UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-Q
 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2023March 31, 2024
or
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                to                

Commission File Number001-40125
LOCL Logo.gifLB New Logo.gif
 
LOCAL BOUNTI CORPORATION
(Exact name of registrant as specified in its charter)
 

Delaware98-1584830
(State or Other Jurisdiction of Incorporation or Organization)(I.R.S Employer Identification No.)
400 W. Main St.Hamilton,MT59840
(Address of Principal Executive Offices, Including Zip Code)
(800)640-4016
        (Registrant's Telephone Number, Including Area Code)
 
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, par value of $0.0001 per share LOCL New York Stock Exchange
Warrants, thirteen exercisable for one share of Common Stock for $149.50 per shareLOCL WSNew York Stock Exchange
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No    
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer  Accelerated filer 
    
Non-accelerated filer  Smaller reporting company 
    
    Emerging growth company 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2of the Act).    Yes      No  

The number of outstanding shares of Local Bounti Corporation'sCorporation’s common stock was 8,227,9018,487,988 at AugustMay 7, 2023.2024.

 
 
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TABLE OF CONTENTS

Page
Part I – FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Condensed Consolidated Balance Sheets at June 30, 2023March 31, 2024 and December 31, 20222023
Unaudited Condensed Consolidated Statements of Operations for the three and six months ended June 30, March 31, 2024 and
2023
and 2022
Unaudited Condensed Consolidated Statements of Stockholders' Equity for the three and six months ended
June 30, 2023March 31, 2024 and 20222023
Unaudited Condensed Consolidated Statements of Cash Flows for the sixthree months ended June 30,March 31, 2024 and
2023 and 2022
Notes to Unaudited Condensed Consolidated Financial Statements
Part II – OTHER INFORMATION
SIGNATURES

























2



CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q and the information incorporated herein by reference contain certain statements that constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "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:

Local Bounti's ability to generate significant revenue;
the risk that Local Bounti may never achieve or sustain profitability;
the risk that Local Bounti could fail to effectively manage its future growth;
the risk that Local Bounti will fail to obtain additional necessary capital when needed on acceptable terms or at all;
Local Bounti's ability to complete the build out of its current or additional facilities in the future;
Local Bounti's reliance on third parties for construction, the risk of delays relating to material delivery and supply chains, and fluctuating material prices;
Local Bounti's ability to scale its operations and decrease its cost of goods sold over time;
the potential for damage to or problems with Local Bounti's facilities;
the impact that current or future acquisitions, investments or expansions of scope of existing relationships have on Local Bounti's business, financial condition, and results of operations;
unknown liabilities that may be assumed in acquisitions;
restrictions contained in Local Bounti's debt facility agreements with Cargill Financial Services International, Inc. ("Cargill Financial");
Local Bounti's ability to attract and retain qualified employees;
Local Bounti's ability to develop and maintain its brand or brands;
Local Bounti's ability to achieve its sustainability goals;
Local Bounti's ability to maintain its company culture or focus on its vision as it grows;
Local Bounti's ability to execute on its growth strategy;
the risk of diseases and pests destroying crops;
Local Bounti's ability to compete successfully in the highly competitive natural food market;markets in which it operates;
Local Bounti's ability to defend itself against intellectual property infringement claims;
Local Bounti's ability to effectively integrate the acquired operations of any CEA or similar operations which it acquires into its existing operations;
changes in consumer preferences, perception, and spending habits in the food industry;
the risk that seasonality may adversely impact Local Bounti's results of operations;
Local Bounti's ability to repay, refinance, restructure, or extend its indebtedness as it comes due;
Local Bounti's ability to comply with the continued listing requirements of the New York Stock Exchange ("NYSE");
Local Bounti's ability to implement any share repurchase program; and
the other factors discussed in Item 1A, "Risk Factors" of the Company's most recent Annual Report on Form 10-K and any updates to those factors set forth in Local Bounti's subsequent Quarterly Reports on Form 10-Q or Current Reports on Form 8-K.

The forward-looking statements contained herein are based on our current expectations and beliefs concerning future developments and their potential effects on our business. There can be no assurance that future developments affecting our business will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-lookingforward- looking statements. These risks and uncertainties include, but are not limited to, the "Risk Factors" identified in Part I, Item 1A of the Company's most recent Annual Report on Form 10-K. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all such risk factors, nor can we assess the effect of all such risk factors on our business or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking
3


statements. Should one or more of these risks or uncertainties materialize, or should any of the assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements.

In light of these risks and uncertainties, there is no assurance that the events or results suggested by the forward-looking statements will in fact occur, and you should not place undue reliance on these forward-looking statements. The forward-looking statements made by us in this Quarterly Report on Form 10-Q speak only as of the date made. Local Bounti undertakes no obligation, other than as required by applicable law, to update or revise its forward-looking statements, whether as a result of new information, subsequent events, anticipated or unanticipated circumstances or otherwise.

WEBSITE AND SOCIAL MEDIA DISCLOSURE
Investors and others should note that we routinely announce material information to investors and the marketplace using filings with the SEC, press releases, public conference calls, presentations, webcasts and our website. We also intend to use certain social media channels as a means of disclosing information about Local Bounti and our products to our customers, investors and the public (e.g., @Local Bounti and #LocalBounti on Twitter)X). The information posted on social media channels is not incorporated by reference in this Quarterly Report on Form 10-Q or in any other report or document we file with the SEC. While not all of the information that we post to our website or social media accounts is of a material nature, some information could be deemed to be material. Accordingly, we encourage investors, the media, and others to sign up for and regularly follow our social media accounts. Users may automatically receive email alerts and other information about Local Bounti by signing up for email alerts under the "Investors" section of our website at https://investors.localbounti.com.

ADDITIONAL INFORMATION
Unless the context indicates otherwise, references in this Quarterly Report on Form 10-Q to the "Company," "Local Bounti," "we," "us," "our" and similar terms refer to Local Bounti Corporation and its consolidated subsidiaries.
On June 15, 2023, we effected a 1-for-13 reverse stock split of our common stock. All common share and per share amounts throughout this Quarterly Report on Form 10-Q have been restated to reflect the 1-for-13 reverse stock split. See Note 2, Summary of Significant Accounting Policies, for additional detail.


4


 PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
LOCAL BOUNTI CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
June 30,December 31,
 20232022
Assets
Current assets
Cash and cash equivalents$33,946 $13,666 
Restricted cash6,480 11,272 
Accounts receivable, net2,793 2,691 
Inventory, net4,254 3,594 
Prepaid expenses and other current assets3,046 2,881 
Total current assets50,519 34,104 
Property and equipment, net230,849 157,844 
Operating lease right-of-use assets211 137 
Goodwill38,481 38,481 
Intangible assets, net43,921 47,273 
Other assets25 901 
Total assets$364,006 $278,740 

Liabilities and stockholders' equity
Current liabilities
Accounts payable$9,045 $13,757 
Accrued liabilities17,372 9,426 
Operating lease liabilities62 84 
Total current liabilities26,479 23,267 
Long-term debt, net of debt issuance costs179,403 119,814 
Financing obligation49,146 14,139 
Operating lease liabilities, noncurrent152 187 
Warrant liability10,546 — 
Total liabilities265,726 157,407 
Commitments and contingencies (Note 11)
Stockholders' equity
Common stock, $0.0001 par value, 400,000,000 shares authorized, 8,188,981 and 7,976,980 issued and outstanding as of June 30, 2023 and December 31, 2022, respectively(1)
10 
Additional paid-in capital311,795 300,636 
Accumulated deficit(213,516)(179,313)
Total stockholders' equity98,280 121,333 
Total liabilities and stockholders' equity$364,006 $278,740 

(1) Prior comparative period share amounts issued and outstanding have been retroactively adjusted to reflect the Reverse Stock Split (as defined below). See Note 2, Summary of Significant Accounting Policies, for additional detail.

March 31,December 31,
 20242023
Assets
Current assets
Cash and cash equivalents$8,242 $10,326 
Restricted cash6,489 6,569 
Accounts receivable, net3,360 3,078 
Inventory, net4,960 4,210 
Prepaid expenses and other current assets2,620 2,805 
Total current assets25,671 26,988 
Property and equipment, net344,112 313,166 
Operating lease right-of-use assets155 172 
Intangible assets, net40,461 41,353 
Other assets3,008 73 
Total assets$413,407 $381,752 

Liabilities and stockholders' equity
Current liabilities
Accounts payable$12,778 $14,640 
Accrued liabilities19,314 17,204 
Financing obligation25 — 
Operating lease liabilities76 97 
Total current liabilities32,193 31,941 
Long-term debt, net of debt issuance costs329,775 277,985 
Financing obligation, noncurrent49,397 49,225 
Operating lease liabilities, noncurrent95 114 
Warrant liability11,394 7,214 
Total liabilities422,854 366,479 
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
Additional paid-in capital317,930 318,600 
Accumulated deficit(327,378)(303,328)
Total stockholders' (deficit) equity(9,447)15,273 
Total liabilities and stockholders' equity$413,407 $381,752 

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements
 
5


LOCAL BOUNTI CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
 
Three Months Ended June 30,Six Months Ended June 30, Three Months Ended March 31,
2023202220232022 20242023
SalesSales$7,183 $6,269 $13,881 $6,551 
Cost of goods sold(2)(3)(4)
6,331 6,281 12,750 6,520 
Cost of goods sold(1)(2)
Gross profitGross profit852 (12)1,131 31 
Operating expenses:Operating expenses:
Research and development(3)(4)
3,526 3,073 7,102 5,914 
Selling, general and administrative(3)(4)
16,704 23,141 32,685 44,502 
Research and development(1)(2)
Research and development(1)(2)
Research and development(1)(2)
Selling, general and administrative(1)(2)
Total operating expensesTotal operating expenses20,230 26,214 39,787 50,416 
Loss from operationsLoss from operations(19,378)(26,226)(38,656)(50,385)
Other income (expense):Other income (expense):
Change in fair value of warrant liability
Change in fair value of warrant liability
Change in fair value of warrant liabilityChange in fair value of warrant liability15,151 — 15,151 — 
Interest expense, netInterest expense, net(6,472)(5,465)(10,771)(7,108)
Other incomeOther income23 28 73 58 
Net lossNet loss$(10,676)$(31,663)$(34,203)$(57,435)
Net loss applicable to common stockholders per basic common share:Net loss applicable to common stockholders per basic common share:
Basic and diluted(1)
$(1.35)$(4.65)$(4.37)$(8.80)
Net loss applicable to common stockholders per basic common share:
Net loss applicable to common stockholders per basic common share:
Basic and diluted
Basic and diluted
Basic and diluted
Weighted average common shares outstanding:Weighted average common shares outstanding:
Basic and diluted(1)
7,930,371 6,815,947 7,829,673 6,525,453 
Basic and diluted
Basic and diluted
Basic and diluted

(1)Prior comparative period share and per share amounts have been retroactively adjusted to reflect the Reverse Stock Split (as defined below). See Note 2, Summary of Significant Accounting Policies, for additional detail.

(2) Amounts include the impact for non-cash increase in cost of goods sold attributable to the fair value basis adjustment to inventory in connection with the Pete's Acquisition (as defined below) as follows:

 Three Months Ended June 30,Six Months Ended June 30,
 2023202220232022
Cost of goods sold$— $1,042 $— $1,042 
Total business combination fair value basis adjustment to inventory$— $1,042 $— $1,042 

(3) Amounts include stock-based compensation as follows:
Three Months Ended June 30,Six Months Ended June 30, Three Months Ended March 31,
2023202220232022 20242023
Cost of goods soldCost of goods sold$(11)$47 $76 $52 
Research and developmentResearch and development595 485 1,333 970 
Selling, general and administrativeSelling, general and administrative3,850 11,164 8,984 21,687 
Total stock-based compensation expense, net of amounts capitalizedTotal stock-based compensation expense, net of amounts capitalized$4,434 $11,696 $10,393 $22,709 

(4)(2) Amounts include depreciation and amortization as follows:
Three Months Ended June 30,Six Months Ended June 30, Three Months Ended March 31,
2023202220232022 20242023
Cost of goods soldCost of goods sold$894 $891 $1,830 $953 
Research and developmentResearch and development466 218 1,032 531 
Selling, general and administrativeSelling, general and administrative1,956 2,272 3,912 2,438 
Total depreciation and amortizationTotal depreciation and amortization$3,316 $3,381 $6,774 $3,922 
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements

6


LOCAL BOUNTI CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY
FOR THE THREE AND SIX MONTHS ENDED JUNE 30,MARCH 31, 2024 and 2023 and 2022
(in thousands, except share data)
Voting Common Stock(1)
Additional
Paid-in
Capital
Accumulated
Deficit
Total Stockholders'
Equity
Common Stock
Additional
Paid-in
Capital
Accumulated
Deficit
Total Stockholders'
(Deficit) Equity
SharesAmount
Balance, December 31, 20227,976,980 $10 $300,636 $(179,313)$121,333 
Balance, December 31, 2023
Balance, December 31, 2023
Balance, December 31, 2023
Vesting of restricted stock units, netVesting of restricted stock units, net41,502 — — — — 
Stock-based compensationStock-based compensation— — 6,361 — 6,361 
Net lossNet loss— — — (23,527)(23,527)
Balance, March 31, 20238,018,482 10 306,997 (202,840)104,167 
Vesting of restricted stock units, net171,051 — — — — 
Reclass of par value related to additional paid in capital— (9)— — 
Cash paid for fractional shares from the Reverse Stock Split(552)— (3)— (3)
Stock-based compensation— — 4,792 — 4,792 
Net loss— — — (10,676)(10,676)
Balance, June 30, 20238,188,981 $$311,795 $(213,516)$98,280 
Balance, March 31, 2024

Voting Common Stock(1)
Additional
Paid-in
Capital
Accumulated
Deficit
Total Stockholders'
Equity
Common Stock
Additional
Paid-in
Capital
Accumulated
Deficit
Total Stockholders'
Equity
SharesAmount
Balance, December 31, 20216,641,914 $$169,916 $(68,242)$101,683 
Balance, December 31, 2022
Balance, December 31, 2022
Balance, December 31, 2022
Vesting of restricted stock units, netVesting of restricted stock units, net9,298 — — — — 
Stock-based compensationStock-based compensation— — 11,042 — 11,042 
Net lossNet loss— — — (25,772)(25,772)
Balance, March 31, 20226,651,212 180,958 (94,014)$86,953 
Issuance of common stock for business combination434,969 — 50,948 — 50,948 
Issuance of common stock for debt modification148,687 — 17,416 — 17,416 
Issuance of common stock upon exercise of warrants— — — — 
Vesting of restricted stock units, net8,859 — — — — 
Stock-based compensation— — 11,783 — 11,783 
Net loss— — — (31,663)(31,663)
Balance, June 30, 20227,243,728 $$261,105 $(125,677)$135,437 
Balance, March 31, 2023

(1) Share amounts have been retroactively adjusted to reflect the Reverse Stock Split (as defined below). See Note 2, Summary of Significant Accounting Policies, for additional detail.
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements
 

7


LOCAL BOUNTI CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Six Months Ended
June 30,
Three Months Ended
March 31,
20232022 20242023
Operating Activities:Operating Activities:
Net lossNet loss$(34,203)$(57,435)
Adjustments to reconcile net loss to cash used in operating activities:
Net loss
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
DepreciationDepreciation3,423 1,826 
Amortization3,351 2,096 
Reduction of right-of-use assets from operating leases— — 
Depreciation
Depreciation
Amortization of intangible assets
Stock-based compensation expense, net of amounts capitalizedStock-based compensation expense, net of amounts capitalized10,393 22,709 
Bad debt allowance
Allowance for expected credit losses
Inventory allowanceInventory allowance315 378 
Loss on disposal of property and equipmentLoss on disposal of property and equipment152 280 
Gain related to change in fair value of warrant liability(15,151)— 
Paid-in-kind interest9,256 — 
Change in fair value of warrant liability
Paid-in-kind interest expense
Amortization of debt issuance costsAmortization of debt issuance costs3,085 1,858 
Interest on financing obligation232 282 
Interest expense on financing obligation
Changes in operating assets and liabilities:Changes in operating assets and liabilities:
Accounts receivable
Accounts receivable
Accounts receivableAccounts receivable(106)(92)
InventoryInventory(975)618 
Prepaid expenses and other current assetsPrepaid expenses and other current assets496 714 
Other assetsOther assets— 2,324 
Accounts payableAccounts payable842 2,318 
Operating lease liabilitiesOperating lease liabilities(135)
Accrued liabilitiesAccrued liabilities2,933 (4,545)
Net cash used in operating activitiesNet cash used in operating activities(16,088)(26,657)
Investing Activities:Investing Activities:
Investing Activities:
Investing Activities:
Purchases of property and equipmentPurchases of property and equipment(76,187)(25,467)
Asset acquisition— (25,813)
Business combination, net of cash acquired— (91,393)
Purchases of property and equipment
Purchases of property and equipment
Net cash used in investing activitiesNet cash used in investing activities(76,187)(142,673)
Financing Activities:Financing Activities:
Proceeds from financing obligation35,000 — 
Financing Activities:
Financing Activities:
Proceeds from issuance of debtProceeds from issuance of debt72,992 111,881 
Payment of debt issuance costs(226)(2,342)
Fractional shares paid in cash pursuant to Reverse Stock Split(3)— 
Proceeds from issuance of debt
Proceeds from issuance of debt
Net cash provided by financing activitiesNet cash provided by financing activities107,763 109,539 
Net increase in cash and cash equivalents and restricted cash15,488 (59,791)
Cash and cash equivalents and restricted cash and cash equivalents at beginning of period24,938 101,077 
Cash and cash equivalents and restricted cash and cash equivalents at end of period$40,426 $41,286 
Net decrease in cash and cash equivalents and restricted cash
Cash and cash equivalents and restricted cash at beginning of period
Cash and cash equivalents and restricted cash at end of period
















8



Reconciliation of cash, cash equivalents, and restricted cash from the Unaudited Condensed Consolidated Balance Sheets to the Unaudited Condensed Consolidated Statements of Cash Flows

Six Months Ended
June 30,
20232022
Cash and cash equivalents$33,946$22,703 
Restricted cash and cash equivalents6,48018,583
Total cash and cash equivalents and restricted cash and cash equivalents as shown in the Unaudited Condensed Consolidated Statements of Cash Flows$40,426$41,286
Cash and cash equivalents$8,242$7,468 
Restricted cash6,489
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:Non-cash activities:
Warrants issued in connection with debt modificationWarrants issued in connection with debt modification$25,697$
Warrants issued in connection with debt modification
Warrants issued in connection with debt modification$$25,697
Purchases of property and equipment included in accounts payable and accrued liabilitiesPurchases of property and equipment included in accounts payable and accrued liabilities$(543)$(10,039)Purchases of property and equipment included in accounts payable and accrued liabilities$1,965$7,584
Interest capitalized to property and equipment, netInterest capitalized to property and equipment, net$5,683$2,079
Stock-based compensation capitalized to property and equipment, netStock-based compensation capitalized to property and equipment, net$264$577
Non-cash equity settlement on employee receivableNon-cash equity settlement on employee receivable$176$17,416Non-cash equity settlement on employee receivable$$175
Stock-based compensation capitalized to property and equipment, net$936$
Non-cash financing obligation activity$$840
Right-of-use asset obtained in exchange for operating lease liability$$388
Reduction of right of use asset and associated lease liability due to lease cancellation$$(203)
Issuance of common stock related to modification of line of credit$$116

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements
9


LOCAL BOUNTI CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Business Description
Description of the Business

Local Bounti Corporation ("Local Bounti" or the "Company") was founded in August 2018 and is headquartered in Hamilton, Montana. The Company is a producer of sustainably grown living lettuce, herbs, and loose leaf lettuce. The Company is a controlled environment agriculture ("CEA") company that utilizes patent pendingpatented Stack & Flow TechnologyTM®, which is a hybrid of vertical and hydroponic greenhouse farming, to grow healthy food sustainably and affordably. Through the Company's CEA process, its goal is to produce environmentally sustainable products in a manner that will increase harvest efficiency, limit water usage, and reduce the carbon footprint of the production and distribution process. The Company's primary products include living butter lettuce as well as packaged salad and cress.
2. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
Management of Local Bounti is responsible for the Unaudited Condensed Consolidated Financial Statements included in this document, which have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The Unaudited Condensed Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in the statements herein.
The Unaudited Condensed Consolidated Financial Statements do not include all of the disclosures required by GAAP for annual financial statements and should be read in conjunction with the audited Consolidated Financial Statements of the Company for the year ended December 31, 20222023 (the "Annual Financial Statements") as filed with the SEC on March 31, 2023.SEC. In the opinion of the Company, the accompanying Unaudited Condensed Financial Statements contain all adjustments, consisting of only normal recurring adjustments, necessary to fairly present its financial position as of June 30, 2023,March 31, 2024, its results of operations for the three and six months ended June 30,March 31, 2024 and 2023, and 2022, its cash flows for the sixthree months ended June 30,March 31, 2024 and 2023, and 2022, and its stockholders' (deficit) equity for the three and six months ended June 30, 2023March 31, 2024 and 2022.2023. Results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year ending December 31, 20232024 or any future period. The Unaudited Condensed Consolidated Balance Sheet at December 31, 20222023 was derived from the Annual Financial Statements but does not contain all of the footnote disclosures from the Annual Financial Statements.

Liquidity

The Company has incurred losses and generated negative cash flows from operations since its inception. At June 30, 2023, weMarch 31, 2024, the Company had an accumulated deficit of $213.5$327.4 million and cash and cash equivalents and restricted cash of $33.9$14.7 million.

The Ninth Amendment to the credit facilities with Cargill Financial, as described in Note 6, Debt, allows for the payment in kind of the quarterly interest payments due and payable for the quarters ending June 30, 2024, September 30, 2024, and December 31, 2024. The Ninth Amendment also provides for up to $15.0 million in working capital for the Company, $5.0 million of which has been drawn down, and the remaining $10.0 million of which remains available to the Company as of March 31, 2024. In addition, the Company expects to close in the second quarter of 2024 on the four previously disclosed Conditional Commitment Letters ("CCLs") from a commercial finance lender that were executed in the second half of 2023. Together, the CCLs will provide financing of approximately $228 million to fund its 2024 facility expansions, its new greenfield facility in the Midwest, and to repay certain existing construction financing which will lower the Company’s cost of capital. The funding expected pursuant to the CCLs is subject to the completion of definitive documents and the satisfaction of customary closing conditions.

The Company believes that itsthe additional $10.0 million of working capital from Cargill Financial, the $228 million from a commercial finance lender, the Company's current cash position, cash generated from product sales, borrowing capacity, expectedand anticipated additional deferrals of future cash interest payment deferralsand principal payments under itsthe Company's credit facilities with Cargill Financial and its ability to secure financing, if necessary, will be adequate to fund the Company’s planned operations of the Company forover the next 12 months from the issuance of these Unaudited Condensed Consolidated Financial Statements.

The Company also believes additional cash can be secured through other debt or equity financings, if necessary.However, there can be no assurance that equity or debt financing will be available to the Company should it need it or, if available, that the terms will be satisfactory to the Company and not dilutive to existing shareholders. The
10


Company's failure to raise capital as and when needed could have significant negative consequences for ourits business, financial condition and results of consolidated operations.

Reverse Stock Split Stockholder Approval

On April 3, 2023, the Company's board of directors (the "Board") authorized an amendment to the Company's Certificate of Incorporation to, at the discretion of the Board, effect a reverse stock split of the shares of Local Bounti's common stock, at any time prior to June 30, 2024, at a ratio within a range of 1-for-2 to 1-for-25, with the exact ratio and effective time of the reverse stock split to be determined at the discretion of the Board without further approval or authorization of the Company's stockholders. The amendment was approved by stockholders at a special meeting of stockholders held on April 26, 2023. On June 4, 2023, the Board approved a 1-for-13 reverse stock split (the "Reverse Stock Split") of the Company's issued and outstanding shares of common stock, par value $0.0001 per share. Trading of the Company's common stock on the NYSE commenced on a split-adjusted basis on June 15, 2023.

As a result of the Reverse Stock Split, every 13 shares of common stock issued and outstanding were automatically reclassified into one new share of common stock without any action on the part of the holders. The Company paid cash in lieu of fractional shares resulting from the Reverse Stock Split. Proportionate adjustments were made to the exercise prices and the number of shares underlying the Company’s outstanding equity awards, as applicable, and warrants exercisable for shares of Common Stock, as well as to the number of shares issuable under the Company’s equity incentive plans and certain existing agreements.

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Accordingly, for the Company’s publicly traded warrants trading under the symbol "LOCL WS," every 13 warrants became exercisable for one share of common stock at an exercise price of $149.50 per share of common stock. The common stock issued pursuant to the Reverse Stock Split will remain fully paid and non-assessable. The Reverse Stock Split did not affect the number of authorized shares of common stock or the par value of the common stock.

All share and per share amounts presented herein with respect to common stock have been retroactively adjusted to reflect the Reverse Stock Split for all periods presented.

There have been no material changes or updates to the Company's significant accounting policies from those described in the Annual Financial Statements except for the updates noted below.

Derivatives

Equity instruments issued in connection with debt and other equity instruments are required to be evaluated for derivative liability accounting treatment in accordance with Accounting Standards Codification ("ASC") 815, Derivatives and Hedging. Unless certain exception criteria are met, the freestanding financial instrument must be recognized as a separate liability and subsequently measured on the balance sheet at fair value in accordance with ASC 820, Fair Value Measurement.

The Company has evaluated the terms and features of its debt and equity instruments and identified a freestanding equity instrument (the March 2023 Cargill Warrant, as defined below) issued in connection with the Sixth Amendment (as defined below) that did not meet the criteria necessary to qualify for the derivative scope exception. Due to certain provisions that could result in the issuance of additional shares upon settlement, the warrant instrument did not meet the fixed-for-fixed criteria necessary for the instrument to be classified and recorded within equity. As a result, the warrant is accounted for at fair value until settled through exercise or expiration and is classified as a derivative liability on the Unaudited Condensed Consolidated Balance Sheet at June 30, 2023. The initial $25.7 million fair value of the March 2023 Cargill Warrant was recorded as additional debt discount to the Facilities (as defined below) and a derivative liability in the "Warrant Liability" line item of the Unaudited Condensed Consolidated Balance Sheets. The change in fair value of the warrant will be remeasured each quarter until the instrument is settled or expires with changes in fair value recorded in "Change in fair value of warrant liability" in the Unaudited Condensed Consolidated Statements of Operations. The fair value of the warrant liability is determined using a Black-Scholes-Merton option pricing model. See Note 6, Debt, for more information.

Recently Adopted Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), which amends the guidance on reporting credit losses for assets held at amortized cost and available for sale debt securities. For assets held at amortized cost, the amendment eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost of the financial assets to present the net amount expected to be collected. The Company adopted this guidance on January 1, 2023 using the modified retrospective method. The adoption of this guidance did not have a material impact on the Company's Unaudited Condensed Consolidated Financial Statements.

Recently Issued Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for certain financial instruments with characteristics of liability and equity characteristics, including convertible instruments and contracts on an entity’s own equity. The standard reduces the number of models used to account for convertible instruments, removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, and requires the if-converted method for calculation of diluted earnings per share for all convertible instruments. The Company adopted this guidance on January 1, 2024. The adoption of this guidance did not have a material impact on the Company's Unaudited Condensed Consolidated Financial Statements.
.
Recently Issued Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), which requires disclosure of specific categories and disaggregation of information in the rate reconciliation table. The ASU also requires disclosure of disaggregated information related to income taxes paid, income or loss from continuing operations before income tax expense or benefit, and income tax expense or benefit from continuing operations. The standard is effective for the Company for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023.2024. Early adoption is permitted and the amendments should be applied on a prospective basis. The Company is currently evaluating the impact of this standard on its Unaudited Condensed Consolidated Financial Statements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280), which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The standard is effective for the Company for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact of this standard on its Unaudited Condensed Consolidated Financial Statements.


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3. Inventory
InventoryInventories consisted of the following:

June 30,December 31,
20232022
(in thousands)
Raw materials$2,552$2,018
Production(1)
2,5302,213
Finished goods(1)
17854
Inventory allowance(1,006)(691)
Total inventory, net$4,254$3,594
_____________________
(1) Approximately $1.8 million of inventory classified as finished goods at December 31, 2022 has been reclassified to the production category at June 30, 2023 to conform the historical presentation to the current period presentation, which reflects the nature and timing of the Company's current harvesting and cost accumulation processes.
March 31,December 31,
20242023
(in thousands)
Raw materials$2,382$1,843
Production3,4803,010
Finished goods74110
Inventory allowance(976)(753)
Total inventory, net$4,960$4,210

4. Property and Equipment

Property and equipment, net consisted of the following:
June 30,December 31,
20232022
(in thousands)
March 31,March 31,December 31,
202420242023
(in thousands)(in thousands)
Machinery, equipment, and vehiclesMachinery, equipment, and vehicles$42,028$32,774Machinery, equipment, and vehicles$56,194$44,169
LandLand19,25319,296Land19,25319,253
Buildings and leasehold improvementsBuildings and leasehold improvements62,76055,392Buildings and leasehold improvements86,04466,754
Construction-in-progressConstruction-in-progress116,60256,753Construction-in-progress198,290196,324
Less: Accumulated depreciationLess: Accumulated depreciation(9,794)(6,371)Less: Accumulated depreciation(15,669)(13,334)
Property and equipment, netProperty and equipment, net$230,849$157,844Property and equipment, net$344,112$313,166

Depreciation expense related to property and equipment was $1.6$2.3 million and $1.3 million for the three months ended June 30, 2023 and 2022, respectively, and $3.4 million and $1.8 million for the sixthree months ended June 30, 2023March 31, 2024 and 2022,2023, respectively.
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5. Accrued Liabilities
Accrued liabilities consisted of the following:

June 30,December 31,
20232022
(in thousands)
March 31,March 31,December 31,
202420242023
(in thousands)(in thousands)
InterestInterest$6,541 $4,372 
ConstructionConstruction5,800 825 
PayrollPayroll1,845 1,470 
ProductionProduction1,464 1,438 
Professional servicesProfessional services808 894 
OtherOther914 427 
Total accrued liabilitiesTotal accrued liabilities$17,372 $9,426 
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6. Debt
Debt consisted of the following:

June 30,December 31, March 31,December 31,
20232022
202420242023
(in thousands) (in thousands)
Senior FacilitySenior Facility$177,962$98,442Senior Facility$317,565$269,395
Subordinated FacilitySubordinated Facility45,22842,500Subordinated Facility49,65248,132
Unamortized deferred financing costsUnamortized deferred financing costs(43,787)(21,128)Unamortized deferred financing costs(37,442)(39,542)
Total debtTotal debt$179,403$119,814Total debt$329,775$277,985

Agreements with Cargill Financial

On September 3, 2021, Local Bounti Operating Company LLC and certain subsidiaries entered into (a) a credit agreement (the "Senior Credit Agreement") with Cargill Financial Services International, Inc. ("Cargill Financial") for an up to $150.0 million multiple-advance term loan (the "Senior Facility") and (b) a subordinated credit agreement (the "Subordinated Credit Agreement" and, together with the Senior Credit Agreement, the "Original Credit Agreements") with Cargill Financial for an up to $50.0 million multiple-advance term loan (the "Subordinated Facility" and, together with the Senior Facility, the "Facilities").

As previously disclosed in the Company's Annual Financial Statements, Local Bounti Operating Company LLC ("Local Bounti Operating"), the Company and certain subsidiaries entered into with Cargill Financial a First Amendment, a Second Amendment, and a Third Amendment, Fourth Amendment, a Fifth Amendment, a Sixth Amendment, and a Seventh Amendment to the Original Credit Agreement, dated asAgreements.

In the first quarter of September 3, 2021, and the Subordinated Credit Agreement, dated as of September 3, 2021 (the "Original Credit Agreements," and the facilities thereunder, the "Senior Facility" and the "Subordinated Facility," respectively and, collectively, the "Facilities") (which are further described in the Annual Financial Statements) in March 2022, August 2022, and December 2022, respectively. As further described below,2024, Local Bounti Operating Company LLC, the Company, and certain subsidiaries entered into with Cargill Financial a Fourth Amendment, a Fifthan Eighth Amendment and a SixthNinth Amendment to the Original Credit Agreements (as so amended, collectively referred to as the "Amended Credit Agreements")., as further described below.

FourthEighth Amendment to the Original Credit Agreements

On January 6, 2023, Local Bounti Operating,23, 2024, the Company, andalong with certain subsidiaries of the Company, entered into a Fourthan Eighth Amendment to the Original Credit Agreements (the "Fourth"Eighth Amendment") with Cargill Financial. The Fourth Amendment reduced the minimum liquidity covenant in each ofFinancial to further amend the Original Credit Agreements from $20.0 million to $11.0 million.

FifthAgreements. The Eighth Amendment to the Original Credit Agreements

On March 13, 2023, Local Bounti Operating, the Company and certain subsidiaries entered into a Fifth Amendment to the Original Credit Agreements (the "Fifth Amendment") with Cargill Financial. The Fifth Amendment (i) reduced the amount of cash required to be held in the debt service reserve account by approximately $11.0 million until April 2, 2024, at which time the amount of cash required to be held in the debt service reserve account will be an amount equal to the sum of interest and principal payments that would be required under the Amended Credit Agreements for two calendar quarters; (ii) allowedallows for the payment in kind of the quarterly interest paymentpayments due and payable for the quarter endedending March 31, 2023 and allowed for the payment in kind of the unused commitment fee payable for the quarter ended March 31, 2023 which amounted to $4.3 million; and (iii) reduced the minimum liquidity covenant in each of the Amended Credit Agreements from $11.0 million to $1.0 million. The aggregate amount of outstanding loans and undrawn commitments under the Amended Credit Agreements remained at $170.0 million (plus interest and fees paid in kind).2024.

SixthNinth Amendment to the Original Credit Agreements

On March 28, 2023, Local Bounti Operating,26, 2024, the Company, andalong with certain of its subsidiaries, entered into a SixthNinth Amendment to the Original Credit Agreements (the "Sixth"Ninth Amendment") with Cargill Financial.Financial to further amend the Original Credit Agreements. The SixthNinth Amendment among other things, (i) expanded the Facilities from $170.0 million to up to $280.0 million (plus, in each case, interest and fees paid in kind), including capital to fund construction at the Company’s facilities in Georgia, Texas, and Washington, subject to certain conditions and at Cargill Financial's discretion; (ii) allowedallows for the payment in kind of the quarterly interest paymentpayments due and payable for the quarterquarters ending June 30, 2023 which amounted2024, September 30, 2024, and December 31, 2024. The Ninth amendment also
12


provides for up to $5.0 million; and (iii) added a minimum production covenant based on a projected production forecast.In consideration$15.0 million in working capital for the improved flexibilityCompany, $5.0 million of which was drawn down, and the expanded sizeremaining $10.0 million of which remains available to the Facilities, Local Bounti issued Cargill Financial 5.4 million warrants with a per share exercise price of $13.00 per share (both number of warrants and per share exercise price adjusted forCompany.

General provisions to the Reverse Stock Split) and a 5-year term that expires on March 28, 2028 (the "March 2023 Cargill Warrant").Amended Credit Agreements

The Company evaluated the before and after cash flow changes resulting from the Fourth, Fifth and Sixth Amendments and concluded the change in cash flows underlying these cumulative amendments were not significantly different from the cash flows underlying the terms in the Original Credit Agreements; therefore, the Company accounted for these amendments as a modification rather than as an extinguishment. Consequently, the $25.7 million fair value of the March 2023 Cargill Warrant was recorded as an additional debt discount that will amortize to interest expense over the remaining term of the Amended Credit Agreements. Fees paid to non-lender third parties as a result of the modification have been expensed as incurred.

Subsequent to the Sixth Amendment, the interest rate on the Subordinated Facility is 12.5% per annum and the interest rate on the Senior Facility is equal to SOFR plus a margin (which varies between 7.5% to 8.5% depending on the Senior Facility net leverage ratio) per annum, with accrued interest paid quarterly in arrears on the first business
13


day of the subsequent quarter (and paid in cash beginning October 1, 2023) through the maturity date on September 3, 2028.

Principal payments under the Senior Facility are payable quarterly, beginning April 1, 2025, based on a 10-year straight line amortization schedule, with the remaining unpaid balance under both the Senior Facility and the Subordinated Facility due on the September 3, 2028 maturity date.

In accordance with the Original Credit Agreements, the Company is required to have a debt service reserve account which is shown as restricted cash and cash equivalents on the Unaudited Condensed Consolidated Balance Sheets. The Fifth Amendment and Sixth Amendment, taken together, reduced the minimum balance to maintain in the debt service reserve account to $0 through March 31, 2025. From and after April 1, 2025, the minimum balance to maintain in the debt service reserve account will be increased to two quarters of scheduled interest payments and two quarters of scheduled principal payments.

The Amended Credit Agreements also contain certain financial covenants that become measurable and effective beginning in the third quarter of 2025, including debt coverage, net leverage, and interest coverage ratios. Additional covenants and other provisions exist that may limit or affect the timing of the Company's ability, among other things, to undergo a merger or consolidation, sell certain assets, create liens, guarantee certain obligations of third parties, make certain investments or acquisitions, and declare dividends or make distributions. The Facilities are secured with a first-priority lien against substantially all of the assets of the Company and its subsidiaries, including their intellectual property. The Company was in compliance with all applicable covenants as of June 30, 2023.
7. Financing Obligation

On April 27, 2023, Hollandia Real Estate, LLC ("Hollandia"), a wholly-owned subsidiary ofMarch 31, 2024 other than the Company, and STORE Master Funding XXXI, LLC ("STORE") consummated a $35 million multi-site sale and leaseback transaction relating to the Carpinteria Facility and the Oxnard Facility (collectively, the "Hollandia Facilities").

In connection with the sale and leaseback transaction, Hollandia and STORE entered into a Master Lease Agreement (the "STORE Lease"), dated April 27, 2023 (the "Effective Date"). Pursuant to the STORE Lease, Hollandia will lease the Hollandia Facilities from STORE, subject to the terms and conditions of the STORE Lease.

The STORE Lease provides for an initial term of 25 years, commencing on the Effective Date and expiring on April 30, 2048 ("Initial Term"). Hollandia has four options to extend the Initial Term for separate renewal terms of five years each (together with the Initial Term, the "Lease Term"). Subject to adjustment asfinancial covenant set forth in the STORE Lease, the combined annual minimum rent payable to STORE during the first yearSection 6.8(g) of the Lease Term is an amount equal to $3.2 million (the "Base Annual Rent") with payments made monthly, subject to annual rent increases of three percent (3%) of the Base Annual Rent.

The STORE Lease contains certain representations, warranties, covenants, obligations, conditions, indemnification provisions and termination provisions customaryAmended Credit Agreements, for sale and leaseback transactions.

As part of the STORE Lease, Hollandia delivered to STORE a letter of credit in an amount equal to $6.5 million as security for the full and faithful performance by Hollandia of the terms, provisions, covenants and conditions of the STORE Lease. In the event of default under the Lease, STORE shall have the right to draw on the letter of credit to satisfy any monetary obligations under the STORE Lease. The letter of credit shall be released after five (5) years, contingent on achieving certain financial metrics as specified in the STORE Lease. The $6.5 million for the letter of credit is included in "Restricted cash" on the Unaudited Condensed Consolidated Balance Sheets.

The Company accounted for the STORE Lease as a financing transaction in accordance with ASC 842, Leases, as the STORE Lease was determined to be a finance lease. The presence of a finance lease indicates that control of the Hollandia Facilities has not transferred to STORE and, as such, the transaction was deemed a failed sale and leaseback and the proceeds from the sale and leaseback transaction are therefore accounted for as a financing obligation. The leased assets remain on the Unaudited Condensed Consolidated Balance Sheets and will continue to be depreciated over their original estimated useful lives, and the contractual lease payments will be allocated between interest expense (as imputed interest) and repayment of the $35 million financing obligation through April 30, 2048, which is the end of the 25-year lease term and when the Company expects control of the leased assets to transfer to STORE. The Company utilizedobtained a rate of 11.06% to calculate imputed interest and recognized $0.7 million of interest expensepermanent waiver from Cargill Financial for the three months ended June 30, 2023 related to the STORE Lease.

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The following table summarizes future financing obligation payments for the Initial Term by fiscal year through April 30, 2048, when control of the leased assets is expected to transfer to STORE:

STORE Lease Financing Obligation
(in thousands)
Remainder of 2023$1,619
20243,302
20253,401
20263,503
20273,608
Thereafter102,063
Total financing obligation payments117,496
Unamortized deferred financing costs(224)
Amount representing interest(97,622)
Net financing obligation and asset at end of term15,240
Total financing obligation$34,890
March 31, 2024.
8.7. Fair Value Measurements
The following table sets forth, by level within the fair value hierarchy, the accounting of the Company’s financial assets and liabilities at fair value on a recurring and nonrecurring basis according to the valuation techniques the Company uses to determine their fair value:

June 30, 2023 March 31, 2024
Level 1Level 2Level 3 Level 1Level 2Level 3
(in thousands)
(in thousands)(in thousands)
Recurring fair value measurementsRecurring fair value measurements   Recurring fair value measurements 
Assets:Assets:   Assets: 
Money market funds Money market funds$40,135$$ Money market funds$14,607$$
Liabilities:Liabilities:
March 2023 Cargill Warrant liability$$$10,546
Liabilities:
Liabilities:
March 2023 Cargill Warrant Liability
March 2023 Cargill Warrant Liability
March 2023 Cargill Warrant Liability$$$11,394
December 31, 2022
Level 1Level 2Level 3
(in thousands)
December 31, 2023December 31, 2023
Level 1Level 1Level 2Level 3
(in thousands)(in thousands)
Recurring fair value measurementsRecurring fair value measurements
Assets:Assets:
Assets:
Assets:
Money market funds Money market funds$13,997$$
Money market funds
Money market funds$16,322$$
Liabilities:
Liabilities:
Liabilities:
March 2023 Cargill Warrant Liability
March 2023 Cargill Warrant Liability
March 2023 Cargill Warrant Liability$$$7,214

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

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The fair value of the March 2023 Cargill Warrant Liability is determined using a Black-Scholes model. The following table presents changes in the Level 3 fair value measurement for the warrant liability on a recurring basis:
June 30,
2023
(in thousands)
Balance as of March 28, 2023 (initial measurement)$25,697
Fair value measurement adjustments(15,151)
Balance as of June 30, 2023$10,546

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

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

June 30,
2023
March 28, 2023
(initial measurement)
March 31,
2024
March 31,
2024
InputInput
Share price
Share price
Share priceShare price$2.72$5.84$2.91
Risk-free interest rateRisk-free interest rate4.13%3.63%Risk-free interest rate4.21%
VolatilityVolatility132%135%Volatility128%
Exercise priceExercise price$13.00$13.00Exercise price$6.50
Warrant life4.75.0
Warrant life (years)Warrant life (years)4.0
Dividend yieldDividend yield—%—%Dividend yield—%

As of June 30, 2023March 31, 2024 and December 31, 2022,2023, the carrying value of the Company's cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued expenses approximated their respective fair values due to their short-term maturities. Therefore, no unrealized gains or losses were recorded during the periods presented. There were no transfers of financial instruments between Level 1, Level 2, and Level 3 during the periods presented.
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Common Stock Purchase Warrant Amendment


On January 23, 2024, the Company entered into an Amendment to Common Stock Purchase Warrant (the "Warrant Amendment") with Cargill Financial to amend that certain Common Stock Purchase Warrant, dated March 28, 2023, issued by the Company to Cargill Financial (the "Original Warrant" and as amended, the "Warrant") to amend the exercise price under Section 2(b) thereunder from $13.00 to $6.50 per share of common stock. The impact of the reduced exercise price was included in the mark-to-market net change in fair value of the warrant liability during the three months ended March 31, 2024.
9.
The Original Warrant was issued by the Company to Cargill Financial to purchase up to 5,353,846 shares of common stock. Pursuant to the Warrant Amendment, the Warrant entitles Cargill Financial to purchase 5,353,846 shares of common stock at an exercise price of $6.50 per share.
8. Stock-Based Compensation

Restricted Common Stock Awards

A summary of the restricted common stock awards ("RSAs") for the sixthree months ended June 30, 2023March 31, 2024 is as follows:

Number of Shares of Restricted Common Stock Awards1


Average Grant-Date Fair Value1
Unvested at December 31, 2022288,804$24.05
Forfeited(19,175)$36.27
Vested(46,937)$34.19
Unvested at June 30, 2023222,692$20.83
_____________________
(1) Share and per share amounts have been retroactively adjusted to reflect the Reverse Stock Split. See Note 2, Summary of Significant Accounting Policies, for additional detail.
Number of Shares of Restricted Common Stock Awards

Average Grant-Date Fair Value
Unvested and outstanding at December 31, 2023135,701$23.60
Vested(52,193)$25.73
Unvested and outstanding at March 31, 202483,508$22.27

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Total expense of RSAs for the three and six months ended June 30, 2023 was $0.3 million and $0.5$0.2 million respectively. Total expense of RSAs for the three and six months ended June 30, 2022 was $0.9 millionMarch 31, 2024 and $1.8 million,2023, respectively. As of June 30, 2023,March 31, 2024, the total compensation cost related to unvested RSAs not yet recognized is $1.3$0.4 million. Unvested RSA expense not yet recognized is expected to be recognized over a weighted average period of 1.290.8 years.

Restricted Stock Units

A summary of the restricted stock units ("RSUs") activity for the sixthree months ended June 30, 2023March 31, 2024 is as follows:

Number of RSUs(1)
Average Grant-Date Fair Value(1)
Unvested at December 31, 2022727,484$81.51
Granted574,379$10.58
Forfeited(12,763)$69.50
Vested(342,900)$64.85
Vested, unsettled85,813$73.01
Unvested and outstanding at June 30, 20231,032,013$47.00
_____________________
(1) Share and per share amounts have been retroactively adjusted to reflect the Reverse Stock Split. See Note 2, Summary of Significant Accounting Policies, for additional detail.
Number of RSUsAverage Grant-Date Fair Value
Unvested and outstanding at December 31, 2023689,837$47.43
Forfeited(72,472)$59.14
Vested(165,575)$59.94
Unvested and outstanding at March 31, 2024451,790$40.94

Total (benefit) expense of RSUs, net of amounts capitalized, was $(1.2) million and $5.8 million for the three and six months ended June 30,March 31, 2024 and 2023, was $4.1 million and $9.9 million, respectively. Total expense of RSUs for the three and six months ended June 30, 2022 was $10.9 million and $21.0 million, respectively. As of June 30, 2023,March 31, 2024, the total compensation cost related to unvested RSUs not yet recognized is $19.9$4.8 million. Unvested RSU expense not yet recognized is expected to be recognized over a weighted average period of 2.11.9 years.

10.9. Net Loss Per Share

Net loss per share is computed by dividing net loss by the weighted average number of common stockshares outstanding during the period. In computing net loss per share, the Company's unvested restricted common stock and warrants are not considered participating securities. Diluted loss per common share is the same as basic loss per common share for the three and six months ended June 30,March 31, 2024 and 2023 and 2022 because the effects of potentially dilutive items were anti-dilutive given the Company's net loss. Diluted net loss per common share represents an adjustment to basic net loss per share attributable to common stockholders giving effect to all potential common shares that were dilutive and outstanding during the period.

17


The following table sets forth the computation of the Company's net loss per share attributable to common stockholders:
 
 Three Months Ended June 30,Six Months Ended June 30,
(in thousands, except share and per share data)(1)
 2023202220232022
Net loss$(10,676)$(31,663)$(34,203)$(57,435)
Weighted average common stock outstanding, basic and diluted7,930,371 6,815,947 7,829,673 6,525,453 
Net loss per common share, basic and diluted$(1.35)$(4.65)$(4.37)$(8.80)
_____________________

(1) Share and per share amounts have been retroactively adjusted to reflect the Reverse Stock Split. See Note 2, Summary of Significant Accounting Policies, for additional detail.
 Three Months Ended March 31,
(in thousands, except share and per share data)
 20242023
Net loss$(24,050)$(23,527)
Weighted average common shares outstanding, basic and diluted8,325,944 7,727,866 
Net loss per common share, basic and diluted$(2.89)$(3.04)

The following table discloses the weighted-average shares outstanding of securities that could potentially dilute basic net earningsloss per share in the future that were not included in the computation of diluted net loss per share as the impact would be anti-dilutive:
 Three Months Ended June 30,Six Months Ended June 30,
 2023202220232022
Restricted Stock(1)
222,692 405,444 236,053 410,218 
Warrants(2)
6,241,475 887,638 3,697,659 887,639 
 Three Months Ended March 31,
 20242023
Restricted Stock108,553 249,565 
Warrants6,241,475 1,125,578 
_____________________
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(1) Share amounts have been retroactively adjusted to reflect the Reverse Stock Split. See Note 2, Summary of Significant Accounting Policies, for additional detail.

(2) Subsequent to the Reverse Stock Split, every 13 common shares under warrants becomes exercisable for one share of common stock at an exercise price of $149.50 per share of common stock, which is reflected in the table above. See Note 2, Summary of Significant Accounting Policies, for additional detail.

11.10. Commitments and Contingencies
Legal Matters

The Company has and may become party to various legal proceedings and other claims that arise in the ordinary course of business. The Company records a liability when it believes that it is probable that a loss will be incurred, and the amount of loss or range of loss can be reasonably estimated. Management is currently not aware of any matters that it expects will have a material adverse effect on the financial position, results of operations, or cash flows of the Company.

18
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our Unaudited Condensed Consolidated Financial Statements, including the Notes to those statements, included elsewhere in this Quarterly Report on Form 10-Q, 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, which involve risks and uncertainties. Our actual results may differ materially from the results discussed in the forward-looking statements.
Our Mission and Vision
Our mission is to bring our farm to your kitchen. Our vision is to deliver the freshest, locally grown produce over the fewest food miles. We believe that happy plants make happy taste buds and we are committed to reimagining the standards of freshness. 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. Together, we believe we are capable of extraordinary things.

Company Overview

Local Bounti is a controlled environment agriculture ("CEA") company that produces sustainably grown produce, focused today on living and loose leaf lettuce. Founded in 2018, and headquartered in Hamilton, Montana, Local Bounti utilizes its patent pendingpatented Stack & Flow Technology™Technology® to grow healthy food sustainably and affordably. Our proprietary process is a hybrid, utilizing vertical farming in early plant growth, followed by greenhouse farming for final grow out. We designed our Stack & Flow Technology™Technology® to give our products exactly what they need at every step of their growth cycle. Our goal is to grow in an environmentally sustainable manner that not only increases harvest efficiency and enhances unit economics, but also limits water usage and reduces the carbon footprint of the production and distribution process. Controlling the environmental conditions in both the 'Stack' and 'Flow' components of our growing system helps to ensure healthy, nutritious, consistent, and delicious products that are non-genetically modified organisms ("non-GMO"). We use 90% less water, 90% less land, and significantly less pesticides and herbicides than traditional outdoor agriculture operations.

Our first facility in Hamilton, Montana (the "Montana Facility") commenced construction in 2019 and reached full commercial operation by the second half of 2020. In 2021, we successfully completed the expansion of our Montana Facility, more than doubling our production capacity. Immediately after expansion, this facility was dedicated equally to commercial production and research and development that focused on new products, technology and system design. Today, the majority of theThe Montana Facility is dedicated tocurrently used for commercial production, butas well as research-and-development activities. In 2022, we continue to utilize dedicated space for research and development to improve our existing and future facilities.

On April 4, 2022, Local Bounti acquired California-based complementary greenhouse farming company Hollandia Produce Group, Inc. and its subsidiaries, (the "Pete's Acquisition"), which operateoperated under the name Pete's ("Pete's").Pete's. Through the Pete's Acquisition, we significantly increased our growing footprint now operating three additional greenhouse growingto include two then-existing facilities including two in California and one under-construction facility in Georgia. The Georgia the latter of whichfacility initially became operational in July 2022. 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.

We now have distributiondistribute our products to approximatelyover 13,000 retail locations across 35 U.S. states, and Canadian provinces, primarily through direct relationships with blue-chip retail customers, including Albertsons, Sam's Club, Kroger, Target, Walmart, Whole Foods, and AmazonFresh. Today, ourOur primary product isproducts include living butter lettuce – for which we are a leading provider with an approximate 80% share of the CEA market within the Western U.S.

– as well as packaged leafy greens and cress. We derive the majorityare currently expanding distribution of our revenue from the sale of produce. We growGrab & Go Salad Kits and package freshare set to expand our baby leaf portfolio by introducing several high-velocity offerings including spinach, arugula, 50/50 blend and power greens that are sold into existing markets and channels such as food retailers and food service distributors from our Montana and two California facilities, and beginning inby the third quarter of 2024. In October 2022, we signed an offtake agreement with Sam'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 our Georgia facility.certain facilities and runs through September 2028.

We offer sales incentives to our customers, including temporary price reductions. We anticipate that these promotional activities could impact sales and that changes in such activities could impact period-over-period results. Sales may also vary from period to period depending on the purchase orders we receive, the volume and mix of products sold and the channels through which our products are sold. In response to realized cost inflation, we have implemented contractually allowable price increases which we anticipate to benefit from in 2023 and beyond.

We intend to continue to increase our production capacity and expand our reach to new markets, new geographies, and new customers through either the building of new facilities, the expansion of existing facilities, or through the acquisition of existing greenhouse facilities, which we would planevaluate to update with our Stack & Flow Technology™Technology®. We conduct an ongoing build-versus-buy analysis whenever we decide to build a new facility or acquire an existing facility. We also expectcontinue to expandexplore expanding our product offeringofferings to new varieties of fresh greens, herbs, berries, and other produce. Additionally, we evaluate commercial opportunities as part of these expansion efforts on an ongoing basis.

In October 2022, we signed a five-year offtake agreement with Sam's Club for our leafy greens production starting at our greenhouse facility in Georgia. We continue to advance our expansion of the Georgia facility and further
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enhance capacity with the addition of our Stack & Flow TechnologyTM to meet pent up demand for Local Bounti packaged salads to current customers and open the opportunity to earn new business in that region.

Commercial Facility Expansion Update

Byron, Georgia Facility ProgressContinues to Operate at Heightened Levels of Production

ConstructionIn the first quarter, we increased production by an additional 50% compared to December 2023, which equates to production that is approximately three times that of the greenhouse Phase 1-B was completeda 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 earlya 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 and construction of Phase 1-C is well underway with approximately 90%2024. We are focused on satisfying existing demand from retailers across the southeastern U.S. In March of that building now enclosed. The remaining Stack zones that comprise Phase 1-C are expected2024, the Company delivered its first shipment of Spinach to be completed early incustomers from the fourth quarter 2023. Our Stack & Flow TechnologyTM is expected to add approximately 40% of incremental revenue generating capacity to the finished Georgia facility, which will be comprised of six acres of greenhouses and multiple climate, water, and spectral controlled Stack zones.facility.

Commissioning at Mount Pleasant, Texas Facility ProgressTX and Pasco, WA Facilities; Shipping First Product to Customers

WithWe commenced operations and test seeding at both the greenhouse structure largely complete,Texas and Washington facilities in late January of 2024 and we will begin installation of the Stack zonesare shipping our first product to customers in the third quarter of 2023.second quarter. The addition of this newTexas facility in northeast Texas is expected to fortifyfortifies our distribution in markets across Texas, Oklahoma, Louisiana, Mississippi, Arkansas, Kansas, and Missouri. Further,The Washington facility bolsters our distribution capabilities in the facilityPacific Northwest to serve our expanding retail customer base.

Capacity Expansion at Existing Facilities in 2024

Plans remain underway to build additional capacity across our network of facilities enabled with our Stack & Flow Technology®. The locations and degree of expansion will be announced at a future date, but construction is currently anticipated to begin late in the second quarter of 2024, subject to the closing of the CCLs from a commercial finance lender discussed in the Liquidity and Capital Resources section of this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. The planned expansions are designed to provide additional capacity and allow for our growing product assortment to meet existing demand from our direct relationships with blue-chip retailers and distributors throughout the region.distributors. The facility is still expectedplanned expansions are designed to commence operations in the fourth quarter of 2023.provide additional capacity and allow for our growing product assortment to meet existing demand from our direct relationships with blue-chip retailers and distributors.

Pasco, WashingtonNext Facility Progressto be Opened in the Midwest

We are planning our next high-tech Stack & Flow facility to be built in the Midwestern U.S. The region is in close proximity to existing customers' distribution networks and will support growing retail demand for our products, improve service to retail partners throughout the Midwest, and also provide improved access to the Northeast. We expect to name the future location following completion of negotiations and are targeting construction to begin in the third quarter of 2024. This future facility is expected to comprise a six-acre greenhouse that is supported by multiple Stack zones.

Hamilton, Montana Facility to Transition from R&D to Commercial Production

The structural steel worktransition of the Montana 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 greenhousescapacity enhancements brought about by the completion of the Georgia facility and the commencement of operations at both Texas and Washington and is now complete and glass installation is progressing. When complete,expected to help drive us toward our goal of achieving positive adjusted EBITDA in early 2025.

Product Development & Distribution

Starting in the facility will be comprisedsecond quarter of three acres2024, we expect to expand distribution of greenhouse that will be supported by multiple Stack zones. The facility will help bolster our distribution capabilities inGrab-and-Go Salad Kits to customers throughout the Pacific Northwest and is still expectedSouthern United States, which will include approximately 700 doors of incremental distribution to commence operations early in the first quarter 2024, which reflects our decision to stagger construction to accommodate the commissioning of our Texas facility in the fourth quarter of 2023.current footprint and include four unique flavor offerings: Artisanal Chicken Caesar, Memphis Inspired Chicken, Sweet Poppy Power, and Modern Greek Style.

Recent DevelopmentsWe are set to expand our baby leaf assortment in the third quarter of 2024 by introducing several high-velocity offerings including Arugula, Baby Spinach & Spring Mix Blend, and Power Greens. While we are still scaling up these products, we are pleased to have delivered our first shipment of Spinach to customers in March of 2024 out of the Georgia facility.
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Appointment of New Chief Executive Officer

Effective as of June 5, 2023, the Board appointed Anna Fabrega as the Chief Executive Officer and principal executive officer of the Company. Ms. Fabrega previously served as Chief Executive Officer of Freshly, LLC, a direct-to-consumer fresh prepared food subscription service, from October 2021 to November 2022. Ms. Fabrega initially joined Freshly as Chief Commercialization Officer in January 2021. Prior to joining Freshly, from October 2011 to January 2021, Ms. Fabrega served in successively more senior leadership roles with Amazon.com, Inc., including Managing Director of Amazon Go and Amazon Kitchen, Director of Amazon Go Category Leader, General Manager of Amazon Sports, and Senior Manager, Marketing and Third-Party Marketplace – Sporting Goods. Ms. Fabrega earned a B.A. in International Business from the University of Florida and an M.B.A. from the Kellogg School of Management at Northwestern University.

Factors Affecting Our Financial Condition and Results of Operations

We have expended, and we expect to continue to expend, substantial resources as we:

complete construction and commissioning of new and expanded facilities;

standardize operating and manufacturing processes across our facilities;

identify and invest in future growth opportunities, including new product lines;

complete construction and commissioning of new facilities in Pasco, Washington, and Mount Pleasant, Texas;

integrate Pete's operations into our business;

invest in product innovation and development;

invest in sales and marketing efforts to increase brand awareness, engage customers and drive sales of our products; and

incur additional general administration expenses, including increased executive, finance, legal and accounting expenses associated with being a public company, and growing operations.



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Results of Operations

Three and Six Months Ended June 30, 2023March 31, 2024 compared to the Three and Six Months Ended June 30, 2022March 31, 2023

The following table sets forth our historical operating results for the periods indicated:

Three Months Ended June 30,Six Months Ended June 30, 
 20232022$ Change20232022$ Change
(in thousands)(in thousands)
Sales$7,183 $6,269 914$13,881 $6,551 7,330
Cost of goods sold(1)(2)(3)
6,331 6,281 5012,750 6,520 6,230
Gross profit852 (12)8641,131 31 1,100
Operating expenses:
Research and development(2)(3)
3,526 3,073 4537,102 5,914 1,188
Selling, general and administrative(2)(3)
16,704 23,141 (6,437)32,685 44,502 (11,817)
Total operating expenses20,230 26,214 (5,984)39,787 50,416 (10,629)
Loss from operations(19,378)(26,226)6,848(38,656)(50,385)11,729
Other income (expense):
Change in fair value of warrant liability15,151 — 15,151 15,151 — 15,151 
Interest expense, net(6,472)(5,465)(1,007)(10,771)(7,108)(3,663)
Other income23 28 (5)73 58 15
Net loss$(10,676)$(31,663)20,987$(34,203)$(57,435)23,232

Three Months Ended March 31, 
 20242023$ Change% Change
(in thousands)
Sales$8,383 $6,698 1,68525%
Cost of goods sold(1)(2)
7,597 6,419 1,17818%
Gross profit786 279 507182%
Operating expenses:
Research and development(1)(2)
3,487 3,576 (89)(2)%
Selling, general and administrative(1)(2)
7,598 15,981 (8,383)(52)%
Total operating expenses11,085 19,557 (8,472)(43)%
Loss from operations(10,299)(19,278)8,979(47)%
Other income (expense):
Change in fair value of warrant liability(4,180)— (4,180)100%
Interest expense, net(9,608)(4,299)(5,309)123%
Other income37 50 (13)(26)%
Net loss$(24,050)$(23,527)(523)2%
(1)Amounts include the impact for non-cash increase in cost of goods sold attributable to the fair value basis adjustment to inventory in connection with the Pete's Acquisition as follows:

 Three Months Ended June 30,Six Months Ended June 30,
 20232022$ Change20232022$ Change
Cost of goods sold$— $1,042 (1,042)$— $1,042 (1,042)
Total business combination fair value basis adjustment to inventory$— $1,042 (1,042)$— $1,042 (1,042)

(2) Amounts include stock-based compensation as follows:
Three Months Ended June 30,Six Months Ended June 30,
20232022$ Change20232022$ Change
20242023$ Change% Change
(in thousands)
Cost of goods sold
Cost of goods sold
Cost of goods soldCost of goods sold$(11)$47 (58)$76 $52 24 $21 $$87 (66)(66)(76)%
Research and developmentResearch and development595 485 110 1,333 970 363 Research and development93 738 738 (645)(645)(87)%
Selling, general and administrativeSelling, general and administrative3,850 11,164 (7,314)8,984 21,687 (12,703)Selling, general and administrative(1,048)5,134 5,134 (6,182)(6,182)(120)%
Total stock-based compensation expense, net of amounts capitalizedTotal stock-based compensation expense, net of amounts capitalized$4,434 $11,696 (7,262)$10,393 $22,709 (12,316)Total stock-based compensation expense, net of amounts capitalized$(934)$$5,959 (6,893)(6,893)(116)%

(3)(2) Amounts include depreciation and amortization as follows:
 Three Months Ended June 30,Six Months Ended June 30,
 20232022$ Change20232022$ Change
Cost of goods sold$894 $891 $1,830 $953 877 
Research and development466 218 248 1,032 531 501 
Selling, general and administrative1,956 2,272 (316)3,912 2,438 1,474 
Total depreciation and amortization$3,316 $3,381 (65)$6,774 $3,922 2,852 

 Three Months Ended March 31,
 20242023$ Change% Change
Cost of goods sold$1,203 $936 
Research and development797 566 23141%
Selling, general and administrative1,228 1,956 (728)(37)%
Total depreciation and amortization$3,228 $3,458 (230)(7)%
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The following sections discuss and analyze the changes in the significant line items in our Unaudited Condensed Consolidated Statements of Operations for the comparative periods in the table above.

Sales

We derive the majority of our revenue from the sale of produce grown at our facilities. In response to realized cost inflation, we have implemented contractually allowable price increases which we anticipate to benefit from in 2023 and beyond.

Sales increased by $0.9$1.7 million for the three months ended June 30, 2023,March 31, 2024, compared to the three months ended June 30, 2022.March 31, 2023. The increase was primarily due to an increaseincreased production and growth in sales from our Georgia facility which became operational in July 2022, and also due to an increase in sales from our Montana Facility.

Sales increased by $7.3 million for the six months ended June 30, 2023, compared to the six months ended June 30, 2022. The increase was due primarily to the Pete's Acquisition at the beginning of April 2022 and also due to an increase in sales from our Georgia facility.Georgia.

Cost of Goods Sold

Cost of goods sold consists primarilyis the direct cost of costs related to growing produce for sale at our greenhouse facilities, including labor costs, which includeconsists of wages, salaries, benefits, and stock-based compensation, seeds, soil, nutrients and other input supplies, packaging materials, depreciation, utilities and other manufacturing overhead. We expect that, over time, cost of goods sold will decrease as a percentage of sales, as a result of scaling our business.

Cost of goods sold increased by $0.1$1.2 million for the three months ended June 30, 2023March 31, 2024, compared to the three months ended June 30, 2022,March 31, 2023, due primarily to increased production volume related to an increase inand sales during the three months ended June 30, 2023 compared to the three months ended June 30, 2022 and, to a lesser extent, an increase in the cost of labor, utilities, and production supplies caused partially by weather-related variables at our California facilities. The extreme weather created some unique growing challenges that were exacerbated by facility damage that required repairs and maintenance. This resulted in lower production, which lead to a temporary decrease in fixed cost absorption that has since been resolved. Cost of goods sold for the three months ended June 30, 2022 was negatively impacted due to the fair value step-up to expected selling price of acquired inventory from the Pete's Acquisition during the second quarter of 2022. This acquired inventory was subsequently sold during the second quarter of 2022 at the stepped-up value or at a zero margin, which negatively impacted gross margin during the second quarter of 2022 by $1.0 million or 16.6%.

Cost of goods sold increased by $6.2 million for the six months ended June 30, 2023, compared to the six months ended June 30, 2022, due primarily to increased production volume related to an increase in sales during the six months ended June 30, 2023 compared to the six months ended June 30, 2022 driven by the Pete's Acquisition on April 4, 2022. We also experienced an increase of $0.7 million related to utilities price spikes in California and inclement weather-related costs that impacted yields at our California facilities, and an increase in the cost of labor, utilities, and production supplies. Cost of goods sold for the six months ended June 30, 2022 was negatively impacted due to the fair value step-up to expected selling price of acquired inventory from the Pete's Acquisition during the second quarter of 2022. This acquired inventory was subsequently sold during the second quarter of 2022 at the stepped-up value or at a zero margin, which negatively impacted gross margin during the second quarter of 2022 by $1.0 million or 15.9%.$1.7 million.

Research and Development

Research and development expenses consist primarily of compensationcosts related to employees engaged in research and development activities, which include salaries, benefits,of our production, harvesting, and stock-based compensation, overhead (including depreciation, utilitiespost-harvest packaging methods, techniques, and other related allocated expenses), and supplies and servicesprocesses, as well as production surplus costs related to the development and testing of our growingproduction processes. Our research and development efforts are focused on the development of our processes utilizing our facilities, increasing production yields, developing new leafy green SKUs and value-added products such as grab-and-go salads, and exploring new crops, including spinach, arugula, and berries. We focusexpect that as our facilities continue to scale that research and development efforts in areas we believe will generate future revenue and grow our intellectual property portfolio across process improvements, genetics, computer, vision, artificial intelligence, and process controls. We expect that, over the long term, research and developmentexpenses will decrease as a percentage of sales,significantly in 2024 and beyond as a result of the establishment of our growing process. Research and development is performed at the Montana and Georgia facilities, where we continue to develop our commercial scale Stack & Flow Technology® and processes for implementation at our other facilities. We expect to transition in 2024 the majority of our Montana Facility from its current focus on research and development to a commercially oriented facility that is growing produce for sale to customers. This transition will follow the capacity enhancements brought about by the completion of our Georgia facility and the commencement 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.

Research and development costs increaseddecreased by $0.5$0.1 million for the three months ended June 30, 2023March 31, 2024, compared to the three months ended June 30, 2022March 31, 2023. As explained above, as the Georgia facility has been completed and increased by $1.2 million foroperations have commenced at both the six months ended June 30, 2023, compared to the six months ended June 30, 2022. The increase for both periods was due to increasedTexas and Washington facilities, there has been a resulting decrease of investment in personnel, materials, supplies, and facility capacity usage fordevoted to research and development purposes asdevelopment. However, we continue to expand our product offering and refine our growing process. We incurredincur costs for research andthe development of our production, harvesting, and post-harvest packaging techniques and processes, as well asincluding production surplus costs related to the development and testing of our commercial scale Stack & Flow Technology and production processes.processes at the Georgia facility.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses consist of employee compensation, including salaries, benefits, and stock-based compensation for our executive, legal, finance, information technology, human resources and sales and marketing teams, expenses for third-party professional services, Pete's Acquisition related integration costs, insurance, marketing, advertising, computer hardware and software, and amortization of intangible assets, among others.
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We expect selling, general, and administrative expenses to decrease significantly in 2024 due primarily to expected salary cost savings of approximately $5.0 million on an annualized basis as a result of our recent actions to streamline our organizational structure.

Selling, general, and administrative expenses decreased by $6.4$8.4 million for the three months ended June 30, 2023,March 31, 2024, compared to the three months ended June 30, 2022,March 31, 2023, primarily driven byrelated to a $7.3$6.2 million decrease in stock-based compensation due toexpense that was a result of prior year awards that were issued at a higher fair value, as compared to the fair value of awards being expensed in the current period, werethat fully vested and expensed in the prior quarter. In addition, stock-based compensation resulted in a net benefit for the three months ended March 31, 2024 due to forfeitures of RSU awards in the current year-to-date period. This decrease was partially offset by an increase of $0.8 million in professional, legal, accounting, and consulting fees.

Selling, general, and administrative expenses decreased by $11.8 million for the six months ended June 30, 2023, compared to the six months ended June 30, 2022, primarily driven by a $12.7 million decrease in stock-based compensation due to prior year awardsperiod that were issuedgranted at asignificantly higher grant-date fair value,values than the RSU awards currently being expensed. Additional decreases as compared to the fair value of awards being expensed in the currentprior year period and were fully vested and expensed prior to the current year-to-date period, and a $3.8$1.2 million decrease in transaction costs due to the Pete's Acquisition in the prior year. This decrease was partially offset by an increase of $1.4 million in professional, legal, accounting, and professional consulting fees, related to our strategic transactions and potential business acquisitions due diligence activities, an increase of $1.3a $0.7 million decrease in amortization of intangibles acquired as part of the Pete's Acquisition,depreciation and an increase of $0.8 million in salaries, wages, and benefits due to increased headcount from Company growth and the Pete's Acquisition.amortization.

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Change in Fair Value of Warrant Liability

The change in fair value of warrant liability includes the mark-to-market adjustments to the warrant liability to reflect its fair value as of the end of the reporting period. The decreaseincrease in fair value of the warrant liability is primarily due to the significant decreaseincrease in our closing stock price at June 30, 2023March 31, 2024 compared to the closing stock price on the warrant issuance date.prior measurement date of December 31, 2023. The period-end Local Bounti Corporation close stock price is a key input to the Black-Scholes-Merton option pricingBlack-Scholes model we use to measure and estimate the fair value of the warrant at the end of each reporting period.

Interest Expense, net

Interest expense consists primarily of contractual interest and amortization of debt issuance costs, net of interest capitalized for construction assets, related to the loans withfrom Cargill Financial and also interest recognized per the terms of our financing obligation related to the Montana Facility and the HollandiaCalifornia Facilities. We capitalize interest costs on borrowings during the construction period of major construction projects as part of the cost of the constructed assets.

Interest expense, net increased by $1.0$5.3 million for the three months ended June 30, 2023,March 31, 2024, compared to the three months ended June 30, 2022.March 31, 2023. The increase is primarily due to a $92.3 millionan increase in the principal amount outstanding on the Senior Facility, as well asand, to a lesser extent, a variable rate increase on the Senior Facility period over period, both of which increased interest expense by $1.2$4.4 million over the prior year period. Also contributing to the net increase was $0.7 million of incremental interest expense related to the financing obligation for the Montana Facility and the Hollandia Facilities. We capitalized $3.2 million of interest during the three months ended June 30, 2023. No interest was capitalized during the three months ended June 30, 2022.

Interest expense, net increased by $3.7 million for the six months ended June 30, 2023, compared to the six months ended June 30, 2022. The increase is primarily due to a $92.3 million increase in the principal amount outstanding on the Senior Facility as well as a variable rate increase on the Senior Facility period over period, which increased interest expense by $4.0 million over the prior year period. Also contributing to the net increase was $0.7$0.9 million of incremental interest expense for the financing obligationobligations related to the Montana FacilityCalifornia Facilities. During the three months ended March 31, 2024 and the Hollandia Facilities. We2023, we capitalized $5.3$5.7 million and $2.1 million of interest, during the six months ended June 30, 2023. No interest was capitalized during the six months ended June 30, 2022.respectively.

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Liquidity and Capital Resources

We have incurred losses and generated negative cash flows from operations since our inception. At June 30, 2023,March 31, 2024, we had an accumulated deficit of $213.5$327.4 million and cash and cash equivalents and restricted cash of $33.9$14.7 million.

As of June 30, 2023, the principal amount due under our credit facilitiesThe Facilities with Cargill Financial totaled $223.2 million, none of which is classified as current. These debt agreements contain various financial and non-financial covenants and certain restrictions on our business, which include restrictions on additional indebtedness, minimum liquidity and other financial covenants, and material adverse effects, that could cause us to be at risk of default. A failure to comply with the covenants and other provisions of these debt instruments, including any failure to make payments when required, would generally result in events of default under such instruments, which could result in the acceleration of a substantial portion of such indebtedness.

The CEA business is capital-intensive. Currently, our primary sources of liquidity and capital resources are cash on hand, cash flows generated from the sale of our products, and the Facilities with Cargill Financial. Cash expenditures over the next 12 months are expected to include interest payments on debt obligations, general operating costs for employee wages and related benefits, outside services for legal, accounting, IT infrastructure, and costs associated with growing, harvesting and selling our products, such as the purchase of seeds, soil, nutrients and other growing supplies, shipping and fulfillment costs, and facility maintenance costs.

We believe that our current cash position, cash flow from operations,The Ninth Amendment to the proceeds from the sale leaseback transaction (seecredit facilities with Cargill Financial, as described in Note 7,6, Financing ObligationDebt, in Notes toof the Unaudited Condensed Consolidated Financial Statements, allows for additional detail)the payment in kind of the quarterly interest payments due and payable for the quarters ending June 30, 2024, September 30, 2024, and December 31, 2024. The Ninth Amendment also provides for up to $15.0 million in working capital for the Company, $5.0 million of which has been drawn down, and the borrowing capacityremaining $10.0 million of which remains available to the Company as of March 31, 2024. In addition, the Company expects to close in the second quarter of 2024 on the four previously disclosed CCLs from a commercial finance lender that were executed in the second half of 2023. Together, the CCLs will provide financing of approximately $228 million to fund its 2024 facility expansions, its new greenfield facility in the Midwest, and to repay certain existing construction financing which will lower the Company’s cost of capital. The funding expected pursuant to the CCLs is subject to the completion of definitive documents and the satisfaction of customary closing conditions.

The Company believes that the remaining $10.0 million of working capital from Cargill Financial, the $228 million from a commercial finance lender, the Company's current cash position, cash generated from product sales, and anticipated additional deferrals of future cash interest and principal payments under our Facilitiesthe Company's credit facilities with Cargill Financial are sufficientwill be adequate to fund our basic cash requirements forthe Company’s planned operations over the next 12 months from the date of issuance of thethese Unaudited Condensed Consolidated Financial Statements. Also, while
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We also believe additional cash can be secured through other debt, equity financings, or sale leaseback financing, if necessary. However, there can be no assurance that equity or debt financing will be available to us should we believeneed it or, if available, that the Facilities with Cargill Financial, as most recently amended, provide adequate resourcesterms will be satisfactory to us and flexibilitynot dilutive to fund our planned construction projects, ourexisting shareholders. Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth in Part I, Item 1A of the Company's most recent Annual Report on Form 10-K. In the event thatOur failure to raise capital as and when needed could have significant negative consequences for our plans change, or our cash requirements are greater than we anticipate, we may need to curtail operations or delay construction activities.business, financial condition and results of consolidated operations.

Cargill Loans

In September 2021, the Company and Cargill Financial entered into the Senior Facility and the Subordinated Facility. Subsequent to the amendments described in Note 6, Debt, of the Unaudited Condensed Consolidated Financial Statements, Cargill Financial may in its discretion provide advances under the Facilities of up to $280.0$343.5 million (plus paid-in-kind interest and fees paid in kind)fees), including capital to fund construction at the Company’s facilities in Georgia, Texas, and Washington, subject to certain conditions. As of June 30, 2023,March 31, 2024, a total of $178.0$317.6 million and $45.2$49.7 million was outstanding on the Senior Facility and the Subordinated Facility, respectively. The Senior Facility and the Subordinated Facility are included in "Long-term debt" on the Unaudited Condensed Consolidated Balance Sheets.

At June 30, 2023,March 31, 2024, our principal and estimated interest payment obligations for the Senior Facility and the Subordinated Facility are as follows(1):

(in thousands)(in thousands)
Remainder of 2023$15,054
202430,109
Remainder of 2024
Remainder of 2024
Remainder of 2024$37,550
2025202546,848202577,608
2026202652,428202686,788
2027202752,428202786,788
Thereafter184,101
20282028303,325
TotalTotal$380,968
Total
Total$592,059
_____________________

(1)Interest is calculated based on a 12.5% interest rate for the Subordinated Facility and a 13.74%13.81% interest rate for the Senior Facility effective as of JulyApril 1, 2023.2024.


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Financing Obligations

We have atwo financing obligationobligations related to sale leaseback transactions that did not qualify for sales treatment of the underlying assets. In June 2020, the Company completed the construction of the Montana Facility. Subsequent to its completion, the Company entered into a failed sale leaseback transaction for the Hollandia Facilities (see Note 7, Financing Obligation, to the Unaudited Condensed Consolidated Financial Statements for additional detail on this transaction) and a financing obligation related to a failed sale leaseback forof the Montana Facility (seewith Grow Bitterroot, LLC, a related party, for total consideration of $6.9 million with an initial term of 15 years. On April 27, 2023, Hollandia Real Estate, LLC, a wholly owned subsidiary of the Company, and STORE Master Funding XXXI, LLC consummated a $35 million multi-site sale and leaseback transaction relating to our most recent Annual Report on Form 10-K for additional detail on this transaction)Carpinteria Facility and our Oxnard Facility (collectively, the "California Facilities").

The following table summarizes future aggregate financing obligation payments by fiscal year for both the HollandiaCalifornia Facilities and the Montana Facility:
Financing Obligation
(in thousands)
Remainder of 2023$2,404
20244,893
Financing ObligationFinancing Obligation
(in thousands)(in thousands)
Remainder of 2024Remainder of 2024$3,689
202520255,02420255,024
202620265,15820265,158
202720275,29720275,297
202820285,439
ThereafterThereafter126,969Thereafter121,532
Total financing obligation paymentsTotal financing obligation payments149,745Total financing obligation payments146,139

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Cash Flow Analysis

A summary of our cash flows from operating, investing, and financing activities is presented in the following table:

Three Months Ended
March 31,
Three Months Ended
March 31,
Six Months Ended
June 30,
20242023
20232022
(in thousands)
(in thousands)(in thousands)
Net cash used in operating activitiesNet cash used in operating activities$(16,088)$(26,657)Net cash used in operating activities$(7,083)$(7,830)
Net cash used in investing activitiesNet cash used in investing activities(76,187)(142,673)Net cash used in investing activities(34,985)(32,685)
Net cash provided by financing activitiesNet cash provided by financing activities107,763109,539Net cash provided by financing activities39,90423,045
Cash and cash equivalents and restricted cash at beginning of periodCash and cash equivalents and restricted cash at beginning of period24,938101,077Cash and cash equivalents and restricted cash at beginning of period16,89524,938
Cash and cash equivalents and restricted cash at end of periodCash and cash equivalents and restricted cash at end of period$40,426 $41,286 

Net Cash Used In Operating Activities

Net cash used in operating activities was $16.1$7.1 million for the sixthree months ended June 30, 2023March 31, 2024 due to a net loss of $34.2$24.1 million and an increase in other assets of $2.9 million. The net loss includedThis was partially offset by non-cash activities of $9.8 million in paid-in-kind interest, a non-cash gainloss of $4.2 million related to change in fair value of warrant liability, of $15.2 million. These amounts were partially offset by non-cash activities of $10.4 million in stock-based compensation expense, net of amounts capitalized, $9.3 million of paid-in-kind interest, $3.4$2.3 million in depreciation expense, $3.4$0.9 million in amortization expense, $3.1and $2.1 million in amortization of debt issuance costs, and $3.1 million net increase of cash from changes in assets and liabilities.costs.

Net cash used in operating activities was $26.7$7.8 million for the sixthree months ended June 30, 2022March 31, 2023 due to a net loss of $57.4$23.5 million. This was partially offset by non-cash activities of $22.7$6.0 million in stock-based compensation expense, $1.9 million in amortizationnet of debt issuance costs,amounts capitalized, $1.8 million in depreciation expense, $2.1and $1.7 million in amortization expense, and $1.3expense. Additional offset was due to $5.2 million net increase of cash from changes in assets and liabilities.

Net Cash Used In Investing Activities

Net cash used in investing activities was $76.2$35.0 million for the sixthree months ended June 30,March 31, 2024, due primarily to purchases of construction materials and services, equipment, and other items for the Washington and Texas facilities.

Net cash used in investing activities was $32.7 million for the three months ended March 31, 2023, due primarily to purchases of construction materials and services, equipment, and other items for the Washington, Georgia, and Texas facilities.

Net cash used in investing activities was $142.7 million for the six months ended June 30, 2022, due primarily to the acquisitions in the prior year, including the Pete's Acquisition for net cash outlay of $91.4 million and a property acquisition for net cash outlay of $25.8 million. Additional cash used in investing activities related to $25.5 million of purchases of equipment and other items for the Washington, Georgia, and Montana facilities.

Net Cash Provided By Financing Activities

Net cash provided by financing activities was $107.8 million for the six months ended June 30, 2023, comprised of $73.0 million of proceeds from the issuance of debt and $35.0 million of proceeds from the sale and leaseback transaction with STORE for the Hollandia Facilities. See Note 7, Financing Obligation, in Notes to the Unaudited Condensed Consolidated Financial Statements for additional detail on the sale and leaseback transaction.
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Net cash provided by financing activities was $109.5$39.9 million for the sixthree months ended June 30, 2022, due primarily to $111.9March 31, 2024, comprised of $39.9 million of net proceeds from the issuance of debt with Cargill Financial. This was partially offset by the payment of debt issuance costs of $2.3 million.debt.

Net cash provided by financing activities was $23.0 million for the three months ended March 31, 2023, comprised of $23.0 million of net proceeds from the issuance of debt.

Critical Accounting Policies and Estimates

There have been no changes to the Company'sCompany’s critical accounting policies and estimates from those described under "Critical Accounting Policies and Estimates" in the Management's Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2022, except as noted below and further discussed in Note 2 of the Unaudited Condensed Consolidated Financial Statements.

The assessment and valuation of freestanding financial derivative instruments, which impacts gains or losses on such derivatives, the carrying value of debt, and interest expense.2023.

Recent Accounting Pronouncements

For more information about recent accounting pronouncements, see Note 2 of the Unaudited Condensed Consolidated Financial Statements, which is incorporated into this Item 2 by reference thereto.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and are not required to provide the information under this item.
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Item 4. Controls and Procedures


Limitations on effectiveness of control and procedures

In designing and evaluationevaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls relative to their costs.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated our disclosure controls and procedures, as such term is defined under Exchange Act Rule 13a-15(e) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of June 30, 2023,March 31, 2024, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the sixthree months ended June 30, 2023March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
See Note 11,10, Commitments and Contingencies, to the Unaudited Condensed Consolidated Financial Statements for information regarding legal proceedings.

Item 1A. Risk Factors

There have been no material updates to our risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2022, as updated by our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, other than the following:

We cannot assure you that our Reverse Stock Split will increase our stock price, marketability or our liquidity.

On June 15, 2023, we completed the Reverse Stock Split. We cannot predict the long-term effect of the Reverse Stock Split upon the market price for shares of our common stock, and the history of similar Reverse Stock Splits for companies in like circumstances has varied. Some investors may view a reverse stock split negatively. We cannot assure you that our common stock will be more attractive to institutional or other long-term investors or that it will attract brokers and investors who trade in lower priced stocks. Even if the Reverse Stock Split has a positive effect on the market price for shares of our common stock, the market price and liquidity of our common stock may decrease due to other factors, including our future performance, economic conditions and other factors, some of which may not be under our control. The percentage market price decline as an absolute number and as a percentage of our overall market capitalization may be greater than would occur in the absence of the Reverse Stock Split. The total market capitalization of our common stock following the Reverse Stock Split is lower than the total market capitalization before the Reverse Stock Split and it could continue to decline. In addition, the Reverse Stock Split increased the number of our stockholders who own "odd lots" of fewer than 100 shares of common stock. Brokerage commission and other costs of transactions in odd lots are generally higher than the costs of transactions of more than 100 shares of common stock. Accordingly, the Reverse Stock Split may not achieve the desired results of increasing the stock price, marketability and liquidity of our common stock, which could materially adversely affect our business, financial condition and results of operations.2023.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

There were no unregistered sales of our equity securities during the period covered by this quarterly report which were not previously reported in a Current Report on Form 8-K.

Item 5. Other Information

During the fiscal quarter ended March 31, 2024, none of our directors or officers informed us of the adoption or termination of a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as those terms are defined in Regulation S-K, Item 408.
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25


Item 6. Exhibits

Exhibit
Number
Description
3.1
3.2
3.3
3.4
10.1*4.1
10.1*
10.2*
10.3
10.4+
31.1
31.2
32.1**
32.2**
101The following financial statements from Local Bounti’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023,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 blocks of text and including detailed tags.
104Cover Page Interactive Data File - the cover page from this Quarterly Report on Form 10-Q for the quarter ended June 30, 2023,March 31, 2024, formatted in Inline XBRL (included in Exhibit 101).
_____________________
*Schedules and exhibits to this Exhibitexhibit have been omitted in accordance with Regulation S-K Item 601(a)(5)601(b)(2). The registrant hereby agrees to furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon its request.
**This document is being furnished in accordance with SEC Release Nos. 33‑8212 and 34‑47551.
+Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and is the type that the registrant treats as private or confidential. A copy of omitted information will be furnished to the Securities and Exchange Commission upon request; provided, however, that the parties may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any document so furnished.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
Local Bounti Corporation
/s/ Craig M. Hurlbert
/s/ Anna FabregaName:  Craig M. Hurlbert
Name:  Anna Fabrega
Title:    Chief Executive Officer and Director
 Date: August 14, 2023May 10, 2024
(Principal Executive Officer)
/s/ Kathleen Valiasek
Name:  Kathleen Valiasek
Title:    Chief Financial Officer
 Date: August 14, 2023May 10, 2024
(Principal Financial and Accounting Officer)

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