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Local Bounti (LOCL) - 2021 Q2 - Quarterly Report
Local Bounti Local Bounti (US:LOCL)2021-08-16 20:19

PART I. FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and explanatory notes for Leo Holdings III Corp Item 1. Condensed Consolidated Financial Statements This section presents the unaudited condensed consolidated financial statements and comprehensive notes for Leo Holdings III Corp Unaudited Condensed Consolidated Balance Sheet This balance sheet provides a snapshot of the company's assets, liabilities, and shareholders' equity as of June 30, 2021 | Assets/Liabilities/Equity | June 30, 2021 | | :------------------------ | :------------ | | Assets: | | | Cash | $460,232 | | Prepaid expenses | $919,083 | | Total current assets | $1,379,315 | | Investments in Trust Account | $275,006,781 | | Total Assets | $276,386,096 | | Liabilities: | | | Accounts payable | $11,500 | | Accrued expenses | $122,328 | | Total current liabilities | $133,828 | | Deferred underwriting commissions | $9,625,000 | | Warrant liabilities | $12,566,666 | | Total Liabilities | $22,325,494 | | Shareholders' Equity: | | | Class A ordinary shares (subject to redemption) | $249,060,600 | | Class A ordinary shares | $259 | | Class B ordinary shares | $688 | | Additional paid-in capital | $9,305,166 | | Accumulated deficit | $(4,306,111) | | Total Shareholders' Equity | $5,000,002 | | Total Liabilities and Shareholders' Equity | $276,386,096 | Unaudited Condensed Consolidated Statements of Operations This statement details the company's operating expenses and net loss for the three months and period ended June 30, 2021 | Operating Expenses/Income (Loss) | Three Months Ended June 30, 2021 | Period from Jan 8, 2021 (Inception) through June 30, 2021 | | :------------------------------- | :------------------------------- | :-------------------------------------------------------- | | General and administrative expenses | $461,434 | $586,376 | | Administrative fee - related party | $27,884 | $37,561 | | Loss from operations | $(489,318) | $(623,937) | | Change in fair value of warrant liabilities | $(4,821,666) | $(3,413,333) | | Offering costs associated with issuance of warrants | — | $(275,622) | | Net gain from investments held in Trust Account | $6,781 | $6,781 | | Net loss | $(5,304,203) | $(4,306,111) | | Basic and diluted net income per share, Class A ordinary shares | $0.00 | $0.00 | | Basic and diluted net loss per share, Class B ordinary shares | $(0.77) | $(0.65) | Unaudited Condensed Consolidated Statements of Changes in Shareholders' Equity This statement outlines the changes in the company's shareholders' equity from inception through June 30, 2021 | Item | Class A Shares Amount | Class B Shares Amount | Additional Paid-in Capital | Retained Earnings (Accumulated Deficit) | Total Shareholders' Equity | | :------------------------------------------------ | :-------------------- | :-------------------- | :------------------------- | :-------------------------------------- | :------------------------- | | Balance - January 8, 2021 (inception) | $— | $— | $— | $— | $— | | Issuance of Class B ordinary shares to Sponsor | — | $690 | $24,310 | — | $25,000 | | Sale of units in initial public offering, less fair value of warrant liabilities for public warrants | $2,750 | — | $270,377,250 | — | $270,380,000 | | Offering costs | — | — | $(15,504,954) | — | $(15,504,954) | | Excess cash received over the fair value of the private warrants | — | — | $3,466,667 | — | $3,466,667 | | Class A ordinary shares subject to possible redemption | $(2,544) | — | $(254,362,256) | — | $(254,364,800) | | Net income | — | — | — | $998,092 | $998,092 | | Balance - March 31, 2021 (unaudited) | $206 | $690 | $4,001,017 | $998,092 | $5,000,005 | | Class B ordinary shares forfeited | — | $(2) | $2 | — | $— | | Class A ordinary shares subject to possible redemption | $53 | — | $5,304,147 | — | $5,304,200 | | Net loss | — | — | — | $(5,304,203) | $(5,304,203) | | Balance - June 30, 2021 (unaudited) | $259 | $688 | $9,305,166 | $(4,306,111) | $5,000,002 | Unaudited Condensed Consolidated Statement of Cash Flows This statement presents the cash inflows and outflows from operating, investing, and financing activities for the period ended June 30, 2021 | Cash Flow Activity | Period from Jan 8, 2021 (Inception) through June 30, 2021 | | :----------------- | :-------------------------------------------------------- | | Net loss | $(4,306,111) | | Adjustments to reconcile net loss to net cash used in operating activities: | | | Change in fair value of warrant liabilities | $3,413,333 | | Offering costs associated with issuance of warrants | $275,622 | | Net gain from investments held in Trust Account | $(6,781) | | Changes in operating assets and liabilities: | | | Prepaid expenses | $(894,083) | | Accounts payable | $11,500 | | Accrued expenses | $37,328 | | Net cash used in operating activities | $(1,469,192) | | Cash deposited in Trust Account | $(275,000,000) | | Net cash used in investing activities | $(275,000,000) | | 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 | $460,232 | | Cash - beginning of the period | $— | | Cash - end of the period | $460,232 | Notes to Unaudited Condensed Consolidated Financial Statements These notes provide detailed explanations and disclosures supporting the unaudited condensed consolidated financial statements Note 1 — Description of Organization and Business Operations This note describes the company's formation as a SPAC, its IPO, private placement, and proposed merger with Local Bounti Corporation - Leo Holdings III Corp was incorporated on January 8, 2021, as a Cayman Islands exempted company, formed as a blank check company (SPAC) to effect a business combination, primarily targeting the consumer sector21 - The company consummated its Initial Public Offering (IPO) on March 2, 2021, raising $275.0 million from 27,500,000 units at $10.00 per unit, incurring approximately $15.8 million in offering costs23 - Simultaneously with the IPO, a private placement of 5,333,333 warrants at $1.50 each generated $8.0 million, with proceeds from both the IPO and private placement totaling $275.0 million placed into a Trust Account2425 - On June 17, 2021, the Company entered into a merger agreement with Local Bounti Corporation, which will result in Local Bounti becoming a wholly-owned subsidiary of the Company after the merger3435 Note 2 — Basis of Presentation and Summary of Significant Accounting Policies This note outlines the financial statement presentation, adherence to GAAP, and key accounting policies, including warrant classification and temporary equity - The financial statements are presented in U.S. dollars, conform to GAAP, and include normal recurring adjustments; the company is an 'emerging growth company' and has elected to use the extended transition period for new accounting standards424546 - The company classifies its warrants as derivative warrant liabilities at fair value, subject to re-measurement each reporting period, with changes recognized in the statements of operations5456 - Class A ordinary shares subject to possible redemption are classified as temporary equity due to redemption rights outside the company's control58 Note 3 — Initial Public Offering This note details the company's IPO, including gross proceeds, unit structure, and associated offering costs - On March 2, 2021, the Company completed its IPO of 27,500,000 units at $10.00 per unit, generating $275.0 million gross proceeds, with each unit including one Class A ordinary share and one-fifth of one redeemable warrant67 - Offering costs for the IPO amounted to approximately $15.8 million, with $9.6 million allocated to deferred underwriting commissions67 Note 4 — Private Placement Warrants This note describes the private placement of warrants, including proceeds, exercise terms, and redemption characteristics - Concurrently with the IPO, the Company completed a private placement of 5,333,333 Private Placement Warrants to the Sponsor at $1.50 per warrant, raising $8.0 million68 - These warrants are exercisable for one Class A ordinary share at $11.50 per share, are non-redeemable, and exercisable on a cashless basis when held by the Sponsor or permitted transferees69 Note 5 — Related Party Transactions This note discloses transactions with related parties, including founder share issuance, loans, and administrative service fees - The Sponsor acquired 6,900,000 Class B ordinary shares (Founder Shares) for $25,000, with 25,000 Founder Shares forfeited due to partial exercise of the over-allotment option, resulting in 6,875,000 Class B shares outstanding71 - The Sponsor loaned the Company approximately $112,000, which was repaid in full on March 3, 2021, with potential future Working Capital Loans for business combination transaction costs7374 - The Company pays the Sponsor $10,000 per month for administrative services, incurring $28,000 for the three months ended June 30, 2021, and $38,000 from inception through June 30, 202176 Note 6 — Commitments and Contingencies This note outlines the company's registration rights, deferred underwriting commissions, and potential COVID-19 impacts - The Company has registration rights agreements with holders of Founder Shares, Private Placement Warrants, and potential Working Capital Loan warrants77 - The underwriter received a $5.5 million underwriting discount at IPO closing, with an additional $9.6 million in deferred underwriting commissions payable upon completion of a Business Combination79 - Management acknowledges the potential negative effect of the COVID-19 pandemic on the Company's financial position and search for a target, though the specific impact is not yet determinable80 Note 7 — Warrants This note details the terms, exercisability, and redemption conditions for both public and private warrants - Public Warrants become exercisable 30 days after a Business Combination or 12 months from IPO closing, provided a registration statement is effective, and expire five years after a Business Combination or earlier upon redemption/liquidation8283 - The Company may redeem Public Warrants at $0.01 per warrant if Class A ordinary shares trade at or above $18.00 for 20 trading days within a 30-day period86 - Private Placement Warrants are identical to Public Warrants but are non-redeemable and exercisable on a cashless basis as long as held by initial purchasers or permitted transferees84 Note 8 — Shareholders' Equity This note specifies the authorized and outstanding share capital, including Class A and Class B ordinary shares, and their conversion terms - The Company is authorized to issue 5,000,000 preference shares, 500,000,000 Class A ordinary shares, and 50,000,000 Class B ordinary shares919293 - As of June 30, 2021, there were 2,593,940 Class A ordinary shares outstanding (excluding 24,906,060 subject to redemption) and 6,875,000 Class B ordinary shares outstanding9293 - Class B ordinary shares will automatically convert into Class A ordinary shares upon the consummation of the initial Business Combination, at a ratio ensuring they represent 20% of the total outstanding shares post-IPO and equity-linked securities95 Note 9 — Fair Value Measurements This note explains the fair value measurement of investments and warrant liabilities, including valuation methodologies and recognized changes Fair Value Measured as of June 30, 2021 | Item | Level 1 | Level 2 | Level 3 | Total | | :------------------------------------ | :---------- | :------ | :---------- | :---------- | | Investments held in Trust Account – U.S. Treasury Securities | $275,006,781 | $— | $— | $275,006,781 | | Warrant liabilities – public warrants | $6,380,000 | $— | $— | $6,380,000 | | Warrant liabilities – private warrants | $— | $— | $6,186,666 | $6,186,666 | - The Company recognized a loss in the fair value of warrant liabilities of approximately $4.8 million for the three months ended June 30, 2021, and $3.4 million from inception through June 30, 202198 - The fair value of Private Warrants and Public Warrants (prior to active trading) is determined using a Monte-Carlo simulation model, relying on assumptions for stock-price volatility, expected life, risk-free interest rate, and dividend yield98100 Note 10 — Subsequent Events This note confirms that no subsequent events requiring adjustment or disclosure were identified up to the financial statement issuance date - The Company evaluated subsequent events up to the financial statement issuance date and identified no events requiring adjustment or disclosure102 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's analysis of the company's financial condition, operational results, liquidity, and critical accounting policies Overview This overview describes the company's formation as a SPAC, its IPO, private placement, and the requirement for a business combination - Leo Holdings III Corp is a blank check company formed on January 8, 2021, for the purpose of effecting a business combination, focusing on the consumer sector105 - The company completed its IPO on March 2, 2021, raising $275.0 million, and a private placement generating $8.0 million, with $275.0 million of these proceeds placed in a Trust Account106107108 - The company must complete a business combination with an aggregate fair market value of at least 80% of the assets held in the Trust Account109 Proposed Business Combination This section details the company's definitive merger agreement with Local Bounti Corporation - On June 17, 2021, the Company entered into a merger agreement with Local Bounti Corporation, which will result in Local Bounti becoming a wholly-owned subsidiary of the Company112113 Liquidity and Capital Resources This section assesses the company's cash position, working capital, and sources of liquidity to meet operational needs - As of June 30, 2021, the Company had approximately $460,000 in its operating bank account and working capital of approximately $1.2 million115 - Liquidity needs have been met through a $25,000 contribution from the Sponsor, a $112,000 loan from the Sponsor (repaid), and net proceeds from the Private Placement not held in the Trust Account116 - Management believes the Company has sufficient working capital and borrowing capacity to meet its needs through the earlier of a business combination or one year from the filing date117 Results of Operations This section analyzes the company's net loss for the reporting periods, highlighting key expense drivers - For the three months ended June 30, 2021, the Company reported a net loss of approximately $5.3 million121 - The net loss for the three months was primarily driven by $461,000 in general and administrative expenses, $28,000 in related party administrative fees, and a $4.8 million loss from the change in fair value of warrant liabilities121 - From inception (January 8, 2021) through June 30, 2021, the Company had a net loss of approximately $4.3 million, including $586,000 in G&A, $38,000 in administrative fees, $3.4 million loss from warrant fair value changes, and $276,000 in offering costs122 Contractual Obligations This section outlines the company's ongoing administrative service fees and deferred underwriting commissions - The Company pays the Sponsor $10,000 per month for administrative services, totaling $28,000 for the three months ended June 30, 2021, and $38,000 from inception through June 30, 2021123 - The underwriter is entitled to $9.6 million in deferred underwriting commissions, payable from the Trust Account upon completion of a Business Combination127 Critical Accounting Policies This section discusses the company's key accounting policies, particularly for redeemable shares and warrant liabilities - Class A ordinary shares subject to possible redemption are classified as temporary equity due to redemption rights outside the Company's control128 - Warrants issued are accounted for as derivative warrant liabilities at fair value, with changes recognized in the statements of operations132 Recent Accounting Pronouncements This section addresses the adoption of new accounting standards and their impact on the company's financial statements - The Company adopted ASU No. 2020-06 on January 1, 2021, which simplifies accounting for convertible instruments, with no material impact on its financial position, results of operations, or cash flows134 Off-Balance Sheet Arrangements This section confirms the absence of any off-balance sheet arrangements as of the reporting date - As of June 30, 2021, the Company did not have any off-balance sheet arrangements136 JOBS Act This section explains the company's status as an 'emerging growth company' and its election for delayed accounting standard adoption - The Company qualifies as an 'emerging growth company' under the JOBS Act and has elected to delay the adoption of new or revised accounting standards, which may affect comparability with other public companies137 Item 3. Quantitative and Qualitative Disclosures About Market Risk The Company, as a smaller reporting company, is not required to provide extensive market risk disclosures. It states that as of June 30, 2021, it was not subject to any material market or interest rate risk due to its investments in short-term U.S. government securities and money market funds - As of June 30, 2021, the Company was not subject to any material market or interest rate risk139 - Proceeds in the Trust Account are invested in U.S. government securities with maturities of 185 days or less or in money market funds, minimizing interest rate risk due to their short-term nature139 Item 4. Controls and Procedures This section discusses the evaluation of the company's disclosure controls and procedures, noting a previously reported material weakness related to the classification of warrants. Despite this, management believes the financial statements fairly present the company's financial condition. Remediation efforts are ongoing Evaluation of Disclosure Controls and Procedures This section reports on the evaluation of disclosure controls, noting a material weakness in warrant classification but affirming fair financial statement presentation - A material weakness in internal control over financial reporting was identified, related to the classification of public, private warrants, and units as equity instead of derivative liabilities142 - Despite the material weakness, management believes the condensed consolidated financial statements in this Form 10-Q fairly present the financial condition, results of operations, and cash flows143 Changes in Internal Control over Financial Reporting This section discusses the absence of material changes in internal control, while outlining ongoing remediation efforts for identified weaknesses - No changes in internal control over financial reporting materially affected or are reasonably likely to materially affect internal control during the most recent fiscal quarter144 - The Company enhanced processes to identify and apply accounting requirements for complex standards, including increased access to literature and communication, but remediation is not yet fully complete as of June 30, 2021144 PART II. OTHER INFORMATION This section provides additional information not covered in the financial statements, including legal proceedings, risk factors, and equity sales Item 1. Legal Proceedings The Company reported no legal proceedings as of the filing date - There are no legal proceedings to report146 Item 1A. Risk Factors The Company stated that there have been no material changes to the risk factors previously disclosed in its final prospectus and prior quarterly report - No material changes to the risk factors disclosed in the final prospectus (March 9, 2021) and the Quarterly Report on Form 10-Q (March 31, 2021) as of the date of this report147 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities This section details the unregistered sale of equity securities through a private placement of warrants and the use of proceeds from the registered Initial Public Offering, including the amounts placed in the Trust Account and underwriting commissions - The Company consummated a Private Placement of 5,333,333 Private Placement Warrants at $1.50 per warrant, generating gross proceeds of $8.0 million149 - $275.0 million from the Initial Public Offering was placed in the Trust Account, invested in U.S. government treasury bills and money market funds151 - The Company paid approximately $5.5 million in underwriting discounts and commissions, with an additional $9.6 million deferred152 Item 3. Defaults Upon Senior Securities The Company reported no defaults upon senior securities - There were no defaults upon senior securities153 Item 4. Mine Safety Disclosures This item is not applicable to the Company - Mine Safety Disclosures are not applicable to the Company154 Item 5. Other Information The Company reported no other information - There is no other information to report155 Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications and XBRL taxonomy documents Exhibits Filed | 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) |