Local Bounti CorporationDE

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

(1)Amounts include stock-based compensation as follows:

(2)Amounts include depreciation and amortization as follows:

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 and 2023

(in thousands, except share data)

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

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

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 produce, focused primarily on living and loose leaf lettuce, arugula, spinach, and basil. The Company is a controlled environment agriculture ("CEA") company that utilizes patented Stack & Flow Technology®, 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.

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, 2023 (the "Annual Financial Statements") as filed with the SEC. In the opinion of the Company, the accompanying Unaudited Condensed Consolidated Financial Statements contain all adjustments, consisting of only normal recurring adjustments, necessary to fairly present its financial position as of September 30, 2024, its results of operations for the three and nine months ended September 30, 2024 and 2023, its cash flows for the nine months ended September 30, 2024 and 2023, and its stockholders' (deficit) equity for the three and nine months ended September 30, 2024 and 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, 2024 or any future period. The Unaudited Condensed Consolidated Balance Sheet at December 31, 2023 was derived from the Annual Financial Statements but does not contain all of the footnote disclosures from the Annual Financial Statements.

Liquidity and Going Concern

The CEA business is highly capital-intensive. Since its inception, the Company has incurred losses and generated negative cash flows from operations. At September 30, 2024, the Company had an accumulated deficit of $387.0 million and cash and cash equivalents and restricted cash of $6.8 million. Currently, the Company’s primary sources of liquidity and capital resources are cash on hand, cash flows generated from the sale of products, and the credit facilities with Cargill Financial.

As of September 30, 2024, the Company's outstanding debt principal totaled $431.7 million. On April 1, 2025, the Company is required to begin making quarterly principal payments under the Senior Facility (defined below) and quarterly interest payments under both the Senior Facility and the Subordinated Facility (defined below).

The Company’s current operating plan indicates that it will continue to incur losses from operations and generate negative cash flows from operating activities until the Texas and Washington facilities start operating at full commercial scale and generate sufficient gross profit to cover its losses. The Company's cash on hand as of September 30, 2024, and projected cash inflows generated from operations over the next 12 months are not expected to be sufficient to fund anticipated cash outflows for operations and the required debt service obligations beginning April 1, 2025. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for the next twelve months.

The Company’s Unaudited Condensed Consolidated Financial Statements as of September 30, 2024, do not include any adjustments that might result from the outcome of this uncertaintyand have been prepared to assume the Company will continue as a going concern.

The Company’s plan to alleviate the conditions that raised substantial doubt about its ability to continue as a going concern includes the following:

•Renegotiate the terms of the credit facilities with Cargill Financial to provide the Company with additional working capital over the next twelve months, subject to terms and conditions precedent to the Senior Facility.

•Renegotiate the terms of the credit facilities with Cargill Financial to defer all principal payments due under the Senior Facility through November 30, 2025, subject to terms and conditions precedent to the Senior Facility.

•Renegotiate the terms of the credit facilities with Cargill Financial to allow for the payment in kind of the interest payments on the Senior Facility and the Subordinated Facility through November 30, 2025, subject to terms and conditions precedent to the Senior Facility.

•Renegotiate the terms of the credit facilities with Cargill Financial to waive the restricted cash requirement of two quarters of future interest and principal payments through November 30, 2025, subject to terms and conditions precedent to the Senior Facility.

•Continue to ramp production at the Company’s Washington and Texas facilities to full commercial scale to accelerate and significantly increase revenue growth.

•Reduce production costs as a result of manufacturing and technical developments.

•Lower research and development and general and administrative costs.

•Reduce or delay uncommitted capital expenditures, including nonessential facilities and information technology projects.

•Raise additional working capital through other sources of debt and equity financings.

While the Company fully expects to implement and execute its plans and to have access to these additional sources of capital, such plans or other additional sources of financing may not be achievable on favorable terms and conditions, or at all, and these conditions and events in the aggregate do not alleviate substantial doubt regarding the Company’s ability to continue as a going concern over the next twelve months from the date these Unaudited Condensed Consolidated Financial Statements are issued.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Expenditures for additions and improvements are capitalized; expenditures for maintenance and repairs that neither materially add to the value of the property nor appreciably prolong its economic life are charged to expense as incurred.

Assets to be disposed of by sale are reported as assets held for sale at the lower of the carrying amount or the asset's fair value less cost to sell, and depreciation is ceased. Assets to be disposed of other than by sale are recorded at cost less accumulated depreciation and classified as held and used until the asset is disposed. Upon sale or other disposition of an asset, the Company recognizes a gain or loss on disposal measured as the difference between the net carrying amount of the asset and the net proceeds received.

During the three and nine months ended September 30, 2024, the Company recognized a $1.6 million loss on assets disposed of other than by sale, primarily related to construction-in-progress assets related to certain growing technology and equipment that will not be utilized in the Company's current facilities or in future construction projects, following the Company’s realignment of its facility in Hamilton, Montana (the "Montana Facility") away from a research and development focus and an assessment of recent growing process advancements and alignment of the Company's technology across its facilities. Loss on disposals are included in "Selling, general and administrative" on the Unaudited Condensed Consolidated Statements of Operations.

Recently Adopted Accounting Pronouncements

In August 2020, the FASB issued ASU 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, which simplifies the accounting for certain financial instruments with 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 November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires additional disclosures and disaggregation of certain costs and expenses presented on the face of the income statement. The standard is effective for the Company for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. The requirements in ASU 2024-03 can be applied either on a retrospective or prospective basis. Early adoption is permitted. The Company has not concluded to early adopt or on the method of adopting the provisions of ASU 2024-03 and is currently evaluating the impact of this standard on its Unaudited Condensed Consolidated Financial Statements.

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, 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 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.

3. Inventory

Inventories consisted of the following:

4. Property and Equipment

Property and equipment, net consisted of the following:

Depreciation expense related to property and equipment was $5.0 million and $1.7 million for the three months ended September 30, 2024 and 2023, respectively, and $10.3 million and$5.2 million for thenine months ended September 30, 2024 and 2023, respectively.

5. Accrued Liabilities

Accrued liabilities consisted of the following:

6. Debt

Debt consisted of the following:

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 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 and certain subsidiaries and Cargill Financial entered into a series of amendments: the First Amendment, the Second Amendment, the Third Amendment, the Fourth Amendment, the Fifth Amendment, the Sixth Amendment, and the Seventh Amendment to the Original Credit Agreements.

In the first half of 2024, Local Bounti Operating Company LLC, the Company, and certain subsidiaries and Cargill Financial entered into the Eighth Amendment, the Ninth Amendment, and the Tenth Amendment to the Original Credit Agreements (as so amended, collectively referred to as the "Amended Credit Agreements"), as further described below.

Eighth Amendment to Credit Agreements

On January 23, 2024, the Company, along with certain subsidiaries of the Company, entered into an Eighth Amendment to the Original Credit Agreements (the "Eighth Amendment") with Cargill Financial to further amend the Original Credit Agreements. The Eighth Amendment allows for the payment in kind of the quarterly interest payments due and payable for the quarter ending March 31, 2024.

Ninth Amendment to Credit Agreements

On March 26, 2024, the Company, along with certain of its subsidiaries, entered into a Ninth Amendment to the Original Credit Agreements (the "Ninth Amendment") with Cargill Financial to further amend the Original Credit

Agreements. The Ninth Amendment 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, $15.0 million of which has been drawn down.

Tenth Amendment to Credit Agreements

On June 28, 2024, the Company, along with certain of its subsidiaries, entered into a Tenth Amendment to the Original Credit Agreements (the "Tenth Amendment") with Cargill Financial to further amend the Original Credit Agreements. The Tenth Amendment adds a new maximum cash operating expense to revenue ratio covenant, to be tested beginning with the fiscal quarter ending September 30, 2024.

General provisions to the Amended Credit Agreements

The interest rate on the Subordinated Facility is 12.5% per annum. 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 day of the subsequent quarter through the maturity date on September 3, 2028. Principal payments are due and payable quarterly under the Senior Facility, beginning April 1, 2025, based on the principal balance as of December 31, 2023 and assuming a fixed 10-year straight line amortization schedule. The remaining unpaid principal balance under both the Senior Facility and the Subordinated Facility is 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 on the 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 totwo quarters of scheduled interest payments andtwo quarters of scheduled principal payments.

The Amended Credit Agreements contain a minimum liquidity covenant and certain other financial covenants that become measurable and effective beginning in the third quarter of 2025, including debt coverage, net leverage, and interest coverage ratios. The Sixth Amendment added a quarterly minimum production covenant for each facility based on pounds produced and sold during each quarter effective beginning in the second quarter of 2023 and the Tenth Amendment added a cash operating expense to revenue ratio effective beginning in the third quarter of 2024. 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 failed to achieve the minimum liquidity, minimum production, operating expense ratio covenants and exceeded certain capital expenditure limitations during the quarter ended September 30, 2024. The Company was able to obtain waivers for these covenant violations; therefore, it was in compliance with all applicable covenants as of September 30, 2024.

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:

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

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:

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:

As of September 30, 2024 and December 31, 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.

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 initial 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.

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 thenine months ended September 30, 2024 is as follows:

Total RSA expense for the three and nine months ended September 30, 2024 was $0.1 million and $0.5 million, respectively. Total RSA expense for the three and nine months ended September 30, 2023 was $0.3 million and $0.9 million, respectively. As of September 30, 2024, the total compensation cost related to unvested RSAs not yet recognized is $0.1 million. Unvested RSA expense not yet recognized is expected to be recognized over a weighted average period of 0.4 years.

Restricted Stock Units

A summary of therestricted stock units ("RSUs") activity for the nine months ended September 30, 2024 is as follows:

Total RSU expense, net of amounts capitalized, for the three and nine months ended September 30, 2024 was $1.3 million and $1.6 million, respectively. Total RSU expense, net of amounts capitalized, for the three and nine months ended September 30, 2023 was $2.9 million and $12.8 million, respectively. As of September 30, 2024, the total compensation cost related to unvested RSUs not yet recognized is $4.5 million. Unvested RSU expense not yet recognized is expected to be recognized over a weighted average period of 1.75 years.

9. Net Loss Per Share

Net loss per share is computed by dividing net loss by the weighted average number of common shares 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 thethree and nine months ended September 30, 2024 and 2023 because the effects of potentially dilutive items were anti-dilutive given the Company's net loss. If and when applicable, 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.

The following table sets forth the computation of the Company's net loss per share attributable to common stockholders:

The following table discloses the weighted-average shares outstanding of securities that could potentially dilute basic net loss 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:

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.