☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
LEO HOLDINGS III CORP
Commission File Number | 001-40125 |
Delaware | 98-1584830 | ||||||||||||||
(State or
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Identification No.) |
400 W. Main St. | Hamilton, | MT | 59840 | |||||||||||
(Address |
(800) | 640-4016 |
(Registrant's Telephone Number, Including Area Code) |
(310) 800-1000
Registrant’s telephone number, including area code
Not Applicable
(Former name or former address, if changed since last report)
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
New York Stock Exchange |
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||||||||||||||||
Non-accelerated filer | ☒ | Smaller reporting company | ☒ | |||||||||||||||||
Emerging growth company | ☒ |
As
LEO HOLDINGS III CORP
Form 10-Q
For the Period From January 8, 2021 (inception) Through March 31, 2021
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LEO HOLDINGS III CORP
UNAUDITED CONDENSED BALANCE SHEET
March 31, 2021 | ||||
Assets: | ||||
Current assets: | ||||
Cash | $ | 804,139 | ||
Prepaid expenses | 1,063,070 | |||
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Total current assets | 1,867,209 | |||
Investments held in Trust Account | 275,000,000 | |||
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Total Assets | $ | 276,867,209 | ||
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Liabilities and Shareholders’ Equity: | ||||
Current liabilities: | ||||
Accounts payable | $ | 32,960 | ||
Accounts payable - related party | 9,677 | |||
Accrued expenses | 89,767 | |||
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Total current liabilities | 132,404 | |||
Deferred underwriting commissions | 9,625,000 | |||
Warrant liabilities | 7,745,000 | |||
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Total liabilities | 17,502,404 | |||
Commitments and Contingencies (Note 6) | ||||
Class A ordinary shares, $0.0001 par value; 25,436,480 shares subject to possible redemption at $10.00 per share | 254,364,800 | |||
Shareholders’ Equity: | ||||
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; 2,063,520 shares issued and outstanding (excluding 25,436,480 shares subject to possible redemption) | 206 | |||
Class B ordinary shares, $0.0001 par value; 50,000,000 shares authorized; 6,900,000 shares issued and outstanding (1) | 690 | |||
Additional paid-in capital | 4,001,017 | |||
Retained earnings | 998,092 | |||
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Total shareholders’ equity | 5,000,005 | |||
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Total Liabilities and Shareholders’ Equity | $ | 276,867,209 | ||
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The accompanying notes are an integral part of these unaudited condensed financial statements.
For the Period from January 8, 2021 (Inception) through March 31, 2021 | ||||
Operating expenses | ||||
General and administrative expenses | $ | 124,942 | ||
Administrative fee - related party | 9,677 | |||
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Loss from operations | (134,619 | ) | ||
Change in fair value of warrant liabilities | 1,408,333 | |||
Offering costs associated with issuance of warrants | (275,622 | ) | ||
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Net income | $ | 998,092 | ||
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Weighted average shares outstanding of Class A ordinary shares, basic and diluted | 27,500,000 | |||
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Basic and diluted net income per share, Class A ordinary shares | $ | 0.00 | ||
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Weighted average shares outstanding of Class B ordinary shares, basic and diluted | 6,316,265 | |||
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Basic and diluted net income per share, Class B ordinary shares | $ | 0.16 | ||
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The accompanying notes are an integral part of these unaudited condensed financial statements.
LEO HOLDINGS III CORP
UNAUDITED CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
For the period from January 8, 2021 (inception) through March 31, 2021
Ordinary Shares | Additional | Total | ||||||||||||||||||||||||||
Class A | Class B | Paid-in | Retained | Shareholders’ | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Earnings | Equity | ||||||||||||||||||||||
Balance - January 8, 2021 (inception) | — | $ | — | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
Issuance of Class B ordinary shares to Sponsor (1) | — | — | 6,900,000 | 690 | 24,310 | — | 25,000 | |||||||||||||||||||||
Sale of units in initial public offering, less fair value of warrant liabilities for public warrants | 27,500,000 | 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 | (25,436,480 | ) | (2,544 | ) | — | — | (254,362,256 | ) | — | (254,364,800 | ) | |||||||||||||||||
Net income | — | — | — | — | — | 998,092 | 998,092 | |||||||||||||||||||||
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Balance - March 31, 2021 (unaudited) | 2,063,520 | $ | 206 | 6,900,000 | $ | 690 | $ | 4,001,017 | $ | 998,092 | $ | 5,000,005 | ||||||||||||||||
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The accompanying notes are an integral part of these unaudited condensed financial statements.
LEO HOLDINGS III CORP
UNAUDITED CONDENSED STATEMENT OF CASH FLOWS
For the Period from January 8, 2021 (Inception) through March 31, 2021 | ||||
Cash Flows from Operating Activities: | ||||
Net income | $ | 998,092 | ||
Adjustments to reconcile net income to net cash used in operating activities: | ||||
Change in fair value of warrant liabilities | (1,408,333 | ) | ||
Offering costs associated with issuance of warrants | 275,622 | |||
Changes in operating assets and liabilities: | ||||
Prepaid expenses | (1,038,070 | ) | ||
Accounts payable | 32,960 | |||
Accounts payable - related party | 9,677 | |||
Accrued expenses | 4,767 | |||
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Net cash used in operating activities | (1,125,285 | ) | ||
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Cash Flows from Investing Activities: | ||||
Cash deposited in Trust Account | (275,000,000 | ) | ||
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Net cash used in investing activities | (275,000,000 | ) | ||
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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 | ) | ||
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Net cash provided by financing activities | 276,929,424 | |||
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Net increase in cash | 804,139 | |||
Cash - beginning of the period | — | |||
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Cash - end of the period | $ | 804,139 | ||
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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 | ||
Initial value of Class A ordinary shares subject to possible redemption | $ | 253,038,210 | ||
Change in value of Class A ordinary shares subject to possible redemption | $ | 1,326,590 |
The accompanying notes are an integral part of these unaudited condensed financial statements.
LEO HOLDINGS III CORP
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 1 — Description of Organization and Business Operations
Leo Holdings III Corp (the “Company”) was incorporated as a Cayman Islands exempted companyThis Quarterly Report 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 March 31, 2021, the Company had not commenced any operations. All activity for the period from January 8, 2021 (inception) through March 31, 2021 relates to the Company’s formationForm 10-Q and the initial public offering (the “Initial Public Offering”) described below and since the Initial Public Offering. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. 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 6).
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 4).
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 andinformation incorporated herein by reference contain 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,statements that constitute "forward-looking statements" within the meaning set forth inof Section 2(a)(16)27A of the Investment CompanySecurities Act of 1940,1933, as amended (the “Investment Company Act”"Securities 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.
LEO HOLDINGS III CORP
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
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 5). 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 4) 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.
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 1321E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)"Exchange Act"), and the "safe harbor" provisions of the United States Private Securities Litigation Reform Act of 1995. In some cases, you can identify these forward-looking statements by the use of terms such as "expect," "anticipate," "believe," "continue," "estimate," "intend," "may," "plan," "project," "seek," "should," "target," "will," or similar expressions, and variations or negatives of these words, but the absence of these words does not mean that a statement is not forward-looking. These forward-looking statements include, without limitation, statements regarding our ability to raise capital in the future, future financial performance, business strategies including future acquisitions, expansion plans including construction of future facilities, future results of operations, estimated revenues, losses, projected costs, prospects, plans and objectives of management. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to differ materially from results expressed or implied in this Quarterly Report on Form 10-Q. The following factors, among others, could cause actual results to differ materially from those described in these forward-looking statements:
assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements.
March 31, | December 31, | ||||||||||
2024 | 2023 | ||||||||||
Assets | |||||||||||
Current assets | |||||||||||
Cash and cash equivalents | $ | 8,242 | $ | 10,326 | |||||||
Restricted cash | 6,489 | 6,569 | |||||||||
Accounts receivable, net | 3,360 | 3,078 | |||||||||
Inventory, net | 4,960 | 4,210 | |||||||||
Prepaid expenses and other current assets | 2,620 | 2,805 | |||||||||
Total current assets | 25,671 | 26,988 | |||||||||
Property and equipment, net | 344,112 | 313,166 | |||||||||
Operating lease right-of-use assets | 155 | 172 | |||||||||
Intangible assets, net | 40,461 | 41,353 | |||||||||
Other assets | 3,008 | 73 | |||||||||
Total assets | $ | 413,407 | $ | 381,752 | |||||||
Liabilities and stockholders' equity | |||||||||||
Current liabilities | |||||||||||
Accounts payable | $ | 12,778 | $ | 14,640 | |||||||
Accrued liabilities | 19,314 | 17,204 | |||||||||
Financing obligation | 25 | — | |||||||||
Operating lease liabilities | 76 | 97 | |||||||||
Total current liabilities | 32,193 | 31,941 | |||||||||
Long-term debt, net of debt issuance costs | 329,775 | 277,985 | |||||||||
Financing obligation, noncurrent | 49,397 | 49,225 | |||||||||
Operating lease liabilities, noncurrent | 95 | 114 | |||||||||
Warrant liability | 11,394 | 7,214 | |||||||||
Total liabilities | 422,854 | 366,479 | |||||||||
Commitments and contingencies (Note 10) | |||||||||||
Stockholders' (deficit) equity | |||||||||||
Common stock, 0.0001 par value, 400,000,000 shares authorized, 8,437,542 and 8,311,229 issued and outstanding as of March 31, 2024 and December 31, 2023, respectively | 1 | 1 | |||||||||
Additional paid-in capital | 317,930 | 318,600 | |||||||||
Accumulated deficit | (327,378) | (303,328) | |||||||||
Total stockholders' (deficit) equity | (9,447) | 15,273 | |||||||||
Total liabilities and stockholders' equity | $ | 413,407 | $ | 381,752 |
Three Months Ended March 31, | |||||||||||
2024 | 2023 | ||||||||||
Sales | $ | 8,383 | $ | 6,698 | |||||||
Cost of goods sold(1)(2) | 7,597 | 6,419 | |||||||||
Gross profit | 786 | 279 | |||||||||
Operating expenses: | |||||||||||
Research and development(1)(2) | 3,487 | 3,576 | |||||||||
Selling, general and administrative(1)(2) | 7,598 | 15,981 | |||||||||
Total operating expenses | 11,085 | 19,557 | |||||||||
Loss from operations | (10,299) | (19,278) | |||||||||
Other income (expense): | |||||||||||
Change in fair value of warrant liability | (4,180) | — | |||||||||
Interest expense, net | (9,608) | (4,299) | |||||||||
Other income | 37 | 50 | |||||||||
Net loss | $ | (24,050) | $ | (23,527) | |||||||
Net loss applicable to common stockholders per basic common share: | |||||||||||
Basic and diluted | $ | (2.89) | $ | (3.04) | |||||||
Weighted average common shares outstanding: | |||||||||||
Basic and diluted | 8,325,944 | 7,727,866 |
Three Months Ended March 31, | |||||||||||
2024 | 2023 | ||||||||||
Cost of goods sold | $ | 21 | $ | 87 | |||||||
Research and development | 93 | 738 | |||||||||
Selling, general and administrative | (1,048) | 5,134 | |||||||||
Total stock-based compensation expense, net of amounts capitalized | $ | (934) | $ | 5,959 |
Three Months Ended March 31, | |||||||||||
2024 | 2023 | ||||||||||
Cost of goods sold | $ | 1,203 | $ | 936 | |||||||
Research and development | 797 | 566 | |||||||||
Selling, general and administrative | 1,228 | 1,956 | |||||||||
Total depreciation and amortization | $ | 3,228 | $ | 3,458 |
Common Stock | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders' (Deficit) Equity | ||||||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||||||||
Balance, December 31, 2023 | 8,311,237 | $ | 1 | $ | 318,600 | $ | (303,328) | $ | 15,273 | ||||||||||||||||||||
Vesting of restricted stock units, net | 126,305 | — | — | — | — | ||||||||||||||||||||||||
Stock-based compensation | — | — | (670) | — | (670) | ||||||||||||||||||||||||
Net loss | — | — | — | (24,050) | (24,050) | ||||||||||||||||||||||||
Balance, March 31, 2024 | 8,437,542 | $ | 1 | $ | 317,930 | $ | (327,378) | $ | (9,447) |
Common Stock | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders' Equity | ||||||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||||||||
Balance, December 31, 2022 | 7,976,980 | $ | 1 | $ | 300,645 | $ | (179,313) | $ | 121,333 | ||||||||||||||||||||
Vesting of restricted stock units, net | 41,502 | — | — | — | — | ||||||||||||||||||||||||
Stock-based compensation | — | — | 6,361 | — | 6,361 | ||||||||||||||||||||||||
Net loss | — | — | — | (23,527) | (23,527) | ||||||||||||||||||||||||
Balance, March 31, 2023 | 8,018,482 | $ | 1 | $ | 307,006 | $ | (202,840) | $ | 104,167 |
Three Months Ended March 31, | |||||||||||
2024 | 2023 | ||||||||||
Operating Activities: | |||||||||||
Net loss | $ | (24,050) | $ | (23,527) | |||||||
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||
Depreciation | 2,335 | 1,782 | |||||||||
Amortization of intangible assets | 893 | 1,676 | |||||||||
Stock-based compensation expense, net of amounts capitalized | (934) | 5,959 | |||||||||
Allowance for expected credit losses | — | 8 | |||||||||
Inventory allowance | 223 | 30 | |||||||||
Loss on disposal of property and equipment | 3 | — | |||||||||
Change in fair value of warrant liability | 4,180 | — | |||||||||
Paid-in-kind interest expense | 9,786 | — | |||||||||
Amortization of debt issuance costs | 2,100 | 981 | |||||||||
Interest expense on financing obligation | 198 | 50 | |||||||||
Changes in operating assets and liabilities: | |||||||||||
Accounts receivable | (281) | 76 | |||||||||
Inventory | (973) | (284) | |||||||||
Prepaid expenses and other current assets | 181 | 4 | |||||||||
Other assets | (2,936) | — | |||||||||
Accounts payable | 969 | 571 | |||||||||
Operating lease liabilities | (21) | — | |||||||||
Accrued liabilities | 1,244 | 4,844 | |||||||||
Net cash used in operating activities | (7,083) | (7,830) | |||||||||
Investing Activities: | |||||||||||
Purchases of property and equipment | (34,985) | (32,685) | |||||||||
Net cash used in investing activities | (34,985) | (32,685) | |||||||||
Financing Activities: | |||||||||||
Proceeds from issuance of debt | 39,904 | 23,045 | |||||||||
Net cash provided by financing activities | 39,904 | 23,045 | |||||||||
Net decrease in cash and cash equivalents and restricted cash | (2,164) | (17,470) | |||||||||
Cash and cash equivalents and restricted cash at beginning of period | 16,895 | 24,938 | |||||||||
Cash and cash equivalents and restricted cash at end of period | $ | 14,731 | $ | 7,468 |
If the Company is unable to complete a Business Combination within 24 monthscash, cash equivalents, and restricted cash 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, equalUnaudited Condensed Consolidated Balance Sheets 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 releasedUnaudited Condensed Consolidated Statements of Cash Flows
Cash and cash equivalents | $ | 8,242 | $ | 7,468 | |||||||
Restricted cash | 6,489 | — | |||||||||
Total cash and cash equivalents and restricted cash as shown in the Unaudited Condensed Consolidated Statements of Cash Flows | $ | 14,731 | $ | 7,468 |
Non-cash activities: | |||||||||||
Warrants issued in connection with debt modification | $ | — | $ | 25,697 | |||||||
Purchases of property and equipment included in accounts payable and accrued liabilities | $ | 1,965 | $ | 7,584 | |||||||
Interest capitalized to property and equipment, net | $ | 5,683 | $ | 2,079 | |||||||
Stock-based compensation capitalized to property and equipment, net | $ | 264 | $ | 577 | |||||||
Non-cash equity settlement on employee receivable | $ | — | $ | 175 |
LEO HOLDINGS III CORP
The Sponsor agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete a
Liquidity and Capital Resources
As of March 31, 2021, the Company had approximately $804,000 in its operating bank account and working capital of approximately $1.7 million.
The Company’s 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 the Note (as defined in Note 5), 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 31, 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 5). As of March 31, 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 — Basic of Presentation and process.
The accompanying unaudited condensed financial statements are presented and Principles of Consolidation
LEO HOLDINGS III CORP
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Emerging Growth Company
period. The Company is an “emerging growth company,” as defined in Section 2(a)Unaudited Condensed Consolidated Balance Sheet at December 31, 2023 was derived from the Annual Financial Statements but does not contain all 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 exemptionsfootnote disclosures from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
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. Annual Financial Statements.
Concentration of Credit Risk
Financial instruments that potentially subjectworking capital for the Company, to concentrations$5.0 million of credit risk consistwhich has been drawn down, and the remaining $10.0 million of cash accounts in a financial institution, which at times, may exceed the Federal Depository Insurance Coverage limit of $250,000. As of March 31, 2021,remains available to the Company has not experienced 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 March 31, 2021.
Investments Held2024. In addition, the Company expects to close in the Trust Account
The Company’s portfoliosecond quarter of investments held2024 on the four previously disclosed Conditional Commitment Letters ("CCLs") from a commercial finance lender that were executed in the Trust Account is comprisedsecond half of U.S. government securities, within2023. Together, the meaning set forth in Section 2(a)(16)CCLs will provide financing 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, or a combination thereof. The Company’s investments heldapproximately $228 million to fund its 2024 facility expansions, its new greenfield facility in the Trust Account are classified as trading securities. Trading securities are presented onMidwest, and to repay certain existing construction financing which will lower the balance sheets at fair value at the endCompany’s cost 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.capital. 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 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 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 financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. One of the more significant accounting estimates included in these financial statements is the determination of the fair value of the warrant liability. Accordingly, the actual results could differ from those estimates.
LEO HOLDINGS III CORP
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
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 include:
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 significantfunding expected pursuant to the fair value measurement.
As of March 31, 2021, the carrying values of cash, accounts payable and accrued expenses approximate their fair values dueCCLs is subject to the short-term nature of the instruments. The Company’s marketable securities held in Trust Account is comprised of investments in U.S. Treasury securities with an original maturity of 185 days or less and are recognized at fair value. The fair value of marketable securities held in Trust Account is determined using quoted prices in active markets.
Offering Costs
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 to shareholders’ equity upon the completion of definitive documents and the Initial Public Offering.
Class A Ordinary Shares Subject to Possible Redemption
satisfaction of customary closing conditions.
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 March 31, 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.
LEO HOLDINGS III CORP
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
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 statement. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially changeplanned operations over the next twelve months.
Net Income per Ordinary Share
Net income per ordinary share is computed by dividing net income applicable to shareholders by12 months from the weighted average numberissuance of ordinary shares outstanding during the period. these Unaudited Condensed Consolidated Financial Statements.
The Company’s unaudited condensed statement of operations includes a presentation of income per ordinary shares subject to redemption in a manner similarsecured through other debt or equity financings, if necessary.
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 ASC 480 and ASC 815-15. 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 accountswhen needed could have significant negative consequences for its 10,833,333 warrants issued in connection with its Initial Public Offering (5,500,000)business, financial condition and Private Placement (5,333,333), 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 statementresults of consolidated operations. The fair value of warrants issued by the Company in connection with the Public Offering and Private Placement have been estimated using Monte-Carlo simulations at each measurement date.
Recent
Pronouncements
March 31, | December 31, | ||||||||||
2024 | 2023 | ||||||||||
(in thousands) | |||||||||||
Raw materials | $ | 2,382 | $ | 1,843 | |||||||
Production | 3,480 | 3,010 | |||||||||
Finished goods | 74 | 110 | |||||||||
Inventory allowance | (976) | (753) | |||||||||
Total inventory, net | $ | 4,960 | $ | 4,210 |
March 31, | December 31, | ||||||||||
2024 | 2023 | ||||||||||
(in thousands) | |||||||||||
Machinery, equipment, and vehicles | $ | 56,194 | $ | 44,169 | |||||||
Land | 19,253 | 19,253 | |||||||||
Buildings and leasehold improvements | 86,044 | 66,754 | |||||||||
Construction-in-progress | 198,290 | 196,324 | |||||||||
Less: Accumulated depreciation | (15,669) | (13,334) | |||||||||
Property and equipment, net | $ | 344,112 | $ | 313,166 |
March 31, | December 31, | ||||||||||
2024 | 2023 | ||||||||||
(in thousands) | |||||||||||
Interest | $ | 11,866 | $ | 9,786 | |||||||
Construction | 3,860 | 2,995 | |||||||||
Payroll | 1,679 | 2,596 | |||||||||
Production | 731 | 690 | |||||||||
Professional services | 456 | 411 | |||||||||
Other | 722 | 726 | |||||||||
Total accrued liabilities | $ | 19,314 | $ | 17,204 |
March 31, | December 31, | ||||||||||
2024 | 2023 | ||||||||||
(in thousands) | |||||||||||
Senior Facility | $ | 317,565 | $ | 269,395 | |||||||
Subordinated Facility | 49,652 | 48,132 | |||||||||
Unamortized deferred financing costs | (37,442) | (39,542) | |||||||||
Total debt | $ | 329,775 | $ | 277,985 |
March 31, 2024 | ||||||||||||||||||||
Level 1 | Level 2 | Level 3 | ||||||||||||||||||
(in thousands) | ||||||||||||||||||||
Recurring fair value measurements | ||||||||||||||||||||
Assets: | ||||||||||||||||||||
Money market funds | $ | 14,607 | $ | — | $ | — | ||||||||||||||
Liabilities: | ||||||||||||||||||||
March 2023 Cargill Warrant Liability | $ | — | $ | — | $ | 11,394 |
December 31, 2023 | ||||||||||||||||||||
Level 1 | Level 2 | Level 3 | ||||||||||||||||||
(in thousands) | ||||||||||||||||||||
Recurring fair value measurements | ||||||||||||||||||||
Assets: | ||||||||||||||||||||
Money market funds | $ | 16,322 | $ | — | $ | — | ||||||||||||||
Liabilities: | ||||||||||||||||||||
March 2023 Cargill Warrant Liability | $ | — | $ | — | $ | 7,214 |
March 31, | |||||
2024 | |||||
(in thousands) | |||||
Balance as of December 31, 2023 | $ | 7,214 | |||
Fair value measurement adjustments through other income (expense) | 4,180 | ||||
Balance as of March 31, 2024 | $ | 11,394 |
March 31, 2024 | |||||
Input | |||||
Share price | $ | 2.91 | |||
Risk-free interest rate | 4.21% | ||||
Volatility | 128% | ||||
Exercise price | $ | 6.50 | |||
Warrant life (years) | 4.0 | ||||
Dividend yield | —% |
Number of Shares of Restricted Common Stock Awards | Average Grant-Date Fair Value | ||||||||||
Unvested and outstanding at December 31, 2023 | 135,701 | $ | 23.60 | ||||||||
Vested | (52,193) | $ | 25.73 | ||||||||
Unvested and outstanding at March 31, 2024 | 83,508 | $ | 22.27 |
Number of RSUs | Average Grant-Date Fair Value | ||||||||||
Unvested and outstanding at December 31, 2023 | 689,837 | $ | 47.43 | ||||||||
Forfeited | (72,472) | $ | 59.14 | ||||||||
Vested | (165,575) | $ | 59.94 | ||||||||
Unvested and outstanding at March 31, 2024 | 451,790 | $ | 40.94 |
Three Months Ended March 31, | |||||||||||
(in thousands, except share and per share data) | |||||||||||
2024 | 2023 | ||||||||||
Net loss | $ | (24,050) | $ | (23,527) | |||||||
Weighted average common shares outstanding, basic and diluted | 8,325,944 | 7,727,866 | |||||||||
Net loss per common share, basic and diluted | $ | (2.89) | $ | (3.04) |
Three Months Ended March 31, | |||||||||||
2024 | 2023 | ||||||||||
Restricted Stock | 108,553 | 249,565 | |||||||||
Warrants | 6,241,475 | 1,125,578 |
Recent Issued Accounting Standards
The Company’s management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statement.
LEO HOLDINGS III CORP
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 3 — 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 8).
Note 4 — Private Placement Warrants
Simultaneously with the closingflows 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 5 — 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.
LEO HOLDINGS III CORP
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
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 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 March 31, 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 approximately $10,000 in expenses in connection with such services for the period from January 8, 2021 (inception) through March 31, 2021, as reflected in the accompanying unaudited condensed statement of operations. As of March 31, 2021, approximately $10,000 in accounts payable with related party was outstanding, respectively, as reflected in the accompanying unaudited condensed balance sheet.
Note 6 — 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.
LEO HOLDINGS III CORP
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
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 financial statement. The financial statement does not include any adjustments that might result from the outcome of this uncertainty.
Note 7 — Derivative Warrant Liabilities
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.
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.
LEO HOLDINGS III CORP
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
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.
LEO HOLDINGS III CORP
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 8 — Shareholders’ Equity
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 March 31, 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 March 31, 2021, there were 2,063,520 shares of Class A ordinary shares outstanding, excluding 25,436,480 Class A ordinary shares subject to possible conversion that were classified as temporary equity in the accompanying balance sheet.
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. On January 18, 2021, the Company issued 5,750,000 Class B ordinary shares. On February 25, 2021, the Company effected a share capitalization, resulting in an aggregate of 6,900,000 Class B ordinary shares outstanding. Of the 6,900,000 Class B ordinary shares outstanding, up to 900,000 shares were subject to forfeiture to the Company by the Sponsor for no consideration to the extent that the underwriters’ over-allotment option was not exercised in full or in part, so that the initial shareholders would collectively own 20% of the Company’s issued and outstanding ordinary 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 expiration of the over-allotment option, 25,000 Class B ordinary shares were forfeited.
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 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.
LEO HOLDINGS III CORP
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
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 | ) | ||
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Warrant liabilities at March 31, 2021 | $ | 7,745,000 | ||
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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 | — | — |
Note 10 — Revision to Prior Period Financial Statements
During the course of preparing the quarterly report on Form 10-Q for the period from January 8, 2021 (inception) through March 31, 2021, the Company identified a misapplication of accounting guidance related to the Company’s warrants in the Company’s previously issued audited balance sheet dated March 2, 2021, filed on Form 8-K on March 9, 2021 (the “Post-IPO Balance Sheet”).
On April 12, 2021, the staff of the Securities and Exchange Commission (the “SEC Staff”) issued a public statement entitled “Staff Statement on Accounting and Reporting Considerations for Warrants issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Staff Statement”). In the SEC Staff Statement, the SEC Staff expressed its view that certain terms and conditions common to SPAC warrants may require the warrants to be classified as liabilities on the SPAC’s balance sheets as opposed to equity. Since their issuance on March 2, 2021, the Company’s warrants have been accounted for as equity within the Company’s previously reported balance sheet. After discussion and evaluation, including with the Company’s independent registered public accounting firm and the Company’s audit committee, management concluded that the warrants should be presented as liabilities with subsequent fair value remeasurement.
LEO HOLDINGS III CORP
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The warrants were reflected as a component of equity in the Post-IPO Balance Sheet as opposed to liabilities on the balance sheets, based on the Company’s application of FASB ASC Topic 815-40,Derivatives and Hedging, Contracts in Entity’s Own Equity (“ASC 815-40). The views expressed in the SEC Staff Statement were not consistent with the Company’s historical interpretation of the specific provisions within its warrant agreement and the Company’s application of ASC 815-40 to the warrant agreement. The Company reassessed its accounting for Warrants issued on March 2, 2021, in light of the SEC Staff’s published views. Based on this reassessment, management determined that the warrants should be classified as liabilities measured at fair value upon issuance, with subsequent changes in fair value reported in the Company’s Statement of Operations each reporting period.
The Company concluded that the misstatement was not material to the Post-IPO Balance Sheet and the misstatement had no material impact to any prior interim period. The effect of the revisions to the Post-IPO Balance Sheet is as follows:
As of March 2, 2021 | ||||||||||||
As Previously Reported | Restatement Adjustment | As Restated | ||||||||||
Balance Sheet | ||||||||||||
Total assets | $ | 277,526,800 | $ | — | $ | 277,526,800 | ||||||
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Liabilities and shareholders’ equity | ||||||||||||
Total current liabilities | $ | 710,251 | $ | — | $ | 710,251 | ||||||
Deferred underwriting commissions | 9,625,000 | — | 9,625,000 | |||||||||
Warrant liabilities | — | 9,153,333 | 9,153,333 | |||||||||
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Total liabilities | 10,335,251 | 9,153,333 | 19,488,584 | |||||||||
Class A ordinary shares, $0.001 par value; shares subject to possible redemption | 262,191,540 | (9,153,330 | ) | 253,038,210 | ||||||||
Shareholders’ equity | ||||||||||||
Preference shares - $0.0001 par value | — | — | — | |||||||||
Class A ordinary shares - $0.001 par value | 128 | 92 | 220 | |||||||||
Class B ordinary shares - $0.001 par value | 690 | — | 690 | |||||||||
Additional paid-in-capital | 5,052,066 | 275,527 | 5,327,593 | |||||||||
Accumulated deficit | (52,875 | ) | (275,622 | ) | (328,497 | ) | ||||||
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Total shareholders’ equity | 5,000,009 | (3 | ) | 5,000,006 | ||||||||
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Total liabilities and shareholders’ equity | $ | 277,526,800 | $ | — | $ | 277,526,800 | ||||||
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Note 11 — Subsequent Events
Management has evaluated subsequent events to determine if events or transactions occurring through the date the financial statements were issued required potential adjustment to or disclosure in the financial statements and has concluded that all such events that would require recognition or disclosure have been recognized or disclosed.
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References to the “Company,” “Leo Holdings III Corp,” “Leo Holdings III,” “our,” “us” or “we” refer to Leo Holdings III Corp. and analysis of the Company’s financial condition and results of operations should be read in conjunction with our Unaudited Condensed Consolidated Financial Statements, including the unaudited interim condensed financialNotes to those statements, and the notes thereto containedincluded 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 StatementsThis Quarterly Report on Form 10-Q, includes and the section entitled "Cautionary Note Regarding Forward-Looking Statements" in this Quarterly Report on Form 10-Q. As discussed in more detail in the section entitled "Cautionary Note Regarding Forward-Looking Statements," this discussion contains forward-looking statements, withinwhich involve risks and uncertainties. Our actual results may differ materially from the meaningresults discussed in the forward-looking statements.Section 27Afreshness. We also believe that local is the best kind of business, and we are committed to helping communities thrive for generations to come. We are committed to building empowered local teams.Securities Actproduction and distribution process. Controlling the environmental conditions in both the 'Stack' and 'Flow' components of 1933, as amended,our growing system helps to ensure healthy, nutritious, consistent, 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 statementsdelicious products that 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.OverviewWe 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”non-genetically modified organisms ("non-GMO"). We are an emerging growthuse 90% less water, 90% less land, and significantly less pesticides and herbicides than traditional outdoor agriculture operations.as such,its subsidiaries, which operated under the name Pete's. Through the Pete's Acquisition, we significantly increased our growing footprint to include two then-existing facilities in California and one under-construction facility in Georgia. The Georgia facility initially became operational in July 2022 and was significantly expanded in 2023. In 2024, we completed construction on two new facilities in Texas and Washington, bringing our total facility count to six. subject to alla leading provider with an approximate 80% share of the risks associatedCEA market within the Western U.S. – as well as packaged leafy greens and cress. We are currently expanding distribution of our Grab & Go Salad Kits and are set to expand our baby leaf portfolio by introducing several high-velocity offerings including spinach, arugula, 50/50 blend and power greens by the third quarter of 2024. In October 2022, we signed an offtake agreement with emerging growth companies.Our sponsorSam's Club for our leafy greens production initially starting at our greenhouse facility in Georgia. The offtake agreement provides for the sale of defined minimum quantities of leafy greens from certain facilities and runs through September 2028.Leo Investors III lp,approximately three times that of a Cayman Islands exempted limited partnership (the “Sponsor”)year ago, and this has continued through April of 2024. We recently initiated a scaled trial for a differentiated use of our Stack towers that have in a smaller trial demonstrated a further yield increase of at least 10% beyond what is currently being achieved. We expect to receive those results later in the second quarter of 2024. We are focused on satisfying existing demand from retailers across the southeastern U.S. In March of 2024, the Company delivered its first shipment of Spinach to customers from the Georgia facility.registration statement for our Initial Public Offering was declared effective on February 25, 2021. On March 2, 2021, we consummated our Initial Public Offeringlocations and degree of 27,500,000 units (the “Units” and, with respectexpansion will be announced at a future date, but construction is currently anticipated to the Class A ordinary shares includedbegin late in the Units being offered, the “Public Shares”), including 3,500,000 additional Unitssecond quarter of 2024, subject 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,CCLs from a commercial finance lender discussed in the Company consummatedLiquidity and Capital Resources section of this private placement (“Private Placement”)Midwest5,333,333 warrants (each,negotiations and are targeting construction to begin in the third quarter of 2024. This future facility is expected to comprise 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 closingsix-acre greenhouse that is supported by multiple Stack zones.Initial Public OfferingMontana Facility from a research and development focus to a commercially oriented focus growing produce for sale to customers is on track for mid-year completion. This transition will follow 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 selectedcapacity enhancements brought about 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 Combinationthe Georgia facility and (ii) the commencement of operations at both Texas and Washington and is expected to help drive us toward our goal of achieving positive adjusted EBITDA in early 2025.Trust AccountPacific Northwest and Southern United States, which will include approximately 700 doors of incremental distribution to our current footprint and include four unique flavor offerings: Artisanal Chicken Caesar, Memphis Inspired Chicken, Sweet Poppy Power, and Modern Greek Style.described below.we:
Our management has broad discretion
Three Months Ended March 31, | |||||||||||||||||||||||
2024 | 2023 | $ Change | % Change | ||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Sales | $ | 8,383 | $ | 6,698 | 1,685 | 25% | |||||||||||||||||
Cost of goods sold(1)(2) | 7,597 | 6,419 | 1,178 | 18% | |||||||||||||||||||
Gross profit | 786 | 279 | 507 | 182% | |||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||
Research and development(1)(2) | 3,487 | 3,576 | (89) | (2)% | |||||||||||||||||||
Selling, general and administrative(1)(2) | 7,598 | 15,981 | (8,383) | (52)% | |||||||||||||||||||
Total operating expenses | 11,085 | 19,557 | (8,472) | (43)% | |||||||||||||||||||
Loss from operations | (10,299) | (19,278) | 8,979 | (47)% | |||||||||||||||||||
Other income (expense): | |||||||||||||||||||||||
Change in fair value of warrant liability | (4,180) | — | (4,180) | 100% | |||||||||||||||||||
Interest expense, net | (9,608) | (4,299) | (5,309) | 123% | |||||||||||||||||||
Other income | 37 | 50 | (13) | (26)% | |||||||||||||||||||
Net loss | $ | (24,050) | $ | (23,527) | (523) | 2% |
Three Months Ended March 31, | |||||||||||||||||||||||
2024 | 2023 | $ Change | % Change | ||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Cost of goods sold | $ | 21 | $ | 87 | (66) | (76)% | |||||||||||||||||
Research and development | 93 | 738 | (645) | (87)% | |||||||||||||||||||
Selling, general and administrative | (1,048) | 5,134 | (6,182) | (120)% | |||||||||||||||||||
Total stock-based compensation expense, net of amounts capitalized | $ | (934) | $ | 5,959 | (6,893) | (116)% |
Three Months Ended March 31, | |||||||||||||||||||||||
2024 | 2023 | $ Change | % Change | ||||||||||||||||||||
Cost of goods sold | $ | 1,203 | $ | 936 | |||||||||||||||||||
Research and development | 797 | 566 | 231 | 41% | |||||||||||||||||||
Selling, general and administrative | 1,228 | 1,956 | (728) | (37)% | |||||||||||||||||||
Total depreciation and amortization | $ | 3,228 | $ | 3,458 | (230) | (7)% |
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 thenour Montana Facility from its current focus on deposit in the Trust Account, including interest earned on the funds held in the Trust Accountresearch 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.
Liquidity and Capital Resources
As of March 31, 2021, we had approximately $804,000 in its operating bank account and working capital of approximately $1.7 million.
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 pursuantdevelopment to a promissory note. We repaidcommercially oriented facility that is growing produce for sale to customers. This transition will follow the note in full on March 3, 2021. Subsequent fromcapacity enhancements brought about by 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 financial statements. The 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 March 31, 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.
ForGeorgia facility and the period from January 8, 2021 (inception) throughcommencement of operations at both the Texas and Washington facilities and is expected to help drive us toward our goal of achieving positive adjusted EBITDA in early 2025.
Contractual Obligations
Administrative Support Agreement
CommencingWarrant Liability
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 March 31, 2021, 25,436,480 Class A ordinary shares subject to possible redemption are presented as temporary equity, outside of the shareholders’ equity section of our balance sheet.
Net Income per Ordinary Share
Net income per ordinary share is computed by dividing net income applicable to shareholders by the weighted average number of ordinary shares outstanding during the period. We have not considered the effect of the warrants sold in the Initial Public Offering and the Private Placement to purchase an aggregate of 10,833,333 ordinary shares in the calculation of diluted income per share, because their inclusion would be anti-dilutive under the treasury stock method.
Our unaudited condensed statement of operations includes a presentation of income per ordinary shares subject to redemption in a manner similar to the two-class method of income (loss) per share. Net income per ordinary share, basic and diluted for Class A ordinary shares is calculated by dividing the investment income earned on the Trust Account of approximately $0 by the weighted average number of Class A ordinary shares outstanding for the period from January 8, 2021 (inception) through March 31, 2021. Net income per ordinary share, basic and diluted for Class B ordinary shares is calculated by dividing the net income of approximately $998,000 for the period from January 8, 2021 (inception) through March 31, 2021, less income attributable to Class A ordinary shares, by the weighted average number of Class B ordinary shares outstanding.
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 815-15. 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.
(in thousands) | |||||
Remainder of 2024 | $ | 37,550 | |||
2025 | 77,608 | ||||
2026 | 86,788 | ||||
2027 | 86,788 | ||||
2028 | 303,325 | ||||
Total | $ | 592,059 |
Financing Obligation | |||||
(in thousands) | |||||
Remainder of 2024 | $ | 3,689 | |||
2025 | 5,024 | ||||
2026 | 5,158 | ||||
2027 | 5,297 | ||||
2028 | 5,439 | ||||
Thereafter | 121,532 | ||||
Total financing obligation payments | 146,139 |
Three Months Ended March 31, | |||||||||||
2024 | 2023 | ||||||||||
(in thousands) | |||||||||||
Net cash used in operating activities | $ | (7,083) | $ | (7,830) | |||||||
Net cash used in investing activities | (34,985) | (32,685) | |||||||||
Net cash provided by financing activities | 39,904 | 23,045 | |||||||||
Cash and cash equivalents and restricted cash at beginning of period | 16,895 | 24,938 | |||||||||
Cash and cash equivalents and restricted cash at end of period | $ | 14,731 | $ | 7,468 |
Recent Adoptedno changes to the Company’s critical accounting policies and estimates from those described under "Critical Accounting Standards
In August 2020,Policies and Estimates" in the FASB issued ASU No. 2020-06, Debt—Debt with ConversionManagement's Discussion and Other Options (Subtopic 470-20)Analysis of Financial Condition 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 qualifyResults of Operations of our Annual Report on Form 10-K 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. Adoptionyear ended December 31, 2023.
Recent Issued Accounting Standards
Our management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying unaudited condensed financial statements.
Off-Balance Sheet Arrangements
As of March 31, 2021, we did not have any off-balance sheet arrangements as defined inUnaudited Condensed Consolidated Financial Statements, which is incorporated into this 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 provided2 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.
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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.
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On April 12, 2021,
After considering the SEC Statement, we concludedfact that there were misstatementsare resource constraints and that management is required to apply judgment in evaluating the March 2, 2021 audited closing balance sheet we filed with the SEC on Form 8-K on March 9, 2021. Based on the guidance in Accounting Standards Codification (“ASC”) 815-40, “Derivatives and Hedging — Contracts in Entity’s Own Equity”, we concluded that provisions in the warrant agreement preclude the warrants from being accounted for as componentsbenefits of equity. As the warrants meet the definition of a derivative as contemplated in ASC 815, the warrants should have been recorded as derivative liabilities on the balance sheet and measured at fair value at inception and at each reporting date in accordance with ASC 820, “Fair Value Measurement”, with changes in fair value recognized in the statement of operations in the period of change. Further, ASC 815 requires that upfront costs and fees relatedpossible controls relative to items for which the fair value option is elected (our warrant liabilities) should have been recognized as expense as incurred.
We have corrected the accounting for the warrants in this Quarterly Report on Form 10-Q. The effect of the revision on specific line items in our March 2, 2021 audited closing date balance sheet can be found in Note 10 of the Notes to unaudited condensed financial statements.
their costs.
In connection
reasonable assurance level.
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None.
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As of the date of this Quarterly Report on Form 10-Q, there
Our warrants are accounted for as liabilities and the changes in value of our warrants could have a material effect on our financial results.
On April 12, 2021, the SEC Staff issued the SEC Statement, wherein the SEC Staff expressed its view that certain terms and conditions common to SPAC warrants may require the warrants to be classified as liabilities on the SPAC’s balance sheet as opposed to being treated as equity. Specifically, the SEC Statement focused on certain settlement terms and provisions related to certain tender offers following a business combination, which terms are similar to those contained in the warrant agreement governing our warrants. As a result of the SEC Statement, we reevaluated the accounting treatment of our warrants, and pursuant to the guidance in ASC 815, Derivatives and Hedging, determined the warrants should be classified as derivative liabilities measured at fair value on our balance sheet, with any changes in fair value to be reported each period in earnings on our statement of operations.
As a result of the recurring fair value measurement, our financial statements may fluctuate quarterly, based on factors which are outside of our control. Due to the recurring fair value measurement, we expect that we will recognize non-cash gains or losses on our warrants each reporting period and that the amount of such gains or losses could be material.
We have identified a material weakness in our internal control over financial reporting. This material weakness could continue to adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Our management is likewise required, on a quarterly basis, to evaluate the effectiveness of our internal controls and to disclose any changes and material weaknesses identified through such evaluation in those internal controls. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
As described elsewhere in this Quarterly Report, we identified a material weakness in our internal control over financial reporting related to the accounting for the warrants we issued in connection with our Initial Public Offering and private placement in March 2021. As a result of this material weakness, our management concluded that our disclosure controls and procedures were not effective as of March 31, 2021. This material weakness resulted in a misstatement of our warrant liabilities, additional paid-in capital and accumulated deficit in our previously issued audited balance sheet dated March 2, 2021, filed on a CurrentAnnual Report on Form 8-K on March 9, 2021.
Any failure to maintain effective internal control over financial reporting or disclosure controls and procedures could adversely impact our ability to report our financial position and results from operations on a timely and accurate basis. If our financial statements are not accurate, investors may not have a complete understanding of our operations. Likewise, if our financial statements are not filed on a timely basis, we could be subject to sanctions or investigations by10-K for the stock exchange on which our ordinary shares are listed, the SEC or other regulatory authorities. In either case, there could result a material adverse effect on our business. Ineffective internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.
We can give no assurance that the measures we have taken and plan to take in the future will remediate the material weakness identified or that any additional material weaknesses or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls. In addition, even if we are successful in strengthening our controls and procedures, in the future those controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our financial statements.
We may face litigation and other risks as a result of the material weakness in our internal control over financial reporting.
We identified a material weakness in our internal controls over financial reporting. As a result of such material weakness, the change in accounting for our warrants, and other matters raised or that may in the future be raised by the SEC, we face potential for litigation or other disputes which may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from the material weaknesses in our internal control over financial reporting and the preparation of our financial statements. As of the date of this Quarterly Report, we have no knowledge of any such litigation or dispute. However, we can provide no assurance that such litigation or dispute will not arise in the future. Any such litigation or dispute, whether successful or not, could have a material adverse effect on our business, results of operations and financial condition or our ability to complete a business combination.
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Simultaneously with
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 payableCurrent Report on the consummation of the Initial Public Offering. As of March 31, 2021, the loan balance was $0.
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.
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None.
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Not applicable.
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None.
Exhibit Number |
Description | ||||||||
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3.3 | ||||||||
4.1 | ||||||||
10.1* | ||||||||
10.2* | ||||||||
31.1 | ||||||||
31.2 | ||||||||
32.1** | ||||||||
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32.2** | ||||||||
101 | The following financial statements from Local Bounti’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, formatted in Inline XBRL: (a) Unaudited Condensed Consolidated Statements of Cash Flows, (b) Unaudited Condensed Consolidated Statements of Operations, (c) Unaudited Condensed Consolidated Balance Sheets, and (d) Notes to Unaudited Condensed Consolidated Financial Statements, tagged as | |||||||
104 | Cover Page Interactive Data File - the cover page from this Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, formatted in |
SIGNATURE
_____________________
* | Schedules to this exhibit have been omitted in accordance with Regulation S-K Item 601(b)(2). The registrant hereby agrees to furnish supplementally a copy of any omitted schedule to the SEC upon its request. | |||||||
** | This document is being furnished in accordance with SEC Release Nos. 33‑8212 and 34‑47551. |
Local Bounti Corporation | ||||||||||
Name: Craig M. Hurlbert | ||||||||||
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Title: | Chief Executive Officer and Director | |||||||||
Date: May 10, 2024 | ||||||||||
(Principal Executive Officer) | ||||||||||
/s/ Kathleen Valiasek | ||||||||||
Name: Kathleen Valiasek | ||||||||||
Title: Chief Financial Officer | ||||||||||
Date: May 10, 2024 | ||||||||||
(Principal Financial and Accounting Officer) |