Lerer Hippeau Acquisition Corp. - Quarter Report: 2022 June (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-Q
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2022
OR
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number:
001-40168
LERER HIPPEAU ACQUISITION CORP.
(Exact name of registrant as specified in its charter)
Delaware |
86-1418494 | |
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
100 Crosby Street, Suite 201 New York, New York |
10012 | |
(Address Of Principal Executive Offices) |
(Zip Code) |
(646)
237-4837
Registrant’s telephone number, including area code
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
Class A common stock, $0.0001 par value |
LHAA |
The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2
of the Exchange Act.
Large accelerated filer |
☐ |
Accelerated filer |
☐ | |||
Non-accelerated filer |
☒ |
Smaller reporting company |
☒ | |||
Emerging growth company |
☒ |
|||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act). Yes ☒ No ☐ As of August 11, 2022, 22,951,509 Class A common
shares
, par value $0.0001 per share, and 5,566,546 Class B common shares, par value $0.0001 per share, were issued and outstanding. LERER HIPPEAU ACQUISITION CORP.
Form
10-Q
For the Quarterly Period Ended June 30, 2022
Table of Contents
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PART I. FINANCIAL INFORMATION
Item 1. |
Condensed Financial Statements |
LERER HIPPEAU ACQUISITION CORP.
CONDENSED BALANCE SHEETS
June 30, 2022 |
December 31, 2021 |
|||||||
(Unaudited) |
||||||||
| Assets: |
||||||||
| Current assets: |
||||||||
| Cash |
$ | 15,458 | $ | 625,442 | ||||
| Prepaid expenses |
339,410 | 530,528 | ||||||
| |
|
|
|
|||||
| Total current assets |
354,868 | 1,155,970 | ||||||
| Investments held in Trust Account |
223,003,796 | 222,680,678 | ||||||
| |
|
|
|
|||||
| Total Assets |
$ |
223,358,664 |
$ |
223,836,648 |
||||
| |
|
|
|
|||||
| Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Deficit: |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 60,207 | $ | 46,685 | ||||
| Accrued expenses |
150,018 | 172,000 | ||||||
| Franchise tax payable |
113,475 | 194,023 | ||||||
| Income tax payable |
10,456 | — | ||||||
| Convertible promissory note – related party |
100,000 | — | ||||||
| |
|
|
|
|||||
| Total current liabilities |
434,156 | 412,708 | ||||||
| Deferred underwriting commissions |
7,793,165 | 7,793,165 | ||||||
| |
|
|
|
|||||
| Total liabilities |
8,227,321 | 8,205,873 | ||||||
| Commitments and Contingencies |
||||||||
| Class A common stock subject to possible redemption, $0.0001 par value; 22,266,185 shares issued and outstanding at redemption value of $10.00 per share at June 30, 2022 and December 31, 2021 |
222,661,850 | 222,661,850 | ||||||
| Stockholders’ Deficit: |
||||||||
| Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding at June 30, 2022 and December 31, 2021 |
— | — | ||||||
| Class A common stock, $0.0001 par value; 200,000,000 shares authorized; 685,324 shares issued and outstanding (excluding 22,266,185 shares subject to possible redemption) at June 30, 2022 and December 31, 2021 |
69 | 69 | ||||||
| Class B common stock, $0.0001 par value; 20,000,000 shares authorized; 5,566,546 shares issued and outstanding at June 30, 2022 and December 31, 2021 |
557 | 557 | ||||||
| Additional paid-in capital |
— | — | ||||||
| Accumulated deficit |
(7,531,133 | ) | (7,031,701 | ) | ||||
| |
|
|
|
|||||
| Total stockholders’ deficit |
(7,530,507 | ) | (7,031,075 | ) | ||||
| |
|
|
|
|||||
| Total Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Deficit |
$ |
223,358,664 |
$ |
223,836,648 |
||||
| |
|
|
|
|||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
1
LERER HIPPEAU ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
For The Three Months Ended June 30, |
For The Six Months Ended June 30, 2022 |
For The Period From January 12, 2021 (inception) through June 30, 2021 |
||||||||||||||
2022 |
2021 |
|||||||||||||||
General and administrative expenses |
$ | 345,937 | $ | 184,483 | $ | 653,944 | $ | 265,257 | ||||||||
Administrative expenses - related party |
30,000 | 30,000 | 60,000 | 38,387 | ||||||||||||
Franchise tax expenses |
49,315 | 60,479 | 98,132 | 93,151 | ||||||||||||
Loss from operations |
(425,252 | ) | (274,962 | ) | (812,076 | ) | (396,795 | ) | ||||||||
Gain on investments held in Trust Account |
300,695 | 8,020 | 323,118 | 11,258 | ||||||||||||
Interest expense |
(18 | ) | — | (18 | ) | — | ||||||||||
Loss before income taxes |
(124,575 | ) | (266,942 | ) | (488,976 | ) | (385,537 | ) | ||||||||
Income tax expense |
(10,456 | ) | — | (10,456 | ) | — | ||||||||||
Net loss |
$ | (135,031 | ) | $ | (266,942 | ) | $ | (499,432 | ) | $ | (385,537 | ) | ||||
Weighted average shares outstanding of Class A common stock, basic and diluted |
22,951,509 | 22,951,509 | 22,951,509 | 16,151,062 | ||||||||||||
Basic and diluted net loss per share, Class A common stock |
$ | (0.00 | ) | $ | (0.01 | ) | $ | (0.02 | ) | $ | (0.02 | ) | ||||
Weighted average shares outstanding of Class B common stock, basic and diluted |
5,566,546 | 5,566,546 | 5,566,546 | 5,398,681 | ||||||||||||
Basic and diluted net loss per share, Class B common stock |
$ | (0.00 | ) | $ | (0.01 | ) | $ | (0.02 | ) | $ | (0.02 | ) | ||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
2
LERER HIPPEAU ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
For the Three and Six Months Ended June 30, 2022
Common Stock |
Additional Paid-In Capital |
Accumulated Deficit |
Total Stockholders’ Deficit |
|||||||||||||||||||||||||
Class A |
Class B |
|||||||||||||||||||||||||||
Shares |
Amount |
Shares |
Amount |
|||||||||||||||||||||||||
Balance - December 31, 2021 |
685,324 |
$ |
69 |
5,566,546 |
$ |
557 |
$ |
— |
$ |
(7,031,701 |
) |
$ |
(7,031,075 |
) | ||||||||||||||
Net loss |
— |
— |
— |
— |
— |
(364,401 | ) | (364,401 | ) | |||||||||||||||||||
Balance - March 31, 2022 (Unaudited) |
685,324 |
69 |
5,566,546 |
557 |
— |
(7,396,102 |
) |
(7,395,476 |
) | |||||||||||||||||||
Net loss |
— |
— |
— |
— |
— |
(135,031 | ) | (135,031 | ) | |||||||||||||||||||
Balance - June 30, 2022 (Unaudited) |
685,324 |
$ |
69 |
5,566,546 |
$ |
557 |
$ |
— |
$ |
(7,531,133 |
) |
$ |
(7,530,507 |
) | ||||||||||||||
For the Three Months Ended June 30, 2021 and For the Period from January 12, 2021 (inception) through June 30, 2021
Common Stock |
Additional Paid-In Capital |
Accumulated Deficit |
Total Stockholders’ Deficit |
|||||||||||||||||||||||||
Class A |
Class B |
|||||||||||||||||||||||||||
Shares |
Amount |
Shares |
Amount |
|||||||||||||||||||||||||
Balance - January 12, 2021 (inception) |
— |
$ |
— |
— |
$ |
— |
$ |
— |
$ |
— |
$ |
— |
||||||||||||||||
Issuance of Class B common stock to Sponsor |
— |
— |
5,750,000 | 575 | 24,425 | — |
25,000 | |||||||||||||||||||||
Sale of private placement shares to Sponsor in private placement |
685,324 | 69 | — |
— |
6,853,171 | — |
6,853,240 | |||||||||||||||||||||
Forfeiture of Class B common stock |
— |
— |
(183,454 | ) | (18 | ) | 18 | — |
— | |||||||||||||||||||
Accretion of Class A common stock subject to possible redemption |
— |
— |
— |
— |
(6,877,614 | ) | (5,999,818 | ) | (12,877,432 | ) | ||||||||||||||||||
Net loss |
— |
— |
— |
— |
— |
(118,595 | ) | (118,595 | ) | |||||||||||||||||||
Balance - March 31, 2021 (Unaudited) |
685,324 |
69 |
5,566,546 |
557 |
— |
(6,118,413 |
) |
(6,117,787 |
) | |||||||||||||||||||
Net loss |
— |
— |
— |
— |
— |
(266,942 | ) | (266,942 | ) | |||||||||||||||||||
Balance - June 30, 2021 (Unaudited) |
685,324 |
$ |
69 |
5,566,546 |
$ |
557 |
$ |
— |
$ |
(6,385,355 |
) |
$ |
(6,384,729 |
) | ||||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
3
LERER HIPPEAU ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
For The Six Months Ended June 30, 2022 |
For The Period From January 12, 2021 (inception) through June 30, 2021 |
|||||||
Cash Flows from Operating Activities: |
||||||||
Net loss |
$ | (499,432 | ) | $ | (385,537 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
Gain on investments held in Trust Account |
(323,118 | ) | (11,258 | ) | ||||
Changes in operating assets and liabilities: |
||||||||
Prepaid expenses |
191,118 | (795,355 | ) | |||||
Accounts payable |
83,522 | 41,527 | ||||||
Accrued expenses |
(21,982 | ) | 34,000 | |||||
Franchise tax payable |
(80,548 | ) | 93,151 | |||||
Income tax payable |
10,456 | — | ||||||
Net cash used in operating activities |
(639,984 | ) | (1,023,472 | ) | ||||
Cash Flows from Investing Activities |
||||||||
Cash deposited in Trust Account |
— | (222,661,850 | ) | |||||
Net cash used in investing activities |
— | (222,661,850 | ) | |||||
Cash Flows from Financing Activities: |
||||||||
Repayment of note payable to related party |
— | (65,093 | ) | |||||
Proceeds from issuance of Class B common stock to Sponsor |
— | 25,000 | ||||||
Proceeds received from convertible promissory note -related party |
100,000 | — | ||||||
Proceeds received from initial public offering |
— | 222,661,850 | ||||||
Proceeds received from private placement |
— | 6,853,240 | ||||||
Offering costs paid |
(70,000 | ) | (4,934,174 | ) | ||||
Net cash provided by financing activities |
30,000 | 224,540,823 | ||||||
Net increase (decrease) in cash |
(609,984 | ) | 855,501 | |||||
Cash - beginning of the period |
625,442 | — | ||||||
Cash - end of the period |
$ |
15,458 |
$ |
855,501 |
||||
Supplemental disclosure of noncash activities: |
||||||||
Offering costs included in accounts payable |
$ | — | $ | 15,000 | ||||
Offering costs included in accrued expenses |
$ | — | $ | 70,000 | ||||
Offering costs paid by related party under promissory note |
$ | — | $ | 65,093 | ||||
Deferred underwriting commissions in connection with the initial public offering |
$ | — | $ | 7,793,165 | ||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
4
LERER HIPPEAU ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note
1-Description
of Organization and Business Operations Lerer Hippeau Acquisition Corp. (the “Company”) is a blank check company incorporated in Delaware on January 12, 2021. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). The Company is an emerging growth company and, as such, the Company is subject to all of the risks associated with emerging growth companies.
As of June 30, 2022, the Company had not commenced any operations. All activity for the period from January 12, 2021 (inception) through June 30, 2022, relates to the Company’s formation and the initial public offering (the “Initial Public Offering” or “IPO”) described below, and since the Initial Public Offering, the search for a prospective initial Business Combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company generates
non-operating
income in the form of interest income earned on the Trust Account (as defined below). The Company’s sponsor is LHAC Sponsor LLC, a Delaware limited liability company (the “Sponsor”). The registration statement for the Company’s Initial Public Offering was declared effective on March 4, 2021. On March 9, 2021, the Company consummated its Initial Public Offering of 22,266,185 shares of Class A common stock, including the issuance of 2,266,185 shares of Class A common stock as a result of the underwriters’ partial exercise of their over-allotment option, (each, a “Public Share” and collectively, the “Public Shares”) at $10.00 per share, generating gross proceeds of approximately $222.7 million, and incurring offering costs of approximately $12.9 million, inclusive of approximately $7.8 million in deferred underwriting commissions (Note 5).
Simultaneously with the closing of the Initial Public Offering, the Company consummated the private placement (“Private Placement”) of 685,324 shares of Class A common stock (each, a “Private Placement Share” and collectively, the “Private Placement Shares”), at a price of $10.00 per Private Placement Share to the Sponsor, generating proceeds of approximately $6.9 million (Note 4).
Upon the closing of the Initial Public Offering and the Private Placement, approximately $222.7 million ($10.00 per share) of the net proceeds of the sale of the Public Shares in the Initial Public Offering and of the Private Placement Shares in 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 are invested in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”) having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule
2a-7
promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account as described below. The Company’s 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 Shares, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete one or more initial Business Combinations having an aggregate fair market value of at least 80% of the net assets held in the Trust Account (net of amounts disbursed to management for working capital purposes, if permitted, and excluding the amount of any deferred underwriting commissions) at the time of the agreement to enter into the initial Business Combination. However, the Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the 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.
The Company will provide the holders of the Public Shares (the “Public Stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The Public Stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then held in the Trust Account (initially at $10.00 per Public Share).
5
LERER HIPPEAU ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The
per-share
amount to be distributed to Public Stockholders who redeem their Public Shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters (as discussed in Note 5). These Public Shares are recorded at a redemption value and classified as temporary equity in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” The Company will proceed with a Business Combination if a majority of the shares voted are voted in favor of the Business Combination. The Company will not redeem the Public Shares in an amount that would cause its net tangible assets to be less than $5,000,001. If a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction is required by law, or the Company decides to obtain stockholder approval for business or legal reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. Additionally, each Public Stockholder may elect to redeem its Public Shares irrespective of whether it votes for or against the proposed transaction. If the Company seeks stockholder approval in connection with a Business Combination, the initial stockholders (as defined below) agreed to vote their Founder Shares (as defined below in Note 4) and any Public Shares purchased during or after the Initial Public Offering in favor of a Business Combination. In addition, the initial stockholders agreed to waive their redemption rights with respect to their Founder Shares and any Public Shares held by them in connection with the completion of a Business Combination.
The Certificate of Incorporation provides that a Public Stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15% or more of the Public Shares, without the prior consent of the Company.
The Sponsor and the Company’s officers and directors (the “initial stockholders”) agreed not to propose an amendment to the Certificate of Incorporation to modify the substance or timing of the Company’s obligation to redeem 100% of the Public Shares if the Company does not complete a Business Combination within the Combination Period (as defined below) or with respect to any other material provisions relating to stockholders’ rights or
pre-initial
Business Combination activity, unless the Company provides the Public Stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment. If the Company is unable to complete a Business Combination within 24 months from the closing of the Initial Public Offering, or March 9, 2023, or during any extended period of time that it may have to consummate a Business Combination as a result of an amendment to the Certificate of Incorporation (the “Combination Period”), the Company 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 the Company to pay its taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish Public Stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders and the board of directors, liquidate and dissolve, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. The initial stockholders agreed to waive their rights to liquidating distributions from the Trust Account with respect to the Founder Shares and the Private Placement Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the initial stockholders acquire Public Shares, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the Company fails to complete a Business Combination within the Combination Period. The underwriters agreed to waive their rights to the deferred underwriting commission (see Note 5) held in the Trust Account in the event the Company does not complete a Business Combination within in the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event
6
LERER HIPPEAU ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
of such distribution, it is possible that the per-share value of the residual assets remaining available for distribution (including Trust Account assets) will be
only $10.00. In order to protect the amounts held in the Trust Account, the Sponsor agreed to be liable to the Company if and to the extent any claims by a third party (except for the Company’s independent registered public accounting firm) for services rendered or products sold to the Company, or a prospective target business with which the Company has entered into a letter of intent, confidentiality or other similar agreement or business combination agreement (a “Target”), reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per Public Share and (ii) the actual amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.00 per Public Share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or Target that executed a waiver of any and all rights to the monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). The Company seeks to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (except for the Company’s independent registered public accounting firm), prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account. Liquidity and Going Concern
As of June 30, 2022, the Company had approximately $15,000 in its operating bank account and working capital of approximately $45,000 (not taking into account approximately $124,000 in franchise tax and income tax obligations that may be paid
using investment income earned on the Trust Account).
Prior to the completion of the IPO, the Company’s liquidity needs were satisfied through a cash contribution of $25,000 from the Sponsor to purchase the Founder Shares (as defined in Note 4) and a loan of approximately $65,000
from the Sponsor pursuant to the Note (as defined in Note 4), which was fully repaid on March 11, 2021. Subsequent to the consummation of the IPO and Private Placement, the Company’s liquidity needs have been satisfied with the proceeds from the consummation of the Private Placement not held in the Trust Account, and a
post-IPO
promissory note from the Sponsor (the “convertible promissory note – related party”) (see Note 4).In order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, provide the Company Working Capital Loans (as defined in Note 4). On June 27, 2022, the Company issued the convertible promissory note – related party in the amount of up to $650,000 to the Sponsor. As of June 30, 2022, $100,000 was drawn under the convertible promissory note – related party.
The Company believes it may need to raise additional funds in order to meet the expenditures required for operating the business. If the Company’s estimate of the costs of identifying a target business, undertaking
in-depth
due diligence and negotiating an initial Business Combination is less than the actual amount necessary to do so, the Company may have insufficient funds currently available to operate the business prior to the initial Business Combination. The Company may need to raise additional capital through additional loans or investments from its Sponsor, its officers or directors or their affiliates. The Company’s Sponsor, officers and directors, or their affiliates, may, but are not obligated to, loan the Company additional funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs. Accordingly, the Company may not be able to obtain additional financing. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, reducing overhead expenses, and extending the terms and due dates of certain accrued expenses and other liabilities. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all. In connection with the Company’s assessment of going concern considerations in
accordance
with FASB Accounting Standards Update (“ASU”) 2014-15,
“Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that the liquidity condition and mandatory liquidation and subsequent dissolution
raise substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after March 9, 2023. The condensed financial statements do not include any adjustment that might be necessary if the Company is unable to continue as a going concern. Management plans to complete a Business Combination prior to the mandatory liquidation date. 7
LERER HIPPEAU ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note
2-Basis
of Presentation and Summary of Significant Accounting Policies Basis of Presentation
The accompanying unaudited condensed financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for financial information and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP. In the opinion of management, the unaudited condensed financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. Operating results for the three and six months ended June 30, 2022 are not necessarily indicative of the results that may be expected through December 31, 2022.
The accompanying unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form
10-K
filed with the SEC on March 29, 2022. Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to
non-emerging
growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statement with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.Use of estimates
The preparation of condensed financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed financial statements and the reported amounts of revenues and expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the condensed financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
8
LERER HIPPEAU ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company had no cash equivalents as of June 30, 2022 and December 31, 2021.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal Depository Insurance Corporation Coverage limit of $250,000. As of June 30, 2022 and December 31, 2021, the Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.
Investments Held in Trust Account
The Company’s portfolio of investments is comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities and generally have a readily determinable fair value, or a combination thereof. When the Company’s investments held in the Trust Account are comprised of U.S. government securities, the investments are classified as trading securities. When the Company’s investments held in the Trust Account are comprised of money market funds, the investments are recognized at fair value. Trading securities and investments in money market funds are presented on the condensed balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities is included in gain from investments held in the Trust Account in the accompanying statements of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under the FASB ASC Topic 820, “Fair Value Measurements,” approximates the carrying amounts represented in the condensed balance sheets, primarily due to their short-term nature.
Fair Value Measurements
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
• |
Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
• |
Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
• |
Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
9
LERER HIPPEAU ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Offering Costs Associated with the Initial Public Offering
Offering costs consisted of legal, accounting, underwriting and other costs incurred that were directly related to the Initial Public Offering and that were charged against the carrying value of Class A common stock subject to possible redemption upon the completion of the Initial Public Offering. These costs amounted to approximately $12.9 million, consisting of approximately $4.5 million of underwriting fees, $7.8 million of deferred underwriting fees and $0.6 million of other offering costs.
Class A Common Stock Subject to Possible Redemption
The Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Class A common stock subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Conditionally redeemable Class A common stock (including shares of Class A common stock 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 the Company’s control) are classified as temporary equity. At all other times, Class A common stock are classified as stockholders’ equity. As part of the Private Placement, the Company issued 685,324 Private Placement Shares to the Sponsor. These Private Placement Shares will not be transferable, assignable or salable until 30 days after the completion of the Company’s initial Business Combination. They are also considered
non-redeemable
and are presented as permanent equity in the Company’s balance sheets
. The Company’s Class A common stock sold in the Initial Public Offering feature certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, as of June 30, 2022 and December 31, 2021, 22,266,185 shares of Class A common stock subject to possible redemption were presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s condensed balance sheets. Under ASC the Company has elected to recognize changes in the redemption value immediately as they occur and adjust the carrying value of the security to equal the redemption value at the end of each reporting period. This method would view the end of the reporting period as if it were also the redemption date for the security. Effective with the closing of the Initial Public Offering, the Company recognized the accretion from initial book value to redemption amount, which resulted in charges against additional
480-10-S99,
paid-in
capital (to the extent available) and accumulated deficit. Income Taxes
The Company complies with the accounting and reporting requirements of FASB ASC 740, “Income Taxes,” which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. As of June 30, 2022 and December 31, 2021, the Company had established a full valuation allowance on its deferred tax assets.
FASB ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be
more-likely-than-not
to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits, and no amounts were accrued for the payment of interest and penalties as of June 30, 2022 and December 31, 2021.The Company may be subject to potential examination by U.S. federal, U.S. state or foreign taxing authorities in the area of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with U.S. federal, U.S. state and foreign tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
10
LERER HIPPEAU ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Net Loss Per Share of Common Stock
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” The Company has two classes of shares, which are referred to as Class A common stock and Class B common stock. Income and losses are shared pro rata between the two classes of shares. Net loss per common share is calculated by dividing the net income by the weighted average shares of common stock outstanding for the respective period. Accretion associated with the redeemable Class A common stock is excluded from earnings per share as the redemption value approximates fair value.
The table below presents a reconciliation of the numerator and denominator used to compute basic and diluted net loss per share for each class of common
stock:
For The Three Months Ended June 30, |
For The Six Months Ended |
For The Period From January 12, 2021 (inception) |
||||||||||||||||||||||||||||||
2022 |
2021 |
June 30, 2022 |
through June 30, 2021 |
|||||||||||||||||||||||||||||
Class A |
Class B |
Class A |
Class B |
Class A |
Class B |
Class A |
Class B |
|||||||||||||||||||||||||
Basic and diluted net loss per common share: |
||||||||||||||||||||||||||||||||
Numerator: |
||||||||||||||||||||||||||||||||
Allocation of net loss |
$ | (108,674 | ) | $ | (26,357 | ) | $ | (214,837 | ) | $ | (52,105 | ) | $ | (401,946 | ) | $ | (97,486 | ) | $ | (288,952 | ) | $ | (96,585 | ) | ||||||||
Denominator: |
||||||||||||||||||||||||||||||||
Basic and diluted weighted average common shares outstanding |
22,951,509 | 5,566,546 | 22,951,509 | 5,566,546 | 22,951,509 | 5,566,546 | 16,151,062 | 5,398,681 | ||||||||||||||||||||||||
Basic and diluted net loss per common share |
$ | (0.00 | ) | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.02 | ) | $ | (0.02 | ) | $ | (0.02 | ) | $ | (0.02 | ) | ||||||||
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying condensed financial statements.
Note
3-Initial
Public Offering On March 9, 2021, the Company consummated its Initial Public Offering of 22,266,185 Public Shares, including the issuance of 2,266,185 Public Shares as a result of the underwriters’ partial exercise of their over-allotment option, at $10.00 per share, generating gross proceeds of approximately $222.7 million, and incurring offering costs of approximately $12.9 million, inclusive of approximately $7.8 million in deferred underwriting commissions.
Note
4-Related
Party Transactions Founder Shares
On January 20, 2021, the Sponsor purchased 5,750,000 shares of the Company’s Class B common stock, par value $0.0001 per share (the “Founder Shares”), for an aggregate price of $25,000. The initial stockholders agreed to forfeit up to 750,000 Founder Shares to the extent that the over-allotment option was not exercised in full by the underwriters, so that the Founder Shares would represent 20.0% of the Company’s issued and outstanding shares after the Initial Public Offering. On March 9, 2021, the underwriters partially exercised the over-allotment option to purchase 2,266,185 Public Shares and forfeited the remainder of their option; thus, an aggregate of 183,454 Founder Shares were forfeited and canceled by the Company.
The initial stockholders agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier to occur of: (A) one year after the completion of the initial Business Combination or earlier if, subsequent to the initial Business Combination, the closing price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any
30-trading
day period commencing at least 150 days after the initial Business Combination and (B) the date following the completion of the initial Business Combination on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction that results in all of the stockholders having the right to exchange their Class A common stock for cash, securities or other property.11
LERER HIPPEAU ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Private Placement Shares
Simultaneously with the closing of the Initial Public Offering, the Company consummated the Private Placement of 685,324 Private Placement Shares, at a price of $10.00 per Private Placement Share to the Sponsor, generating proceeds of approximately $6.9 million. A portion of the proceeds from the sale of the Private Placement Shares to the Sponsor was added to the proceeds from the Initial Public Offering held in the Trust Account.
The Sponsor and the Company’s officers and directors agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Shares until 30 days after the completion of the initial Business Combination.
Related Party Loans
On January 19, 2021, the Sponsor agreed to loan the Company an aggregate of up to $300,000 to cover expenses related to the Initial Public Offering pursuant to a promissory note (the “Note”). This loan was
non-interest
bearing and payable upon the completion of the Initial Public Offering. The Company borrowed approximately $65,000 under the Note and on March 11, 2021, the Company repaid the Note in full. The Note is no longer available to the Company. 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 the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing and the convertible promissory note – related party described below, the terms of any other such Working Capital Loans, if any, have not been determined and no other written agreements exist with respect to such loans. Any other such Working Capital Loans would either be repaid upon consummation of a Business Combination or, at the lenders’ discretion, up
to $
1.5million of such Working Capital Loans may be convertible into shares of the post Business Combination entity at a price
of $
10.00per share. The shares would be identical to the Private Placement Shares.
On June 27, 2022, the Company, issued the convertible promissory note – related party in the amount
of up to $650,000
to its Sponsor (the “Payee”). The proceeds of the convertible promissory note – related party, which may be drawn down from time to time until the earlier to occur of (i) March 9, 2023, which is the date that is 24 months from the closing of the Company’s IPO, or if the period of time that the Company has to consummate a Business Combination is extended as a result of an amendment to its Certificate of Incorporation, the latest date of such extended period, and (ii) the date of the consummation of a Business Combination (such earlier date of (i) and (ii), the “Maturity Date”), will be used for costs and expenses related to a Business Combination transaction and for general working capital purposes.
The convertible promissory note – related party bears interest at the lowest short-term Applicable Federal Rate (within the meaning of Internal Revenue Code Section 1274) in effect as of the date the note was issued and is payable in full upon the Maturity Date. A failure to pay the principal amount outstanding and any and all interest earned thereon (the “Full Balance”) on the Maturity Date or the commencement of a voluntary or involuntary bankruptcy action will be deemed an event of default, in which case the convertible promissory note – related party may be accelerated. Prior to the Company’s first payment of all or any portion of the Full Balance of the convertible promissory note – related party in cash, the Payee has the option to convert all, but not less than all, of the Full Balance of the convertible promissory note – related party into private placement shares (the “Conversion Shares”), equal to: (x) the Full Balance of the convertible promissory note – related party being converted, divided by (y) $10.00, rounded up to the nearest whole number of shares. The Conversion Shares would be identical to the Private Placement Shares. The Payee would be entitled to certain registration rights relating to the Conversion Shares. The Conversion Shares that may be issued pursuant to the convertible promissory note – related party would not be registered under the Securities Act, and would be issued in reliance on the exemption from registration requirements thereof provided by Section 4(a)(2) of the Securities Act. The Company has determined that the conversion feature does not require bifurcation as an embedded derivative and as such the carrying value of the loan is recognized at cost and presented as a liability on the accompanying condensed balance sheets.
12
LERER HIPPEAU ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
As of June 30, 2022, the Company had
$100,000
outstanding under the convertible promissory note – related party. No other
Working
Capital Loans were outstanding as of June 30, 2022. As of December 31, 2021, no Working Capital Loans were outstanding. Administrative Services Agreement
Commencing on the date that the Company’s securities were first listed on Nasdaq and continuing until the earlier of the Company’s consummation of a Business Combination or the Company’s liquidation, the Company agreed to pay the Sponsor a total of $10,000 per month for office space, secretarial and administrative services provided to members of the Company’s management team. For the three months ended June 30, 2022 and 2021, the Company incurred expenses of approximately $30,000 under this agreement. For the six months ended June 30, 2022 and for the period from January 12, 2021 (inception) through June 30, 2021, the Company incurred expenses of approximately $60,000 and $38,000, respectively, under the agreement. As of June 30, 2022 and December 31, 2021, the amount due to the Sponsor for these services was $150,000 and approximately $90,000,
respectively,
which is included in accounts payable and accrued expenses on the accompanying condensed balance sheets. The Sponsor, executive officers and directors, or any of their respective affiliates will be reimbursed for any expenses incurred in connection with activities on the Company’s behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. The Company’s audit committee reviews on a quarterly basis all payments that are made to the Sponsor, executive officers or directors, or the Company’s or their affiliates.
out-of-pocket
Note
5-Commitments
and Contingencies Registration Rights
The holders of Founder Shares, Private Placement Shares and shares that may be issued upon conversion of Working Capital Loans (including the Conversion Shares), if any, are entitled to registration rights pursuant to a registration rights agreement signed upon the consummation of the Initial Public Offering. These holders are entitled to certain demand and “piggyback” registration rights. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The Company granted the underwriters a
45-day
option from the date of the final prospectus relating to the Initial Public Offering to purchase up to 3,000,000 additional Public Shares to cover over-allotments, if any, at the Initial Public Offering price, less underwriting discounts and commissions. On March 9, 2021, the underwriters partially exercised the over-allotment option to purchase 2,266,185 Public Shares and forfeited the remaining of their option. The underwriters were entitled to an underwriting discount of $0.20 per Public Share, or approximately $4.5 million in the aggregate, paid upon the closing of the Initial Public Offering. In addition, $0.35 per Public Share, or approximately $7.8 million in the aggregate, will be payable to the underwriters for deferred underwriting commissions. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
Risks and Uncertainties
Various social and political circumstances in the United States and around the world (including wars and other forms of conflict, including rising trade tensions between the United States and China, and other uncertainties regarding actual and potential shifts in the United States and foreign, trade, economic and other policies with other countries,
13
LERER HIPPEAU ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
terrorist acts, security operations and catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes and global health epidemics), may also contribute to increased market volatility and economic uncertainties or deterioration in the United States and worldwide. Specifically, the rising conflict between Russia and Ukraine, and resulting market volatility could adversely affect the Company’s ability to complete a Business Combination. In response to the conflict between Russia and Ukraine, the United States and other countries have imposed sanctions or other restrictive actions against Russia. Any of the above factors, including sanctions, export controls, tariffs, trade wars and other governmental actions, could have a material adverse effect on the Company’s ability to complete a Business Combination and the value of the Company’s securities.
Management continues to evaluate the impact of these types of risks (including the impact of the ongoing global
COVID-19
pandemic on the industry) and has concluded that while it is reasonably possible that these risks and uncertainties could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these unaudited condensed financial statements. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty. Note
6-Class
A Common Stock Subject to Possible Redemption The Company’s Class A common stock sold in the Initial Public Offering features certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of future events. The Company is authorized to issue 200,000,000 shares of Class A common stock with a par value of $0.0001 per share. Holders of the Company’s Class A common stock are entitled to one vote for each share. As of June 30, 2022 and December 31, 2021, there were 22,266,185 shares of Class A common stock outstanding which were subject to possible redemption.
The Class A common stock subject to possible redemption reflected on the accompanying condensed balance sheets is reconciled on the following
table:
| Gross proceeds |
$ | 222,661,850 | ||
| Less: |
||||
| Offering costs allocated to Class A common stock subject to possible redemption |
(12,877,432 | ) | ||
| Plus: |
||||
| Accretion on Class A common stock subject to possible redemption amount |
12,877,432 | |||
| |
|
|||
| Class A common stock subject to possible redemption |
$ | 222,661,850 | ||
| |
|
Note
7-Stockholders’
Deficit Preferred Stock -
Class
A Common Stock -
non-redeemable
shares classified as permanent equity.Class
B Common Stock -
14
LERER HIPPEAU ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Stockholders of record are entitled to one vote for each share held on all matters to be voted on by stockholders. Holders of Class A common stock and holders of Class B common stock will vote together as a single class on all matters submitted to a vote of the stockholders except as required by law.
The Class B common stock will automatically convert into Class A common stock concurrently with or immediately following the consummation of the initial Business Combination on a basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like, and subject to further adjustment as provided herein. In the case that additional shares of Class A common stock or equity-linked securities are issued or deemed issued in connection with the initial Business Combination, the number of shares of Class A common stock issuable upon conversion of all Founder Shares will equal, in the aggregate, on an basis.
one-for-one
as-converted
basis, 20% of the total number of shares of Class A common stock outstanding after such conversion (after giving effect to any redemptions of shares of Class A common stock by Public Stockholders), including the total number of shares of Class A common stock issued, or deemed issued or issuable upon conversion or exercise of any equity-linked securities or rights issued or deemed issued, by the Company in connection with or in relation to the consummation of the initial Business Combination, excluding any shares of Class A common stock or equity-linked securities or rights exercisable for or convertible into shares of Class A common stock issued, or to be issued, to any seller in the initial Business Combination and any Private Placement Shares or Conversion Shares issued to the Sponsor, officers or directors upon conversion of Working Capital Loans, provided that such conversion of Founder
Shares will never occur on a less than one-for-one
Note
8-Fair
Value Measurements The following table presents information about the Company’s assets that are measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021 and indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value.
June 30, 2022
Description |
Quoted Prices in Active Markets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Other Unobservable Inputs (Level 3) |
|||||||||
| Funds that invest in U.S. Treasury Securities |
$ | 223,003,796 | $ | — | $ | — | ||||||
December 31, 2021
Description |
Quoted Prices in Active Markets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Other Unobservable Inputs (Level 3) |
|||||||||
| Funds that invest in U.S. Treasury Securities |
$ | 222,680,678 | $ | — | $ | — | ||||||
Transfers to/from Levels 1, 2, and 3 are recognized at the beginning of the reporting period. There were transfers between levels during the three and six months ended June 30, 2022, during the three months ended June 30, 2021 and for the period from January 12, 2021 (inception) through June 30, 2021.
no
Level 1 instruments include investments in mutual funds invested in government securities. The Company uses inputs such as actual trade data, benchmark yields, quoted market prices from dealers or brokers, and other similar sources to determine the fair value of its investments.
15
LERER HIPPEAU ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note
9-Subsequent
Events On August 4, 2022, the Company borrowed an additional $150,000 under its convertible promissory note – related party. As a result, as of the date of this filing, $250,000 is outstanding under the convertible promissory note – related party.
The Company evaluated subsequent events and transactions that occurred up to the date the condensed financial statements were issued. Based upon this review, other than the above, the Company determined that there have been no events that have occurred that would require recognition or adjustments to the disclosures in the condensed financial statements.
16
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
References to the “Company,” “Lerer Hippeau Acquisition Corp.,” “Lerer Hippeau,” “our,” “us” or “we” refer to Lerer Hippeau Acquisition 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 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
includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). 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 U.S. Securities and Exchange Commission (“SEC”) filings. Overview
We are a blank check company incorporated in Delaware on January 12, 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 LHAC Sponsor LLC, a Delaware limited liability company (the “Sponsor”). The registration statement for our initial public offering (“IPO”) was declared effective on March 4, 2021. On March 9, 2021, we consummated our IPO of 22,266,185 shares of Class A common stock, including the issuance of 2,266,185 shares of Class A common stock as a result of the underwriters’ partial exercise of their over-allotment option, (each, a “Public Share” and collectively, the “Public Shares”) at $10.00 per share, generating gross proceeds of approximately $222.7 million, and incurring offering costs of approximately $12.9 million, inclusive of approximately $7.8 million in deferred underwriting commissions.
Simultaneously with the closing of the IPO, we consummated the private placement (“Private Placement”) of 685,324 shares of Class A common stock (each, a “Private Placement Share” and collectively, the “Private Placement Shares”), at a price of $10.00 per Private Placement Share to the Sponsor, generating proceeds of approximately $6.9 million.
Upon the closing of the IPO and the Private Placement, approximately $222.7 million ($10.00 per share) of the net proceeds of the sale of the Public Shares in the IPO and of the Private Placement Shares in 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 United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”) having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule
2a-7
promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations, 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. 17
Our management has broad discretion with respect to the specific application of the net proceeds of the IPO and the sale of Private Placement Shares, 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 net assets held in the Trust Account (net of amounts disbursed to management for working capital purposes, if permitted, and excluding the amount of any deferred underwriting commissions) at the time 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 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 24 months from the closing of the IPO, or March 9, 2023, or during any extended period of time that we may have to consummate a Business Combination as a result of an amendment to our amended and restated certificate of incorporation (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 (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish Public Stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders and the board of directors, liquidate and dissolve, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. Liquidity and Going Concern
As of June 30, 2022, we had approximately $15,000 in our operating bank account, and working capital of approximately $45,000 (not taking into account approximately $124,000 in income tax and franchise tax obligations that may be paid using investment income earned on the Trust Account).
Our liquidity needs to date have been satisfied through a cash contribution of $25,000 from the Sponsor to purchase the Founder Shares (as defined in Note 4 to the accompanying condensed financial statements), the loan of approximately $65,000 from the Sponsor pursuant to an initial Note (as defined in Note 4 to the accompanying condensed financial statements), the proceeds from the consummation of the Private Placement not held in the Trust Account, and the proceeds from a
post-IPO
convertible promissory note from our Sponsor (“convertible promissory note – related party”) which is considered to be a Working Capital Loan (as defined in Note 4 to the accompanying condensed financial statements). The Company fully repaid the initial Note on March 11, 2021. In order to finance additional transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, provide the Company with additional Working Capital Loans. On June 27, 2022, we issued the convertible promissory note – related party in the amount of up to $650,000 to our Sponsor. The proceeds of the convertible promissory note – related party, may be drawn down from time to time until the Maturity Date (as defined in Note 4 to the accompanying condensed financial statements), and will be used for costs and expenses related to a Business Combination transaction and for general working capital purposes. The convertible promissory note – related party bears interest at the lowest short-term Applicable Federal Rate (within the meaning of Internal Revenue Code Section 1274) in effect as of the date the convertible promissory note – related party was issued and is payable in full upon the Maturity Date. As of June 30, 2022, $100,000 was drawn under the convertible promissory note – related party. No other Working Capital Loans were outstanding as of June 30, 2022. There were no Working Capital Loans outstanding at December 31, 2021.
We believe we may need to raise additional funds in order to meet the expenditures required for operating the business. If our estimate of the costs of identifying a target business, undertaking
in-depth
due diligence and negotiating an initial Business Combination is less than the actual amount necessary to do so, we may have insufficient funds currently available to operate the business prior to the initial Business Combination. We may need to raise additional capital through additional loans or investments from our Sponsor, our officers or directors or their affiliates. Our Sponsor, officers and directors, or their affiliates, may, but are not obligated to, loan us additional funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet our working capital needs. Accordingly, we may not be able to obtain additional financing. If we are unable to raise additional capital, we 18
may be required to take additional measures to conserve liquidity, which could include, but not necessarily be
limited
to, curtailing operations, suspending the pursuit of a potential transaction, reducing overhead expenses, and extending the terms and due dates of certain accrued expenses and other liabilities. We cannot provide any assurance that new financing will be available to us on commercially acceptable terms, if at all. In connection with our assessment of going concern considerations in accordance with Financial Accounting Standards Board’s (“FASB”) Accounting Standards Update (“ASU”)
2014-15,
“Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that the liquidity condition and mandatory liquidation and subsequent dissolution
raise substantial
doubt about our ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should we be required to liquidate after March 9, 2023. The condensed financial statements do not include any adjustment that might be necessary if we are unable to continue as a going concern. Various social and political circumstances in the United States and around the world (including wars and other forms of conflict, including rising trade tensions between the United States and China, and other uncertainties regarding actual and potential shifts in the United States and foreign, trade, economic and other policies with other countries, terrorist acts, security operations and catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes and global health epidemics), may also contribute to increased market volatility and economic uncertainties or deterioration in the United States and worldwide. Specifically, the rising conflict between Russia and Ukraine, and resulting market volatility could adversely affect our ability to complete a Business Combination. In response to the conflict between Russia and Ukraine, the United States and other countries have imposed sanctions or other restrictive actions against Russia. Any of the above factors, including sanctions, export controls, tariffs, trade wars and other governmental actions, could have a material adverse effect on our ability to complete a Business Combination and the value of our securities.
Management continues to evaluate the impact of these types of risks (including the impact of the ongoing global
COVID-19
pandemic on the industry) and has concluded that while it is reasonably possible that these risks and uncertainties could have a negative effect on our financial position, results of operations and/or search for a target company, the specific impact is not readily determinable as of the date of these unaudited condensed financial statements. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty. Results of Operations
Our entire activity from inception up to June 30, 2022, was for our formation and the IPO and, subsequent to the IPO, the search for a target for our initial Business Combination. We will not be generating any operating revenues until the closing and completion of our initial Business Combination.
For the three months ended June 30, 2022, we had a net loss of approximately $135,000, which consisted of approximately $346,000 in general and administrative expenses, $30,000 in administrative expenses—related party, approximately $49,000 in franchise tax expenses, and approximately $10,000 in income tax expense, partly offset by approximately $301,000 in gain on investments held in the Trust Account.
For the three months ended June 30, 2021, we had net losses of approximately $267,000, which consisted of approximately $184,000 in general and administrative expenses, approximately $30,000 in administrative expenses—related party, and approximately $60,000 in franchise tax expenses, partly offset by approximately $8,000 in gain on investments held in Trust Account.
For the six months ended June 30, 2022, we had a net loss of approximately $499,000, which consisted of approximately $654,000 in general and administrative expenses, $60,000 in administrative expenses—related party, approximately $98,000 in franchise tax expenses, and approximately $10,000 in income tax expense, partly offset by approximately $323,000 in gain on investments held in the Trust Account.
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For the period from January 12, 2021 (inception) through June 30, 2021, we had net losses of approximately $386,000, which consisted of approximately $266,000 in general and administrative expenses, approximately $38,000 in administrative expenses—related party, and approximately $93,000 in franchise tax expenses, offset by approximately $11,000 in gain on investments held in Trust Account.
Contractual Obligations
Administrative Services Agreement
Commencing on the date that our securities were first listed on Nasdaq and continuing until the earlier of our consummation of a Business Combination or our liquidation, we agreed to pay the Sponsor a total of $10,000 per month for office space, secretarial and administrative services provided to members of our management team.
Our Sponsor, executive officers and directors, or any of their respective affiliates will be reimbursed for any expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our audit committee reviews on a quarterly basis all payments that are made to our Sponsor, executive officers or directors, or our or their affiliates.
out-of-pocket
For the three months ended June 30, 2022 and 2021, the Company incurred expenses of
approximately
$30,000 under this agreement. For the six months ended June 30, 2022 and for the period from January 12, 2021 (inception) through June 30, 2021, the Company incurred expenses of $60,000 and approximately $38,000, respectively, under this agreement. As of June 30, 2022 and December 31, 2021, the amount due to the Sponsor for these services was $150,000 and approximately $90,000, respectively, which is included in accounts payable and accrued expenses on the accompanying condensed balance sheets. Registration Rights
The holders of Founder Shares, Private Placement Shares and shares that may be issued upon conversion of Working Capital Loans (including the Conversion Shares), if any, are entitled to registration rights pursuant to a registration rights agreement signed upon the consummation of the IPO. These holders are entitled to certain demand and “piggyback” registration rights. We will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
We granted the underwriters a
45-day
option from the date of the final prospectus relating to the IPO to purchase up to 3,000,000 additional Public Shares to cover over-allotments, if any, at the IPO price, less underwriting discounts and commissions. On March 9, 2021, the underwriters partially exercised the over-allotment option to purchase 2,266,185 Public Shares and forfeited the remainder of their option. The underwriters were entitled to an underwriting discount of $0.20 per Public Share, or approximately $4.5 million in the aggregate, paid upon the closing of the IPO. In addition, $0.35 per Public Share, or approximately $7.8 million in the aggregate, will be payable to the underwriters for deferred underwriting commissions. The deferred fee will become payable to the underwriters 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 Estimates
This management’s discussion and analysis of our financial condition and results of operations is based on our condensed financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these condensed financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our condensed financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to fair value of financial instruments and accrued expenses. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We have identified the following as our critical accounting estimates:
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Investments Held in the Trust Account
Our portfolio of investments is comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities and generally have a readily determinable fair value, or a combination thereof. When our investments held in the Trust Account are comprised of U.S. government securities, the investments are classified as trading securities. When our investments held in the Trust Account are comprised of money market funds, the investments are recognized at fair value. Trading securities and investments in money market funds are presented on the condensed balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities are included in gain from investments held in the Trust Account in the accompanying statements of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.
Class A Common Stock Subject to Possible Redemption
Class A common stock subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Conditionally redeemable Class A common stock (including shares of Class A common stock 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 common stock are classified as stockholders’ equity. As part of the Private Placement, the Company issued 685,324 Private Placement Shares to the Sponsor. These Private Placement Shares will not be transferable, assignable or salable until 30 days after the completion of our initial Business Combination. They are also considered
non-redeemable
and are presented as permanent equity in the Company’s balance sheets. Our Class A common stock sold in the IPO 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 June 30, 2022 and December 31, 2021, 22,266,185 shares of Class A common stock subject to possible redemption at the redemption amount were presented at redemption value as temporary equity, outside of the stockholders’ equity section of our condensed balance sheets. We recognize changes in redemption value immediately as they occur and adjust the carrying value of the Class A common stock subject to possible redemption to equal the redemption value at the end of each reporting period. Effective with the closing of the IPO, we recognized the accretion from initial book value to redemption amount, which resulted in charges against additional
paid-in
capital (to the extent available) and accumulated deficit. Net income (loss) per common shares
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 common stock and Class B common stock. Income and losses are shared pro rata between the two classes of shares. Net income per common share is calculated by dividing the net income by the weighted average shares of common stock outstanding for the respective period. Accretion associated with the redeemable Class A common stock is excluded from earnings per share as the redemption value approximates fair value.
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying condensed financial statements.
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 condensed financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates. 21
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 of the Sarbanes-Oxley Act, (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 IPO 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. The net proceeds of the IPO, including amounts in the Trust Account, are 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 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 |
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended June 30, 2022, 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 officer have concluded that during the period covered by this report, our disclosure controls and procedures were effective as of June 30, 2022. Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
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 June 30, 2022 covered by this Quarterly Report on Form
10-Q
that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. The material weakness discussed below was remediated during the quarter ended June 30, 2022. Remediation of a Material Weakness in Internal Control over Financial Reporting
We recognize the importance of the control environment as it sets the overall tone for the Company and is the foundation for all other components of internal control. Consequently, we designed and implemented remediation measures to address the material weakness previously identified in fiscal year 2021 and enhance our internal control
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over financial reporting. In light of the material weakness, we enhanced our processes to identify and appropriately apply applicable accounting requirements to better evaluate and understand the nuances of the complex accounting standards that apply to our condensed financial statements, including providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. The foregoing actions, which we believe remediated the material weakness in internal control over financial reporting, were completed as of the date of June 30, 2022.
PART
II-OTHER
INFORMATION Item 1. |
Legal Proceedings |
None.
Item 1A. |
Risk Factors |
Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in our Annual Report on Form
10-K
filed with the SEC on March 29, 2022. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. Except as set forth below, as of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K
filed with the SEC on March 29, 2022, except we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC. Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect our business, including our ability to negotiate and complete our initial Business Combination, and results of operations.
We are subject to laws and regulations enacted by national, regional and local governments. In particular, we are required to comply with certain SEC and other legal requirements. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly. Those laws and regulations and their interpretation and application may also change from time to time and those changes could have a material adverse effect on our business, investments and results of operations. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business, including our ability to negotiate and complete our initial Business Combination, and results of operations.
On March 30, 2022, the SEC issued proposed rules relating to, among other items, enhancing disclosures in business combination transactions involving special purpose acquisition companies and private operating companies; amending the financial statement requirements applicable to transactions involving shell companies; the potential liability of certain participants in proposed business combination transactions; and the extent to which special purpose acquisition companies could become subject to regulation under the Investment Company Act of 1940, as amended. These rules, if adopted, whether in the form proposed or in revised form, may materially adversely affect our ability to negotiate and complete our initial Business Combination and may increase the costs and time related thereto.
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
On March 9, 2021, we consummated our IPO of 22,266,185 shares of Class A common stock, including the issuance of 2,266,185 shares of Class A common stock as a result of the underwriters’ partial exercise of their over-allotment option, at $10.00 per share, generating gross proceeds of approximately $222,661,850.
The securities sold in our IPO were registered under the Securities Act on a registration statement on Form
S-1
(No. 333-253066).
The SEC declared the registration statement effective on March 4, 2021. 23
Of the gross proceeds received from the IPO and the partial exercise of the option to purchase additional shares, $222,661,850 was placed in the Trust Account. The net proceeds of the IPO and certain proceeds from the Private Placement are invested in U.S. government treasury bills with a maturity of 185 days or less and in money market funds meeting certain conditions under Rule
2a-7
under the Investment Company Act which invest only in direct U.S. government treasury obligations. Barclays Capital Inc. acted as the book running manager and Code Advisors LLC and Drexel Hamilton, LLC also served as underwriters in the IPO.
We paid a total of approximately $5.1 million in underwriting discounts and commissions and other offering costs related to the IPO. In addition, the underwriters agreed to defer approximately $7.8 million in underwriting discounts and commissions.
For a description of the use of proceeds generated in our IPO, see Part I, Item 2 of this Form
10-Q.
On June 27, 2022, we issued the convertible promissory note – related party in the amount of up to $650,000 to our Sponsor (the “Payee”). The proceeds of the convertible promissory note – related party, which may be drawn down from time to time until the Maturity Date, will be used for costs and expenses related to a Business Combination transaction and for general working capital purposes.
The convertible promissory note – related party bears interest at the lowest short-term Applicable Federal Rate (within the meaning of Internal Revenue Code Section 1274) in effect as of the date the note was issued and is payable in full upon the Maturity Date. A failure to pay the principal amount outstanding and any and all interest earned thereon (the “Full Balance”) on the Maturity Date or the commencement of a voluntary or involuntary bankruptcy action will be deemed an event of default, in which case the convertible promissory note – related party may be accelerated. Prior to our first payment of all or any portion of the Full Balance of the convertible promissory note – related party in cash, the Payee has the option to convert all, but not less than all, of the Full Balance of the convertible promissory note – related party into private placement shares (the “Conversion Shares”), equal to: (x) the Full Balance of the convertible promissory note – related party being converted, divided by (y) $10.00, rounded up to the nearest whole number of shares. The Conversion Shares would be identical to the Private Placement Shares. The Payee would be entitled to certain registration rights relating to the Conversion Shares. The Conversion Shares that may be issued pursuant to the convertible promissory note – related party would not be registered under the Securities Act, and would be issued in reliance on the exemption from registration requirements thereof provided by Section 4(a)(2) of the Securities Act.
Item 3. |
Defaults upon Senior Securities |
None.
Item 4. |
Mine Safety Disclosures. |
Not applicable.
Item 5. |
Other Information. |
None.
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Item 6. |
Exhibits. |
| * | These certifications are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing. |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused
this report to be signed on its behalf by the undersigned hereunto duly authorized. | Dated: August 11, 2022 | LERER HIPPEAU ACQUISITION CORP. | |||||
| By: | /s/ Eric Hippeau | |||||
| Name: | Eric Hippeau | |||||
| Title: | Chief Executive Officer | |||||
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