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LERER HIPPEAU ACQUISITION CORP.

(LHAA)
Delayed Nasdaq  -  03:28 2022-09-29 pm EDT
9.820 USD   -0.00%
08/11LERER HIPPEAU ACQUISITION CORP. Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)
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08/11Lerer Hippeau Acquisition Corp. Reports Earnings Results for the Second Quarter and Six Months Ended June 30, 2022
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06/28Lerer Hippeau Acquisition Corp. : Entry into a Material Definitive Agreement, Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant, Unregistered Sale of Equity Securities, Financial Statements and Exhibits (form 8-K)
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LERER HIPPEAU ACQUISITION CORP. Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

08/11/2022 | 04:20pm EDT

References to the "Company," "Lerer Hippeau Acquisition Corp.," "Lerer Hippeau," "our," "us" or "we" refer to Lerer Hippeau Acquisition Corp. The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the unaudited interim condensed financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Cautionary Note Regarding Forward-Looking Statements


This Quarterly Report on Form
10-Q
includes forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). We have
based these forward-looking statements on our current expectations and
projections about future events. These forward-looking statements are subject to
known and unknown risks, uncertainties and assumptions about us that may cause
our actual results, levels of activity, performance or achievements to be
materially different from any future results, levels of activity, performance or
achievements expressed or implied by such forward-looking statements. In some
cases, you can identify forward-looking statements by terminology such as "may,"
"should," "could," "would," "expect," "plan," "anticipate," "believe,"
"estimate," "continue," or the negative of such terms or other similar
expressions. Factors that might cause or contribute to such a discrepancy
include, but are not limited to, those described in our other U.S. Securities
and Exchange Commission ("SEC") filings.

Overview

We are a blank check company incorporated in Delaware on January 12, 2021. We were formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (the "Business Combination"). We are an emerging growth company and, as such, we are subject to all of the risks associated with emerging growth companies.

Our sponsor is LHAC Sponsor LLC, a Delaware limited liability company (the "Sponsor"). The registration statement for our initial public offering ("IPO") was declared effective on March 4, 2021. On March 9, 2021, we consummated our IPO of 22,266,185 shares of Class A common stock, including the issuance of 2,266,185 shares of Class A common stock as a result of the underwriters' partial exercise of their over-allotment option, (each, a "Public Share" and collectively, the "Public Shares") at $10.00 per share, generating gross proceeds of approximately $222.7 million, and incurring offering costs of approximately $12.9 million, inclusive of approximately $7.8 million in deferred underwriting commissions.

Simultaneously with the closing of the IPO, we consummated the private placement ("Private Placement") of 685,324 shares of Class A common stock (each, a "Private Placement Share" and collectively, the "Private Placement Shares"), at a price of $10.00 per Private Placement Share to the Sponsor, generating proceeds of approximately $6.9 million.

Upon the closing of the IPO and the Private Placement, approximately $222.7 million ($10.00 per share) of the net proceeds of the sale of the Public Shares in the IPO and of the Private Placement Shares in the Private Placement were placed in a trust account ("Trust Account") located in the United States with Continental Stock Transfer & Trust Company acting as trustee, and will be invested only in United States "government securities" within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended (the "Investment Company Act") having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations, as determined by us, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account as described below.

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Our management has broad discretion with respect to the specific application of the net proceeds of the IPO and the sale of Private Placement Shares, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that we will be able to complete a Business Combination successfully. We must complete one or more initial Business Combinations having an aggregate fair market value of at least 80% of the net assets held in the Trust Account (net of amounts disbursed to management for working capital purposes, if permitted, and excluding the amount of any deferred underwriting commissions) at the time of the agreement to enter into the initial Business Combination. However, we will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act.


If we are unable to complete a Business Combination within 24 months from the
closing of the IPO, or March 9, 2023, or during any extended period of time that
we may have to consummate a Business Combination as a result of an amendment to
our amended and restated certificate of incorporation (the "Combination
Period"), we will (i) cease all operations except for the purpose of winding up,
(ii) as promptly as reasonably possible but not more than ten business days
thereafter, redeem the Public Shares, at a
per-share
price, payable in cash, equal to the aggregate amount then on deposit in the
Trust Account, including interest earned on the funds held in the Trust Account
and not previously released to us to pay our taxes (less up to $100,000 of
interest to pay dissolution expenses), divided by the number of then outstanding
Public Shares, which redemption will completely extinguish Public Stockholders'
rights as stockholders (including the right to receive further liquidating
distributions, if any), and (iii) as promptly as reasonably possible following
such redemption, subject to the approval of the remaining stockholders and the
board of directors, liquidate and dissolve, subject in each case to the
Company's obligations under Delaware law to provide for claims of creditors and
the requirements of other applicable law.

Liquidity and Going Concern

As of June 30, 2022, we had approximately $15,000 in our operating bank account, and working capital of approximately $45,000 (not taking into account approximately $124,000 in income tax and franchise tax obligations that may be paid using investment income earned on the Trust Account).


Our liquidity needs to date have been satisfied through a cash contribution of
$25,000 from the Sponsor to purchase the Founder Shares (as defined in Note 4 to
the accompanying condensed financial statements), the loan of approximately
$65,000 from the Sponsor pursuant to an initial Note (as defined in Note 4 to
the accompanying condensed financial statements), the proceeds from the
consummation of the Private Placement not held in the Trust Account, and the
proceeds from a
post-IPO
convertible promissory note from our Sponsor ("convertible promissory note -
related party") which is considered to be a Working Capital Loan (as defined in
Note 4 to the accompanying condensed financial statements). The Company fully
repaid the initial Note on March 11, 2021. In order to finance additional
transaction costs in connection with a Business Combination, the Sponsor or an
affiliate of the Sponsor, or certain of the Company's officers and directors
may, but are not obligated to, provide the Company with additional Working
Capital Loans.

On June 27, 2022, we issued the convertible promissory note - related party in the amount of up to $650,000 to our Sponsor. The proceeds of the convertible promissory note - related party, may be drawn down from time to time until the Maturity Date (as defined in Note 4 to the accompanying condensed financial statements), and will be used for costs and expenses related to a Business Combination transaction and for general working capital purposes. The convertible promissory note - related party bears interest at the lowest short-term Applicable Federal Rate (within the meaning of Internal Revenue Code Section 1274) in effect as of the date the convertible promissory note - related party was issued and is payable in full upon the Maturity Date. As of June 30, 2022, $100,000 was drawn under the convertible promissory note - related party. No other Working Capital Loans were outstanding as of June 30, 2022. There were no Working Capital Loans outstanding at December 31, 2021.


We believe we may need to raise additional funds in order to meet the
expenditures required for operating the business. If our estimate of the costs
of identifying a target business, undertaking
in-depth
due diligence and negotiating an initial Business Combination is less than the
actual amount necessary to do so, we may have insufficient funds currently
available to operate the business prior to the initial Business Combination. We
may need to raise additional capital through additional loans or investments
from our Sponsor, our officers or directors or their affiliates. Our Sponsor,
officers and directors, or their affiliates, may, but are not obligated to, loan
us additional funds, from time to time or at any time, in whatever amount they
deem reasonable in their sole discretion, to meet our working capital needs.
Accordingly, we may not be able to obtain additional financing. If we are unable
to raise additional capital, we

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may be required to take additional measures to conserve liquidity, which could
include, but not necessarily be
limited
to, curtailing operations, suspending the pursuit of a potential transaction,
reducing overhead expenses, and extending the terms and due dates of certain
accrued expenses and other liabilities. We cannot provide any assurance that new
financing will be available to us on commercially acceptable terms, if at all.

In connection with our assessment of going concern considerations in accordance
with Financial Accounting Standards Board's ("FASB") Accounting Standards Update
("ASU")
2014-15,
"Disclosures of Uncertainties about an Entity's Ability to Continue as a Going
Concern," management has determined that the liquidity condition and mandatory
liquidation and subsequent
dissolution
raise
substantial
doubt about our ability to continue as a going concern. No adjustments have been
made to the carrying amounts of assets or liabilities should we be required to
liquidate after March 9, 2023. The condensed financial statements do not include
any adjustment that might be necessary if we are unable to continue as a going
concern.

Various social and political circumstances in the United States and around the world (including wars and other forms of conflict, including rising trade tensions between the United States and China, and other uncertainties regarding actual and potential shifts in the United States and foreign, trade, economic and other policies with other countries, terrorist acts, security operations and catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes and global health epidemics), may also contribute to increased market volatility and economic uncertainties or deterioration in the United States and worldwide. Specifically, the rising conflict between Russia and Ukraine, and resulting market volatility could adversely affect our ability to complete a Business Combination. In response to the conflict between Russia and Ukraine, the United States and other countries have imposed sanctions or other restrictive actions against Russia. Any of the above factors, including sanctions, export controls, tariffs, trade wars and other governmental actions, could have a material adverse effect on our ability to complete a Business Combination and the value of our securities.


Management continues to evaluate the impact of these types of risks (including
the impact of the ongoing global
COVID-19
pandemic on the industry) and has concluded that while it is reasonably possible
that these risks and uncertainties could have a negative effect on our financial
position, results of operations and/or search for a target company, the specific
impact is not readily determinable as of the date of these unaudited condensed
financial statements. The unaudited condensed financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

Results of Operations

Our entire activity from inception up to June 30, 2022, was for our formation and the IPO and, subsequent to the IPO, the search for a target for our initial Business Combination. We will not be generating any operating revenues until the closing and completion of our initial Business Combination.

For the three months ended June 30, 2022, we had a net loss of approximately $135,000, which consisted of approximately $346,000 in general and administrative expenses, $30,000 in administrative expenses-related party, approximately $49,000 in franchise tax expenses, and approximately $10,000 in income tax expense, partly offset by approximately $301,000 in gain on investments held in the Trust Account.

For the three months ended June 30, 2021, we had net losses of approximately $267,000, which consisted of approximately $184,000 in general and administrative expenses, approximately $30,000 in administrative expenses-related party, and approximately $60,000 in franchise tax expenses, partly offset by approximately $8,000 in gain on investments held in Trust Account.

For the six months ended June 30, 2022, we had a net loss of approximately $499,000, which consisted of approximately $654,000 in general and administrative expenses, $60,000 in administrative expenses-related party, approximately $98,000 in franchise tax expenses, and approximately $10,000 in income tax expense, partly offset by approximately $323,000 in gain on investments held in the Trust Account.

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For the period from January 12, 2021 (inception) through June 30, 2021, we had net losses of approximately $386,000, which consisted of approximately $266,000 in general and administrative expenses, approximately $38,000 in administrative expenses-related party, and approximately $93,000 in franchise tax expenses, offset by approximately $11,000 in gain on investments held in Trust Account.

Contractual Obligations

Administrative Services Agreement

Commencing on the date that our securities were first listed on Nasdaq and continuing until the earlier of our consummation of a Business Combination or our liquidation, we agreed to pay the Sponsor a total of $10,000 per month for office space, secretarial and administrative services provided to members of our management team.


Our Sponsor, executive officers and directors, or any of their respective
affiliates will be reimbursed for any
out-of-pocket
expenses incurred in connection with activities on our behalf such as
identifying potential target businesses and performing due diligence on suitable
business combinations. Our audit committee reviews on a quarterly basis all
payments that are made to our Sponsor, executive officers or directors, or our
or their affiliates.

For the three months ended June 30, 2022 and 2021, the Company incurred expenses
of
approximately
$30,000 under this agreement. For the six months ended June 30, 2022 and for the
period from January 12, 2021 (inception) through June 30, 2021, the Company
incurred expenses of $60,000 and approximately $38,000, respectively, under this
agreement. As of June 30, 2022 and December 31, 2021, the amount due to the
Sponsor for these services was $150,000 and approximately $90,000, respectively,
which is included in accounts payable and accrued expenses on the accompanying
condensed balance sheets.

Registration Rights

The holders of Founder Shares, Private Placement Shares and shares that may be issued upon conversion of Working Capital Loans (including the Conversion Shares), if any, are entitled to registration rights pursuant to a registration rights agreement signed upon the consummation of the IPO. These holders are entitled to certain demand and "piggyback" registration rights. We will bear the expenses incurred in connection with the filing of any such registration statements.


Underwriting Agreement

We granted the underwriters a
45-day
option from the date of the final prospectus relating to the IPO to purchase up
to 3,000,000 additional Public Shares to cover over-allotments, if any, at the
IPO price, less underwriting discounts and commissions. On March 9, 2021, the
underwriters partially exercised the over-allotment option to purchase 2,266,185
Public Shares and forfeited the remainder of their option.

The underwriters were entitled to an underwriting discount of $0.20 per Public Share, or approximately $4.5 million in the aggregate, paid upon the closing of the IPO. In addition, $0.35 per Public Share, or approximately $7.8 million in the aggregate, will be payable to the underwriters for deferred underwriting commissions. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete a Business Combination, subject to the terms of the underwriting agreement.

Critical Accounting Estimates

This management's discussion and analysis of our financial condition and results of operations is based on our condensed financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these condensed financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our condensed financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to fair value of financial instruments and accrued expenses. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We have identified the following as our critical accounting estimates:

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Investments Held in the Trust Account

Our portfolio of investments is comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities and generally have a readily determinable fair value, or a combination thereof. When our investments held in the Trust Account are comprised of U.S. government securities, the investments are classified as trading securities. When our investments held in the Trust Account are comprised of money market funds, the investments are recognized at fair value. Trading securities and investments in money market funds are presented on the condensed balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities are included in gain from investments held in the Trust Account in the accompanying statements of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.

Class A Common Stock Subject to Possible Redemption

Class A common stock subject to mandatory redemption (if any) are classified as
liability instruments and are measured at fair value. Conditionally redeemable
Class A common stock (including shares of Class A common stock that feature
redemption rights that are either within the control of the holder or subject to
redemption upon the occurrence of uncertain events not solely within our
control) are classified as temporary equity. At all other times, Class A common
stock are classified as stockholders' equity. As part of the Private Placement,
the Company issued 685,324 Private Placement Shares to the Sponsor. These
Private Placement Shares will not be transferable, assignable or salable until
30 days after the completion of our initial Business Combination. They are also
considered
non-redeemable
and are presented as permanent equity in the Company's balance sheets. Our
Class A common stock sold in the IPO feature certain redemption rights that are
considered to be outside of our control and subject to the occurrence of
uncertain future events. Accordingly, as of June 30, 2022 and December 31, 2021,
22,266,185 shares of Class A common stock subject to possible redemption at the
redemption amount were presented at redemption value as temporary equity,
outside of the stockholders' equity section of our condensed balance sheets.

We recognize changes in redemption value immediately as they occur and adjust the carrying value of the Class A common stock subject to possible redemption to equal the redemption value at the end of each reporting period. Effective with the closing of the IPO, we recognized the accretion from initial book value to redemption amount, which resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit.

Net income (loss) per common shares

We comply with accounting and disclosure requirements of FASB ASC Topic 260, "Earnings Per Share." We have two classes of shares, which are referred to as Class A common stock and Class B common stock. Income and losses are shared pro rata between the two classes of shares. Net income per common share is calculated by dividing the net income by the weighted average shares of common stock outstanding for the respective period. Accretion associated with the redeemable Class A common stock is excluded from earnings per share as the redemption value approximates fair value.

Recent Accounting Pronouncements

Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying condensed financial statements.

JOBS Act


The Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We qualify as an "emerging growth company" and
under the JOBS Act are allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded)
companies. We are electing to delay the adoption of new or revised accounting
standards, and as a result, we may not comply with new or revised accounting
standards on the relevant dates on which adoption of such standards is required
for
non-emerging
growth companies. As a result, the condensed financial statements may not be
comparable to companies that comply with new or revised accounting
pronouncements as of public company effective dates.

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Additionally, we are in the process of evaluating the benefits of relying on the
other reduced reporting requirements provided by the JOBS Act. Subject to
certain conditions set forth in the JOBS Act, if, as an "emerging growth
company," we choose to rely on such exemptions we may not be required to, among
other things, (i) provide an auditor's attestation report on our system of
internal controls over financial reporting pursuant to Section 404 of the
Sarbanes-Oxley Act, (ii) provide all of the compensation disclosure that may be
required of
non-emerging
growth public companies under the Dodd-Frank Wall Street Reform and Consumer
Protection Act, (iii) comply with any requirement that may be adopted by the
PCAOB regarding mandatory audit firm rotation or a supplement to the auditor's
report providing additional information about the audit and the financial
statements (auditor discussion and analysis) and (iv) disclose certain executive
compensation related items such as the correlation between executive
compensation and performance and comparisons of the CEO's compensation to median
employee compensation. These exemptions will apply for a period of five years
following the completion of our IPO or until we are no longer an "emerging
growth company," whichever is earlier.

© Edgar Online, source Glimpses

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