placement, as derivative warrant liabilities in accordance with ASC
815-40.
Accordingly, we recognize the warrant instruments as liabilities at fair value and adjusts the instruments to fair value at each reporting period. The liabilities are subject to
re-measurement
at each balance sheet date until exercised, and any change in fair value is recognized in our statements of operations. The fair value of warrants issued in connection with the Private Placement has been estimated using a Monte-Carlo simulation at each
 
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balance sheet date. The fair value of the warrants issued in connection with the Initial Public Offering was initially measured using a Monte-Carlo simulation model and subsequently been measured based on the market price at each measurement date when separately listed and traded. The determination of the fair value of the warrant liability may be subject to change as more current information becomes available and accordingly the actual results could differ significantly. Derivative warrant liabilities are classified as
non-current
liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU
No. 2020-06,
Debt-Debt with Conversion and Other Options (Subtopic
470-20)
and Derivatives and Hedging- Contracts in Entity’s Own Equity (Subtopic
815-40):
Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU
2020-06”),
which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas. We adopted ASU
2020-06
on January 1, 2021 using the modified retrospective method for transition. Adoption of the ASU did not impact our financial position, results of operations or cash flows.
Our management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying unaudited condensed consolidated financial statements.
Off-Balance
Sheet Arrangements
As of September 30, 2021, we did not have any
off-balance
sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for
non-emerging
growth companies. As a result, the financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of
non-emerging
growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our Initial Public Offering or until we are no longer an “emerging growth company,” whichever is earlier.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined by Rule
12b-2
of the Exchange Act and are not required to provide the information otherwise required under this item. As of September 30, 2021, we were not subject to any market or interest rate risk. The net proceeds of the Initial Public Offering, including amounts in the Trust Account, will be invested in U.S. government securities with a maturity of 185 days or less or in money market funds that meet certain conditions under Rule
2a-7
under the Investment Company Act of 1940, as amended, that invest only in direct U.S. government treasury obligations. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
We have not engaged in any hedging activities since our inception and we do not expect to engage in any hedging activities with respect to the market risk to which we are exposed.
Item 4. Controls and Procedures (As Revised)
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended September 30, 2021, as such term is defined in Rules
13a-15(e)
and
15d-15(e)
under the Exchange Act. Based on this evaluation our principal executive officer and principal financial and accounting officer have concluded that during the period covered by this report, our disclosure controls and procedures were not effective. Our internal control over financial reporting did not result in the proper accounting classification of complex financial instruments and presentation of earnings per share which, due to its material impact on our financial statements, we determined to be a material weakness.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended September 30, 2021 covered by this First
 
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Amendment on Form
10-Q/A
that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. The Company previously identified a material weakness in internal controls related to the accounting for warrants issued in connection with our initial public offering. As a result of the restatement described in this First Amendment on Form
10-Q/A,
management has identified a material weakness in internal controls related to complex financial instruments and earnings per share, as described above.
Remediation Plan
Management has implemented remediation steps to address the material weakness and to improve our internal control over financial reporting. Specifically, we expanded and improved our review process for complex securities, earnings per share and related accounting standards. We plan to further improve this process by enhancing access to accounting literature, identification of third-party professionals with whom to consult regarding complex accounting applications and consideration of additional staff with the requisite experience and training to supplement existing accounting professionals.
The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.
 
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PART
II-OTHER
INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
As of the date of this Quarterly Report on Form
10-Q/A,
there have been no material changes to the risk factors disclosed in our final prospectus filed with the SEC on March 9, 2021 and the Quarterly Report on Form
10-Q/A
for the fiscal quarter ended March 31, 2021, as filed with the SEC on June 10, 2021. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Simultaneously with the closing of the Initial Public Offering, the Company consummated the Private Placement of 5,333,333 Private Placement Warrants, at a price of $1.50 per Private Placement Warrant with the Sponsor, generating gross proceeds of $8.0 million.
In connection with the Initial Public Offering, our sponsor had agreed to loan us an aggregate of up to $250,000 pursuant to the Note. This loan is
non-interest
bearing and payable on the consummation of the Initial Public Offering.
Of the gross proceeds received from the Initial Public Offering and the full exercise of the option to purchase additional Shares, $275.0 million was placed in the Trust Account. The net proceeds of the Initial Public Offering and certain proceeds from the Private Placement are invested in U.S. government treasury bills with a maturity of 180 days or less and in money market funds meeting certain conditions under Rule
2a-7
under the Investment Company Act which invest only in direct U.S. government treasury obligations.
We paid a total of approximately $5.5 million in underwriting discounts and commissions related to the Initial Public Offering. In addition, the underwriters agreed to defer $9.6 million in underwriting discounts and commissions.
Item 3. Defaults upon Senior Securities
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits.
 
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Exhibit
Number
  
Description
31.1*    Certification of Chief Executive Officer (Principal Executive Officer) Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*    Certification of Chief Financial Officer (Principal Financial and Accounting Officer) Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*    Certification of Chief Executive Officer (Principal Executive Officer) Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*    Certification of Chief Financial Officer (Principal Financial and Accounting Officer) Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS    XBRL Instance Document
101.SCH    XBRL Taxonomy Extension Schema Document
101.CAL    XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF    XBRL Taxonomy Extension Definition Linkbase Document
101.LAB    XBRL Taxonomy Extension Label Linkbase Document
101.PRE    XBRL Taxonomy Extension Presentation Linkbase Document
104    Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
 
*
These certifications are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
Dated: December 8, 2021     LOCAL BOUNTI CORPORATION
    By:   /s/ Kathleen Valiasek
    Name:   Kathleen Valiasek
    Title:   Chief Financial Officer
 
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