References to the "Company," "Leo Holdings III Corp ," "Leo Holdings III," "our," "us" or "we" refer toLeo Holdings III Corp. The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the unaudited interim condensed consolidated financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties. Cautionary Note Regarding Forward-Looking Statements This Quarterly Report on Form 10-Q/A includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may," "should," "could," "would," "expect," "plan," "anticipate," "believe," "estimate," "continue," or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our otherSEC filings. Overview We are a blank check company incorporated as aCayman Islands exempted company onJanuary 8, 2021 . We were formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (the "Business Combination"). We are an emerging growth company and, as such, we are subject to all of the risks associated with emerging growth companies. Our sponsor isLeo Investors III LP , aCayman Islands exempted limited partnership (the "Sponsor"). The registration statement for our Initial Public Offering was declared effective onFebruary 25, 2021 . OnMarch 2, 2021 , we consummated our Initial Public Offering of 27,500,000 units (the "Units" and, with respect to the Class A ordinary shares included in the Units being offered, the "Public Shares"), including 3,500,000 additional Units to partially cover over-allotments (the "Over-Allotment Units"), at$10.00 per Unit, generating gross proceeds of$275.0 million , and incurring offering costs of approximately$15.8 million , of which approximately$9.6 million was for deferred underwriting commissions. Simultaneously with the closing of the Initial Public Offering, the Company consummated the private placement ("Private Placement") of 5,333,333 warrants (each, a "Private Placement Warrant" and collectively, the "Private Placement Warrants"), at a price of$1.50 per Private Placement Warrant with the Sponsor, generating gross proceeds of$8.0 million , and incurring offering costs approximately$11,000 . Upon the closing of the Initial Public Offering and the Private Placement,$275.0 million ($10.00 per Unit) of the net proceeds of the Initial Public Offering and certain of the proceeds of the Private Placement were placed in a trust account ("Trust Account"), located inthe United States withContinental Stock Transfer & Trust Company acting as trustee, and will be invested only inU.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the "Investment Company Act"), with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting the conditions of paragraphs (d)(2), (d) (3) and (d)(4) of Rule 2a-7 of the Investment Company Act, as determined by us, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account as described below. Our management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that we will be able to complete a Business Combination successfully. We must complete one or more initial Business Combinations having an aggregate fair market value of at least 80% of the assets held in the Trust Account (excluding the deferred underwriting commissions and taxes paid or payable on income earned on the Trust Account) at the time of the signing of the agreement to enter into the initial Business Combination. However, we will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. If we are unable to complete a Business Combination within the Combination Period, we will (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to us to pay our taxes that were paid by us or are payable by us, if any (less up to$100,000 of interest to pay dissolution expenses), divided by the number of the then-outstanding Public Shares, which redemption will completely extinguish Public Shareholders' rights as shareholders (including the right to receive further liquidation distributions, if any); and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining shareholders and the board of directors, liquidate and dissolve, subject in the case of clauses (ii) and (iii) to the Company's obligations underCayman Islands law to provide for claims of creditors and the requirements of other applicable law. Restatement to Previously Reported Financial Statements We concluded we should restate our previously issued financial statements to classify all Class A ordinary shares subject to redemption in temporary equity. In accordance with ASC 480-10-S99, redemption provisions not solely within the control of the Company require shares subject to redemption to be classified outside of permanent equity. We had previously classified a portion of our Class A ordinary shares in permanent equity. Although we did not specify a maximum redemption threshold, our charter currently provides that we will not redeem our Public Shares in an amount that would cause our net tangible assets to be less than$5,000,001 . Previously, we did not consider redeemable shares classified as temporary equity as part of net tangible assets. Effective with these condensed financial statements, we have revised this interpretation to include temporary equity in net tangible assets. 18 -------------------------------------------------------------------------------- Table of Contents In accordance withSEC Staff Accounting Bulletin No. 99, "Materiality," andSEC Staff Accounting Bulletin No. 108, "Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements," we evaluated the corrections and have determined that the related impact was material to the previously filed financial statements that contained the error, reported in our Form 8-K filed with theSEC onMarch 2, 2021 (the "Post-IPO Balance Sheet") and our Form 10-Qs for the quarterly periods endedMarch 31, 2021 , andJune 30, 2021 (the "Affected Quarterly Periods"). Therefore, we, in consultation with our Audit Committee, concluded that the Post-IPO Balance Sheet and the Affected Quarterly Periods should be restated to present all Class A ordinary shares subject to possible redemption as temporary equity and to recognize accretion from the initial book value to redemption value at the time of our Initial Public Offering and the Over-Allotment. As such, we are reporting these restatements to those periods in this quarterly report. The previously presented Post-IPO Balance Sheet and Affected Quarterly Periods should no longer be relied upon. The change in the carrying value of the redeemable Class A ordinary shares in the Post-IPO Balance Sheet resulted in a reclassification of approximately 0.9 million Class A ordinary shares from permanent equity to temporary equity. Proposed Business Combination OnJune 17, 2021 , we entered into an Agreement and Plan of Merger (the "merger agreement") by and amongLongleaf Merger Sub, Inc. , aDelaware corporation ("Merger Sub 1"),Longleaf Merger Sub II, LLC ("Merger Sub 2") andLocal Bounti Corporation , aDelaware corporation ("Local Bounti"). Pursuant to the merger agreement, each issued and outstanding Class A and Class B ordinary share of us will be converted into one share of common stock, par value$0.0001 per share, of us (the "New Local Bounti Common Stock"); each issued and outstanding whole warrant to purchase Class A ordinary shares of us will automatically represent the right to purchase one share of New Local Bounti Common Stock at an exercise price of$11.50 per share on the terms and conditions set forth in our warrant agreement. On the date of closing, subject to the conditions set forth in the merger agreement, Merger Sub 1 will merge with and intoLocal Bounti , whichLocal Bounti as the surviving company, followed immediately by the merger of the surviving company with and into Merger Sub 2, with Merger Sub 2 surviving the merger as a wholly-owned subsidiary of us and, after giving effect to the Mergers,Local Bounti will be a wholly-owned subsidiary of us. Refer to the proxy statement/consent solicitation statement/prospectus, as filed in Form S-4 with theSecurities and Exchange Commission onOctober 7, 2021 for additional information. Liquidity and Capital Resources As ofSeptember 30, 2021 , we had approximately$189,000 in its operating bank account and working capital of approximately$483,000 . Our liquidity needs to date have been satisfied through a contribution of$25,000 from Sponsor to cover for certain expenses in exchange for the issuance of the Founder Shares, the loan of approximately$112,000 from the Sponsor pursuant to a promissory note. We repaid the note in full onMarch 3, 2021 . Subsequent from the consummation of the Initial Public Offering, our liquidity has been satisfied through the net proceeds from the consummation of the Private Placement not held in the Trust Account. In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of our officers and directors may, but are not obligated to, provide us Working Capital Loans. To date, there were no amounts outstanding under any Working Capital Loan. Based on the foregoing, management believes that we will have sufficient working capital and borrowing capacity from our Sponsor or an affiliate of our Sponsor, or certain of our officers and directors to meet its needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, we will be using these funds for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination. Management continues to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on our financial position, results of our operations and/or search for a target company, the specific impact is not readily determinable as of the date of the unaudited condensed consolidated financial statements. The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Results of Operations Our entire activity since inception up toSeptember 30, 2021 was in preparation for our formation and the Initial Public Offering. We will not be generating any operating revenues until the closing and completion of our initial Business Combination at the earliest. For the three months endedSeptember 30, 2021 , we had net income of approximately$3.5 million , which consisted of approximately$4.2 million in change in the fair value of warrant liabilities and approximately$7,000 of net gain on the investments held in the Trust Account, partially offset by approximately$717,000 general and administrative expenses and approximately$46,000 in related party general and administrative fee. For the period fromJanuary 8, 2021 (inception) throughSeptember 30, 2021 , we had net loss of approximately$837,000 , which consisted of approximately$1.3 million general and administrative expenses, approximately$84,000 in related party general and administrative fee and approximately$276,000 of offering costs associated with issuance of warrants, partially offset by approximately$812,000 in change in the fair value of warrant liabilities and approximately$14,000 of net gain on the investments held in the Trust Account. -------------------------------------------------------------------------------- Table of Contents Contractual Obligations Administrative Support Agreement Commencing on the date that the Company's securities were first listed on theNew York Stock Exchange , the Company agreed to pay the Sponsor a total of$10,000 per month for office space, secretarial and administrative services provided to the Company. Upon completion of the initial Business Combination or the Company's liquidation, the Company will cease paying these monthly fees. We incurred and paid approximately$30,000 and$58,000 in expenses in connection with such services for the three months endedSeptember 30, 2021 and for the period fromJanuary 8, 2021 (inception) throughSeptember 30, 2021 , respectively, as reflected in the accompanying unaudited condensed consolidated statements of operations. As ofSeptember 30, 2021 , approximately$16,000 in expenses in connection with compliance services with related party was outstanding, as reflected in the accompanying unaudited condensed consolidated balance sheet. Registration and Shareholder Rights The holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any Class A ordinary shares issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans) were entitled to registration rights pursuant to a registration and shareholder rights agreement signed upon consummation of the Initial Public Offering. These holders were entitled to certain demand and "piggyback" registration rights. However, the registration and shareholder rights agreement provided that we will not permit any registration statement filed under the Securities Act to become effective until the termination of the applicable lock-up period for the securities to be registered. We will bear the expenses incurred in connection with the filing of any such registration statements. Underwriting Agreement We granted the underwriter a 45-day option from the final prospectus relating to the Initial Public Offering to purchase up to 3,600,000 additional Units to cover over-allotments, if any, at the Initial Public Offering price less the underwriting discounts and commissions. The underwriters partially exercised their over-allotment option onMarch 2, 2021 to purchase an additional 3,500,000 Over-Allotment Units. The remaining unexercised over- allotment option expired at the conclusion of the 45-day option period. The underwriter was entitled to an underwriting discount of$0.20 per unit, or$5.5 million in the aggregate, paid upon the closing of the Initial Public Offering. In addition,$0.35 per unit, or approximately$9.6 million in the aggregate will be payable to the underwriter for deferred underwriting commissions. The deferred fee will become payable to the underwriter from the amounts held in the Trust Account solely in the event that we complete a Business Combination, subject to the terms of the underwriting agreement. Critical Accounting Policies Class A ordinary shares subject to possible redemption We account for its Class A ordinary shares subject to possible redemption in accordance with the guidance in ASC Topic 480 "Distinguishing Liabilities from Equity." Class A ordinary shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Conditionally redeemable Class A ordinary shares (including Class A ordinary shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, Class A ordinary shares are classified as shareholders' equity. Our Class A ordinary shares feature certain redemption rights that are considered to be outside of our control and subject to the occurrence of uncertain future events. Accordingly, as ofSeptember 30, 2021 , 27,500,000 Class A ordinary shares subject to possible redemption are presented as temporary equity, outside of the shareholders' equity section of the Company's condensed consolidated balance sheet. Net Income (loss) per Ordinary Share We comply with accounting and disclosure requirements of FASB ASC Topic 260, "Earnings Per Share." We have two classes of shares, which are referred to as Class A ordinary shares and Class B ordinary shares. Income and losses are shared pro rata between the two classes of shares. Net income (loss) per ordinary share is calculated by dividing the net income (loss) by the weighted average number of ordinary shares outstanding for the respective period. The calculation of diluted net income (loss) per ordinary share does not consider the effect of the warrants underlying the Units sold in the Initial Public Offering and the Private Placement Warrants to purchase 10,833,333 Class A ordinary shares in calculation of diluted income (loss) per share, because their exercise is contingent upon future events and their inclusion would be anti-dilutive under the treasury stock method. As a result, diluted net income (loss) per share is the same as basic net income (loss) per share for the three months endedSeptember 30, 2021 and for the period fromJanuary 8, 2021 (inception) throughSeptember 30, 2021 . Accretion associated with the redeemable Class A ordinary shares is excluded from earnings per share as the redemption value approximates fair value. Derivative Warrant Liabilities We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC 815-40. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. We account for its warrants issued in connection with its Initial Public and Private Placement, as derivative warrant liabilities in accordance with ASC 815-40. Accordingly, we recognize the warrant instruments as liabilities at fair value and adjusts the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statements of operations. The fair value of warrants issued in connection with the Private Placement has been estimated using a Monte-Carlo simulation at each 20 -------------------------------------------------------------------------------- Table of Contents balance sheet date. The fair value of the warrants issued in connection with the Initial Public Offering was initially measured using a Monte-Carlo simulation model and subsequently been measured based on the market price at each measurement date when separately listed and traded. The determination of the fair value of the warrant liability may be subject to change as more current information becomes available and accordingly the actual results could differ significantly. Derivative warrant liabilities are classified as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities. Recent Accounting Pronouncements InAugust 2020 , the FASB issued ASU No. 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) 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 ("ASU 2020-06"), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas. We adopted ASU 2020-06 onJanuary 1, 2021 using the modified retrospective method for transition. Adoption of the ASU did not impact our financial position, results of operations or cash flows. Our management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying unaudited condensed consolidated financial statements. Off-Balance Sheet Arrangements As ofSeptember 30, 2021 , we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K. JOBS Act The Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an "emerging growth company" and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, the financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates. Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an "emerging growth company," we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor's attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO's compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our Initial Public Offering or until we are no longer an "emerging growth company," whichever is earlier. Item 3. Quantitative and Qualitative Disclosures About Market Risk We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item. As ofSeptember 30, 2021 , we were not subject to any market or interest rate risk. The net proceeds of the Initial Public Offering, including amounts in the Trust Account, will be invested inU.S. government securities with a maturity of 185 days or less or in money market funds that meet certain conditions under Rule 2a-7 under the Investment Company Act of 1940, as amended, that invest only in directU.S. government treasury obligations. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk. We have not engaged in any hedging activities since our inception and we do not expect to engage in any hedging activities with respect to the market risk to which we are exposed. Item 4. Controls and Procedures (As Revised) Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in theSEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. Evaluation of Disclosure Controls and Procedures Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter endedSeptember 30, 2021 , as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation our principal executive officer and principal financial and accounting officer have concluded that during the period covered by this report, our disclosure controls and procedures were not effective. Our internal control over financial reporting did not result in the proper accounting classification of complex financial instruments and presentation of earnings per share which, due to its material impact on our financial statements, we determined to be a material weakness. Changes in Internal Control Over Financial Reporting There was no change in our internal control over financial reporting that occurred during the fiscal quarter endedSeptember 30, 2021 covered by this First 21 -------------------------------------------------------------------------------- Table of Contents Amendment on Form 10-Q/A that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. The Company previously identified a material weakness in internal controls related to the accounting for warrants issued in connection with our initial public offering. As a result of the restatement described in this First Amendment on Form 10-Q/A, management has identified a material weakness in internal controls related to complex financial instruments and earnings per share, as described above. Remediation Plan Management has implemented remediation steps to address the material weakness and to improve our internal control over financial reporting. Specifically, we expanded and improved our review process for complex securities, earnings per share and related accounting standards. We plan to further improve this process by enhancing access to accounting literature, identification of third-party professionals with whom to consult regarding complex accounting applications and consideration of additional staff with the requisite experience and training to supplement existing accounting professionals. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects. 22
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Table of Contents PART II-OTHER INFORMATION
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