References to the "Company," "our," "us" or "we" refer to Levere Holdings Corp.
The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the unaudited 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.
Overview
We are a blank check company incorporated as a Cayman Islands exempted company
on January 15, 2021, for the purpose of effecting a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses, or a Business Combination. Our sponsor
is Goggo Network Gmbh, a German company limited by shares, or our Sponsor.
The registration statement for our initial public offering, or IPO, was declared
effective on March 18, 2021. On March 23, 2021, we consummated the IPO of
25,000,000 Units (as defined below), at $10.00 per Unit, generating gross
proceeds of $250.0 million. The Company granted the Underwriters in the IPO, or
the Underwriters, a 45-day option to purchase up to 3,750,000 additional Units
to cover over-allotments, if any. On March 31, 2021, the Underwriters partially
exercised the over-allotment option and purchased an additional 2,128,532 Units,
generating an aggregate of gross proceeds of approximately $21.3 million. Each
Unit consists of one Class A ordinary share, and one-third of one redeemable
warrant to purchase one Class A ordinary share, or a Public Warrant, at a price
of $11.50 per whole share, or the "Units" and, with respect to the Class A
ordinary shares included in the Units sold, or the Public Shares. We incurred
transaction costs for the IPO and over-allotment of approximately $15.6 million,
inclusive of approximately $9.5 million in deferred underwriting commissions.
Simultaneously with the closing of the IPO, we consummated the private placement
of 4,666,667 warrants at a price of $1.50 per warrant, or the Private Placement
Warrants, and together with the Public Warrants, the Warrants, to the Sponsor,
generating gross proceeds of $7.0 million, or the IPO Private Placement.
Simultaneously with the closing of the exercise of the overallotment option, we
completed the sale of an aggregate of an additional 283,804 Private Placement
Warrants to the Sponsor, at a purchase price of $1.50 per Private Placement
Warrant, generating gross proceeds of approximately $0.4 million, or the
Over-Allotment Private Placement and together with the IPO Private Placement,
the Private Placements.
Upon the closing of the IPO and exercise of the over-allotment option, and the
simultaneous Private Placements, approximately $271.3 million ($10.00 per Unit)
of the net proceeds were placed in a trust account, or Trust Account, located in
the United States with Continental Stock Transfer & Trust Company acting as
trustee, and invested only in U.S. "government securities," within the meaning
of Section 2(a)(16) of the Investment Company Act of 1940, as amended, or 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.
If we have not completed a Business Combination within 24 months from the
closing of the IPO, 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 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 shareholders' rights as
shareholders (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 shareholders and our board of
directors, liquidate and dissolve, subject in each case to our obligations under
Delaware law to provide for claims of creditors and the requirements of other
applicable law.
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Results of Operations
For the three months ended September 30, 2022, we had a net income of
approximately $1.5 million, which is primarily comprised of a gain from the
change in fair value of warrant liabilities of approximately $0.6 million and
interest earned on marketable securities of $1.2 million, partially offset by a
loss from operations of approximately $0.2 million.
For the nine months ended September 30, 2022, we had a net income of
approximately $10.3 million, which is primarily comprised of a gain from the
change in fair value of warrant liabilities of approximately $9.6 million and
interest earned on marketable securities of $1.6 million, partially offset by a
loss from operations of approximately $0.9 million.
For the three months ended September 30, 2021, we had a net income of
approximately $2.9 million, which included a loss from operations of
$0.3 million and a gain from the change in fair value of warrant liabilities of
$3.2 million.
For the period from January 15, 2021 to September 30, 2021, we had a net income
of approximately $3.5 million, which included a loss from operations of
$0.5 million, offering cost expense allocated to warrants of $0.6 million, and a
gain from the change in fair value of warrant liabilities of $4.6 million.
Our business activities from inception to September 30, 2022 consisted primarily
of our formation and completing our IPO and, since the completion of our IPO,
our activity has been limited to identifying and evaluating prospective
acquisition targets for a Business Combination.
Liquidity, Capital Resources and Going Concern
As of September 30, 2022, we had approximately $0.5 million in our operating
bank account, and a working capital deficit of approximately $0.3 million, or
working capital of approximately $0.6 million excluding the convertible
promissory note payable.
Our liquidity needs up to March 23, 2021 had been satisfied through (i) a
capital contribution from our Sponsor of $25,000 for the 7,187,500 Class B
ordinary shares, par value $0.0001 per share, or the Founder Shares, and
(ii) proceeds from the loan under an unsecured promissory note from our Sponsor
of up to $300,000. Subsequent to the consummation of our IPO, our liquidity
needs have been satisfied through the net proceeds from the Private Placements
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 certain of our officers and directors may, but are not obligated
to, provide us working capital loans. On May 13, 2022, we entered into a
convertible promissory note with the Sponsor pursuant to which the Sponsor
agreed to loan us up to an aggregate principal amount of $960,000. Concurrently
with entering into the debt agreement, we borrowed $960,000 against the
convertible promissory note. The proceeds from the note will be used to for
working capital purposes and to finance transaction costs in connection with a
Business Combination. See Note 6 to our unaudited financial statements for
further discussion of the convertible promissory note. As of September 30, 2022,
the outstanding principal balance under the convertible promissory note amounted
to an aggregate of $960,000.
In connection with the Company's assessment of going concern considerations in
accordance with FASB'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 23, 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 and an
extension has not been requested by the Sponsor and approved by the Company's
shareholders, there will be a mandatory liquidation and subsequent dissolution
of the Company. Management has determined that if the Company is unable to raise
additional funds to alleviate liquidity needs then the Company will cease all
operations except for the purpose of liquidating. The liquidity condition and
date for mandatory liquidation and subsequent dissolution raise substantial
doubt about the Company's ability to continue as a going concern one year from
the date that these financial statements are issued. No adjustments have been
made to the carrying amounts of assets or liabilities should the Company be
unable to continue as a going concern. The Company intends to complete the
Business Combination before the mandatory liquidation date of March 23, 2023.
The Company is within 12 months of its mandatory liquidation as of the time of
filing this Quarterly Report on Form 10-Q
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Contractual Obligations
As of September 30, 2022, we did not have any long-term debt obligations,
capital lease obligations, operating lease obligations, purchase obligations or
other long-term liabilities, other than an agreement to pay the sponsor a
monthly fee of $10,000 for office space, utilities, secretarial support and
administrative services. We began incurring these fees on March 23, 2021 and
will continue to incur these fees monthly until the earlier of the completion of
an initial business combination and our liquidation.
The underwriters of the IPO are entitled to a deferred underwriting commission
of 3.5% of the gross proceeds of the IPO and over-allotment, or $9,494,986 in
the aggregate. 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.
Critical Accounting Estimates
This management's discussion and analysis of our financial condition and results
of operations is based on our unaudited condensed financial statements, which
have been prepared in accordance with U.S. GAAP. The preparation of these
unaudited 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
unaudited 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.
Warrants Liability
We evaluated the Warrants in accordance with ASC 815-40 and concluded that a
provision in the Warrant Agreement, dated March 23, 2021, by and between us and
Continental Stock Transfer & Trust Company related to certain tender or exchange
offers as well as provisions that provided for potential changes to the
settlement amounts dependent upon the characteristics of the holder of the
warrant, precludes the Warrants from being accounted for as components of
equity. As the Warrants meet the definition of a derivative as
contemplated in ASC 815-40 and are not eligible for an exception from derivative
accounting, the Warrants are recorded as derivative liabilities on our Balance
Sheets and measured at fair value at inception (on the date of the IPO) and at
each reporting date in accordance with ASC 820, "Fair Value Measurement", with
changes in fair value recognized in our Statement of Operations in the period of
change.
Convertible Promissory Note
We account for conversion options embedded in convertible notes in accordance
with ASC 815. ASC 815 generally requires companies to bifurcate conversion
options embedded in convertible notes from their host instruments and to account
for them as free-standing derivative financial instruments.
We review the terms of convertible debt issued to determine whether there are
embedded derivative instruments, including embedded conversion options, which
are required to be bifurcated and accounted for separately as derivative
financial instruments. In circumstances where the host instrument contains more
than one embedded derivative instrument, including the conversion option, that
is required to be bifurcated, the bifurcated derivative instruments are
accounted for as a single, compound derivative instrument.
Bifurcated embedded derivatives are initially recorded at fair value and are
then revalued at each reporting date with changes in the fair value reported as
non-operating income or expense. When the equity or convertible debt instruments
contain embedded derivative instruments that are to be bifurcated and accounted
for as liabilities, the total proceeds received are first allocated to the fair
value of all the bifurcated derivative instruments. The remaining proceeds, if
any, are then allocated to the host instruments themselves, usually resulting in
those instruments being recorded at a discount from their face value. The
discount from the face value of the convertible debt, together with the stated
interest on the instrument, is amortized over the life of the instrument through
periodic charges to interest expense.
We assessed the provisions of the Convertible Promissory Note under ASC 470-20.
The derivative component of the obligation is initially valued and classified as
a derivative liability. The conversion option was valued using a Monte Carlo
simulation model, which is considered to be a Level 3 fair value measurement.
The conversion option liability is not recorded as of September 30, 2022 as it
was determined to have no fair value.
Offering Costs Associated with the Initial Public Offering
We comply with the requirements of the ASC 340-10-S99-1, "Other Assets and
Deferred Costs." Offering costs consisted of legal, accounting, underwriting
fees and other costs incurred through the IPO that were directly related to the
IPO. Offering costs are allocated to the separable financial instruments issued
in the IPO based on a relative fair value basis, compared to total proceeds
received. Offering costs associated with Warrant liabilities are expensed as
incurred, presented as non-operating expenses in our Statement of
Operations. Offering costs associated with the Class A ordinary shares were
charged to shareholders' deficit upon the completion of the IPO. Transaction
costs of the IPO, including the partial exercise of the over-allotment, amounted
to $15,622,172, of which $618,405 were allocated to expense associated with the
Warrant liability.
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Ordinary Shares Subject to Possible Redemption
All of the Class A ordinary shares sold as part of the Units in the IPO contain
a redemption feature which allows for the redemption of such public shares in
connection with our liquidation, if there is a shareholder vote or tender offer
in connection with the initial Business Combination and in connection with
certain amendments to our charter. In accordance with SEC and its staff's
guidance on redeemable equity instruments, which has been codified in
ASC 480-10-S99, redemption provisions not solely within our control require
ordinary shares subject to redemption to be classified outside of permanent
equity. Ordinary liquidation events, which involve the redemption and
liquidation of all of the entity's equity instruments, are excluded from the
provisions of ASC 480. Accordingly, at September 30, 2022 and December 31, 2021,
all Class A ordinary shares subject to possible redemption is presented as
temporary equity, outside of the shareholders' deficit section of our condensed
balance sheets.
We recognize changes in redemption value immediately as they occur and adjusts
the carrying value of redeemable ordinary share to equal the redemption value at
the end of each reporting period. Increases or decreases in the carrying amount
of redeemable ordinary share are affected by charges against additional paid in
capital and accumulated deficit.
Net Income Per Share
We comply with accounting and disclosure requirements of FASB ASC Topic 260,
Earnings Per Share. Net income per share is computed by dividing net income by
the weighted average number of ordinary shares outstanding during the period. We
have two classes of shares, Class A ordinary shares and Class B ordinary shares.
Earnings and losses are shared pro rata between the two classes of shares. We
have not considered the effect of warrants sold in the IPO and the Private
Placements to purchase 13,993,314 ordinary shares in the calculation of diluted
net income per share, since the exercise of the warrants is contingent upon the
occurrence of future events. As a result, diluted net income per ordinary share
is the same as basic net income per ordinary share for the period presented.
Our statement of operations applies the two-class method in calculating net
income per share. Basic and diluted net income per ordinary share for Class A
ordinary shares and Class B ordinary shares is calculated by dividing net income
attributable to us by the weighted average number of Class A ordinary shares and
Class B ordinary shares outstanding, allocated proportionally to each class of
shares.
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU2 020-06, 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 scope exception, and it
simplifies the diluted earnings per share calculation in certain areas. The
Company adopted ASU 2020-06 on January 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 accompanying unaudited condensed financial statements.
Emerging Growth Company and Smaller Reporting Company Status
As an emerging growth company, or EGC, under the Jumpstart Our Business Startups
Act of 2012, or JOBS Act, we may delay the adoption of certain accounting
standards until such time as those standards apply to private companies. Other
exemptions and reduced reporting requirements under the JOBS Act for EGCs
include presentation of only two years of audited financial statements in a
registration statement for an IPO, an exemption from the requirement to provide
an auditor's report on internal controls over financial reporting pursuant to
Section 404(b) of the Sarbanes-Oxley Act of 2002, an exemption from any
requirement that may be adopted by the Public Company Accounting Oversight Board
regarding mandatory audit firm rotation, and less extensive disclosure about our
executive compensation arrangements.
In addition, the JOBS Act provides that an EGC can take advantage of an extended
transition period for complying with new or revised accounting standards. This
provision allows an EGC to delay the adoption of some accounting standards until
those standards would otherwise apply to private companies. We have 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, we can adopt the new or revised standard at the time
private companies adopt the new or revised standard and may do so until such
time that we either (1) irrevocably elect to "opt out" of such extended
transition period or (2) no longer qualify as an emerging growth company. As a
result, our 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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We are also a "smaller reporting company," as defined in the Exchange Act of
1934, or the Exchange Act. We may continue to be a smaller reporting company
even after we are no longer an emerging growth company, in which case we may
continue to rely on exemptions from certain disclosure requirements that are
available to smaller reporting companies.
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