Table of Contents
 
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, 2021March 31, 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 237-4837
Registrant’s telephone number, including area code
Not Applicable
(Former name, or 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
12
, 2021,May 16, 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 respectively.
.
 
 
 
Table of Contents
LERER HIPPEAU ACQUISITION CORP.
Form
10-Q
For the Quarterly Period From January 12, 2021 (inception) Through June 30, 2021Ended March 31, 2022
Table of Contents
 
     
Page
 
PART I. FINANCIAL INFORMATION
     
Item 1.
 
Condensed Financial Statements (Unaudited)
   1 
  
Unaudited Condensed Balance SheetSheets as of June 30,March 31, 2022 (unaudited) and December 31, 2021
   1 
  
Unaudited Condensed Statements of Operations for the Three Months Ended June 30, 20201three months ended March 31, 2022 and for the Periodperiod from January 12, 2021 (inception) through June 30,March 31, 2021
   2 
  
Unaudited Condensed Statements of Changes in Stockholders’ Equity (Deficit) for the three months ended June 30, 2021March 31, 2022 and for the period from January 12, 2021 (inception) through June 30,March 31, 2021
   3 
  
Unaudited Condensed StatementStatements of Cash Flows for the three months ended March 31, 2022 and for the period from January 12, 2021 (inception) through June 30,March 31, 2021
   4 
  
Notes to Unaudited Condensed Financial Statements
   5 
Item 2. 
Management’s Discussion and Analysis of Financial Condition and Results of Operations
   15 
Item 3. 
Quantitative and Qualitative Disclosures About Market Risk
   19 
Item 4. 
Controls and Procedures
   19 
PART II. OTHER INFORMATION
     
Item 1. 
Legal Proceedings
   20 
Item 1A. 
Risk Factors
   20 
Item 2. 
Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities
   20 
Item 3. 
Defaults Upon Senior Securities
   2120 
Item 4. 
Mine Safety Disclosures
   2120 
Item 5. 
Other Information
   21 
Item 6. 
Exhibits
   21 
Signatures
   2322 
Table of Contents
PART I. FINANCIAL INFORMATION
 
Item 1.
Condensed Financial Statements (Unaudited)
LERER HIPPEAU ACQUISITION CORP.
UNAUDITED CONDENSED BALANCE SHEETSHEETS
JUNE 30, 2021
   
M
arch 31, 2022
  
December 31, 2021
 
   
(Unaudited)
    
Assets:
   
Current assets:
   
Cash  $298,462  $625,442 
Prepaid expenses   469,275   530,528 
          
Total current assets
   767,737   1,155,970 
Investments held in Trust Account   222,703,101   222,680,678 
          
Total Assets
  
$
223,470,838
 
 
$
223,836,648
 
          
   
Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Deficit:
         
Current liabilities:         
Accounts payable  $132,605  $46,685 
Accrued expenses   214,534   172,000 
Franchise tax payable   64,160   194,023 
          
Total current liabilities
   411,299   412,708 
Deferred underwriting commissions   7,793,165   7,793,165 
          
Total liabilities
   8,204,464   8,205,873 
   
Commitments and Contingencies
   0    0  
   
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 March 31, 2022 and December 31, 2021   222,661,850   222,661,850 
   
Stockholders’ Deficit:
         
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; NaNissued or outstanding at March 31, 2022 and December 31, 2021   0—     0—   
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 March 31, 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 March 31, 2022 and December 31, 2021   557   557 
Additional
paid-in
capital
   0     0   
Accumulated deficit   (7,396,102)   (7,031,701) 
          
Total stockholders’ deficit
   (7,395,476)   (7,031,075) 
          
Total Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Deficit
  
$
223,470,838
 
 
$
223,836,648
 
          
Assets:
     
Current assets:
     
Cash
  $855,501 
Prepaid expenses
   795,355 
   
 
 
 
Total current assets
  
 
1,650,856
 
Investments held in Trust Account
   222,673,108 
   
 
 
 
Total Assets
  
$
224,323,964
 
   
 
 
 
Liabilities and Stockholders’ Equity:
     
Current liabilities:
     
Accounts payable
  $56,527 
Accrued expenses
   104,000 
Franchise tax payable
   93,151 
   
 
 
 
Total current liabilities
  
 
253,678
 
Deferred underwriting commissions in connection with the initial public offering
   7,793,165 
   
 
 
 
Total liabilities
   8,046,843 
 
    
Commitments and Contingencies
0   
Class A common stock, $0.0001 par value; 21,127,712 shares subject to possible redemption at $10.00 per share
   211,277,120 
 
 
 
 
 
Stockholders’ Equity:
     
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; NaN issued and outstanding
   0—   
Class A common stock, $0.0001 par value; 200,000,000 shares authorized; 1,823,797 shares issued and outstanding (excluding 21,127,712 shares subject to possible redemption)
   182 
Class B common stock, $0.0001 par value; 20,000,000 shares authorized; 5,566,546 shares issued and outstanding
   557 
Additional
paid-in
capital
   5,384,799 
Accumulated deficit
   (385,537) 
   
 
 
 
Total stockholders’ equity
   5,000,001 
   
 
 
 
Total Liabilities and Stockholders’ Equity
  
$
224,323,964
 
   
 
 
 
The accompanying notes are an integral part of these unaudited condensed financial statements.
1
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LERER HIPPEAU ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
   
For The Three Months
Ended March 31, 2022
  
For The Period From
January 12, 2021
(inception) through
March 31, 2021
 
General and administrative expenses  $308,007  $80,774 
Administrative expenses - related party   30,000   8,387 
Franchise tax expenses   48,817   32,672 
          
Loss from operations   (386,824)   (121,833) 
Gain on investments held in Trust Account   22,423   3,238 
          
Net loss
  $(364,401)  $(118,595) 
          
   
Weighted average shares outstanding of Class A common stock, basic and diluted
   22,951,509   7,434,996 
          
Basic and diluted net loss per share, Class A common stock
  $(0.01)  $(0.01) 
          
Weighted average shares outstanding of Class B common stock, basic and diluted
   5,566,546   5,183,529 
          
Basic and diluted net loss per share, Class B common stock
  $(0.01)  $(0.01) 
          
The accompanying notes are an integral part of these unaudited condensed financial
statements
.
2
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LERER HIPPEAU ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
For the Three Months Ended March 31, 2022
 
      
For The Period From January 12,
 
   
For The Three Months Ended
  
2021 (inception) through
 
   
June 30, 2021
  
June 30, 2021
 
General and administrative expenses
 ��$184,483  $265,257 
Administrative expenses - related party
   30,000   38,387 
Franchise tax expenses
   60,479   93,151 
   
 
 
  
 
 
 
Loss from operations
   (274,962)   (396,795) 
Gain on investments held in Trust Account
   8,020   11,258 
   
 
 
  
 
 
 
Net loss
  $(266,942)  $(385,537) 
   
 
 
  
 
 
 
Basic and diluted weighted average shares outstanding of Class A redeemable common stock
   22,266,185   22,266,185 
   
 
 
  
 
 
 
Basic and diluted net income per share, Class A redeemable common stock
  $0    $0   
   
 
 
  
 
 
 
Basic and diluted weighted average shares outstanding of Class A and Class B
non-redeemable
common stock
   6,251,870   5,880,946 
   
 
 
  
 
 
 
Basic and diluted net loss per share, Class A and Class B
non-redeemable
common stock
  $(0.04)  $(0.07) 
   
 
 
  
 
 
 
  
Common Stock
        
Total
Stockholders’
Deficit
 
  
Class A
  
Class B
  
Additional
Paid-In

Capital
  
Accumulated
Deficit
 
  
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
) 
                             
For
the Period from January 12, 2021 (inception) through March 31, 2021
  
Common Stock
        
Total
Stockholders’
Deficit
 
  
Class A
  
Class B
  
Additional
Paid-In

Capital
  
Accumulated
Deficit
 
  
Shares
  
Amount
  
Shares
  
Amount
 
                             
Balance - January 12, 2021 (inception)
  —    $—     —    $—    $—    $—    $0—   
Issuance of Class B common stock to Sponsor  0     —     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
) 
                             
The accompanying notes are an integral part of these unaudited condensed financial statements.
23
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LERER HIPPEAU ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
CASH FLOWS
For the Three
 Months Ended June 30, 2021 and the Period from January 12, 2021 (inception) through June 30, 2021
   
Common Stock
        
Total
Stockholders’
Equity
 
   
Class A
  
Class B
  
Additional Paid-In

Capital
  
Accumulated
Deficit
 
   
Shares
  
Amount
  
Shares
  
Amount
 
Balance - January 12, 2021 (inception)
  
 
0—  
 
 
$
—  
 
 
 
—  
 
 
$
—  
 
 
$
—  
 
 
$
—  
 
 
$
0—  
 
Issuance of Class B common stock to Sponsor
   0—     —     5,750,000   575   24,425   —     25,000 
Sale of shares in initial public offering, gross
   22,266,185   2,227   —     —     222,659,623   —     222,661,850 
Offering costs
   —     —     —     —     (12,877,432)   —     (12,877,432) 
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
   0—     —     (183,454)   (18)   18   —     —   
Common stock subject to possible redemption
   (21,154,406)   (2,116)   —     —     (211,541,944)   —     (211,544,060) 
Net loss
   —     —     —     —     —     (118,595)   (118,595) 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Balance - March 31, 2021 (unaudited)
  
 
1,797,103
 
 
 
180
 
 
 
5,566,546
 
 
 
557
 
 
 
5,117,861
 
 
 
(118,595
) 
 
 
5,000,003
 
Common stock subject to possible redemption
   26,694   2   —     —     266,938   —     266,940 
Net loss
   —     —     —     —     —     (266,942)   (266,942) 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Balance - June 30, 2021 (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
$
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
1,823,797
 
 
$
182
 
 
 
5,566,546
 
  
557
 
 
 
5,384,799
 
 
 
(385,537
) 
 
 
5,000,001
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
         
   
For The Three
Months Ended
March 31, 2022
  
For The Period From
January 12, 2021
(inception) through
March 31, 2021
 
Cash Flows from Operating Activities:
         
Net loss  $(364,401)  $(118,595) 
Adjustments to reconcile net loss to net cash used in operating activities:         
Gain on investments held in Trust Account   (22,423)   (3,238) 
Changes in operating assets and liabilities:         
Prepaid expenses   61,253   (883,372) 
Accounts payable   85,920   943,568 
Accrued expenses   42,534   4,321 
Franchise tax payable   (129,863)   32,672 
          
Net cash used in operating activities
   (326,980)   (24,644) 
          
   
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 initial public offering   —     222,661,850 
Proceeds received from private placement   —     6,853,240 
Offering costs paid   —     (4,630,880) 
          
Net cash provided by financing activities
   —     224,844,117 
          
   
Net increase in cash
   (326,980)   2,157,623 
Cash - beginning of the period
   625,442   0—   
          
Cash - end of the period
  
$
298,462
 
 
$
2,157,623
 
          
   
Supplemental disclosure of noncash activities:
         
Offering costs included in accounts payable  $—    $318,294 
          
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.
3
4
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LERER HIPPEAU ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENT OF CASH FLOWS
For the Period from January 12, 2021 (inception) through June 30, 2021
Cash Flows from Operating Activities:
  
Net loss
  $(385,537) 
Adjustments to reconcile net loss to net cash used in operating activities:
  
Gain on investments held in Trust Account
   (11,258) 
Changes in operating assets and liabilities:
  
Prepaid expenses
   (795,355) 
Accounts payable
   41,527 
Accrued expenses
   34,000 
Franchise tax payable
   93,151 
  
 
 
 
Net cash used in operating activities
   (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 payment to related party
   (65,093) 
Proceeds from issuance of Class B common stock to Sponsor
   25,000 
Proceeds received from initial public offering, gross
   222,661,850 
Proceeds received from private placement
   6,853,240 
Offering costs paid
   (4,934,174) 
  
 
 
 
Net cash provided by financing activities
   224,540,823 
  
 
 
 
Net increase in cash
   855,501 
  
Cash - beginning of the period
   0—   
  
 
 
 
Cash - end of the period
  
$
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 
  
 
 
 
Initial value of Class A common stock subject to possible redemption
  $211,596,640 
  
 
 
 
Change in value of Class A common stock subject to possible redemption
  $(319,520) 
  
 
 
 
The accompanying notes are an integral part of these unaudited condensed financial statements.
4
Table of Contents
LERER HIPPEAU ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 1 — Description
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, 2021,March 31, 2022, the Company had not commenced any operations. All activity for the period from January 12, 2021 (inception) through June 30, 2021,March 31, 2022, relates to the Company’s formation and the initial public offering (the “Initial Public Offering”) 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 has selected December 31 as its fiscal year end.
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 itstheir 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)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 will beare 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 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 anticipated(anticipated to be $10.00 per Public Share).
 
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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
5
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LERER HIPPEAU ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
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 Public Shares in connection with the completion of a Business Combination.
The Certificate of Incorporation provides that a public stockholder,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, in or after the Initial Public Offering, 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 of such distribution, it is possible that the per shareper-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
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LERER HIPPEAU ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
a third party (except for the Company’s independent registered public accounting firm) for services rendered or
6
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LERER HIPPEAU ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
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 Capital ResourcesGoing Concern
As of June 30, 2021,March 31, 2022, the
 Company had approximately $0.9 million$298,000 in its operating bank account and working capital of approximately $1.5 million$421,000 (not taking into account approximately $93,000$64,000 in franchise tax obligations that may be paid using investment income earned in Trust Account).
The Company’s 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), the
a
loan of approximately $65,000 from the Sponsor pursuant to the Note (as defined in Note 4), and the proceeds from the consummation of the Private Placement not held in the Trust Account. The Company fully repaid the Note on March 11, 2021. 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, provide the Company Working Capital Loans (as defined in Note 4). As of June 30,March 31, 2022 and December 31, 2021, there were 0 amounts0amounts outstanding under any Working Capital Loan.
Based on
The Company believes it may need to raise additional funds in order to meet the foregoing, management believes thatexpenditures 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 willmay have sufficient workinginsufficient funds currently available to operate the business prior to the initial Business Combination. The Company may need to raise additional capital and borrowing capacitythrough loans or additional investments from theits Sponsor, its officers or an affiliate of thedirectors or their affiliates. The Company’s Sponsor, or certain of the Company’s officers and directors, or their affiliates, may, but are not obligated to, loan the Company funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet its needs through the earlierCompany’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 consummationterms 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 raises 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 or one year from this filing. Over this time period,prior to the Company will be using these funds for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.mandatory liquidation date.
Note
Note 2 — Basis 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 months ended June 30, 2021 and for the period from January 12, 2021 (inception) through June 30, 2021March 31, 2022 are not necessarily indicative of the results that may be expected through December 31, 2021 or any future period. 2022.
The accompanying unaudited condensed financial statements should be read in conjunction with the audited financial statement(s)statements and notes thereto included in the Company’s final prospectus andAnnual Report on Form
8-K10-K
filed with the SEC on March 5, 2021 and March 1
529, 2022.
, 2021, respectively.
 
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LERER HIPPEAU ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
 
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 unaudited 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 unaudited 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 unaudited 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.
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,March 31, 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,March 31, 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���sCompany’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
 
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LERER HIPPEAU ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
 
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 unaudited condensed statement of operations. The estimated fair values of investments held in the Trust Account are determined using available market information
.
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,” approximateapproximates the carrying amounts represented in the unaudited condensed balance sheet.
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.
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 stockholders’ equitypossible redemption upon the completion of the Initial Public Offering. These costs amountamounted 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 Shares 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 our initial Business Combination. They are also considered
non-redeemable
and are presented as permanent equity in the Company’s balance sheet. 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,March 31, 2022 and December 31, 2021, 21,127,71222,266,185 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 the Company’s unaudited condensed balance sheet.sheets.
Income Taxes
The Company’s taxable income primarily consists of interest income on the Trust Account. The Company’s general and administrative expenses are generally considered
start-up
costs and are not currently deductible.
 
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LERER HIPPEAU ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Under ASC
480-10-S99,
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
paid-in
capital (to the extent available) and accumulated deficit.
Income Taxes
The Company followscomplies with the assetaccounting and liability methodreporting requirements of accounting for income taxes under FASB ASC 740, “Income Taxes.Taxes,” which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are recognizedcomputed for the estimated future tax consequences attributable to differences between the financial statement carrying amountsand tax bases of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured usingthat will result in future taxable or deductible amounts, based on enacted tax laws and rates expectedapplicable to apply to taxable income in the yearsperiods in which those temporarythe differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date.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, 2021, the Company had deferred tax assets in the amount of approximately $56,000 with a full valuation recorded against it.
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
more-likely-than-not
to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of June 30, 2021. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. NoThere were 0 unrecognized tax benefits, and 0 amounts were accrued for the payment of interest and penalties as of June 30,March 31, 2022 and December 31, 2021.
The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company ismay be subject to income tax examinationspotential examination by majorU.S. federal, U.S. state or foreign taxing authorities since inception.
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.
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 income (loss) per share of common stock
Net income (loss) per share of common stock is computed by dividing net income by the weighted-average number of common stock outstanding during the period. As of June 30, 2021, the Company did not have any dilutive securities and other contracts that could, potentially be exercised or converted into common stock and then share in the earnings of the Company. As a result, diluted loss per share of common stock is the same as basic loss per share of common stock for the periods presented.
The Company’s unaudited condensed statements of operations includes a presentation of income per share for common stock subject to redemption in a manner similar to the
two-class
method of income per share. Net income (loss) per share of common stock, basic and diluted for shares of Class A redeemable common stock is calculated by dividing the gain on investments held in the Trust Account, net of applicable taxes available to be withdrawn from the Trust Account, by the weighted average number of Class A redeemable common stock outstanding for the period. Net income (loss) per share of common stock, basic and diluted for shares of Class A and Class B
non-redeemable
common stock is calculated by dividing the net loss, less income attributable to Class A redeemable common stock by the weighted average numbershares of Class A and Class B
non-redeemable
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 following table reflectsbelow presents a reconciliation of the calculation ofnumerator and denominator used to compute basic and diluted net income (loss)loss per share for each class of common stock:
                 
   
For The Three Months Ended
March 31, 2022
   
For The Period From
January 12, 2021 (inception)
through March 31, 2021
 
   
Class A
   
Class B
   
Class A
   
Class B
 
Basic and diluted net loss per common share:                    
Numerator:
                    
Allocation of net loss   (293,272)    (71,129)    (69,878)    (48,717) 
     
Denominator:
                    
Basic and diluted weighted average common shares outstanding   22,951,509    5,566,546    7,434,996    5,183,529 
                     
     
Basic and diluted net loss per common share  $(0.01)   $(0.01)   $(0.01)   $(0.01) 
                     
 
   
For The Three Months
Ended June 30, 2021
   
For The Period From
January 12, 2021 (inception)
through June 30, 2021
 
Redeemable Class A Common stock
    
Numerator: Earnings allocable to Redeemable Class A Common stock
    
Gain on investments held in Trust Account
  $8,020   $11,258 
Less: Company’s portion available to be withdrawn to pay taxes
   (8,020)    (11,258) 
  
 
 
   
 
 
 
Net income attributable to Redeemable Class A Common stock
  
$
0  
 
  
$
0  
 
  
 
 
   
 
 
 
Denominator: Weighted average Redeemable Class A Common stock
    
Basic and diluted weighted average shares outstanding
  
 
22,266,185
 
  
 
22,266,185
 
  
 
 
   
 
 
 
Basic and diluted net income per share, Redeemable Class A Common stock
  
$
0  
 
  
$
0  
 
  
 
 
   
 
 
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LERER HIPPEAU ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
 
Non-Redeemable
Class B Common Stock
                                                                          
Numerator: Net Income minus Net Earnings allocable to Redeemable Class A
C
ommon stock
          
Net loss
  $(266,942)   $(385,537) 
Net income allocable to Redeemable Class A
C
ommon stock
   0      0   
   
 
 
   
 
 
 
Non-redeemable
net loss
  
$
(266,942
) 
  
$
(385,537
) 
   
 
 
   
 
 
 
Denominator: weighted average
Non-redeemable
Class B
C
ommon stock
          
Basic and diluted weighted average shares outstanding,
Non-redeemable
Class B
C
ommon stock
  
 
6,251,870
 
  
 
5,880,946
 
   
 
 
   
 
 
 
Basic and diluted net loss per share,
Non-redeemable
Class B
C
ommon stock
  
$
(0.04
) 
  
$
(0.07
) 
 
 
 
 
 
 
 
 
 
Recent Accounting
Pronouncements
In August 2020, the FASB issued ASU
No. 2020-06,
Debt—Debt with Conversion and Other Options (Subtopic
470-20)
and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic
815-40):
Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU
2020-06”),
which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope
exception
, and it simplifies the diluted earnings per share calculation in certain areas. The Company adopted ASU
2020-06
on January 12, 2021. Adoption of the ASU did not impact the Company’s financial position, results of operations or cash flows.
Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying condensed financial statement
s
.
statements.
Note
Note 3 — Initial 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 itstheir 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
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 underwriter
underwriters
partially exercised the over-allotment option to purchase 2,266,185 Public Shares and forfeited the remainder of its
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.
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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, of Class A Common Stock, at a price of
$10.00 $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
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LERER HIPPEAU ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
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, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination or, at the lenders’ discretion, up to $1.5 million of such Working Capital Loans may be convertible into shares of the post Business Combination entity at a price of $10.00 per share. The shares would be identical to the Private Placement Shares. As of June 30,March 31,
2022
and December 31, 2021, the Company had no borrowings under the0 Working Capital Loans.
Loans outstanding.
Administrative Services Agreement
Commencing on the date that the Company’s securities were first listed on NASDAQ
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, 2021March 31, 2022 and for the period from January 12, 2021 (inception) through June 30,March 31, 2021, the Company incurred expenses of
$30,000approximately $30,000 and approximately $38,000$8,000, respectively, under this agreement, respectively.agreement. As of June 30,March 31, 2022 and December 31, 2021, the amount due to related partythe Sponsor for these services was $120,000 and approximately $38,000,$90,000, respectively, included in accounts payable and accrued expenses on the accompanying unaudited condensed balance sheet.
sheets.
The 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 the Company’s behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. The Company’s audit committee will review
reviews
on a quarterly basis all payments that were
are
made to the Sponsor, executive officers or directors, or the Company’s or their affiliates.
Note 5 — Commitments
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, 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.
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LERER HIPPEAU ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL 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 underwriterunderwriters partially exercised the over-allotment option to purchase 2,266,185 Public Shares and forfeited the remaining of itstheir 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 t
h
ethe terms of the underwriting agreement.
Risks and Uncertainties
Management continues to evaluate the impact of the
COVID-19
pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on 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 condensed financial statements. The condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
12
Note 6 — Stockholders’ EquityTable of Contents
Preferred Stock—
LERER HIPPEAU ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
In February 2022, the Russian Federation and Belarus commenced a military action with the country of Ukraine. As a result of this action, various nations, including the United States, have instituted economic sanctions against the Russian Federation and Belarus. Further, the impact of this action and related sanctions on the world economy are not determinable as of the date of these condensed financial statements and the specific impact on the Company’s financial condition, results of operations, and cash flows is also not determinable as of the date of these condensed financial statements.
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 March 31, 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 -
The
Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share. A
s
As of
June 30, March 31, 2022 and December 31, 2021, there were 0
share
s
shares of
preferred stock issued or outstanding.
Class
 A Common Stock—Stock -
The Company is authorized to issue 200,000,000 shares of Class A common stock with a par value of $0.0001 per share. As of June 30,March 31, 2022 and December 31, 2021, there were 1,823,79722,951,509 shares of Class A common stock issued and outstanding, excluding 21,127,712including 22,266,185 shares of Class A common stock subject to
possible redemption that were classified as temporary equity in the accompanying unaudited condensed balance sheet.sheets (See Note 6).
Class
 B Common Stock -
—The
Company is authorized to issue 20,000,000 shares of Class B common stock with a par value of $0.0001 per share. On January 20, 2021, the Company issued 5,750,000 shares of Class B common stock to the Sponsor. Of the 5,750,000 shares of Class B common stock outstanding,
issued
, an aggregate of up to 750,000 shares of Class B common stock were
was
subject to forfeiture, to the Company by the initial stockholders for no consideration to the extent that the underwriters’ over-allotment option was not exercised in full or in part, so that the initial stockholders would collectively own 20% of the Company’s issued and outstanding common stock after the Initial Public Offering. On March 9, 2021, the underwriterunderwriters partially exercised the over-allotment option to purchase 2,266,185 Public Shares and forfeited the remainder of itstheir option; thus, an aggregate of 183,454 Founder Shares were forfeited and canceled by the Company. As of June 30,March 31, 2022 and December 31, 2021, there were 5,566,546 shares of Class B shares of common stock issued and outstanding, noneNaN subject to forfeiture.
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.
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LERER HIPPEAU ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
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
one-for-one
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
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
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LERER HIPPEAU ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
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 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 basis.
basis.
Note
Note 7 — Fair 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,March 31, 2022 and December 31, 2021 and indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value.
March 31, 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  $222,703,101   $0—     $0—   
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
  $222,665,088   $0—     $0—   
             
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   $0—     $0—   
Transfers to/from Levels 1, 2, and 3 are recognized at the endbeginning of the reporting period. There were no transfers between levels induring the three months ended June 30, 2021March 31, 2022 and for the period from January 12, 2021 (inception) through June 30, 2021.
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.
Note 8 — Subsequent
9-Subsequent
Events
The Company evaluated subsequent events and transactions that occurred up to the date the unaudited condensed financial statements were issued. Based upon this review, the Company determined that there have been no events that have occurred that would require recognition or adjustments to the disclosures in the unaudited condensed financial statements.
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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.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 SECU.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 Offeringinitial public offering (“IPO”) was declared effective on March 4, 2021. On March 9, 2021, we consummated our Initial Public OfferingIPO 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 itstheir 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 Initial Public Offering,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 Initial Public OfferingIPO and the Private Placement, approximately $222.7 million ($10.00 per Share)share) of the net proceeds of the sale of the Public Shares in the Initial Public OfferingIPO 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.
Our management has broad discretion with respect to the specific application of the net proceeds of the Initial Public OfferingIPO 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
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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
15
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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 Initial Public Offering,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 the Certificateour amended and restated certificate of Incorporationincorporation (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 Capital ResourcesGoing Concern
As of June 30, 2021,March 31, 2022, we had approximately $0.8 million$298,000 in our operating bank account, and working capital of approximately $1.5 million$421,000 (not taking into account approximately $93,000$64,000 in franchise tax obligations that may be paid using investment income earned in 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)4 to the accompanying condensed financial statements), the loan of approximately $65,000 from the Sponsor pursuant to the Note, (as defined in Note 4), and the proceeds from the consummation of the Private Placement not held in the Trust Account. The Company fully repaid the Note on March 11, 2021. 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, provide the Company Working Capital Loans.Loans (as defined in Note 4 to the accompanying condensed financial statements). As of June 30,March 31, 2022 and December 31, 2021, there were no amounts outstanding under any Working Capital Loan.Loans outstanding.
Based onWe believe we may need to raise additional funds in order to meet the foregoing, management believes thatexpenditures 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 willmay have sufficient workinginsufficient funds currently available to operate the business prior to the initial Business Combination. We may need to raise additional capital and borrowing capacitythrough loans or additional investments from our Sponsor, our officers or an affiliate of ourdirectors or their affiliates. Our Sponsor, or certain of our officers and directors, or their affiliates, may, but are not obligated to, loan us funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet our needs throughworking capital needs. Accordingly, we may not be able to obtain additional financing. If we are unable to raise additional capital, we may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the earlier of the consummationpursuit of a Business Combination or one year from this filing. Over this time period, wepotential 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 using these funds for paying existing accounts payable, identifyingavailable 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 evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selectingmandatory liquidation and subsequent dissolution raises substantial doubt about our ability to continue as a going concern. No adjustments have been made to the target businesscarrying amounts of assets or liabilities should we be required to merge with or acquire, and structuring, negotiating and consummating the Business Combination.
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.
Management continues to evaluate the impact of the
COVID-19
pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on our financial position, results of our operations and/or search for a target company, the specific impact is not readily determinable as of the date of the condensed financial statements. The 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, 2021March 31, 2022, was for our formation and the Initial Public OfferingIPO and, subsequent to the Initial Public Offering,IPO, the search for a target for itsour initial Business Combination. We will not be generating any operating revenues until the closing and completion of our initial Business Combination.
 
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For the three months ended June 30, 2021,March 31, 2022, we had a net lossesloss of approximately $267,000,$364,000, which consisted of approximately $184,000$308,000 in general and administrative expenses, approximately $30,000 in administrative expenses – related party, and approximately $60,000$49,000 in franchise tax expenses, partly offset by approximately $8,000$22,000 in gain on investments held in the Trust Account.
For the period from January 12, 2021 (inception) through June 30,March 31, 2021, we had net losses of approximately $386,000,$119,000, which consisted of approximately $265,000$81,000 in general and administrative expenses, approximately $38,000$8,000 in administrative expenses – related party, and approximately $93,000$33,000 in franchise tax expenses, offset by approximately $11,000$3,000 in gain on investments held in Trust Account.
Contractual Obligations
Administrative Services Agreement
Commencing on the date that our securities were first listed on NASDAQNasdaq 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.
TheOur 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 will reviewreviews on a quarterly basis all payments that wereare made to theour Sponsor, executive officers or directors, or usour or their affiliates.
DuringFor the three months ended June 30, 2021March 31, 2022 and for the period from January 12, 2021 (inception) through June 30,March 31, 2021, we incurred expenses of approximately $30,000 and $38,000 in expenses$8,000, respectively, under this agreement. As of March 31, 2022 and December 31, 2021, the amount due to the Sponsor for these services respectively, which is included in administrative expenses – related party on the accompanying statement of operations. As of June 30, 2021, we have outstandingwas approximately $38,000$120,000 and $90,000, respectively, included in accounts payable and accrued expenseexpenses on the unauditedaccompanying condensed balance sheet related to these expenses.sheets.
Registration Rights
The holders of Founder Shares, Private Placement Shares and shares that may be issued upon conversion of Working Capital Loans, if any, are entitled to registration rights pursuant to a registration rights agreement signed upon the consummation of the Initial Public Offering.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 Initial Public OfferingIPO to purchase up to 3,000,000 additional Public Shares to cover over-allotments, if any, at the Initial Public OfferingIPO price, less underwriting discounts and commissions. On March 9, 2021, the underwriterunderwriters partially exercised the over-allotment option to purchase 2,266,185 Public Shares and forfeited the remainder of itstheir 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.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 PoliciesEstimates
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,
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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
17
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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 policies:estimates:
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 isare included in gain from investments held in the Trust Account in the accompanying unaudited condensed statement of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.
Class A common stock subjectCommon Stock Subject to possible redemptionPossible 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 sheet. Our Class A common stock featuressold 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,March 31, 2022 and December 31, 2021, 21,127,71222,266,185 shares of Class��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 unaudited condensed balance sheet.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(loss) per common shares
Net loss per share is computed by dividing net loss by the weighted-average numberWe comply with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” We have two classes of shares, of common stock outstanding during the periods. As of June 30, 2021, the Company did not have any dilutive securities and other contracts that could, potentially be exercised or converted intowhich are referred to as Class A common stock and then share inClass B common stock. Income and losses are shared pro rata between the earningstwo classes of the Company. As a result, diluted loss per share of common stock is the same as basic loss per share of common stock for the periods presented.
Our unaudited condensed statements of operations include a presentation ofshares. Net income per share for common stock subject to redemption in a manner similar to the
two-class
method of income per share. Net income (loss) per share of common stock, basic and diluted for shares of Class A redeemable common stock is calculated by dividing the gain on investments held in the Trust Account, net of applicable taxes available to be withdrawn from the Trust Account, by the weighted average number of Class A redeemable common stock outstanding for the period. Net income (loss) per share of common stock, basic and diluted for shares of Class A and Class B
non-redeemable
common stock is calculated by dividing the net loss, less income attributable to Class A common stock by the weighted average numbershares of Class B 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
In August 2020, the FASB issued Accounting Standards Update (“ASU”)
No. 2020-06,
Debt—Debt with Conversion and Other Options (Subtopic
470-20)
and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic
815-40):
Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU
2020-06”),
which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas. We adopted ASU
2020-06
on January 12, 2021. Adoption of the ASU did not impact our financial position, results of operations or cash flows.
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Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying unaudited condensed financial statements.
Off-Balance
Sheet Arrangements
As of June 30, 2021, we did not have any
off-balance
sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation
S-K.
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JOBS Act
The Jumpstart Our Business StartupsJOBS 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.
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 Initial Public OfferingIPO or until we are no longer an “emerging growth company,” whichever is earlier.
 
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined by Rule
12b-2
of the Exchange Act and are not required to provide the information otherwise required under this item. As of June 30, 2021, we were not subject to any market or interest rate risk.
The net proceeds of the Initial Public Offering,IPO, including amounts in the Trust Account, will be invested in U.S. government securities with a maturity of 185 days or less or in money market funds that meet certain conditions under Rule
2a-7
under the Investment Company Act 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, 2021,March 31, 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 hashave concluded that during the period covered by this report, our disclosure controls and procedures were effective.not effective as of March 31, 2022, because of a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Specifically, our management has concluded that our control around the interpretation and accounting for certain complex financial instruments was not effectively designed or maintained. This material weakness resulted in the misstatement of our balance sheet as of March 9, 2021, and our interim financial statements for the quarters ended March 31, 2021, and June 30, 2021.
 
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As a result, our management performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with generally accepted accounting principles in the United States of America. Accordingly, management believes that the condensed financial statements included in this Quarterly Report on Form
10-Q
present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented. Management understands that the accounting standards applicable to our consolidated financial statements are complex and has since the inception of the company benefited from the support of experienced third-party professionals with whom management has regularly consulted with respect to accounting issues. Management intends to continue to further consult with such professionals in connection with accounting matters. 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, 2021March 31, 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.reporting except for the below.
Our Chief Executive Officer and Chief Financial Officer performed additional accounting and financial analyses and other post-closing procedures including consulting with subject matter experts related to the accounting for certain complex features of the Class A common stock. Our management has expended, and will continue to expend, a substantial amount of effort and resources for the remediation and improvement of our internal control over financial reporting. While we have processes to properly identify and evaluate the appropriate accounting technical pronouncements and other literature for all significant or unusual transactions, we have expanded and will continue to improve these processes to ensure that the nuances of such transactions are effectively evaluated in the context of the increasingly complex accounting standards.
PART II—OTHER
II-OTHER
INFORMATION
 
Item 1.
Legal Proceedings
None.
 
Item 1A.
Risk Factors
As
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, on Form
10-Q,
there have been no material changes to the risk factors disclosed in our final prospectusAnnual Report on Form 10-K filed with the SEC on March 5, 2021,29, 2022, except for the below risk factor. Wewe may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
The securitiesChanges in which we invest the funds held in the trust account could bearlaws or regulations, or a negative ratefailure 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 interest, which could reduce the value of the assets held in trust such that the
per-share
redemption amount received by Public Stockholders may be less than $10.00 per share.operations.
The proceeds held
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 trust account will be invested onlyfinancial statement requirements applicable to transactions involving shell companies; the potential liability of certain participants in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule
2a-7
proposed business combination transactions; and the extent to which special purpose acquisition companies could become subject to regulation under the Investment Company Act which invest only in direct U.S. government treasury obligations. While short-term U.S. government treasury obligations currently yield a positive rate of interest, they have briefly yielded negative interest rates in recent years. Central banks in Europe and Japan pursued interest rates below zero in recent years, and the Open Market Committee of the Federal Reserve has not ruled out the possibility that it may1940, as amended. These rules, if adopted, whether in the future adopt similar policiesform proposed or in the United States. In the event that we are unablerevised form, may materially adversely affect our ability to negotiate and complete our initial business combination or make certain amendments to our amendedBusiness Combination and restated certificate of incorporation, our Public Stockholders are entitled to receive their
pro-rata
share ofmay increase the proceeds held in the trust account, plus any interest income, net of income taxes paid or payable (less, in the case we are unable to complete our initial business combination, $100,000 of interest to pay dissolution expenses). Negative interest rates could reduce the value of the assets held in trust such that the
per-sharecosts and time related thereto.
redemption amount received by Public Stockholders may be less than $10.00 per share.
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities
In connection with
On March 9, 2021, we consummated our IPO of 22,266,185 shares of Class A common stock, including the Initial Public Offering, our Sponsor had agreed to loan us an aggregateissuance of up to $300,000 pursuant to the Note. This loan was
non-interest
bearing and payable on the consummation2,266,185 shares of Class A common stock as a result of the Initial Public Offering. Asunderwriters’ partial exercise of June 30, 2021,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 loan balance was $0.Securities Act on a registration statement on Form S-1 (No. 333-253066). The SEC declared the registration statement effective on March 4, 2021.
Of the gross proceeds received from the Initial Public OfferingIPO and the partial exercise of the option to purchase additional Shares,shares, $222,661,850 was placed in the Trust Account. The net proceeds of the Initial Public OfferingIPO 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.
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Barclays Capital Inc. acted as the book running manager and Code Advisors LLC and Drexel Hamilton, LLC also served as underwriters in the Initial Public Offering.IPO.
We paid a total of approximately $5.1 million in underwriting discounts and commissions and other offering costs related to the Initial Public Offering.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.
 
Item 3.
Defaults upon Senior Securities
None.
 
Item 4.
Mine Safety Disclosures.
Not applicable.
 
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Item 5.
Other Information.
None.
 
Item 6.
Exhibits.
 
Exhibit
Number
  
Description
  31.1*  Certification of Chief Executive Officer (Principal Executive Officer) Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  31.2*  Certification of Chief Financial Officer (Principal Financial and Accounting Officer) Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  32.1*  Certification of Chief Executive Officer (Principal Executive Officer) Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
  32.2*  Certification of Chief Financial Officer (Principal Financial and Accounting Officer) Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS  Inline XBRL Instance Document
101.SCH  Inline XBRL Taxonomy Extension Schema Document
101.CAL  Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF  Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB  Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE  Inline XBRL Taxonomy Extension Presentation Linkbase Document
104  Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
 
*
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 12, 2021May 16, 2022  
LERER HIPPEAU ACQUISITION CORP.
  By: 
/s/ Eric Hippeau
  Name: Eric Hippeau
  Title: Chief Executive Officer
 
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