LERER HIPPEAU ACQUISITION CORP. References to the "Company," "
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 otherU.S. Securities and Exchange Commission ("SEC") filings.
Overview
We are a blank check company incorporated in
Our sponsor is
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
Upon the closing of the IPO and the Private Placement, approximately
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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, orMarch 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 underDelaware law to provide for claims of creditors and the requirements of other applicable law.
Liquidity and Going Concern
As of
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 onMarch 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
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
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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 withFinancial 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 afterMarch 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
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
For the three months ended
For the three months ended
For the six months ended
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For the period from
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
Our Sponsor, executive officers and directors, or any of their respective affiliates will be reimbursed for any out-of-pocket 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. For the three months endedJune 30, 2022 and 2021, the Company incurred expenses of approximately$30,000 under this agreement. For the six months endedJune 30, 2022 and for the period fromJanuary 12, 2021 (inception) throughJune 30, 2021 , the Company incurred expenses of$60,000 and approximately$38,000 , respectively, under this agreement. As ofJune 30, 2022 andDecember 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. OnMarch 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
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
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Investments Held in the Trust Account
Our portfolio of investments is comprised of
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 ofJune 30, 2022 andDecember 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.
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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.
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