References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to Lead Edge Growth Opportunities, Ltd. References to our
"management" or our "management team" refer to our officers and directors, and
references to the "Sponsor" refer to Lead Edge SPAC Management, LLC. The
following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the financial
statements and the notes thereto contained elsewhere in this Quarterly Report.
Certain information contained in the discussion and analysis set forth below
includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") that are not historical
facts and involve risks and uncertainties that could cause actual results to
differ materially from those expected and projected. All statements, other than
statements of historical fact included in this Form 10-Q including, without
limitation, statements in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations" regarding the completion of the
proposed Business Combination (as defined below), the Company's financial
position, business strategy and the plans and objectives of management for
future operations, are forward-looking statements. Words such as "expect,"
"believe," "anticipate," "intend," "estimate," "seek" and variations and similar
words and expressions are intended to identify such forward-looking statements.
Such forward-looking statements relate to future events or future performance,
but reflect management's current beliefs, based on information currently
available. A number of factors could cause actual events, performance or results
to differ materially from the events, performance and results discussed in the
forward-looking statements, including that the conditions of the proposed
Business Combination are not satisfied. For information identifying important
factors that could cause actual results to differ materially from those
anticipated in the forward-looking statements, please refer to the Risk Factors
section of the Company's Annual Report on Form 10-K filed with the U.S.
Securities and Exchange Commission (the "SEC"). The Company's securities filings
can be accessed on the EDGAR section of the SEC's website at www.sec.gov. Except
as expressly required by applicable securities law, the Company disclaims 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 are a blank check company incorporated in the Cayman Islands on December 16,
2020 for the purpose of effecting a merger, share exchange, asset acquisition,
share purchase, reorganization or similar business combination with one or more
businesses or entities (a "Business Combination"). We intend to effectuate our
Business Combination using cash derived from the proceeds of the Initial Public
Offering and the sale of the private placement warrants (the "Private Placement
Warrants"), our shares, debt or a combination of cash, shares and debt.
We expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to complete a Business
Combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities from December 16, 2020 (inception) through September 30,
2022 were organizational activities, those necessary to prepare for the Initial
Public Offering, described below, and the search for a target company for a
Business Combination. We do not expect to generate any operating revenues until
after the completion of our Business Combination. We generate non-operating
income in the form of interest income on marketable securities held in the Trust
Account. We incur expenses as a result of being a public company (for legal,
financial reporting, accounting and auditing compliance), as well as for due
diligence expenses.
For the three months ended September 30, 2022, we had a net income of
$3,301,775, which consists of the change in fair value of Derivative liability -
Forward Purchase Agreement of $125,000, change in fair value of warrant
liabilities of $2,120,833 and interest earned on investments held in Trust
Account of $1,287,666, offset by general and administrative expenses of
$231,724.
For the nine months ended September 30, 2022, we had a net income of $9,626,095,
which consists of change in fair value of warrant liabilities of $8,822,084 and
interest earned on investments held in Trust Account of $1,578,529, offset by
general and administrative expenses of $724,518 and the change in fair value of
Derivative liability - Forward Purchase Agreement of $50,000.
For the three months ended September 30, 2021, we had a net income of
$12,220,745, which consists of change in fair value of warrant liabilities of
$13,700,334 and interest earned on investments held in Trust Account of $26,452,
offset by general and administrative expenses of $257,041 and the change in fair
value of Derivative liability - FPA of $1,249,000.
For the nine months ended September 30, 2021, we had a net income of $8,209,776,
which consists of the initial classification of Derivative liability - FPA of
$286,000, the change in fair value of warrant liabilities of $9,530,667, and the
interest earned on investments held in Trust Account of $33,134, offset by
general and administrative expenses of $680,379, change in fair value of
Derivative liability - FPA of $371,000, and transaction costs incurred in
connection with warrant liabilities of $588,646.
Liquidity and Capital Resources
On March 25, 2021, we consummated the Initial Public Offering of 30,000,000
units (the "Units") at $10.00 per Unit, generating gross proceeds of
$300,000,000 (see Note 3). Simultaneously with the closing of the Initial Public
Offering, we consummated the sale of 5,666,667 Private Placement Warrants at a
price of $1.50 per Private Placement Warrant in a private placement to the
Sponsor, generating gross proceeds of $8,500,000. On April 13, 2021, in
connection with the underwriters fully exercising the over-allotment option, an
additional 4,500,000 Units were sold at $10.00 per Unit, generating gross
proceeds of $45,000,000. On April 13, 2021, in connection with the underwriters'
fully exercising the over-allotment option, an additional 600,000 Private
Placement Warrants were sold to the Sponsor for gross proceeds of $900,000.
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For the nine months ended September 30, 2022, cash used in operating activities
was $432,226. Net income of $9,626,095 was affected by the change in fair value
of warrant liability of $8,822,084, interest earned on investments held in Trust
Account of $1,578,529, and the change in fair value of Derivative liability -
Forward Purchase Agreement of $50,000. Changes in operating assets and
liabilities provided $292,292 of cash for operating activities.
For the nine months ended September 30, 2021, cash used in operating activities
was $1,143,742. Net income of $8,209,776 was affected by the change in the fair
value of warrant liability of $9,530,667, interest earned on investments held in
Trust Account of $33,134, change in fair value of derivative liability - FPA of
$371,000, transaction costs incurred in connection with warrant liabilities of
$588,646, and the initial classification of derivative liability - FPA of
$286,000. Changes in operating assets and liabilities used $463,363 of cash for
operating activities.
As of September 30, 2022, the investments held in the Trust Account consisted of
cash of $0 in cash and $346,644,257 in money market funds which are invested
primarily in U.S. Treasury Securities. We may withdraw interest from the Trust
Account to pay taxes, if any. We intend to use substantially all of the funds
held in the Trust Account, including any amounts representing interest earned on
the Trust Account (less income taxes payable), to complete our Business
Combination. To the extent that our share capital or debt is used, in whole or
in part, as consideration to complete our Business Combination, the remaining
proceeds held in the Trust Account will be used as working capital to finance
the operations of the target business or businesses, make other acquisitions and
pursue our growth strategies.
As of September 30, 2022, we had cash of $110,544. We intend to use the funds
held outside the Trust Account primarily to identify and evaluate target
businesses, perform business due diligence on prospective target businesses,
travel to and from the offices, plants or similar locations of prospective
target businesses or their representatives or owners, review corporate documents
and material agreements of prospective target businesses, and structure,
negotiate and complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, the Sponsor or certain of our officers
and directors or their affiliates may, but are not obligated to, loan us funds
as may be required (the "Working Capital Loans"). If we complete a Business
Combination, we would repay such loaned amounts. In the event that a Business
Combination does not close, we may use a portion of the working capital held
outside the Trust Account to repay such loaned amounts but no proceeds from our
Trust Account would be used for such repayment. Up to $1,500,000 of such Working
Capital Loans may be convertible into up to an additional 1,000,000 Private
Placement Warrants of the post-Business Combination entity at a price of $1.50
per warrant. The warrants would be identical to the Private Placement Warrants.
We do not believe we will need to raise additional funds in order to meet the
expenditures required for operating our business. However, if our estimate of
the costs of identifying a target business, undertaking in-depth due diligence
and negotiating a Business Combination are less than the actual amount necessary
to do so, we may have insufficient funds available to operate our business prior
to our Business Combination. Moreover, we may need to obtain additional
financing either to complete our Business Combination or because we become
obligated to redeem a significant number of our public shares upon consummation
of our Business Combination, in which case we may issue additional securities or
incur debt in connection with such Business Combination.
Going Concern
Based on the foregoing, management believes that the Company will have
sufficient working capital and borrowing capacity to meet its needs through the
earlier of the consummation of a Business Combination or March 25, 2023, the
expected liquidation date of the Company if it does not complete a Business
Combination. Over this time period, 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.
The Company intends to complete a Business Combination by March 25, 2023.
However, in the absence of a completed Business Combination, the Company may
require additional capital. 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, suspending the pursuit
of a Business Combination. 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 Financial Accounting Standard Board's Accounting Standards
Update ("ASU") 2014-15, "Disclosures of Uncertainties about an Entity's Ability
to Continue as a Going Concern," the Company has until March 25, 2023, to
consummate a Business Combination. It is uncertain that the Company will be able
to consummate a Business Combination by this time. If a Business Combination is
not consummated by this date, there will be a mandatory liquidation and
subsequent dissolution of the Company. Management has determined that the
mandatory liquidation, should a Business Combination not occur, and potential
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 25, 2023.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of September 30, 2022. We do not participate
in transactions that create relationships with unconsolidated entities or
financial partnerships, often referred to as variable interest entities, which
would have been established for the purpose of facilitating off-balance sheet
arrangements. We have not entered into any off-balance sheet financing
arrangements, established any special purpose entities, guaranteed any debt or
commitments of other entities, or purchased any non-financial assets.
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Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than an agreement to pay to pay an
affiliate of the Sponsor a total of up to $10,000 per month for office space,
secretarial and administrative support services. We began incurring these fees
on March 22, 2021 and will continue to incur these fees monthly until the
earlier of the completion of the Business Combination and our liquidation.
The underwriters are entitled to a deferred fee of $0.35 per Unit, or
$12,075,000 in the aggregate (an additional $1,575,000 was deferred when the
underwriters' over-allotment option was exercised in full on April 13, 2021).
The deferred fee will become payable to the underwriters from the amounts held
in the Trust Account solely in the event that the Company completes a Business
Combination, subject to the terms of the underwriting agreement.
In connection with the consummation of the Initial Public Offering, the Company
entered into a forward purchase agreement with Lead Edge Capital V, LP, a
Delaware limited partnership ("LEC V"), which provides for the purchase of up to
$50,000,000 of units, with each unit consisting of one Class A ordinary share
and one-fourth of one warrant to purchase one Class A ordinary share at $11.50
per share, subject to adjustment, for a purchase price of $10.00 per unit, in a
private placement to occur concurrently with the closing of the Business
Combination. The obligations under the forward purchase agreement do not depend
on whether any Class A ordinary shares are redeemed by the public shareholders.
The forward purchase securities will be issued only in connection with the
closing of the Business Combination. The proceeds from the sale of forward
purchase securities may be used as part of the consideration to the sellers in
our initial business combination, expenses in connection with the Business
Combination or for working capital in the post-transaction company.
Critical Accounting Policies
The preparation of condensed financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies:
Warrant Liabilities and FPA
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 Accounting
Standards Codification ("ASC") 480 and ASC 815. The Company accounts for the
warrants and FPA in accordance with the guidance contained in ASC 815-40, under
which the warrants and FPA do not meet the criteria for equity treatment and
must be recorded as liabilities. Accordingly, the Company classifies the
warrants and FPA as liabilities at their fair value and adjust the warrants and
FPA to fair value at each reporting period. These liabilities are subject to
re-measurement at each balance sheet date until exercised, and any change in
fair value is recognized in the statements of operations. The Private Placement
Warrants and the Public Warrants for periods where no observable traded price
was available are valued using a binomial lattice model and the FPA liability is
valued based on the value of the ordinary shares and warrants as compared to the
purchase price adjusted for the probability of a Business Combination.
Class A Ordinary Shares Subject to Possible Redemption
We account for our ordinary shares subject to possible conversion in accordance
with the guidance in ASC 480. Ordinary shares subject to mandatory redemption
are classified as a liability instrument and measured at fair value.
Conditionally redeemable ordinary shares (including 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 our
control) are classified as temporary equity. At all other times, ordinary shares
are classified as shareholders' equity. Our ordinary shares feature certain
redemption rights that are considered to be outside of our control and subject
to occurrence of uncertain future events. Accordingly, ordinary shares subject
to possible redemption are presented at redemption value as temporary equity,
outside of the shareholders' deficit section of our condensed balance sheets.
Changes in redemption value are recognized immediately as they occur and adjusts
the carrying value of the Class A ordinary shares subject to possible redemption
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.
Net Income Per Ordinary Share
We have two classes of shares, which are referred to as Class A ordinary shares
and Class B ordinary shares. Income and losses are shared pro rata between the
two classes of shares. Net income per ordinary share is calculated by dividing
the net income by the weighted average shares of ordinary shares outstanding for
the respective period. Accretion associated with the redeemable shares of Class
A ordinary shares is excluded from earnings per share as the redemption value
approximates fair value.
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Recent Accounting Standards
In August 2020, Financial Accounting Standards Board ("FASB") issued Accounting
Standards Update ("ASU") 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)" ("ASU 2020-06"), to simplify accounting for certain financial
instruments. ASU 2020-06 eliminates the current models that require separation
of beneficial conversion and cash conversion features from convertible
instruments and simplifies the derivative scope exception guidance pertaining to
equity classification of contracts in an entity's own equity. The new standard
also introduces additional disclosures for convertible debt and freestanding
instruments that are indexed to and settled in an entity's own equity. ASU
2020-06 amends the diluted earnings per share guidance, including the
requirement to use the if-converted method for all convertible instruments. ASU
2020-06 is effective January 1, 2023 and should be applied on a full or modified
retrospective basis, with early adoption permitted beginning on January 1, 2021.
The Company is currently assessing the impact, if any, that ASU 2020-06 would
have on its financial position, results of operations or cash flows.
Management does not believe that any other recently issued, but not yet
effective, accounting standards, including the standard in the next paragraph,
if currently adopted, would have a material effect on our condensed financial
statements.
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