Local Bounti Corporation: Form 10-Q for the period ended Sep 30, 2025

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 revolutionize agriculture, ensuring accessibility to fresh, sustainable, locally grown produce to nourish communities everywhere for generations to come. Our vision is to reimagine freshness. We envision a future where transformative innovation and technology combine to enable us to grow produce locally with minimal food miles, ensuring the freshest and most sustainable offerings for communities everywhere. 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 achievements in sustainable agriculture.

Company Overview

Local Bounti is a controlled environment agriculture ("CEA") company that produces sustainably grown produce, focused primarily on living lettuce, herbs, salad kits, and loose leaf lettuce. Founded in 2018 and headquartered in Hamilton, Montana, Local Bounti utilizes its patented Stack & Flow Technology® to grow healthy food sustainably and affordably. Our proprietary process is a hybrid growing approach, utilizing vertical farming in early plant growth, followed by greenhouse farming for final grow out. We designed our Stack & Flow 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, and consistent 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 commercial operation by the second half of 2020. In 2022, we acquired California-based complementary greenhouse farming company Hollandia Produce Group, Inc. and its subsidiaries, which operated under the name Pete's. Through the Pete's Acquisition, we significantly increased our growing footprint to include two then-existing facilities in California and one under-construction facility in Georgia. The Georgia facility initially became operational in July 2022 and was significantly expanded in 2023. In 2024, we completed construction on two new facilities in Washington and Texas, bringing our total facility count to six.

We distribute our products to approximately 13,000 retail locations across 35 U.S. states, primarily through direct relationships with blue-chip retail customers, including Albertsons, Sam's Club, Kroger, Target, Walmart, Whole Foods, Brookshire's, H-E-B, Sprouts, and AmazonFresh. Our primary products 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 recently introduced new Grab & Go Salads and additions to our baby leaf portfolio with several high-velocity offerings, including bok choy, arugula, and basil. In addition, we introduced 50/50 blend and power greens in the third quarter of 2024. We signed an offtake agreement with Sam's Club in October 2022 for our leafy greens production, initially from our Georgia facility and now including both our Georgia and Texas facilities. The offtake agreement provides for the sale of defined minimum quantities of leafy greens from our Georgia and Texas facilities and runs through September 2028.

We intend to continue to increase our production capacity and expand our reach to new markets, new geographies, and new customers through the building of new facilities, the expansion of existing facilities, or the acquisition of existing greenhouse facilities, which we would evaluate to update with our Stack & Flow Technology. We conduct an ongoing build-versus-buy analysis whenever we decide to build a new facility or acquire an existing facility. We also continue to explore expanding our product offerings 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.

Commercial Facility Update

Texas Facility Reconfiguration Complete

As previously reported, we reconfigured three acres of our Texas facility—originally designed for head lettuce production—to create a flexible growing environment capable of producing both head lettuce and cut products based on customer preferences. The retrofit was completed in late July, and the facility reached full harvestable capacity in early August. The automated harvesting equipment installation was completed and became fully operational during the third quarter, replacing the temporary harvester used during the second quarter. The Texas facility is now sold out on a run-rate basis.

Yield Improvement

We continue to advance our yield improvement and cost reduction initiatives across our facility network. Planned tower upgrades have been installed at each of our facilities following the completion of work at the Texas and Washington facilities in early September. These upgrades are designed to achieve better climate control through the stack phase to enhance production efficiency and increase yield capacity. Management expects to complete optimization in the fourth quarter of 2025 with resultant yield increases of more than 10% to follow.

Cost Reduction Initiatives

Looking ahead, we have targeted additional cost reduction initiatives in the range of $1.5 to $2.0 million, annualized, to be actioned in the fourth quarter of 2025 and realized in the first half of 2026 with additional measures to follow. These savings stem from ongoing projects to improve operational efficiency and reduce costs in key areas like raw materials, packaging, labor, utilities and other cost of goods sold. Within raw materials, these savings are expected to stem from further seed and substrate cost reductions, where management has already made great progress in 2025.

Capacity Expansion Project

Plans remain in place to build additional capacity across our network of facilities enabled with our patented Stack & Flow Technology. The 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. The timing and scope of these projects, including plans to expand into the Midwest, remain under review pending ongoing discussions with retailers to optimize those facilities for specific products in support of retail commitments and strategies to expand distribution.

Intellectual Property

We continue to advance our intellectual property portfolio and recently received a positive update related to our previously filed patent application in 2022 titled "Optimizing Growing Process in a Hybrid Growing Environment Using Computer Vision and AI." We anticipate that this patent may be issued as early as December 2025. We have been utilizing computer vision and AI at all of our Stack & Flow Technology-enabled facilities to analyze plant growth data in conjunction with environmental data to identify patterns that drive improved consistency and yield.

Product Development & Distribution

During the third quarter of 2025, we expanded distribution of our salad kit line across additional regional retailers in the Pacific Northwest, demonstrating ongoing demand for convenient and fresh meal options. In the home-delivery channel, we successfully launched four new grab-and-go offerings with a leading partner, thus increasing the depth of our assortment and further positioning ourselves for growth in the direct-to-consumer segment. Additionally, we entered into an agreement to pack private label Butter Living for Markon Cooperative, which serves as the purchasing, logistics, information, and marketing partner for its five member distributors and their North American foodservice customers. This partnership highlights the trust and credibility we have established with our partners.

Regarding product commercialization, we finalized our new family-sized 10oz Romano Caesar Salad Kit, which launched in key Pacific Northwest retailers, including Walmart, in October. This move advances our strategy to offer multi-serve products at scale.

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, including increased expenses associated with growing operations;
• Identify and invest in future growth opportunities, including new product lines;
• 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

Results of Operations

Three and Nine Months Ended September 30, 2025 compared to the Three and Nine Months Ended September 30, 2024

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

(in thousands)

(in thousands)

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

(in thousands)

(in thousands)

(2) Amounts include depreciation and amortization as follows:

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 our revenue from the sale of produce grown at our six facilities. Sales increased by $2.0 million for the three months ended September 30, 2025, compared to the three months ended September 30, 2024 and sales increased by $7.8 million for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024. The increase was due to increased production and growth in sales from our facility in Georgia and sales from our new facilities in Texas and Washington, which began shipping and selling products in the second quarter of 2024.

Cost of Goods Sold

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

Cost of goods sold increased by $2.0 million for the three months ended September 30, 2025, compared to the three months ended September 30, 2024 and increased by $7.1 million for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, due primarily to production ramp-up at our new Texas and Washington facilities and increased production at our Georgia facilities.

Research and Development

Research and development expenses primarily consist of costs associated with the ongoing development, improvement, testing, alteration, and refinement of our product offerings, production lines, manufacturing processes, growing techniques, and post-harvest packaging methods. Our research and development efforts focus on enhancing each facility’s indoor environmental controls, growing recipes, and refining Stack & Flow Technology processes, all aimed at meeting facility design and production yield specifications. Additionally, we also focus on the development of new leafy green product offerings, value-added products such as Grab & Go Salads, and new crops, including arugula, basil, and berries. Research and development activities are conducted at the facilities in Montana, Texas, Washington, California, and Georgia.

Research and development costs increased by $0.4 million for the three months ended September 30, 2025, compared to the three months ended September 30, 2024 and increased by $5.0 million for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024. The increase is driven primarily by the additional development of our production, harvesting, and post-harvest packaging techniques and processes, including production surplus costs, related to the development and testing of our commercial-scale Stack & Flow Technology and production processes at the Washington, Texas, and Georgia facilities.

Sales and Marketing

Sales and marketing expenses consist of employee compensation, including salaries, benefits, and stock-based compensation for our sales and marketing teams, transportation and delivery costs, marketing, and advertising, among others.

Sales and marketing costs increased by $0.5 million for the three months ended September 30, 2025, compared to the three months ended September 30, 2024. The increase is driven primarily by an increase of $0.2 million in transportation and delivery costs as a result of increased shipments of produce driven by an increase in sales. The remaining difference is due to individually immaterial differences.

Sales and marketing costs increased by $1.1 million for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024. The increase is driven primarily by an increase of $0.5 million in transportation and delivery costs as a result of increased shipments of produce driven by an increase in sales and an increase of $0.2 million in salaries, commissions, benefits, and payroll-related expenses. The remaining difference is due to individually immaterial differences.

General and Administrative

General and administrative expenses consist of employee compensation, including salaries, benefits, and stock-based compensation for our executive, legal, finance, information technology, and human resources teams, expenses for third-party professional services, insurance, computer hardware and software, and amortization of intangible assets, among others.

General, and administrative expenses increased by $0.2 million for the three months ended September 30, 2025, compared to the three months ended September 30, 2024, primarily driven by an impairment charge of $3.7 million related to Pete's trade name, which was partially offset by a decrease of $1.6 million in loss on disposal of assets, a decrease of $0.8 million in salaries, benefits, and payroll-related expenses, a decrease of $0.3 million in professional fees, a decrease of $0.2 million in insurance, and a decrease of $0.2 million in property tax. The remaining difference is due to individually immaterial differences.

General, and administrative expenses increased by $1.9 million for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, primarily driven by an impairment charge of $3.7 million related to Pete's trade name and an increase in stock-based compensation $1.6 million. This increase was partially offset by a decrease of $1.6 million in loss on disposal of assets, a decrease of $0.9 million in salaries, benefits, and payroll-related expenses, and a decrease of $0.9 million in professional fees.

Change in Fair Value of Warrant Liability

The change in fair value of warrant liability includes the mark-to-market adjustments to the Cargill Amended Warrants liability and the U.S. Bounti Warrant liability to reflect their fair value as of the end of the reporting period. The increase in fair value of the warrant liability is primarily due to the Eleventh Amendment entered into on March 31, 2025, which amended the Cargill Original Warrants by decreasing the per share exercise price of the Cargill Original Warrants from $6.50 to $4.00 per share with an amended expiration date of March 31, 2033 and the issuance of the U.S. Bounti Warrant in connection with the issuance of a convertible note with an initial principal balance of $10.0 million on August 1, 2025. The issuance of the U.S. Bounti Warrant and the change in terms of the Cargill Amended Warrants increased the value of the warrants and the related liability for the nine months ended September 30, 2025. Additional increase in the value of the warrants for the three months ended September 30, 2025 is primarily due to a net increase in our closing stock price at September 30, 2025 compared to the closing stock price on the prior measurement date of June 30, 2025. The period-end close stock price is a key input to the Black-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 with Cargill Financial, and also interest recognized per the terms of our financing obligation related to the Montana Facility and the California 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 decreased by $13.8 million for the three months ended September 30, 2025, compared to the three months ended September 30, 2024. The decrease is primarily due to a decrease in the principal amount outstanding under the Senior Facility as a result of the Eleventh Amendment, which decreased interest expense by $13.8 million, net of interest capitalized, over the prior year period.

Interest expense, net decreased by $12.4 million for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024. The decrease is primarily due to a decrease in the principal amount outstanding under the Senior Facility as a result of the Eleventh Amendment, which decreased interest expense by $12.4 million, net of interest capitalized, over the prior year period.

Liquidity and Capital Resources

We have incurred losses and generated negative cash flows from operations since our inception. At September 30, 2025, we had an accumulated deficit of $508.9 million and cash and cash equivalents and restricted cash of $12.7 million.

As of September 30, 2025, the principal amount due under our credit facility with Cargill Financial totaled $302.0 million, none of which is classified as current. In addition, the Company has an outstanding convertible note for $10.0 million to U.S. Bounti, LLC, none of which is classified as current. The debt agreements with Cargill Financial 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 credit facilities with U.S. Bounti, LLC and Cargill Financial. Cash expenditures over the next 12 months are expected to include 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 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 need it or, if available, that the terms will be satisfactory to us and not dilutive to existing shareholders. Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth in Item 1A, Risk Factors, of the Company's most recent Annual Report on Form 10-K. Our failure to raise capital as and when needed could have significant negative consequences for our business, financial condition, and results of consolidated operations.

Cargill Loans

As of September 30, 2025, a total of $302.0 million of principal was outstanding on the Senior Facility. The Senior Facility is included in "Long-term debt, net" on the Unaudited Condensed Consolidated Balance Sheets. The Eleventh Amendment, as described in Note 6, Debt, to the Unaudited Condensed Consolidated Financial Statements, resulted in a lower principal balance and a reduced interest rate. In addition, a debt premium recorded in connection with the amendment will be amortized as a reduction to interest expense over the 10-year term of the Amended Senior Credit Agreement using the effective interest method.

From January 1, 2027 to December 31, 2029, interest will accrue on $100 million of the Senior Facility and will be due and payable in cash starting the first business day after the close of each calendar quarter, beginning with the quarter commencing April 1, 2027, and continuing through December 31, 2029. Interest accruing on the outstanding principal balance of the Senior Facility in excess of $100 million will, at the Company’s option, either be paid in cash or paid in kind, beginning with the quarter commencing April 1, 2027, and continuing through December 31, 2029. As no interest payments are due in the next twelve months, the accrued interest has been classified within "Accrued interest, noncurrent" on the Unaudited Condensed Consolidated Balance Sheets.

From January 1, 2030 to March 31, 2031, interest will accrue on up to $200 million of the Senior Facility and will be due and payable in cash starting the first business day after the close of each calendar quarter, beginning with the quarter commencing April 1, 2030, and continuing through March 31, 2031. Interest accruing on the outstanding principal balance of the Senior Facility in excess of $200 million will, at the Company's option, either be paid in cash or paid-in-kind, beginning with the quarter commencing April 1, 2027, and continuing through March 31, 2031.

At all times after March 31, 2031, interest shall be payable only in cash on the first business day after each calendar quarter end. Additionally, beginning in the fourth quarter of 2027, 50% of the free cash flow generated in the preceding quarter must be used for principal repayment on a quarterly basis. The maturity date of the Senior Facility subsequent to the Eleventh Amendment is December 31, 2035.

U.S. Bounti, LLC Convertible Note

On August 1, 2025, the Company entered into a Convertible Note and Warrant Purchase Agreement with U.S. Bounti, LLC, providing for the issuance of (i) the Note with an initial principal balance of $10.0 million and (ii) the U.S. Bounti Warrant pursuant to which U.S. Bounti, LLC has the right to purchase and acquire 550,000 shares of our common stock. The Note has a maturity date of August 1, 2030 and carries a 6.0% annual interest rate, with interest added to the Note balance twice a year through the end of 2028. From time to time after August 1, 2028, interest may be payable quarterly in arrears in cash, commencing December 31, 2028, if certain conditions are met. As no interest payments are due in the next twelve months, the accrued interest has been classified within "Accrued interest, noncurrent" on the Unaudited Condensed Consolidated Balance Sheets.

The Note can be converted into our common stock at the Conversion Price, which is $2.50 per share. Conversion of the full initial principal amount of the Note would result in the issuance of 4.0 million shares of our common stock, with additional shares possible from accrued interest. On August 1, 2029, 50% of the Note Obligations Amount will be automatically converted into shares of our common stock at the Conversion Price. The remaining 50% of the Note Obligations Amount will be automatically converted into shares of our common stock at the Conversion Price on the maturity date of the Note. The Note is subordinated to obligations under the Company’s Senior Facility.

Financing Obligations

We have two financing obligations 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 sale leaseback transaction of the Montana Facility with Grow Bitterroot, LLC, a related party, for total consideration of $6.9 million with a current lease term of 20 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 with an initial term of 25 years relating to our 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 California Facilities and the Montana Facility:

(in thousands)

Cash Flow Analysis

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

(in thousands)

Net Cash Used In Operating Activities

Net cash used in operating activities was $27.2 million for the nine months ended September 30, 2025 due to a net loss of $85.7 million. This was partially offset by non-cash activities of $17.6 million in depreciation and amortization expense, $25.3 million in paid-in-kind interest, a non-cash loss of $8.4 million related to change in fair value of warrant liability, $4.1 million in stock-based compensation expense, net of amounts capitalized, and $2.1 million in amortization of debt issuance costs, and $1.1 million net increase of cash from changes in operating assets and liabilities.

Net cash used in operating activities was $28.3 million for the nine months ended September 30, 2024 primarily due to a net loss of $83.6 million. This was partially offset by non-cash activities of $23.3 million in paid-in-kind interest, $10.3 million in depreciation expense, $6.3 million in amortization of debt issuance costs, $2.7 million in amortization expense, $2.1 million in stock-based compensation expense, net of amounts capitalized, and $5.7 million net increase of cash from changes in operating assets and liabilities.

Net Cash Used In Investing Activities

Net cash used in investing activities was $12.1 million for the nine months ended September 30, 2025, 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 $72.6 million for the nine months ended September 30, 2024, due primarily to purchases of construction materials and services, equipment, and other items for the Washington, Texas, and Georgia facilities.

Net Cash Provided By Financing Activities

Net cash provided by financing activities was $44.5 million for the nine months ended September 30, 2025, comprised of $21.4 million of proceeds from the issuance of Series A Preferred Stock, $10.5 million of proceeds from the issuance of debt, $10.0 million of proceeds from the issuance of the U.S. Bounti, LLC convertible note, and $3.5 million from the issuance of common stock.

Net cash provided by financing activities was $90.8 million for the nine months ended September 30, 2024, comprised of $90.9 million of net proceeds from the issuance of debt.

Critical Accounting Policies and Estimates

There have been no changes to the Company’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, 2024.

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.

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.

Limitations on effectiveness of control and procedures

In designing and evaluating 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 September 30, 2025, 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 three months ended September 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Except as set forth below, 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, 2024:

U.S. Bounti, LLC ("U.S. Bounti"), following conversion of our Series A Preferred Stock, controls the direction of our business and the concentrated ownership of our common stock may prevent other stockholders from influencing significant decisions.

Following the conversion of our Series A Preferred Stock into common stock at the annual stockholders’ meeting held on June 11, 2025, U.S. Bounti, an entity controlled by Charles R. Schwab, holds the voting power over approximately 55% of our outstanding common stock. Mr. Schwab, through his control of other entities which also hold shares of our common stock, beneficially owns approximately 60% of our outstanding common stock. Mr. Schwab, through his control of U.S. Bounti and other entities holding shares of our common stock, is able to significantly influence our decisions, including the election of directors (and U.S. Bounti has the right to appoint two of our directors), and the approval of significant corporate transactions, such as mergers and related party transactions. Mr. Schwab, through his control of U.S. Bounti and other entities holding shares of our common stock, also has the ability to delay or block, by ownership of our common stock, an unsolicited tender offer. This concentration of ownership could have the effect of delaying, deterring or preventing a change in control of the Company that stockholders might view favorably. Additionally, U.S. Bounti’s interests may not align with the interests of our other stockholders. U.S. Bounti may make investments in companies and may acquire and hold interests in businesses that compete directly or indirectly with us and may also pursue acquisition opportunities that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us.

Although we do not expect to rely on the "controlled company" exemption, we qualify as a "controlled company" within the meaning of the NYSE rules, and we qualify for exemptions from certain corporate governance requirements.

A "controlled company," as defined in the NYSE rules, is a company of which more than 50% of the voting power for the election of directors is held by an individual, a group or another company. Controlled companies are not required to comply with certain NYSE continued listing standards relating to corporate governance, including:

• the requirement that a majority of a company’s board of directors consist of independent directors;
• the requirement that a company’s nominating and corporate governance committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and
• the requirement that a company’s compensation committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.

Charles R. Schwab, through his control of entities which also hold shares of our common stock, beneficially owns approximately 60% of our outstanding common stock. Because Mr. Schwab beneficially owns a majority of the voting power for the election of our directors, and we meet the definition of a "controlled company," these requirements would not apply to us as long as we remain a "controlled company."

We currently do not, and we do not expect to, rely on this exemption and we currently comply with, and we expect to continue to comply with, all relevant corporate governance requirements under the NYSE rules. However, if we were to utilize some or all of these exemptions, our stockholders may not have the same protections afforded to stockholders of companies that are subject to all of the NYSE continued listing standards that relate to corporate governance.