References to the "Company," "our," "us" or "we" refer toHippo Holdings Inc. The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated 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 (this "Quarterly Report") includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may," "should," "could," "would," "expect," "plan," "anticipate," "believe," "estimate," "continue," or the negative of such terms or other similar expressions. Such statements include, but are not limited to, possible business combinations, including the proposed Hippo Business Combination (as defined below) , and the financing thereof, and related matters, as well as all other statements other than statements of historical fact included in this Quarterly Report. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in the Risk Factors section of Amendment No. 1 to our Annual Report on Form 10-K/A filed with theSEC onMay 11, 2021 , in the Hippo Business Combination Proxy Statement/Prospectus (as defined below) and in our other filings with theSecurities and Exchange Commission (the "SEC"). Our filings with theSEC can be accessed on the EDGAR section of theSEC's website at www.sec.gov. Except as expressly required by applicable securities law, we disclaim any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise. Overview We were a blank check company incorporated onOctober 2, 2020 as aCayman Islands exempted company 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"). Our sponsor isReinvent Sponsor Z LLC , aCayman Islands exempted limited liability company (our "Sponsor"). Our registration statement for our initial public offering (the "Initial Public Offering") was declared effective onNovember 18, 2020 . OnNovember 23, 2020 , we consummated our Initial Public Offering of 23,000,000 units (the "Units" and, with respect to the Class A ordinary shares included in the Units, the "Public Shares"), including 3,000,000 additional Units to cover over-allotments (the "Over-Allotment Units"), at$10.00 per Unit, generating gross proceeds of$230.0 million , and incurring offering costs of approximately$13.1 million , inclusive of approximately$8.1 million in deferred underwriting commissions. Substantially concurrently with the closing of the Initial Public Offering, we consummated the private placement (the "Private Placement") of 4,400,000 warrants (each, a "Private Placement Warrant" and collectively, the "Private Placement Warrants"), at a price of$1.50 per Private Placement Warrant to our Sponsor, generating gross proceeds of$6.6 million . Upon the closing of the Initial Public Offering and the Private Placement, an aggregate of$230.0 million ($10.00 per Unit) of the net proceeds of the Initial Public Offering and certain of the proceeds of the Private Placement was placed in a trust account ("Trust Account") withContinental Stock Transfer & Trust Company acting as trustee and invested inUnited States government treasury bills with a maturity of 185 days or less or in money market funds investing solely inU.S. Treasuries and meeting certain conditions under Rule 2a-7 under the Investment Company Act, as determined by us, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account. 20
--------------------------------------------------------------------------------
Table of Contents Recent Developments-Hippo Business Combination OnMarch 3, 2021 , we announced that we entered into an Agreement and Plan of Merger (the "Merger Agreement"), withRTPZ Merger Sub LLC ,RTPZ Merger Sub Inc. , aDelaware corporation and our direct wholly-owned subsidiary ("Merger Sub"), andHippo Enterprises Inc. ("Hippo"), aDelaware corporation. The Merger Agreement provided that: • at the closing of the transactions contemplated by the Merger Agreement (the "Closing"), upon the terms and subject to the conditions of the Merger Agreement and in accordance with the General Corporation Law of theState of Delaware , as amended (the "DGCL"), (i) Merger Sub merged with and into Hippo, the separate corporate existence of Merger Sub ceased and Hippo became the surviving corporation and a wholly owned subsidiary of the Company (the "First Merger") and (ii) immediately following the First Merger, Hippo (as the surviving corporation of the First Merger) merged with and into the Company, the separate corporate existence of Hippo ceased and the Company became the surviving corporation (the "Second Merger" and, together with the First Merger, the "Mergers"); • as a result of the Merger, among other things, all outstanding shares of capital stock of Hippo were canceled in exchange for the right to receive, in the aggregate, a number of shares of RTPZ Common Stock (as defined below) equal to the quotient obtained by dividing (i)$5,522,000,000 (representing the enterprise value of$5,000,000,000 plus Hippo's cash as ofDecember 31, 2020 ($522,000,000)) by (ii)$10.00 ; and • upon the effective time of the Domestication (as defined below), the Company was immediately renamed "Hippo Holdings Inc. " Prior to the Closing, subject to the approval of our shareholders, and in accordance with the DGCL, Cayman Islands Companies Act (as revised) (the "CICA") and our amended and restated memorandum and articles of association, we effected a deregistration under the CICA and a domestication under Section 388 of the DGCL (by means of filing a certificate of domestication with the Secretary ofState of Delaware ), pursuant to which our jurisdiction of incorporation was changed from theCayman Islands to theState of Delaware (the "Domestication"). In connection with the Domestication, (i) each of the then issued and outstanding Class A ordinary shares, par value$0.0001 per share, of the Company, were converted automatically, on a one-for-one basis, into a share of common stock, par value$0.0001 , of the Company (after its Domestication) (the "RTPZ Common Stock"), (ii) each of the then issued and outstanding Class B ordinary shares, par value$0.0001 per share, of the Company, were converted automatically, on a one-for-one basis, into a share of RTPZ Common Stock, (iii) each then issued and outstanding warrant to acquire the Company's Class A ordinary shares were converted automatically into a warrant to acquire an equal number of shares of RTPZ Common Stock (a "Domesticated RTPZ Warrant"), and (iv) each then issued and outstanding unit of the Company were converted automatically into a share of RTPZ Common Stock, on a one-for-one basis, and one-fifth of one Domesticated RTPZ Warrant. OnMarch 3, 2021 , concurrently with the execution of the Merger Agreement, we entered into subscription agreements with certain investors (collectively, the "PIPE Investors "), pursuant to, and on the terms and subject to the conditions of which, thePIPE Investors have collectively subscribed for 55 million shares of RTPZ Common Stock for an aggregate purchase price equal to$550 million (the "PIPE Investment ").The PIPE Investment was consummated substantially concurrently with the Closing, subject to the terms and conditions contemplated by the applicable subscription agreements. OnMarch 3, 2021 , our Sponsor entered into the Sponsor Agreement (the "Sponsor Agreement") with the Company and Hippo, pursuant to which the parties thereto agreed to, among other things, (i) certain vesting terms with respect to the RTPZ Common Stock beneficially owned by our Sponsor as of the Domestication, (ii) a lock-up of securities held by our Sponsor, (iii) the mandatory exercise of the Domesticated RTPZ Warrants held by our Sponsor if (a) RTPZ elects to redeem the Domesticated RTPZ Warrants held by RTPZ's public shareholders and (b) the last reported sales price of the RTPZ Common Stock for any 20 Trading Days (as defined in the Sponsor Agreement) within a period of 30 consecutive Trading Days exceeds$25.00 per share and (iv) certain rights of Sponsor with respect to board representation of the combined company at the Closing, in each case, on the terms and subject to the conditions set forth in the Sponsor Agreement. 21
--------------------------------------------------------------------------------
Table of Contents OnJuly 30, 2021 , as contemplated by the Merger Agreement we filed a notice of deregistration with the Cayman Islands Registrar of Companies, together with the necessary accompanying documents, and filed a certificate of incorporation and a certificate of corporate domestication with the Secretary of State of theState of Delaware , under which we were domesticated and continue as aDelaware corporation, changing our name to "Hippo Holdings Inc. " (the "Domestication"). As a result of and upon the effective time of the Domestication, among other things, (1) each of the then issued and outstanding RTPZ Class A ordinary shares converted automatically, on a one-for-one basis, into a share ofHippo Holdings common stock, (2) each of the then issued and outstanding RTPZ Class B ordinary shares converted automatically, on a one-for-one basis, into a share ofHippo Holdings common stock, (3) each then issued and outstanding RTPZ warrant converted automatically into aHippo Holdings warrant and (4) each issued and outstanding RTPZ unit separated automatically into one share ofHippo Holdings common stock and one-fifth of oneHippo Holdings warrant. OnAugust 2, 2021 , as contemplated by the Merger Agreement, RTPZ and Hippo consummated the merger transactions contemplated by the Merger Agreement. For more information about the Merger Agreement and the proposed Hippo Business Combination, see our Current Report on Form 8-K filed with the SEC on March 4, 2021 and the final prospectus and proxy statement (Registration Number 333- 254691) related to the proposed Hippo Business Combination filed with theSEC on July 9, 2021 (the "Hippo Business Combination Proxy Statement/Prospectus"). Unless specifically stated, this Quarterly Report does not contain the risks associated with the proposed Hippo Business Combination, which are included in the Hippo Business Combination Proxy Statement/Prospectus. Additionally, unless specifically stated, this Quarterly Report does not give effect to the proposed Hippo Business Combination. Results of Operations Our entire activity since inception throughJune 30, 2021 related to our formation, the preparation for the Initial Public Offering, and since the closing of the Initial Public Offering, the search for a prospective initial Business Combination and the negotiation and execution of the proposed Hippo Business Combination. We have neither engaged in any operations nor generated any operating revenues to date. We will not generate any operating revenues until after completion of our initial Business Combination, at the earliest. We will generate non-operating income in the form of interest income on cash and cash equivalents. We expect to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses. Additionally, we recognize non-cash gains and losses within other income (expense) related to changes in recurring fair value measurement of our warrant liabilities at each reporting period. For the three months endedJune 30, 2021 , we had a net loss of approximately$2.6 million , which consisted of approximately$561,600 in general and administrative costs and$2.1 million change in the fair value of derivative warrant liabilities, partially offset by approximately$6,400 gain on the investments held in the Trust Account. For the six months endedJune 30, 2021 , we had a net loss of approximately$5.1 million , which consisted of approximately$2.0 million in general and administrative costs and$3.1 million change in the fair value of derivative warrant liabilities, partially offset by approximately$59,000 gain on the investments held in the Trust Account Liquidity and Capital Resources As ofJune 30, 2021 , we had approximately$101,000 in our operating bank account, a working capital deficit of approximately$397,000 and no interest income available in the Trust Account to fund our working capital requirements, subject to an annual limit of$165,000 , and/or to pay our taxes, if any. 22
--------------------------------------------------------------------------------
Table of Contents Our liquidity needs have been satisfied prior to the completion of the Initial Public Offering through receipt of a$25,000 capital contribution from our Sponsor in exchange for the issuance of the Founder Shares (as defined in Part II, Item 2, Unregistered Sales ofEquity Securities and Use of Proceeds fromRegistered Securities ) to our Sponsor and the advancement of funds by our Sponsor to cover our expenses in connection with the Initial Public Offering. In addition, our Sponsor advanced approximately$60,000 to us under a promissory note (the "Note"). We repaid the Note in full as ofNovember 23, 2020 . Subsequent to the consummation of the Initial Public Offering and Private Placement, our liquidity needs have been satisfied from the proceeds from the consummation of the Private Placement not held in the Trust Account. In addition, in order to finance transaction costs in connection with a Business Combination, our Sponsor or an affiliate of our Sponsor, or our officers and directors may, but are not obligated to, provide us working capital loans ("Working Capital Loans"). As ofJune 30, 2021 , there were no amounts outstanding under any Working Capital Loan. We continue to evaluate the impact of the COVID-19 pandemic and have concluded that the specific impact is not readily determinable as of the date of the condensed consolidated balance sheet. The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Contractual Obligations We do not have any long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations or long-term liabilities, other than an agreement to pay support services fees toReinvent Capital LLC ("Reinvent Capital ') that total$625,000 per year for support and administrative services ("Support Services Agreement"), as well as reimburseReinvent Capital for any out-of-pocket expenses it incurs in connection with providing services or for office space under this agreement. As ofJune 30, 2021 , we paid$0 toReinvent Capital as part of the Support Services Agreement and recognized approximately$156,000 and$312,500 in the condensed consolidated statements of operations for the three and six months endedJune 30, 2021 . As ofJune 30, 2021 andDecember 31, 2020 , we had Support Services fees of$312,500 and$0 , respectively, in Due toRelated Party on the condensed consolidated balance sheet. We ceased paying these quarterly fees and periodic cost reimbursements following the consummation of the Hippo Business Combination. Critical Accounting Policies This management's discussion and analysis of our financial condition and results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted inthe United States of America . The preparation of our unaudited condensed consolidated 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 unaudited condensed consolidated financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to fair value of financial instruments and accrued expenses. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We have identified the following as its critical accounting policies: Derivative Warrant Liabilities We do not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. We evaluate all of our financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to FASB ASC Topic 480 "Distinguishing Liabilities from Equity" and FASB ASC Topic 815, "Derivatives and Hedging" ("ASC 815"). The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. 23
--------------------------------------------------------------------------------
Table of Contents The warrants issued in the Initial Public Offering and the Private Placement Warrants are recognized as derivative liabilities in accordance with ASC 815. Accordingly, we recognize the warrant instruments as liabilities at fair value and adjusts the carrying value of the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised. The initial fair value of Public Warrants issued in connection with the Public Offering and the fair value of the Private Placement Warrants have been estimated usingMonte-Carlo simulations at each measurement date. The fair value of the Public Warrants as ofJune 30, 2021 is based on observable listed prices for such warrants. Derivative warrant liabilities are classified as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities. Class A Ordinary Shares Subject to Possible Redemption Class A ordinary shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Conditionally redeemable Class A ordinary shares (including Class A ordinary shares 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 ordinary shares are classified as shareholders' equity. Our Class A ordinary shares feature certain redemption rights that are considered to be outside of our control and subject to the occurrence of uncertain future events. Accordingly, atJune 30, 2021 , 19,975,356 and 20,484,749, respectively, Class A ordinary shares subject to possible redemption were presented as temporary equity, outside of the shareholders' equity section of the Company's condensed consolidated balance sheet. Net Income (Loss) Per Ordinary Share Net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of ordinary shares outstanding during the periods. We have not considered the effect of the warrants sold in the Initial Public Offering and the Private Placement to purchase an aggregate of 9,000,000 of the Company's Class A ordinary shares in the calculation of diluted income (loss) per share, since their inclusion would be anti-dilutive under the treasury stock method. Our unaudited condensed consolidated statements of operations include a presentation of income (loss) per share for ordinary shares subject to redemption in a manner similar to the two-class method of income (loss) per share. Net income (loss) per ordinary share, basic and diluted for Class A ordinary shares are calculated by dividing the unrealized gain on investments held in the Trust Account, net of applicable taxes and interest to fund working capital requirements, subject to an annual limit of$165,000 , available to be withdrawn from the Trust Account, resulting in income of approximately$6,408 and$59,300 for the three and six months endedJune 30, 2021 , by the weighted average number of Class A ordinary shares outstanding for the period. Net loss per ordinary share, basic and diluted for Class B ordinary shares is calculated by dividing the net income (loss), less income (loss) attributable to Class A ordinary shares by the weighted average number of Class B ordinary shares outstanding for the period. Recent Accounting Pronouncements InAugust 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. The Company adopted ASU 2020-06 onJanuary 1, 2021 . Adoption of the ASU did not impact the Company's financial position, results of operations or cash flows. Our 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 Company's unaudited condensed consolidated financial statements. Off-Balance Sheet Arrangements As ofJune 30, 2021 , we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K. 24
--------------------------------------------------------------------------------
Table of Contents JOBS Act The Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an "emerging growth company" and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, the condensed consolidated 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, (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 Offering or until we are no longer an "emerging growth company," whichever is earlier. This may make comparison of the Company's condensed consolidated financial statements 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. 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. 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 endedJune 30, 2021 , as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon that evaluation and in light of theSEC Staff Statement, our Certifying Officers concluded that, solely due to the Company's misapplication of the accounting for the Company's warrants as liabilities described in in our Annual Report on Form 10K/A for the year endedDecember 31, 2021 , as filed with theSEC onMay 17, 2021 , our disclosure controls and procedures were not effective as ofJune 30, 2021 . In light of this material weakness, we performed additional analysis as deemed necessary to ensure that our unaudited condensed consolidated financial statements were prepared in accordance withU.S. generally accepted accounting principles. Accordingly, management believes that the condensed consolidated financial statements included in this Quarterly Report present fairly in all material respects our financial position, results of operations and cash flows for the period presented 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 theSEC'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. 25
--------------------------------------------------------------------------------
Table of Contents
Changes in Internal Control over Financial Reporting
We have commenced our remediation efforts in connection with the identification
of the material weakness discussed above and have taken the following steps
during the quarter ended
• we have implemented procedures intended to ensure that we identify and apply the applicable accounting guidance to all complex transactions; and • we are establishing additional monitoring and oversight controls designed to ensure the accuracy and completeness of our consolidated financial statements and related disclosures.
While we took certain actions to remediate the material weakness, such
remediation has not been fully evidenced. Accordingly, we continue to test our
controls implemented in the second quarter to assess whether our controls are
operating effectively. While there can be no assurance, we believe our material
weakness will be remediated during the course of fiscal 2021.
Other than the changes discussed above, there have been no changes to our
internal control over financial reporting during the quarter ended
© Edgar Online, source