References to the "Company," "Leo Holdings III Corp," "Leo Holdings III," "our,"
"us" or "we" refer to Leo 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 other
SEC filings.
Overview
We are a blank check company incorporated as a Cayman Islands exempted company
on January 8, 2021. We were formed for the purpose of effecting a merger, share
exchange, asset acquisition, share purchase, reorganization or similar business
combination with one or more businesses (the "Business Combination"). We are an
emerging growth company and, as such, we are subject to all of the risks
associated with emerging growth companies.
Our sponsor is Leo Investors III LP, a Cayman Islands exempted limited
partnership (the "Sponsor"). The registration statement for our Initial Public
Offering was declared effective on February 25, 2021. On March 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 in the United States with Continental
Stock Transfer & Trust Company acting as trustee, and will be invested only in
U.S. government securities, within the meaning set forth in Section 2(a)(16) of
the Investment Company Act of 1940, as amended (the "Investment Company Act"),
with a maturity of 185 days or less or in any open-ended investment company that
holds itself out as a money market fund 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 under Cayman 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.

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In accordance with SEC Staff Accounting Bulletin No. 99, "Materiality," and SEC
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 the SEC on March 2, 2021 (the
"Post-IPO Balance Sheet") and our Form 10-Qs for the quarterly periods ended
March 31, 2021, and June 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
On June 17, 2021, we entered into an Agreement and Plan of Merger (the "merger
agreement") by and among Longleaf Merger Sub, Inc., a Delaware corporation
("Merger Sub 1"), Longleaf Merger Sub II, LLC ("Merger Sub 2") and Local Bounti
Corporation, a Delaware 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 into Local Bounti, which Local
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 the Securities and Exchange Commission on October 7, 2021 for additional
information.
Liquidity and Capital Resources
As of September 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 on March 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 to September 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 ended September 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 from January 8, 2021 (inception) through September 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.
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Contractual Obligations
Administrative Support Agreement
Commencing on the date that the Company's securities were first listed on the
New York Stock Exchange, the Company agreed to pay the Sponsor a total of
$10,000 per month for office space, secretarial and administrative services
provided to the Company. Upon completion of the initial Business Combination or
the Company's liquidation, the Company will cease paying these monthly fees. We
incurred and paid approximately $30,000 and $58,000 in expenses in connection
with such services for the three months ended September 30, 2021 and for the
period from January 8, 2021 (inception) through September 30, 2021,
respectively, as reflected in the accompanying unaudited condensed consolidated
statements of operations. As of September 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 on
March 2, 2021 to purchase an additional 3,500,000 Over-Allotment Units. The
remaining unexercised over- allotment option expired at the conclusion of the
45-day
option period.
The underwriter was entitled to an underwriting discount of $0.20 per unit, or
$5.5 million in the aggregate, paid upon the closing of the Initial Public
Offering. In addition, $0.35 per unit, or approximately $9.6 million in the
aggregate will be payable to the underwriter for deferred underwriting
commissions. The deferred fee will become payable to the underwriter from the
amounts held in the Trust Account solely in the event that we complete a
Business Combination, subject to the terms of the underwriting agreement.
Critical Accounting Policies
Class A ordinary shares subject to possible redemption
We account for its Class A ordinary shares subject to possible redemption in
accordance with the guidance in ASC Topic 480 "Distinguishing Liabilities from
Equity." Class A ordinary shares subject to mandatory redemption (if any) are
classified as liability instruments and are measured at fair value.
Conditionally redeemable Class A ordinary shares (including Class A ordinary
shares that feature redemption rights that are either within the control of the
holder or subject to redemption upon the occurrence of uncertain events not
solely within our control) are classified as temporary equity. At all other
times, Class A ordinary shares are classified as shareholders' equity. Our
Class A ordinary shares feature certain redemption rights that are considered to
be outside of our control and subject to the occurrence of uncertain future
events. Accordingly, as of September 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 ended September 30, 2021 and for the period from January 8, 2021
(inception) through September 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

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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
In August 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
on January 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 of September 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 of September 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 in U.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 direct
U.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 the SEC'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 ended September 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 ended September 30, 2021 covered by this
First

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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.

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PART
II-OTHER
INFORMATION

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