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

9 Months Ended

Sep. 30, 2023

The following table sets forth, by level within the fair value hierarchy, the accounting of the Company’s financial assets and liabilities at fair value on a recurring and nonrecurring basis according to the valuation techniques the Company uses to determine their fair value:


	September 30, 2023
	Level 1		Level 2		Level 3
	(in thousands)
Recurring fair value measurements
Assets:
Money market funds	$	18,231	$	—	$	—
Liabilities:
March 2023 Cargill Warrant Liability	$	—	$	—	$	8,780


	December 31, 2022
	Level 1		Level 2		Level 3
	(in thousands)
Recurring fair value measurements
Assets:
Money market funds	$	13,997	$	—	$	—

The fair value of the Company's money market funds is determined using quoted market prices in active markets for identical assets.

The fair value of the March 2023 Cargill Warrant Liability is determined using a Black-Scholes-Merton option pricing model. The following table presents changes in the Level 3 fair value measurement for the warrant liability on a recurring basis:


	September 30,
	2023
	(in thousands)
Balance as of March 28, 2023 (initial measurement)	$	25,697
Fair value measurement adjustments	(15,151)
Balance as of June 30, 2023	10,546
Fair value measurement adjustments	(1,766)
Balance as of September 30, 2023	$	8,780

The key inputs into the Black-Scholes-Merton option pricing model used to determine the fair value of the 2023 Cargill Warrant Liability were as follows at their measurement dates:


	September 30, 2023		March 28, 2023 (initial measurement)
Input
Share price	$	2.45	$	5.84
Risk-free interest rate	4.60%		3.63%
Volatility	128%		135%
Exercise price	$	13.00	$	13.00
Warrant life (years)	4.5		5.0
Dividend yield	—%		—%

As of September 30, 2023 and December 31, 2022, the carrying value of the Company's cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued expenses approximated their respective fair values due to their short-term maturities. There were no transfers of financial instruments between Level 1, Level 2, and Level 3 during the periods presented.

- 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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