Local Bounti Corporation Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

Fair Value Measurements

3 Months Ended

Mar. 31, 2021

Note 9 — Fair Value Measurements

The following table presents information about the Company’s assets that are measured at fair value on a recurring basis as of March 31, 2021 and indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value.


	Fair Value Measured as of March 31, 2021
	Level 1		Level 2		Level 3		Total
Assets
Investments held in Trust Account - U.S. Treasury Securities	$	275,000,000	$	—	$	—	$	275,000,000
Liabilities:
Warrant liabilities - public warrants		—		—		3,905,000		3,905,000
Warrant liabilities - private warrants		—		—		3,840,000		3,840,000

Transfers to/from Levels 1, 2, and 3 are recognized at the end of the reporting period. There were no transfers between levels of the hierarchy for the period from January 8, 2021 (inception) through March 31, 2021.

The Company utilizes a binomial Monte-Carlo simulation to estimate the fair value of the public warrants and private warrants at each reporting period, with changes in fair value recognized in the statement of operations. For the period from January 8, 2021 (inception) through ended March 31, 2021, the Company recognized a decrease in the fair value of warrant liabilities of approximately $1.4 million presented on the accompanying

condensed

statement of operations.

The change in the fair value of the derivative warrant liabilities for the period from January 8, 2021 (inception) through March 31, 2021 is summarized as follows:


Warrant liabilities at January 8, 2021	$	—
Issuance of Public and Private Warrants		9,153,333
Change in fair value of warrant liabilibites		(1,408,333	)

Warrant liabilities at March 31, 2021	$	7,745,000

The estimated fair value of the derivative warrant liabilities is 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.

The following table provides quantitative information regarding Level 3 fair value measurements inputs as their measurement dates:


	March 31, 2021			March 2, 2021
Exercise price	$	11.50		$	11.50
Stock Price	$	9.66		$	9.83
Term (in years)		5.50			5.58
Volatility		13.90	%		15.10	%
Risk-free interest rate		1.04	%		0.79	%
Dividend yield		—			—

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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