Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM
10-Q

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31,September 30, 2021

OR

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to____________

________ to _______

Leo Holdings Corp. II

(Exact name of registrant as specified in its charter)

Cayman Islands
 
001-39865
 
98-1574497

(State or other jurisdiction

of

incorporation or organization)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

Albany Financial Center, South Ocean Blvd, Suite #507,

P.O. Box
SP-63158,
New Providence, Nassau, The Bahamas

 
n/a
(Address Of Principal Executive Offices)
 
(Zip Code)

(310)
800-1000

Registrant’s telephone number, including area code

Not Applicable

(Former name or former address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange

on which registered

Units, each consisting of one Class A ordinary share, $0.0001 par value, and
one-fourth
of one redeemable warrant
 
LHC.U
 
New York Stock Exchange
Class A ordinary shares included as part of the units
 
LHC
 
New York Stock Exchange
Redeemable warrants included as part of the units
 
LHCWS
 
New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☐    No  ☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T (§
(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule
12b-2
of the Exchange Act.

Large accelerated filer ☐  Accelerated filer ☐
Non-accelerated filer ☒  Smaller reporting company ☒
 
  Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act).    Yes  ☒    No  ☐

As of June 10,November
12
, 2021, 37,500,000 Class A ordinary shares, par value $0.0001 per share, and 9,375,000 Class B ordinary shares, par value $0.0001 per share, were issued and outstanding, respectively.

Table of Contents

Leo Holdings Corp. II

Form
10-Q

For the Quarter Ended March 31, 2021

Table of Contents

     
Page
 

PART I. FINANCIAL INFORMATION

  

Item 1.

 
Condensed Financial Statements
   1 
 
Condensed Balance Sheets as of March 31,September 30, 2021 (Unaudited) and December 31, 2020
   1 
 
Unaudited Condensed StatementStatements of Operations for the Three and Nine Months Ended March 31,September 30, 2021 and for the Period from September 1, 2020 (Inception) through September 30, 2020
   2 
 
Unaudited Condensed StatementStatements of Changes in Shareholders’ Equity (Deficit) for the Three and Nine Months Ended March 31,September 30, 2021 and for the Period from September 1, 2020 (Inception) through September 30, 2020
   3 
 
Unaudited Condensed StatementStatements of Cash Flows for the ThreeNine Months Ended March 31,September 30, 2021 and for the Period from September 1, 2020 (Inception) through September 30, 2020
   4 
 
Notes to Unaudited Condensed Financial Statements
   5 

Item 2.

 
Management’s Discussion and Analysis of Financial Condition and Results of Operations
   1819 

Item 3.

 
Quantitative and Qualitative Disclosures About Market Risk
22

Item 4.

Controls and Procedures22

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings   23 

Item 1A.

4.
 
Risk FactorsControls and Procedures
   23 

Item 2.

PART II. OTHER INFORMATION
  
Item 1.
Legal Proceedings
24
Item 1A.
Risk Factors
24
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities
24
Item 3.
Defaults Upon Senior Securities
   25 

Item 3.

4.
 
Defaults Upon Senior SecuritiesMine Safety Disclosures
   25 

Item 4.

5.
 
Mine Safety DisclosuresOther Information
   25 

Item 5.

6.
 
Other InformationExhibits
   25 

Item 6.

Exhibits26

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

Item 1. Condensed Financial Statements
LEO HOLDINGS CORP. II

CONDENSED BALANCE SHEETS

   March 31, 2021  December 31, 2020 
   (Unaudited)    

Assets:

   

Current assets:

   

Cash

  $723,611  $—   

Prepaid expenses

   808,616   16,771 
  

 

 

  

 

 

 

Total current assets

   1,532,227   16,771 

Investments held in Trust Account

   375,004,727   —   

Deferred offering costs associated with the initial public offering

   —     381,478 
  

 

 

  

 

 

 

Total Assets

  $376,536,954  $398,249 
  

 

 

  

 

 

 

Liabilities and Shareholders’ Equity (Deficit):

   

Current liabilities:

   

Accounts payable

  $70,006  $—   

Accounts payable - related party

   26,452   —   

Accrued expenses

   99,500   245,000 

Note payable - related party

   —     162,127 
  

 

 

  

 

 

 

Total current liabilities

   195,958   407,127 

Deferred underwriting commissions

   13,125,000   —   

Warrant liabilities

   12,031,250   —   
  

 

 

  

 

 

 

Total liabilities

   25,352,208   407,127 

Commitments and Contingencies (Note 6)

   

Class A ordinary shares, $0.0001 par value; 34,618,474 shares subject to possible redemption at $10.00 per share as of March 31, 2021

   346,184,740   —   

Shareholders’ Equity (Deficit):

   

Preference shares, $0.0001 par value; 5,000,000 shares authorized; none issued and outstanding

   —     —   

Class A ordinary shares, $0.0001 par value; 500,000,000 shares authorized; 2,881,526 shares issued and outstanding (excluding 34,618,474 shares subject to possible redemption) as of March 31, 2021

   288   —   

Class B ordinary shares, $0.0001 par value; 50,000,000 shares authorized; 9,375,000 and 10,062,500 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively (1)

   937   1,006 

Additional paid-in capital

   5,361,604   23,994 

Accumulated deficit

   (362,823)   (33,878) 
  

 

 

  

 

 

 

Total shareholders’ equity (deficit)

   5,000,006   (8,878) 
  

 

 

  

 

 

 

Total Liabilities and Shareholders’ Equity (Deficit)

  $376,536,954  $398,249 
  

 

 

  

 

 

 

   
September 30,
2021
  
December 31,
2020
 
   
(Unaudited)
    
Assets:
         
Current assets:
         
Cash
  $447,622  $—   
Prepaid expenses
   566,604   16,771 
   
 
 
  
 
 
 
Total current assets
   1,014,226   16,771 
Investments held in Trust Account
   375,023,633   —   
Deferred offering costs associated with the initial public offering
   —     381,478 
   
 
 
  
 
 
 
Total Assets
  
$
376,037,859
 
 
$
398,249
 
   
 
 
  
 
 
 
Liabilities, Class A Ordinary Shares Subject to Possible Redemption and Shareholders’ Deficit
         
Current liabilities:
         
Accounts payable
  $74,716  $—   
Accounts payable - related party
   23,345   —   
Accrued expenses
   128,500   245,000 
Note payable - related party
   —     162,127 
   
 
 
  
 
 
 
Total current liabilities
   226,561   407,127 
Deferred underwriting commissions
   13,125,000   —   
Warrant liabilities
   10,266,667   —   
   
 
 
  
 
 
 
Total liabilities
   23,618,228   407,127 
Commitments and Contingencies (Note 6)
   0   0 
Class A ordinary shares subject to possible redemption, $0.0001 par value; 37,500,000 and 0 shares at $10.00 per share as of September 30, 2021 and December 31, 2020, respectively
   375,000,000   —   
Shareholders’ Deficit:
         
Preference shares, $0.0001 par value; 5,000,000 shares authorized; NaN issued and outstanding
   0—     —   
Class A ordinary shares, $0.0001 par value; 500,000,000 shares authorized
; 0 non-redeemable shares issued or outstanding
   0     —   
Class B ordinary shares, $0.0001 par value; 50,000,000 shares authorized; 9,375,000 and 10,062,500 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively
(1)
   937   1,006 
Additional
paid-in
capital
   0     23,994 
Accumulated deficit
   (22,581,306)   (33,878) 
   
 
 
  
 
 
 
Total shareholders’ deficit
   (22,580,369)   (8,878) 
   
 
 
  
 
 
 
Total Liabilities, Class A Ordinary Shares Subject to Possible Redemption and Shareholders’ Deficit
  
$
376,037,859
 
 
$
398,249
 
   
 
 
  
 
 
 
(1)

As of December 31, 2020, included up to 1,312,500 Class B ordinary shares subject to forfeiture if the over-allotment option was not exercised in full or in part by the underwriters. On January 12, 2021, the underwriters partially exercised the over-allotment option; thus, 687,500 shares were forfeited.

The accompanying notes are an integral part of these unaudited condensed financial statements.

1
Table of Contents
LEO HOLDINGS CORP. II

UNAUDITED CONDENSED STATEMENTS OF OPERATIONS

   For the Three Months Ended
March 31, 2021		 

Operating expenses

  

General and administrative expenses

  $429,621 

Administrative fee - related party

   26,452 
  

 

 

 

Loss from Operations

   (456,073) 

Change in fair value of warrant liabilities

   547,917 

Offering costs associated with issuance of warrants

   (425,516) 

Net gain from investments held in Trust Account

   4,727 
  

 

 

 

Net loss

  $(328,945) 
  

 

 

 

Weighted average shares outstanding of Class A ordinary shares, basic and diluted

   37,500,000 
  

 

 

 

Basic and diluted net income per share, Class A ordinary shares

  $0.00 
  

 

 

 

Weighted average shares outstanding of Class B ordinary shares, basic and diluted

   9,298,611 
  

 

 

 

Basic and diluted net loss per share, Class B ordinary shares

  $(0.04) 
  

 

 

 

        
For the Period from
 
  
For the Three Months Ended
  
For the Nine Months Ended
  
September 1, 2020 (Inception)
 
  
September 30, 2021
  
September 30, 2021
  
through September 30, 2020
 
Operating expenses
            
General and administrative expenses
 $276,638  $905,085  $11,885 
General and administrative expenses - related party
  43,345   99,592   —   
  
 
 
  
 
 
  
 
 
 
Loss from operations
  (319,983)   (1,004,677)   (11,885) 
Other income (expenses):
            
Change in fair value of warrant liabilities
  5,293,750   2,312,500   —   
Offering costs associated with issuance of warrants
  0     (425,516)   —   
Net gain from investments held in Trust Account
  9,454   23,633   —   
  
 
 
  
 
 
  
 
 
 
Net income (loss)
 $4,983,221  $905,940  $(11,885) 
  
 
 
  
 
 
  
 
 
 
Weighted average shares outstanding of Class A ordinary shares, basic and diluted
  37,500,000   35,989,011   —   
  
 
 
  
 
 
  
 
 
 
Basic and diluted net income per share, Class A ordinary shares
 $0.11  $0.02  $—   
  
 
 
  
 
 
  
 
 
 
Weighted average shares outstanding of Class B ordinary shares, basic
  9,375,000   9,349,817   8,750,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average shares outstanding of Class B ordinary shares, diluted
  
9,375,000
   
9,375,000
   
—
 
  
 
 
  
 
 
  
 
 
 
Basic and diluted net income (loss) per share, Class B ordinary shares
 $0.11  $0.02  $(0.00) 
  
 
 
  
 
 
  
 
 
 
The accompanying notes are an integral part of these unaudited condensed financial statements.

2
Table of Contents
LEO HOLDINGS CORP. II

UNAUDITED CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)

For the Three and Nine Months Ended March 31,September 30, 2021

   Ordinary Shares  Additional     Total 
   Class A  Class B  Paid-in  Accumulated  Shareholders’ 
   Shares  Amount  Shares (1)  Amount  Capital  Deficit  Equity (Deficit) 

Balance - December 31, 2020

   —    $—     10,062,500  $1,006  $23,994  $(33,878)  $(8,878) 

Sale of units in initial public offering, less fair value of warrant liabilities for public warrants

   37,500,000   3,750   —     —     367,683,750   —     367,687,500 

Offering costs

   —     —     —     —     (20,898,264)   —     (20,898,264) 

Excess cash received over the fair value of the private warrants

   —     —     —     —     4,733,333   —     4,733,333 

Class B ordinary shares forfeited

   —     —     (687,500)   (69)   69   —     —   

Class A ordinary shares subject to possible redemption

   (34,618,474)   (3,462)   —     —     (346,181,278)   —     (346,184,740) 

Net loss

   —     —     —     —     —     (328,945)   (328,945) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance - March 31, 2021 (unaudited)

   2,881,526  $288   9,375,000  $937  $5,361,604  $(362,823)  $5,000,006 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

   
                    
   
                    
   
                    
   
                    
   
                    
   
                    
   
                    
 
   
Ordinary Shares
  
Additional
     
Total
 
   
Class A
   
Class B
  
Paid-in
  
Accumulated
  
Shareholders’
 
   
Shares
   
Amount
   
Shares
(1)
  
Amount
  
Capital
  
Deficit
  
Deficit
 
Balance - December 31, 2020
  
 
0  
 
  
$
0  
 
  
 
10,062,500
 
 
$
1,006
 
 
$
23,994
 
 
$
(33,878
) 
 
$
(8,878
) 
Excess cash received over the fair value of the private warrants
   —      —      —     —     4,733,333   —     4,733,333 
Class B ordinary shares forfeited
   —      —      (687,500)   (69)   69   —     —   
Accretion on Class A ordinary shares subject to possible redemption amount
   —      —      —     —     (4,757,396)   (23,453,368)   (28,210,764) 
Net loss
   —      —      —     —     —     (328,945)   (328,945) 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Balance - March 31, 2021 (unaudited)
  
 
0  
 
  
 
0  
 
  
 
9,375,000
 
 
 
937
 
 
 
0  
 
 
 
(23,816,191
) 
 
 
(23,815,254
) 
Net loss
   —      —      —     —     —     (3,748,336)   (3,748,336) 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Balance - June 30, 2021 (unaudited)
  
 
0  
 
  
 
0  
 
  
 
9,375,000
 
 
 
937
 
 
 
0  
 
 
 
(27,564,527
) 
 
 
(27,563,590
) 
Net income
   —      —      —     —     —     4,983,221   4,983,221 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Balance - September 30, 2021 (unaudited)
  
 
0  
 
  
$
0  
 
  
 
9,375,000
 
 
$
937
 
 
$
0  
 
 
$
(22,581,306
) 
 
$
(22,580,369
) 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
For the Period from September 1, 2020 (Inception) through September 30, 2020
   
                    
   
                    
   
                    
   
                    
   
                    
   
                    
   
                    
 
   
Ordinary Shares
   
Additional
      
Total
 
   
Class A
   
Class B
   
Paid-in
   
Accumulated
  
Shareholders’
 
   
Shares
   
Amount
   
Shares
(1)
   
Amount
   
Capital
   
Deficit
  
Equity
 
Balance - September 1, 2020 (inception)
  
 
0  
 
  
$
0  
 
  
 
0  
 
  
$
0  
 
  
$
0  
 
  
$
0  
 
 
$
0  
 
Issuance of Class B ordinary shares to Sponsor
   —      —      10,062,500    1,006    23,994    —     25,000 
Net 
loss
   —      —      —      —      —      (11,885)   (11,885) 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
��  
 
 
  
 
 
 
Balance - September 30, 2020 (unaudited)
  
 
0  
 
  
$
0  
 
  
 
10,062,500
 
  
$
1,006
 
  
$
23,994
 
  
$
(11,885
) 
 
$
13,115
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
  
 
 
 
(1)

As of September 30, 2020 and December 31, 2020, included up to 1,312,500 Class B ordinary shares subject to forfeiture if the over-allotment option was not exercised in full or in part by the underwriters. On January 12, 2021, the underwriters partially exercised the over-allotment option; thus, 687,500 shares were forfeited.

The accompanying notes are an integral part of these unaudited condensed financial statements.

3
Table of Contents
LEO HOLDINGS CORP. II

UNAUDITED CONDENSED STATEMENTSTATEMENTS OF CASH FLOWS

   For the Three Months Ended 
   March 31, 2021 

Cash Flows from Operating Activities:

  

Net loss

  $(328,945) 

Adjustments to reconcile net loss to net cash used in operating activities:

  

Change in fair value of warrant liabilities

   (547,917) 

Offering costs associated with issuance of warrants

   425,516 

Net gain from investments held in Trust Account

   (4,727) 

Change in operating assets:

  

Prepaid expenses

   (791,845) 

Accounts payable

   70,006 

Accounts payable - related party

   26,452 

Accrued expenses

   14,500 
  

 

 

 

Net cash used in operating activities

   (1,136,960) 
  

 

 

 

Cash Flows from Investing Activities:

  

Cash deposited in Trust Account

   (375,000,000) 
  

 

 

 

Net cash used in investing activities

   (375,000,000) 
  

 

 

 

Cash Flows from Financing Activities:

  

Proceeds from note payable to related party

   6,604 

Repayment of note payable to related party

   (168,731) 

Proceeds received from initial public offering, gross

   375,000,000 

Proceeds received from private placement

   10,000,000 

Offering costs paid

   (7,977,302) 
  

 

 

 

Net cash provided by financing activities

   376,860,571 
  

 

 

 

Net change in cash

   723,611 

Cash - beginning of the period

   —   
  

 

 

 

Cash - end of the period

  $723,611 
  

 

 

 

Supplemental disclosure of noncash activities:

  

Offering costs included in accrued expenses

  $85,000 
  

 

 

 

Deferred underwriting commissions

  $13,125,000 
  

 

 

 

Forfeiture of Class B ordinary shares

  $69 
  

 

 

 

Initial value of Class A ordinary shares subject to possible redemption

  $346,074,800 
  

 

 

 

Change in value of Class A ordinary shares subject to possible redemption

  $109,940 
  

 

 

 

     
For the Period from
 
  
For the Nine Months Ended
  
September 1, 2020 (Inception)
 
  
September 30, 2021
  
through September 30, 2020
 
Cash Flows from Operating Activities:
        
Net income (loss)
 $905,940  $(11,885) 
Adjustments to reconcile net income (loss) to net cash used in operating activities:
        
Change in fair value of warrant liabilities
  (2,312,500)   —   
Offering costs associated with issuance of warrants
  425,516   —   
Net gain from investments held in Trust Account
  (23,633)   —   
Change in operating assets:
        
Prepaid expenses
  (549,833)   (13,115) 
Accounts payable
  74,716   —   
Accounts payable - related party
  
23,345

   
—

 
Accrued expenses
  43,500   —   
  
 
 
  
 
 
 
Net cash used in operating activities
  (1,412,949)   (25,000) 
  
 
 
  
 
 
 
Cash Flows from Investing Activities:
        
Cash deposited in Trust Account
  (375,000,000)   —   
  
 
 
  
 
 
 
Net cash used in investing activities
  (375,000,000)   —   
  
 
 
  
 
 
 
Cash Flows from Financing Activities:
        
Proceeds from note payable to related party
  6,604   —   
Repayment of note payable to related party
  (168,731)   —   
Proceeds received from initial public offering, gross
  375,000,000   —   
Proceeds received from private placement
  10,000,000   —   
Offering costs paid
  (7,977,302)   25,000 
  
 
 
  
 
 
 
Net cash provided by financing activities
  376,860,571   25,000 
  
 
 
  
 
 
 
Net change in cash
  447,622   —   
Cash - beginning of the period
  0     —   
  
 
 
  
 
 
 
Cash - end of the period
 
$
447,622
 
 
$
—  
 
  
 
 
  
 
 
 
Supplemental disclosure of noncash activities:
        
Offering costs included in accrued expenses
 $85,000  $175,000 
  
 
 
  
 
 
 
Offering costs included in accounts payable
 $—    $8,000 
  
 
 
  
 
 
 
Offering costs included in note payable
 $—    $23,690 
  
 
 
  
 
 
 
Deferred underwriting commissions
 $13,125,000  $—   
  
 
 
  
 
 
 
Forfeiture of Class B ordinary shares
 $69  $—   
  
 
 
  
 
 
 
The accompanying notes are an integral part of these unaudited condensed financial statements.

4
Table of Contents
LEO HOLDINGS CORP. II
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 1 —- Description of Organization and Business Operations

Organization and General

Leo Holdings Corp. II (the “Company”) was incorporated as a Cayman Islands exempted company on September 1, 2020. The Company was 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”). The Company is an emerging growth company and, as such, the Company is subject to all of the risks associated with emerging growth companies.

As of March 31,September 30, 2021, the Company had not commenced any operations. All activity for the period from September 1, 2020 (inception) through March 31,September 30, 2021 relates to the Company’s formation and the initial public offering (the “Initial Public Offering”) described below, and since the Company’s Initial Public Offering.Offering, the search for a potential target. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate generates
non-operating
income in the form of interest income on investments held in trust account from the proceeds derived from the Initial Public Offering.

Sponsor and Financing

The Company’s sponsor is Leo Investors II Limited Partnership, a Cayman Islands exempted limited partnership (the “Sponsor”). The registration statement for the Company’s Initial Public Offering was declared effective on January 7, 2021. On January 12, 2021, the Company consummated its Initial Public Offering of 37,500,000 units (the “Units” and, with respect to the Class A ordinary shares included in the Units being offered, the “Public Shares”), including 2,500,000 additional Units to partially cover over-allotments (the “Over-Allotment Units”), at $10.00 per Unit, generating gross proceeds of $375.0 million, and incurring offering costs of approximately $21.3 million, of which approximately $13.1 million was for deferred underwriting commissions (Note 6).

Simultaneously with the closing of the Initial Public Offering, the Company consummated the private placement (“Private Placement”) of 6,666,667 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”), at a price of $1.50 per Private Placement Warrant with the Sponsor, generating gross proceeds of $10.0 million, and incurring offering costs of approximately $10,000 (Note 4).

Trust Account

Upon the closing of the Initial Public Offering and the Private Placement, $375.0 million ($10.00 per Unit) of the net proceeds of the Initial Public Offering and certain of the proceeds of the Private Placement were placed in a trust account (“Trust Account”), located in the United States at J.P. Morgan Chase Bank, N.A., with Continental Stock Transfer & Trust Company acting as trustee, and invested only in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940 (the “Investment Company Act”), with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting the conditions of paragraphs (d)(2), (d)(3) and (d)(4) of Rule
2a-7
of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account as described below.

Initial Business Combination

The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete one or more initial Business Combinations having an aggregate fair market value of at least 80% of the assets held in the Trust Account (as defined below) (excluding the deferred underwriting commissions and taxes paid or payable on income earned on the Trust Account) at the time of the signing of the agreement to enter into the initial Business Combination. However, the Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding 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 1940, as amended (the “Investment Company Act”).

Act.

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LEO HOLDINGS CORP. II
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The Company will provide its holders (the “Public Shareholders”) of its Public Shares, with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a general meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek shareholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The Public Shareholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $10.00 per Public Share). The
per-share
amount to be distributed to Public Shareholders who redeem their Public Shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters (as discussed in Note 6). These Public Shares are classified as temporary equity upon the completion of the Initial Public Offering in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” In such case, the Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 upon such consummation of a Business Combination and a majority of the shares voted are voted in favor of the Business Combination. If a shareholder vote is not required by law and the Company does not decide to hold a shareholder vote for business or other legal reasons, the Company will, pursuant to its amended and restated memorandum and articles of association (the “Amended and Restated Memorandum and Articles of Association”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, shareholder approval of the transactions is required by law, or the Company decides to obtain shareholder approval for business or legal reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. Additionally, each Public Shareholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction. If the Company seeks shareholder approval in connection with a Business Combination, the initial shareholders (as defined below) agreed to vote their Founder Shares (as defined below in Note 4) and any Public Shares purchased during or after the Initial Public Offering in favor of a Business Combination. Subsequent to the consummation of the Initial Public Offering, the Company will adopt an insider trading policy which will require insiders to: (i) refrain from purchasing shares during certain blackout periods and when they are in possession of any material
non-public
information and (ii) to clear all trades with the Company’s legal counsel prior to execution. In addition, the initial shareholders agreed to waive their redemption rights with respect to their Founder Shares and Public Shares in connection with the completion of a Business Combination.

Notwithstanding the foregoing, the Amended and Restated Memorandum and Articles of Association provides that a Public Shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15% or more of the Class A ordinary shares sold in the Initial Public Offering, without the prior consent of the Company.

The Company’s Sponsor, officers and directors (the “initial shareholders”) agreed not to propose an amendment to the Amended and Restated Memorandum and Articles of Association that would modify the substance or timing of the Company’s obligation to redeem 100% of its Public Shares if the Company does not complete a Business Combination, unless the Company provides the Public Shareholders with the opportunity to redeem their Class A ordinary shares in conjunction with any such amendment.

If the Company is unable to complete a Business Combination within 24 months from the closing of the Initial Public Offering, or January 12, 2023 (the “Combination Period”), the Company will (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a
per-share
price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to us to fund the Company’s regulatory compliance requirements, and other costs related thereto and/or to pay the Company’s income taxes, if any, (less up to $100,000 of interest to pay dissolution expenses) divided by the number of the then outstanding Public Shares, which redemption will completely extinguish Public Shareholders’ rights as shareholders (including the right to receive further liquidation distributions, if any); and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining shareholders and the Company’s board of directors, liquidate and dissolve, subject in the case of clauses (ii) and (iii), to the Company’s obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law.

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LEO HOLDINGS CORP. II
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The Sponsor agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the Sponsor or members of the Company’s management team acquire Public Shares in or after the Initial Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the Company fails to complete a Business Combination within the Combination Period. The underwriters agreed to waive their rights to their deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does not complete a Business Combination within in the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be only $10.00 per share initially held in the Trust Account. In order to protect the amounts held in the Trust Account, the Sponsor agreed to be liable to the Company if and to the extent any claims by a vendor for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account. This liability will not apply with respect to any claims by a third party who executed a waiver of any right, title, interest or claim of any kind in or to any monies held in the Trust Account or to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (except the Company’s independent registered public accounting firm), prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.

Liquidity and Capital Resources

As of March 31,September 30, 2021, the Company had approximately $724,000$448,000 in its operating bank account and working capital of approximately $1.3 million.

$788,000.

The Company’s liquidity needs to datethrough Initial Public Offering have been satisfied through a contribution of $25,000 from the Sponsor to cover certain of the Company’s expenses in exchange for the issuance of the Founder Shares, the loan of approximately $169,000 from the Sponsor pursuant to the Note (as defined in Note 4), and the proceeds from the consummation of the Private Placement not held in the Trust Account.
5
). The Company repaid the Note in full on January 19, 2021. Subsequent from the consummation of the Initial Public Offering, the Company’s liquidity has been satisfied through the net proceeds from the consummation of the Initial Public Offering and the Private Placement held outside of the Trust Account. In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, provide the Company Working Capital Loans (as defined in Note 4)
5
). To date, there were no0 amounts outstanding under any Working Capital Loan.

Based on the foregoing, management believes that the Company will have sufficient working capital and borrowing capacity from the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors to meet its needs through the earlier of the consummation of a Business Combination or one year from this filing. 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.

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LEO HOLDINGS CORP. II
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 2 — Basic- Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form
10-Q
and Article 8 of Regulation
S-X
and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP. In the opinion of management, the unaudited condensed financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. Operating results for the three and nine months ended March 31,September 30, 2021 are not necessarily indicative of the results that may be expected through December 31, 2021 or for any future periods.

Revision to Previously Reported Financial Statements
In preparation of the Company’s unaudited condensed financial statements as of and for quarterly period ended September 30, 2021, the Company concluded it should revise its financial statements to classify all Class A ordinary shares subject to possible redemption in temporary equity. In accordance with the SEC and its staff’s guidance on redeemable equity instruments, ASC 480, paragraph
10-S99,
redemption provisions not solely within the control of the Company require ordinary shares subject to redemption to be classified outside of permanent equity. The Company had previously classified a portion of its Class A ordinary shares in permanent equity, or total shareholders’ equity. Although the Company did not specify a maximum redemption threshold, its charter currently provides that, the Company will not redeem its public shares in an amount that would cause its net tangible assets to be less than $5,000,001. Previously the Company did not consider redeemable shares classified as temporary equity as part of net tangible assets. Effective with these financial statements, the Company revised this interpretation to include temporary equity in net intangible assets. Accordingly, effective with this filing, the Company presents all redeemable Class A ordinary shares as temporary equity and recognizes accretion from the initial book value to redemption value at the time of its Initial Public Offering and in accordance with ASC 480. The change in the carrying value of the redeemable shares of Class A ordinary shares at the Initial Public Offering resulted in a decrease of approximately $5.5 million in additional
paid-in
capital and an increase of approximately $23.5 million to accumulated deficit, as well as a reclassification of 2,892,520 shares of Class A ordinary shares from permanent equity to temporary equity. The Company will present this revision in a prospective manner in all future filings. Under this approach, the previously issued financial statement included as an exhibit to the Company’s Form
8-K
filed with the SEC on January 19, 2021, and Form
10-Qs
will not be amended, but historical amounts presented in the current and future filings will be recast to be consistent with the current presentation, and an explanatory footnote will be provided.
The impact of the revision to the unaudited condensed balance sheets as of March 31, 2021 and June 30, 2021, is a reclassification of $28.8 million and $32.6 million, respectively, from total shareholders’ equity to Class A ordinary shares subject to possible redemption. There is no impact to the reported amounts for total assets, total liabilities, or net income (loss). In connection with the change in presentation for the Class A ordinary shares subject to possible redemption, the Company has revised its earnings per share calculation to allocate income and losses shared pro rata between the two classes of shares. This presentation contemplates a Business Combination as the most likely outcome, in which case, both classes of shares share pro rata in the income and losses of the Company.
Emerging Growth Company

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to
non-emerging
growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different
8
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LEO HOLDINGS CORP. II
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s unaudited condensed 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.

Use of Estimates

The preparation of unaudited condensed financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements and the reported amounts of revenues and expenses during the reporting periods. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the unaudited condensed financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. One of the more significant accounting estimates included in these financial statements is the determination of the fair value of the warrant liability. Accordingly, the actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company had no0 cash equivalents as of March 31,September 30, 2021 and December 31, 2020 or for any future periods.

2020.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal Depository Insurance CoverageCorporation coverage limit of $250,000, and investments held in Trust Account. The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.

Investments Held in the Trust Account

The Company’s portfolio of investments held in the Trust Account 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. TheWhen the Company’s investments held in the Trust Account are comprised of U.S. government securities, the investments are classified as trading securities. When the Company’s investments held in the Trust Account are comprised of money market funds, the investments are recognized at fair value. Trading securities and investments in money market funds are presented on the 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 net gain from investments held in Trust Account in the accompanying unaudited condensed statementstatements of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.

Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities which qualify as financial instruments under the FASB ASC Topic 820, “Fair Value Measurements,” equal or approximate the carrying amounts represented in the condensed balance sheets.
Fair Value Measurements

Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:

consist of:

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LEO HOLDINGS CORP. II
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets;

Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and

Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.

As

Derivative Warrant Liabilities
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of March 31, 2021its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and December 31, 2020,FASB ASC Topic
815-40,
Derivatives and Hedging, Contracts in Entity’s Own Equity (“ASC
815-40”).
The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is
re-assessed
at the carrying valuesend of cash,each reporting period.
The Company accounts payable, accounts payable – related partyfor its warrants issued in connection with its Initial Public Offering and accrued expenses approximate their fair values due toPrivate Placement, as derivative warrant liabilities in accordance with ASC
815-40.
Accordingly, the short-term nature ofCompany recognizes the instruments. The Company’s marketable securities held in Trust Account is comprised of investments in U.S. Treasury securities with an original maturity of 185 days or less and are recognizedwarrant instruments as liabilities at fair value.value and adjusts the instruments to fair value at each reporting period. The liabilities are subject to
re-measurement
at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s statements of operations. The initial fair value of warrants issued in connection with the Private Placement has been estimated using a Monte-Carlo simulation. The fair value of marketable securities heldthe warrants issued in Trust Accountconnection with the Initial Public Offering was initially measured using a Monte-Carlo simulation model and subsequently been measured based on the market price at each measurement date when separately listed and traded. The determination of the fair value of the warrant liability may be subject to change as more current information becomes available and accordingly the actual results could differ significantly. Derivative warrant liabilities are classified as
non-current
liabilities as their liquidation is determined using quoted prices in active markets.

not reasonably expected to require the use of current assets or require the creation of current liabilities.

Offering Costs Associated with the Initial Public Offering

Offering costs consisted of legal, accounting, underwriting fees and other costs incurred through the Initial Public Offering that were directly related to the Initial Public Offering. Offering costs are allocated to the separable financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared to total proceeds received. Offering costs associated with warrant liabilities are expensed as incurred should disclose the expense here since it is not discussed anywhere else, presented as
non-operating
expenses in the statementstatements of operations. Offering costs associated with the Class A ordinary shares were charged against the carrying value of the Class A ordinary shares
subject to shareholders’ equity possible redemption
upon the completion of the Initial Public Offering. DuringThe Company classifies deferred underwriting commissions as
non-current
liabilities as their liquidation is not reasonably expected to require the three months ended March 31, 2021, there were approximately $426,000 offering costs recorded associated with issuanceuse of public and private warrants.

current assets or require the creation of current liabilities.

Class A Ordinary Shares Subject to Possible Redemption

The Company accounts for its Class A ordinary shares subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” 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.
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Table of Contents
LEO HOLDINGS CORP. II
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The Company’s Class A ordinary shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, at March 31,as of September 30, 2021, 34,618,47437,500,000 Class A ordinary shares subject to possible redemption are presented as temporary equity, outside of the shareholders’ equity section of the Company’s condensed balance sheet.

sheets. There were no Class A ordinary shares outstanding as of December 31, 2020.

Income Taxes

ASC Topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be
more-likely-than-not
to be sustained upon examination by taxing authorities. The Company’s management determined that the Cayman Islands is the Company’s only major tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no0 unrecognized tax benefits and no0 amounts accrued for interest and penalties as of March 31,September 30, 2021 and December 31, 2020. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.

There is currently no taxation imposed on income by the Government of the Cayman Islands. In accordance with Cayman federal income tax regulations, income taxes are not levied on the Company. Consequently, income taxes are not reflected in the Company’s unaudited condensed financial statements. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.

months

.
Net Income (Loss) per Ordinary Share

The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” The Company has two classes of shares, which are referred to as Class A ordinary shares and Class B ordinary shares. Income and losses are shared pro rata between the two classes of shares. Net income (loss) per ordinary share is computedcalculated by dividing the net income (loss) applicable to shareholders by the weighted average number of ordinary shares outstanding duringfor the respective period.
The Company hascalculation of diluted net income (loss) per ordinary share does not consideredconsider the effect of the warrants underlying the Units sold in the Initial Public Offering and the Private Placement Warrants to purchase an aggregate of 16,041,667 Class A ordinary shares in the calculation of diluted income per share, becausesince their inclusion would be anti-dilutive under the treasury stock method.

The Company’s unaudited condensed statement of operations includes As a presentation of income (loss)result, diluted net loss per ordinary shares subject to redemption in a manner similar toshare is the two-class method of income (loss)same as basic net loss per share. Net income per ordinary share basicfor the three and diluted fornine months ended September 30, 2021. Accretion associated with the redeemable Class A ordinary shares is calculated by dividingexcluded from earnings per share as the investment income earned onredemption value approximates fair value.

The table below presents a reconciliation of the Trust Account of approximately $5,000 by the weighted average number of Class A ordinary shares outstanding for the three months ended March 31, 2021. Net loss per ordinary share,numerator and denominator used to compute basic and diluted net income per share for Class Beach class of ordinary shares is calculated by dividing the net lossshares:
   
For the Three Months Ended

September 30, 2021
   
For the Nine Months Ended
September 30, 2021
 
   
Class A
   
Class B
   
Class A
   
Class B
 
Numerator:
                    
Allocation of net income - basic
  $3,986,577   $996,644   $719,116   $186,824 
Allocation of net income - diluted
 
$
3,986,577
  
$
996,644
  
$
718,717
  
$
187,223
 
Denominator:
                    
Weighted average ordinary shares outstanding, basic
   37,500,000    9,375,000    35,989,011    9,349,817 
Weighted average ordinary shares outstanding, diluted
  
37,500,000
   
9,375,000
   
35,989,011
   
9,375,000
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Basic net income per ordinary share
 
$
0.11
  
$
0.11
  
$
0.02
  
$
0.02
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted net income per ordinary share
  $0.11   $0.11   $0.02   $0.02 
   
 
 
   
 
 
   
 
 
   
 
 
 
11
Table of approximately $329,000 for the three months ended March 31, 2021, less income attributable to Class A ordinary shares of approximately $5,000, by the weighted average number of Class B ordinary shares outstanding.

Derivative warrant liabilities

The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC 815-15. 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.

The Company accounts for its 16,041,667 warrants issued in connection with its Initial Public Offering (9,375,000) and Private Placement (6,666,667), as derivative warrant liabilities in accordance with ASC 815-40. Accordingly, the Company recognizes the warrant instruments as liabilities at fair value and adjusts the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s statement of operations. The fair value of warrants issued in connection with the Private Placement has been estimated using Monte-Carlo simulations at each balance sheet date. The fair value of the warrants issued in connection with the Initial Public Offering was initially measured using a Monte-Carlo simulation model at each measurement date and subsequently been measured based on the market price when separately listed and traded.

Contents

LEO HOLDINGS CORP. II
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Recent Adopted Accounting Standards

Pronouncements

In August 2020, the FASB issued ASU
No. 2020-06, Debt—Debt
Debt-Debt with Conversion and Other Options (Subtopic
470-20)
and Derivatives and Hedging—ContractsHedging-Contracts in Entity’s Own Equity (Subtopic
815-40):
Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity
(“ASU
2020-06”),
which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas. The Company adopted ASU
2020-06
on January 1, 2021. Adoption of the ASU did not impact the Company’s financial position, results of operations or cash flows.

Recent Issued Accounting Standards

The Company’s management does not believe that any other recently issued, but not yet effective, accounting standards updates, if currently adopted, would have a material effect on the accompanying financial statements.

Note 3 —- Initial Public Offering

On January 12, 2021, the Company consummated its Initial Public Offering of 37,500,000 Units, including 2,500,000 additional Units to partially cover over-allotments, at $10.00 per Unit, generating gross proceeds of $375.0 million, and incurring offering costs of approximately $21.3 million, of which approximately $13.1 million was for deferred underwriting commissions (Note 6).

Each Unit consists of one1 Class A ordinary share, and
one-fourth
of one redeemable warrant (each, a “Public Warrant”). Each Public Warrant entitles the holder to purchase one Class A ordinary share at a price of $11.50 per share, subject to adjustment (see Note 8)9).

Note 4 —- Private Placement

Simultaneously with the closing of the Initial Public Offering, the Company consummated the Private Placement of
6,666,667
Private Placement Warrants, at a price of $1.50 $
1.50
per Private Placement Warrant with the Sponsor, generating gross proceeds of $10.0$
10.0
 million, and incurring offering costs of approximately $10,000.

$

10,000
.
Each whole Private Placement Warrant is exercisable for one1 whole Class A ordinary share at a price of $11.50 per share. A portion of the proceeds from the Private Placement Warrants was added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the Private Placement Warrants will expire worthless. The Private Placement Warrants will be
non-redeemable
and exercisable on a cashless basis so long as they are held by the Sponsor or its permitted transferees.

The Sponsor and the Company’s officers and directors agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Warrants until 30 days after the completion of the initial Business Combination.

Note 5 —- Related Party Transactions

Founder Shares

On September 9, 2020, the Sponsor paid $25,000 to cover certain expenses of the Company in consideration of 10,062,500 Class B ordinary shares, par value $0.0001 (the “Founder Shares”). In December 2020, the Sponsor transferred 30,000 founder shares to each of the Company’s directors and 90,000 shares in the aggregate to the Company’s strategic advisors. The Sponsor agreed to forfeit up to 1,312,500 Founder Shares to the extent that the over-allotment option is not exercised in full by the underwriters, so that the Founder Shares will represent 20.0% of the Company’s issued and outstanding shares after the Initial Public Offering. The underwriters partially exercised their over-allotment option on January 12, 2021 to purchase an addition of 2,500,000 Units, with the remaining portion of the over-allotment option expiring at the conclusion of the
45-day
option period. As a result of the expiration of the over-allotment option, 687,500 Founder Shares were forfeited.

The initial shareholders agreed, subject to limited exceptions, not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (A) one year after the completion of the initial Business Combination or (B) subsequent to the initial Business Combination, (x) if the last sale price of the Class A ordinary shares equals or exceeds $12.00 per share (as adjusted for share
sub-divisions,
share dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any
30-trading
day period commencing at least 150 days after the initial Business Combination, or (y) the date on which the Company completes a liquidation, merger, share exchange or other similar transaction that results in all of the Company’s shareholders having the right to exchange their Class A ordinary shares for cash, securities or other property.

12
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LEO HOLDINGS CORP. II
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Related Party Loans

On September 8, 2020, the Sponsor agreed to loan the Company an aggregate of up to $300,000 to cover expenses related to the Initial Public Offering pursuant to a promissory note (the “Note”). This Note was non-interest 
0n-interest
bearing and payable upon the completion of the Initial Public Offering. As of January 12, 2021, the Company borrowed approximately $169,000 under the Note. The Company repaid the Note in full on January 19, 2021.

Subsequent to the repayment, the facility was no longer available to the Company.

In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of the proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lenders’ discretion, up to $1.5 million of such Working Capital Loans may be convertible into 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. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. As of March 31,September 30, 2021 and December 31, 2020, the Company had no0 borrowings under the Working Capital Loans.

Administrative Services Agreement

Commencing on the date that the Company’s securities were first listed on the New York Stock Exchange, the Company agreed to pay the Sponsor a total of $10,000 per month for office space, secretarial and administrative services provided to the Company commencing with the closing of the Initial Public Offering. Upon completion of the initial Business Combination or the Company’s liquidation, the Company will cease paying these monthly fees. The Company incurred and paid approximately $26,000$30,000 and $86,000 in expenses in connection with such services during the three and nine months ended March 31,September 30, 2021, as reflected in the accompanying unaudited condensed statementstatements of operations.operations, respectively. During the three and nine months ended September 30, 2021, the Company recorded approximately $13,000 in expenses in connection with compliance services with related party. As of March 31,September 30, 2021, there were approximately $26,000 in accounts$23,000 payable withto related party was outstanding, respectively, as reflected in the accompanying unaudited condensed balance sheets.

sheet.

Note 6 —- Commitments and Contingencies

Registration Rights

The holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any Class A ordinary shares issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans) were entitled to registration rights pursuant to a registration and shareholder rights agreement signed upon consummation of the Initial Public Offering. These holders were entitled to certain demand and “piggyback” registration rights. However, the registration and shareholder rights agreement provided that the Company would not permit any registration statement filed under the Securities Act to become effective until the termination of the applicable
lock-up
period for the securities to be registered. The Company will bear the expenses incurred in connection with the filing of any such registration statements.

Underwriting Agreement

The Company granted the underwriters a
45-day
option from the final prospectus relating to the Initial Public Offering to purchase up to 5,250,000 additional Units to cover over-allotments, if any, at the Initial Public Offering price less the underwriting discounts and commissions. The underwriters partially exercised their over-allotment option on January 12, 2021 to purchase an additional 2,500,000 Over-Allotment Units. The remaining unexercised over-allotment option expired at the conclusion of the
45-day
option period.

13
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LEO HOLDINGS CORP. II
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The underwriters were entitled to an underwriting discount of $0.20 per unit, or $7.5 million in the aggregate, paid upon the closing of the Initial Public Offering. In addition, $0.35 per unit, or approximately $13.1 million in the aggregate will be payable to the underwriters for deferred underwriting commissions. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.

Risks and Uncertainties

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

Note 7 — Derivative Warrant Liabilities

-Warrants

Public Warrants may only be exercised for a whole number of shares. No fractional Public Warrants will be issued upon separation of the Units and only whole Public Warrants will trade. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination or (b) 12 months from the closing of the Initial Public Offering; provided in each case that the Company has an effective registration statement under the Securities Act covering the Class A ordinary shares issuable upon exercise of the Public Warrants and a current prospectus relating to them is available (or the Company permits holders to exercise their Public Warrants on a cashless basis and such cashless exercise is exempt from registration under the Securities Act). The Company agreed that as soon as practicable, but in no event later than twenty business days, after the closing of a Business Combination, the Company will use its best efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the Class A ordinary shares issuable upon exercise of the Public Warrants. If the shares issuable upon exercise of the warrants are not registered under the Securities Act, the Company will be required to permit holders to exercise their warrants on a cashless basis. However, no warrant will be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder, or an exemption from registration is available. Notwithstanding the above, if the Company’s Class A ordinary shares are at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company elects, the Company will not be required to file or maintain in effect a registration statement, but the Company will use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.

The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.

The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants and the ordinary shares issuable upon exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be
non-redeemable
so long as they are held by the initial purchasers or such purchasers’ permitted transferees. If the Private Placement Warrants are held by someone other than the initial shareholders or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.

Once the warrants become exercisable, the Company may redeem the Public Warrants:

in whole and not in part;

at a price of $0.01 per warrant;

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LEO HOLDINGS CORP. II
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
if, and only if, the closing price of ordinary shares equals or exceeds $18.00 per share (as adjusted for share
sub-divisions,
share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within a
30-trading
day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders.

The Company will not redeem the warrants unless an effective registration statement under the Securities Act covering the Class A ordinary shares issuable upon exercise of the warrants is effective and a current prospectus relating to those Class A ordinary shares is available throughout the
30-day
redemption period, except if the warrants may be exercised on a cashless basis and such cashless exercise is exempt from registration under the Securities Act.

In addition, commencing on the day the warrants become exercisable, the Company may redeem the outstanding warrants (except with respect to the Private Placement Warrants):

in whole and not in part;

$0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares determined by reference to an agreed table based on the redemption date and the “fair market value” of Class A ordinary shares;

if, and only if, the closing price of Class A ordinary shares equals or exceeds $10.00 per Public Share (as adjusted for adjustments) for any 20 trading days within the
30-trading
day period ending three trading days before the Company sends the notice of redemption to the warrant holders; and

if the closing price of the Class A ordinary shares for any 20 trading days within a
30-trading
day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders is less than $18.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a warrant as described under the heading “Description of Securities—Warrants—PublicSecurities-Warrants-Public Shareholders’ Warrants—Anti-dilutionWarrants-Anti-dilution Adjustments”), the Private Placement Warrants must also be concurrently called for redemption on the same terms as the outstanding public warrants, as described above.

The “fair market value” of Class A ordinary shares shall mean the average last reported sale price of Class A ordinary shares for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants.

If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. Additionally, in no event will the Company be required to net cash settle any Warrants. If the Company is unable to complete the initial Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.

In addition, if (x) the Company issues additional Class A ordinary shares or equity-linked securities for capital raising purposes in connection with the closing of a Business Combination at an issue price or effective issue price of less than $9.20 per ordinary share (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of a Business Combination on the date of the consummation of a Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Class A ordinary shares during the 20 trading day period starting on the trading day prior to the day on which the Company consummates a Business Combination (such price, the “Market Value”) is below $9.20 per share, then the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, the $18.00 per share redemption trigger price and the “Redemption of Warrants for Class A ordinary shares” described above will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price, and the $10.00 per share redemption trigger price described above under “Redemption of Warrants for Class A ordinary shares” will be adjusted (to the nearest cent) to be equal to the higher of the Market Value and the Newly Issued Price.

15
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LEO HOLDINGS CORP. II
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 8 —– Class A Ordinary Shares Subject to Possible Redemption
The Company’s Class A ordinary shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of future events. The Company is authorized to issue 500,000,000 Class A ordinary shares with a par value of $0.0001 per share. Holders of the Company’s Class A ordinary shares are entitled to one vote for each share. As of September 30, 2021, there were 37,500,000 Class A ordinary shares outstanding, which were all subject to possible redemption and are classified outside of permanent equity in the condensed balance sheet.
The Class A ordinary shares subject to possible redemption reflected on the condensed balance sheet is reconciled on the following table:
Gross proceeds received from Initial Public Offering
  $375,000,000 
Less:
     
Fair value of Public Warrants at issuance
   (7,312,500) 
Offering costs allocated to Class A ordinary shares
   (20,898,264) 
Plus:
     
Accretion on Class A ordinary shares to redemption value
   28,210,764 
   
 
 
 
Class A ordinary shares subject to possible redemption
  $375,000,000 
   
 
 
 
Note 9 - Shareholders’ Equity

Preference Shares —
- The Company is authorized to issue 5,000,000 preference shares with a par value of $0.0001 per share with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. As of MarchSeptember 30, 2021 and December 31, 2021,2020, there were no0 Preference Shares issued or outstanding.

Class
 A Ordinary Shares —
- The Company is authorized to issue 500,000,000 Class A ordinary shares with a par value of $0.0001 per share. As of March 31,September 30, 2021, there were 37,500,000 Class A ordinary shares outstanding, including 34,618,474 Class A ordinary sharesand all of which were subject to possible redemption that are classifiedand included as temporary equity in the accompanying balance sheet.

(see Note 8).

Class
 B Ordinary Shares —
- The Company is authorized to issue 50,000,000 Class B ordinary shares with a par value of $0.0001 per share. As of March 31,September 30, 2021 and December 31, 2020, there were 9,375,000 and 10,062,500 Class B ordinary shares outstanding, respectively. As of December 31, 2020, up to 1,312,500 shares were subject to forfeiture to the Company by the Sponsor for no consideration to the extent that the underwriters’ over-allotment option is not exercised in full or in part, so that the initial shareholders will collectively own 20% of the Company’s issued and outstanding ordinary shares after the Initial Public Offering. The underwriters partially exercised their over-allotment option on January 12, 2021 to purchase an addition of 2,500,000 Units, with the remaining portion of the over-allotment option expiring at the conclusion of the 45-day option period. As a result of the expiration of the over-allotment option, 687,500 Founder Shares were forfeited.

Ordinary shareholders of record are entitled to one vote for each share held on all matters to be voted on by shareholders. Holders of the Class A ordinary shares and holders of the Class B ordinary shares will vote together as a single class on all matters submitted to a vote of the shareholders, except as required by law.

The Class B ordinary shares will automatically convert into Class A ordinary shares on the first business day immediately following the consummation of the initial Business Combination at a ratio such that the number of Class A ordinary shares issuable upon conversion of all Founder Shares will equal, in the aggregate, on an
as-converted
basis, 20% of the sum of (i) the total number of Class A ordinary shares issued and outstanding upon completion of the Initial Public Offering, plus (ii) the sum of the total number of Class A ordinary shares issued or deemed issued or issuable upon conversion or exercise of any equity-linked securities or rights issued or deemed issued, by the Company in connection with or in relation to the consummation of the initial Business Combination, excluding any Class A ordinary shares or equity-linked securities exercisable for or convertible into Class A ordinary shares issued, or to be issued, to any seller in the initial Business Combination and any private placement warrants issued to the Sponsor upon conversion of Working Capital Loans. In no event will the Class B ordinary shares convert into Class A ordinary shares at a rate of less than one to one.

16
Table of Contents
LEO HOLDINGS CORP. II
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 9 —10 - Fair Value Measurements

The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of March 31,September 30, 2021 and indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value.

                                                                                                            
   Fair Value Measured as of March 31, 2021 
   Level 1   Level 2   Level 3   Total 

Assets

        

Investments held in Trust Account - U.S. Treasury Securities

  $ 375,004,727   $—     $—     $ 375,004,727 

Liabilities:

        

Warrant liabilities - public warrants

   7,031,250    —        7,031,250 

Warrant liabilities - private warrants

   —      —      5,000,000    5,000,000 
  

 

 

   

 

 

   

 

 

   

 

 

 

   
Fair Value Measured as of September 30, 2021
 
   
Level 1
   
Level 2
   
Level 3
   
Total
 
Assets
                    
Investments held in Trust Account - U.S. Treasury Securities
  $375,023,633   $—     $—     $375,023,633 
Liabilities:
                    
Warrant liabilities - public warrants
  $6,000,000   $—     $—     $6,000,000 
Warrant liabilities - private warrants
  $—     $—     $4,266,667   $4,266,667 
As of December 31, 2020, there were no assets or liabilities that were measured at fair value on a recurring basis.
Transfers to/from Levels 1, 2, and 3 are recognized at the endbeginning of the reporting period. The estimated fair value of the Public Warrants transferred from a Level 3 measurement to a Level 1 fair value measurement, in March 2021, when the Public Warrants were separately listed and traded.

The Company utilizes a binomial Monte-Carlo simulation to estimatetraded in March 2021.

For periods where no observable traded price is available, the fair value of the public warrants and private warrants at each reporting period, with changes inPublic Warrants has been estimated using a Monte-Carlo simulation model. For periods subsequent to the detachment of the Public Warrants from the Units, the fair value recognized inof the statementPublic Warrants is based on the observable listed price for such warrants. The fair value of operations.the Private Warrants is determined using a Monte-Carlo simulation model. For the three and nine months ended March 31,September 30, 2021, the Company recognized a decrease in the fair value of warrant liabilities of approximately $548,000$5.3 million and $2.3 million, respectively, presented on the accompanying statementcondensed statements of operations.

The change in the fair value of the Level 3 derivative warrant liabilities for the three and nine months ended March 31,September 30, 2021 is summarized as follows:

                        

Warrant liabilities at January 1, 2021

  $—   

Issuance of Public and Private Warrants

   12,579,167 

Public Warrants transfer to Level 1

   (7,312,500) 

Change in fair value of warrant liabilibites

   (266,667) 
  

 

 

 

Warrant liabilities at March 31, 2021

  $5,000,000 
  

 

 

 

Warrant liabilities at January 1, 2021
  $0   
Issuance of Public and Private Warrants
   12,579,167 
Public Warrants transferred to Level 1
   (7,312,500) 
Change in fair value of warrant liabilities
   (266,667) 
   
 
 
 
Warrant liabilities at March 31, 2021
   5,000,000 
Change in fair value of warrant liabilities
   1,466,667 
   
 
 
 
Warrant liabilities at June 30, 2021
   6,466,667 
Change in fair value of warrant liabilities
   (2,200,000) 
   
 
 
 
Warrant liabilities at September 30, 2021
  $4,266,667 
   
 
 
 
The estimated fair value of the derivative warrant liabilities isPublic and Private Placement Warrants, prior to the Public Warrants being traded in an active market, was determined using Level 3 inputs. Inherent in a Monte-Carlo simulation are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its ordinary shares based on historical volatility of select peer companies that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury
zero-coupon
yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates remaining at zero.

Any changes in these assumptions can change the valuation significantly.

17
Table of Contents
LEO HOLDINGS CORP. II
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The following table provides quantitative information regarding Level 3 fair value measurements inputs asat their measurement dates:

                                                
   March 31, 2021  January 12, 2021 

Exercise price

  $11.50  $11.50 

Stock Price

  $9.72  $9.80 

Term (in years)

   5.76   5.97 

Volatility

   13.50%   14.20% 

Risk-free interest rate

   1.10%   0.66% 

Dividend yield

   —     —   

Note 10 — Revision to Prior Period Financial Statements

During the course of preparing the quarterly report on Form 10-Q for the three-month period ended March 31, 2021, the Company identified a misapplication of accounting guidance related to the Company’s warrants in the Company’s previously issued audited balance sheet dated January 12, 2021, filed on Form 8-K on January 19, 2021 (the “Post-IPO Balance Sheet”).

On April 12, 2021, the staff of the Securities and Exchange Commission (the “SEC Staff”) issued a public statement entitled “Staff Statement on Accounting and Reporting Considerations for Warrants issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Staff Statement”). In the SEC Staff Statement, the SEC Staff expressed its view that certain terms and conditions common to SPAC warrants may require the warrants to be classified as liabilities on the SPAC’s balance sheets as opposed to equity. Since their issuance on January 12, 2021, the Company’s warrants have been accounted for as equity within the Company’s previously reported balance sheet. After discussion and evaluation, including with the Company’s independent registered public accounting firm and the Company’s audit committee, management concluded that the warrants should be presented as liabilities with subsequent fair value remeasurement.

The warrants were reflected as a component of equity in the Post-IPO Balance Sheet as opposed to liabilities on the balance sheets, based on the Company’s application of FASB ASC Topic 815-40,Derivatives and Hedging, Contracts in Entity’s Own Equity (“ASC 815-40). The views expressed in the SEC Staff Statement were not consistent with the Company’s historical interpretation of the specific provisions within its warrant agreement and the Company’s application of ASC 815-40 to the warrant agreement. The Company reassessed its accounting for Warrants issued on January 12, 2021, in light of the SEC Staff’s published views. Based on this reassessment, management determined that the warrants should be classified as liabilities measured at fair value upon issuance, with subsequent changes in fair value reported in the Company Statement of Operations each reporting period.

The Company concluded that the misstatement was not material to the Post-IPO Balance Sheet and the misstatement had no material impact to any prior interim period. The effect of the revisions to the Post-IPO Balance Sheet is as follows:

   As of January 12, 2021 
   As Previously   Restatement     
   Reported   Adjustment   As Restated 

Balance Sheet

      

Total assets

  $377,545,296   $—     $377,545,296 
  

 

 

   

 

 

   

 

 

 

Liabilities and shareholders’ equity

      

Total current liabilities

  $766,319   $—     $766,319 

Deferred underwriting commissions

   13,125,000    —      13,125,000 

Warrant liabilities

   —          12,579,167    12,579,167 
  

 

 

   

 

 

   

 

 

 

Total liabilities

   13,891,319    12,579,167    26,470,486 

Class A ordinary shares, $0.001 par value; shares subject to possible redemption

   358,653,970    (12,579,170)    346,074,800 

Shareholders’ equity

      

Preference shares - $0.0001 par value

   —      —      —   

Class A ordinary shares - $0.001 par value

   164    126    290 

Class B ordinary shares - $0.001 par value

   1,006    —      1,006 

Additional paid-in-capital

   5,046,081    425,393    5,471,474 

Accumulated deficit

   (47,244)    (425,516)    (472,760) 
  

 

 

   

 

 

   

 

 

 

Total shareholders’ equity

   5,000,007    3    5,000,010 
  

 

 

   

 

 

   

 

 

 

Total liabilities and shareholders’ equity

  $    377,545,296   $—     $    377,545,296 
  

 

 

   

 

 

   

 

 

 

   
September 30, 2021
  
January 12, 2021
 
Exercise price
  $11.50  $11.50 
Stock Price
  $9.74  $9.80 
Term (in years)
   5.50   5.97 
Volatility
   11.50%   14.20% 
Risk-free interest rate
   1.06%   0.66% 
Dividend yield
   0     0   
Note 11 —- Subsequent Events

Management has

The Company evaluated subsequent events to determine if events orand transactions occurring throughthat occurred up to the date the condensed financial statements were issuedissued. Based upon this review, the Company did not identify any subsequent events that would have required potential adjustment to or disclosure in the condensed financial statements and has concluded that all such events that would require recognition or disclosure have been recognized or disclosed.

statements.

18
Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

References to the “Company,” “our,” “us” or “we” refer to Leo Holdings Corp. II. 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 (this
(this “Quarterly Report”) 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 SEC filings.

Overview

We are a blank check company incorporated as a Cayman Islands exempted company on September 1, 2020. We were formed for the purpose entering into a merger, share exchange, asset acquisition, share purchase, recapitalization, reorganization or other similar business combination with one or more target 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 Leo Investors II Limited Partnership, a Cayman Islands exempted limited partnership (the “Sponsor”). The registration statement for the Company’s Initial Public Offering was declared effective on January 7, 2021. On January 12, 2021, the Company consummated its Initial Public Offering of 37,500,000 units (the “Units” and, with respect to the Class A ordinary shares included in the Units being offered, the “Public Shares”), including 2,500,000 additional Units to partially cover over-allotments (the “Over-Allotment Units”), at $10.00 per Unit, generating gross proceeds of $375.0 million, and incurring offering costs of approximately $21.3 million, of which approximately $13.1 million was for deferred underwriting commissions.

Simultaneously with the closing of the Initial Public Offering, we consummated the private placement (“Private Placement”) of 6,666,667 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”), at a price of $1.50 per Private Placement Warrant with the Sponsor, generating gross proceeds of $10.0 million, and incurring offering costs of approximately $10,000.

Upon the closing of the Initial Public Offering and the Private Placement, $375.0 million ($10.00 per Unit) of the net proceeds of the Initial Public Offering and certain of the proceeds of the Private Placement were placed in a trust account (“Trust Account”), located in the United States at J.P. Morgan Chase Bank, N.A., with Continental Stock Transfer & Trust Company acting as trustee, and invested only in 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 in any open-ended investment company that holds itself out as a money market fund meeting the conditions of paragraphs (d)(2), (d)(3) and (d)(4) of Rule
2a-7
of 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.

Our management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination.

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If we are unable to complete a Business Combination within 24 months from the closing of the Initial Public Offering, or January 12, 2023 (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 fund our regulatory compliance requirements, and other costs related thereto and/or to pay our income taxes, if any, (less up to $100,000 of interest to pay dissolution expenses) divided by the number of the then outstanding Public Shares, which redemption will completely extinguish Public Shareholders’ rights as shareholders (including the right to receive further liquidation 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 the case of clauses (ii) and (iii), to our obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law.

Liquidity and Capital Resources

As of March 31,September 30, 2021, we had approximately $724,000$448,000 in our operating bank account and working capital of approximately $1.3 million.

$788,000.

Our liquidity needs have been satisfied through a payment of $25,000 from our Sponsor to cover certain of our expenses in exchange for the issuance of the Founder Shares, a loan of approximately $169,000 from our Sponsor pursuant to a promissory note. We repaid the promissory note in full on January 19, 2021. Subsequent from the consummation of the Initial Public Offering, our liquidity has been satisfied through the net proceeds from the consummation of the Initial Public Offering and the Private Placement held outside of 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 Loan. To date, there were no amounts outstanding under any Working Capital Loan.

Based on the foregoing, management believes that we will have sufficient working capital and borrowing capacity from our Sponsor or an affiliate of our Sponsor, or certain of our officers and directors to meet our needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, we 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.

Management continues to evaluate the impact of the
COVID-19
pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on our financial position, results of our operations and/or search for a target company, the specific impact is not readily determinable as of the date of the 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 since inception up to March 31,September 30, 2021 was in preparation for our formation and the Initial Public Offering, and since the closing of the Initial Public Offering, the search for business combination candidates. We will not be generating any operating revenues until the closing and completion of our initial Business Combination.

For the three months ended March 31,September 30, 2021, we had net lossincome of approximately $329,000,$5.0 million, which consisted of a gain of approximately $430,000 general and administrative expenses, approximately $26,000 in related party administrative fee and approximately $426,000 in offering costs associated with issuance of warrants offset by $548,000$5.3 million in change in the fair value of warrant liabilities and approximately $5,000$9,000 of net gain on the investments held in the Trust Account.

Account, partially offset by approximately $277,000 general and administrative expenses and approximately $43,000 in related party general and administrative expenses.

For the nine months ended September 30, 2021, we had net income of approximately $906,000, which consisted of a gain of approximately $2.3 million in change in the fair value of warrant liabilities and approximately $24,000 of net gain on the investments held in the Trust Account, partially offset by approximately $905,000 general and administrative expenses, approximately $100,000 in related party general and administrative expenses and approximately $426,000 of offering costs associated with issuance of warrants.
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Contractual Obligations

Administrative Services Agreement

Commencing on the date that our securities were first listed on the New York Stock Exchange, we agreed to pay the Sponsor a total of $10,000 per month for office space, secretarial and administrative services provided to us commencing with the closing of the Initial Public Offering. Upon completion of the initial Business Combination or our liquidation, we will cease paying these monthly fees. We incurred approximately $26,000$30,000 and $86,000 in expenses in connection with such services during the three and nine months ended March 31,September 30, 2021, as reflected in the accompanying unaudited condensed statement of operations. As of March 31, 2021, approximately $26,000 in accounts payable with related party was outstanding, respectively, as reflected in the accompanying unaudited condensed statements of operations. During the three and nine months ended September 30, 2021, the Company recorded approximately $13,000 in expenses in connection with compliance services with related party. As of September 30, 2021, there were approximately $23,000 payable to related party in the accompanying unaudited condensed balance sheets.

sheet.

Commitments and Contingencies

Registration Rights

The holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any Class A ordinary shares issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans) were entitled to registration rights pursuant to a registration and shareholder rights agreement signed upon consummation of the Initial Public Offering. These holders were entitled to certain demand and “piggyback” registration rights. However, the registration and shareholder rights agreement provided that we would not permit any registration statement filed under the Securities Act to become effective until the termination of the applicable
lock-up
period for the securities to be registered. 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 final prospectus relating to the Initial Public Offering to purchase up to 5,250,000 additional Units to cover over-allotments, if any, at the Initial Public Offering price less the underwriting discounts and commissions. The underwriters partially exercised their over-allotment option on January 12, 2021 to purchase an additional 2,500,000 Over-Allotment Units. The remaining unexercised over-allotment option expired at the conclusion of the
45-day
option period.

The underwriters were entitled to an underwriting discount of $0.20 per unit, or $7.5 million in the aggregate, paid upon the closing of the Initial Public Offering. In addition, $0.35 per unit, or approximately $13.1 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 Policies

Class A Ordinary Shares Subject to Possible Redemption

We account for the Class A ordinary shares subject to possible redemption in accordance with the guidance in FASB ASC Topic 480 “Distinguishing Liabilities from Equity.”Equity” (“ASC 480”), 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, at March 31,as of September 30, 2021, 34,618,47437,500,000 Class A ordinary shares subject to possible redemption are presented as temporary equity, outside of the shareholders’ equity section of the Company’s condensed balance sheet.

sheets. There were no Class A ordinary shares outstanding as of December 31, 2020.

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Net Income (Loss) per Ordinary Share

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 ordinary shares and Class B ordinary shares. Income and losses are shared pro rata between the two classes of shares. Net Incomeincome (loss) per ordinary share is computedcalculated by dividing the net income (loss) applicable to shareholders by the weighted average number of ordinary shares outstanding duringfor the respective period. We have
The calculation of diluted net income (loss) per ordinary share does not consideredconsider the effect of the warrants underlying the Units sold in the Initial Public Offering and the Private Placement Warrants to purchase an aggregate of 16,041,667 Class A ordinary shares in the calculation of diluted income per share, becausesince their inclusion would be anti-dilutive under the treasury stock method.

Our unaudited condensed statement of operations includes As a presentation of income (loss)result, diluted net loss per ordinary shares subject to redemption in a manner similar toshare is the two-class method of income (loss)same as basic net loss per share. Net income per ordinary share basicfor the three and diluted fornine months ended September 30, 2021. Accretion associated with the redeemable Class A ordinary shares is calculated by dividingexcluded from earnings per share as the investment income earned on the Trust Account of approximately $5,000 by the weighted average number of Class A ordinary shares outstanding for the three months ended March 31, 2021. Net loss per ordinary share, basic and diluted for Class B ordinary shares is calculated by dividing the net loss of approximately $329,000 for the three months ended March 31, 2021, less income attributable to Class A ordinary shares of approximately $5,000, by the weighted average number of Class B ordinary shares outstanding.

redemption value approximates fair value.

Derivative warrant liabilities

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 ASC 480 and FASB ASC 815-15.Topic
815-40,
Derivatives and Hedging, Contracts in Entity’s Own Equity (“ASC
815-40”).
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.

We account for 16,041,667 warrants issued in connection with its Initial Public Offering (9,375,000) and Private Placement, (6,666,667), as derivative warrant liabilities in accordance with ASC
815-40.
Accordingly, we recognize the warrant instruments as liabilities at fair value and adjusts the instruments to fair value at each reporting period. The liabilities are subject to
re-measurement
at each balance sheet date until exercised, and any change in fair value is recognized in our statementstatements of operations. The fair value of warrants issued in connection with the Private Placement has been estimated using Monte-Carlo simulations at each balance sheet date. The fair value of the warrants issued in connection with the Initial Public Offering was initially measured using a Monte-Carlo simulation model at each measurement date and subsequently been measured based on the market price when separately listed and traded.

The determination of the fair value of the warrant liability may be subject to change as more current information becomes available and accordingly the actual results could differ significantly. 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.
Recent Adopted Accounting Standards

Pronouncements

In August 2020, the FASB issued ASU
No. 2020-06, Debt—Debt
Debt-Debt with Conversion and Other Options (Subtopic
470-20)
and Derivatives and Hedging—ContractsHedging-Contracts in Entity’s Own Equity (Subtopic
815-40):
Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity
(“ASU
2020-06”),
which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas. We adopted ASU
2020-06
on January 1, 2021. Adoption of the ASU did not impact our financial position, results of operations or cash flows.

Recent Issued Accounting Standards

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

Off-Balance
Sheet Arrangements

As of March 31,September 30, 2021, we did not have any
off-balance
sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation
S-K.

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JOBS Act

The Jumpstart Our Business 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 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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are a smaller reporting company as defined by Rule
12b-2
of the Exchange Act and are not required to provide the information otherwise required under this item. As of March 31, 2021, we were not subject to any market or interest rate risk. The net proceeds of the Initial Public Offering, including amounts in the Trust Account, will be invested in U.S. government securities with a maturity of 185 days or less or in money market funds that meet certain conditions under Rule 2a-7 under the Investment Company Act that invest only in direct U.S. government treasury obligations. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.

We have not engaged in any hedging activities since our inception and we do not expect to engage in any hedging activities with respect to the market risk to which we are exposed.

Item 4. Controls and Procedures

On April 12, 2021, the staff at the Securities and Exchange Commission (the “SEC staff”) issued a statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”) (the “SEC Statement”). In the SEC Statement, the SEC staff noted that certain provisions in the typical SPAC warrant agreement may require that the warrants be classified as a liability measured at fair value, with changes in fair value reported each period in earnings, as compared to the historical treatment of the warrants as equity, which has been the practice of most SPACs, including us. We had previously classified our private placement warrants and public warrants as equity (for a full description of our private placement warrants and public warrants, refer to the registration statement on Form S-1 (File No. 333- 249676), filed in connection with the Company’s initial public offering, declared effective by the SEC on October 26, 2020).

After considering the SEC Statement, we concluded that there were misstatements in the January 12, 2021 audited closing balance sheet we filed with the SEC on Form 8-K on January 19, 2021. Based on the guidance in Accounting Standards Codification (“ASC”) 815-40, “Derivatives and Hedging — Contracts in Entity’s Own Equity”, we concluded that provisions in the warrant agreement preclude the warrants from being accounted for as components of equity. As the warrants meet the definition of a derivative as contemplated in ASC 815, the warrants should have been recorded as derivative liabilities on the balance sheet and measured at fair value at inception and at each reporting date in accordance with ASC 820, “Fair Value Measurement”, with changes in fair value recognized in the statement of operations in the period of change. Further, ASC 815 requires that upfront costs and fees related to items for which the fair value option is elected (our warrant liabilities) should have been recognized as expense as incurred.

We have corrected the accounting for the warrants in this Quarterly Report on Form 10-Q. The effect of the restatement on specific line items in our January 12, 2021 audited closing date balance sheet can be found in Note 10 of the Notes to unaudited condensed financial statements.

Evaluation of Disclosure Controls and Procedures

In connection

Our management evaluated, with the restatementparticipation of our January 12, 2021 audited closing balance sheet, our management reassessedcurrent chief executive officer and chief financial officer (our “Certifying Officers”), the effectiveness of our disclosure controls and procedures as of March 31, 2021. As a result ofSeptember 30, 2021, pursuant to Rule
13a-15(b)
under the Exchange Act. Based upon that reassessment and in light of the SEC Statement,evaluation, our management determinedCertifying Officers concluded that our disclosure controls and procedures were effective as of March 31, 2021 were not effective solely as a result of its classification of the warrants as components of equity instead of as derivative warrant liabilities. Due solely to the eventsSeptember 30, 2021.
Disclosure controls and procedures are controls and other procedures that led to our restatement, management has made changes in internal controls related to the accounting for warrants issued in connection with our initial public offering. In light of the material weakness that we identified, we performed additional analysis as deemed necessaryare designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our chief executive officer and chief financial statements for the three months ended March 31, 2021, were prepared in accordance with U.S. GAAP. Accordingly, management believes that the financial statements included in this Quarterly Report on Form 10-Q present fairly in all material respects our financial position, results of operations and cash flows for the period presented.

officer, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There werewas no changeschange in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)that occurred during the most recent fiscal quarter ended September 30, 2021 covered by this Quarterly Report on Form
10-Q
that havehas materially affected, or areis reasonably likely to materially affect, our internal control over financial reporting,reporting. The material weakness discussed below was remediated during the quarter ended September 30, 2021.
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Remediation of a Material Weakness in Internal Control over Financial Reporting
We recognize the importance of the control environment as it sets the circumstances that ledoverall tone for the Company and is the foundation for all other components of internal control. Consequently, we designed and implemented remediation measures to address the restatementmaterial weakness previously identified in the 2nd quarter of 2021 and enhance our previously filedinternal control over financial statements described above had not yet been identified.reporting. In light of the restatement of the previously filed financial statements,material weakness, we plan to enhanceenhanced our processes to identify and appropriately apply applicable accounting requirements to better evaluate and understand the nuances of the complex accounting standards that apply to our condensed financial statements. Our plans at this time includestatements, including providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elementsforegoing actions, which we believe remediated the material weakness in internal control over financial reporting, were completed as of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.

date of September 30, 2021.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in our most recent Annual Report on Form
10-K
filed with the SEC on March 31, 2021 except and the Quarterly Report on Form
10-Q
for the below risk factors.fiscal quarter ended March 31, 2021, as filed with the SEC on June 10, 2021. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.

Our warrants are accounted for as liabilities and the changes in value of our warrants could have a material effect on our financial results.

On April 12, 2021, the SEC Staff issued the SEC Statement, wherein the SEC Staff expressed its view that certain terms and conditions common to SPAC warrants may require the warrants to be classified as liabilities on the SPAC’s balance sheet as opposed to being treated as equity. Specifically, the SEC Statement focused on certain settlement terms and provisions related to certain tender offers following a business combination, which terms are similar to those contained in the warrant agreement governing our warrants. As a result of the SEC Statement, we reevaluated the accounting treatment of our warrants, and pursuant to the guidance in ASC 815, Derivatives and Hedging, determined the warrants should be classified as derivative liabilities measured at fair value on our balance sheet, with any changes in fair value to be reported each period in earnings on our statement of operations.

As a result of the recurring fair value measurement, our financial statements may fluctuate quarterly, based on factors which are outside of our control. Due to the recurring fair value measurement, we expect that we will recognize non-cash gains or losses on our warrants each reporting period and that the amount of such gains or losses could be material.

We have identified a material weakness in our internal control over financial reporting. This material weakness could continue to adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Our management is likewise required, on a quarterly basis, to evaluate the effectiveness of our internal controls and to disclose any changes and material weaknesses identified through such evaluation in those internal controls. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

As described elsewhere in this Quarterly Report, we identified a material weakness in our internal control over financial reporting related to the accounting for the warrants we issued in connection with our Initial Public Offering and private placement in January 2021. As a result of this material weakness, our management concluded that our disclosure controls and procedures were not effective as of March 31, 2021. This material weakness resulted in a misstatement of our warrant liabilities, additional paid-in capital and accumulated deficit in our previously issued audited balance sheet dated January 12, 2021, filed on a Current Report on Form 8-K on January 19, 2021.

Any failure to maintain effective internal control over financial reporting or disclosure controls and procedures could adversely impact our ability to report our financial position and results from operations on a timely and accurate basis. If our financial statements are not accurate, investors may not have a complete understanding of our operations. Likewise, if our financial statements are not filed on a timely basis, we could be subject to sanctions or investigations by the stock exchange on which our ordinary shares are listed, the SEC or other regulatory authorities. In either case, there could result a material adverse effect on our business. Ineffective internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.

We can give no assurance that the measures we have taken and plan to take in the future will remediate the material weakness identified or that any additional material weaknesses or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls. In addition, even if we are successful in strengthening our controls and procedures, in the future those controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our financial statements.

We may face litigation and other risks as a result of the material weakness in our internal control over financial reporting.

We identified a material weakness in our internal controls over financial reporting. As a result of such material weakness, the change in accounting for our warrants, and other matters raised or that may in the future be raised by the SEC, we face potential for litigation or other disputes which may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from the material weaknesses in our internal control over financial reporting and the preparation of our financial statements. As of the date of this Quarterly Report, we have no knowledge of any such litigation or dispute. However, we can provide no assurance that such litigation or dispute will not arise in the future. Any such litigation or dispute, whether successful or not, could have a material adverse effect on our business, results of operations and financial condition or our ability to complete a business combination.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Unregistered Sales of Equity Securities

Simultaneously with the closing of the Initial Public Offering, the Company consummated the Private Placement of 6,666,667 Private Placement Warrants, at a price of $1.50 per Private Placement Warrant with the Sponsor, generating gross proceeds of $10.0 million. Each Private Placement Warrant is exercisable to purchase one Class A ordinary share at an exercise price of $11.50 per share. If the Company does not complete a Business Combination within the Combination Period, the Private Placement Warrants will expire worthless. The Private Placement Warrants will be
non-redeemable
and exercisable on a cashless basis so long as they are held by the Sponsor or its permitted transferees. If the Private Placement Warrants are held by holders other than our Sponsor or its permitted transferees, the Private Placement Warrants will be redeemable by us and exercisable by the holders on the same basis as the Public Warrants included in the Units sold in the Initial Public Offering. The Private Placement Warrants (including the Class A ordinary shares issuable upon exercise thereof) will not be transferable, assignable or salable until 30 days after the completion of our initial Business Combination. The issuance of the Private Placement Warrants was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act. Our Sponsor is an accredited investor for purposes of Rule 501 of Regulation D. No underwriting discounts or commissions were paid with respect to such sale.

Use of Proceeds

On January 12, 2021, we consummated its Initial Public Offering of 37,500,000 Units, including 2,500,000 additional Units to partially cover over-allotments. The Units were sold at an offering price of $10.00 per Unit, generating total gross proceeds of $375.0 million. Each Unit consists of one Class A ordinary shareand
one-fourth
of one redeemable warrant. Each warrant entitles the holder to purchase one Class A ordinary share at a price of $11.50 per share, subject to adjustment. The securities sold in the offering were registered under the Securities Act on registration statement on Form
S-1 (No.
(No.
333-249676).
The SEC declared the registration statement effective on January 7, 2021.

Of the gross proceeds received from the Initial Public Offering and sale of the Private Placement Warrants, $375.0 million was placed in the Trust Account.

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We paid a total of $19.3$7.5 million in underwriting discounts and commissions and approximately $699,000 for other offering costs and expenses related to the Initial Public Offering. In addition, the underwriters agreed to defer approximately $8.1$13.1 million in underwriting discounts and commissions.

For a description of the use of the proceeds generated in our Initial Public Offering, see Part I, Item 2 of this Form
10-Q.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6.

Exhibits.

Item 6. Exhibits.

Exhibit

Number

  

Description

31.1*  Certification of Chief Executive Officer (Principal Executive Officer) Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*  Certification of Chief Financial Officer (Principal Financial and Accounting Officer) Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*  Certification of Chief Executive Officer (Principal Executive Officer) Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*  Certification of Chief Financial Officer (Principal Financial and Accounting Officer) Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS  XBRL Instance Document
101.SCH  XBRL Taxonomy Extension Schema Document
101.CAL  XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF  XBRL Taxonomy Extension Definition Linkbase Document
101.LAB  XBRL Taxonomy Extension Label Linkbase Document
101.PRE  XBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*

These certifications are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: June 10,November 12, 2021  
LEO HOLDINGS CORP. II
  

By:

 

/s/ Lyndon Lea

  Name: Lyndon Lea
  Title: 

President and Chief Executive Officer

(Principal Executive Offier)

Officer)

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