References in this report (the "Quarterly Report") to "we," "us" or the "Company" refer to Carney Technology Acquisition Corp. II. References to our "management" or our "management team" refer to our officers and directors, and references to the "Sponsor" refer to Carney Technology Sponsor II LLC. The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Special Note Regarding Forward-Looking Statements



This Quarterly Report includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended (the "Securities Act")
and Section 21E of the Exchange Act that are not historical facts, and involve
risks and uncertainties that could cause actual results to differ materially
from those expected and projected. All statements, other than statements of
historical fact included in this Quarterly Report including, without limitation,
statements in this "Management's Discussion and Analysis of Financial Condition
and Results of Operations" regarding the Company's financial position, business
strategy and the plans and objectives of management for future operations, are
forward-looking statements. Words such as "expect," "believe," "anticipate,"
"intend," "estimate," "seek" and variations and similar words and expressions
are intended to identify such forward-looking statements. Such forward-looking
statements relate to future events or future performance, but reflect
management's current beliefs, based on information currently available. A number
of factors could cause actual events, performance or results to differ
materially from the events, performance and results discussed in the
forward-looking statements. For information identifying important factors that
could cause actual results to differ materially from those anticipated in the
forward-looking statements, please refer to the Risk Factors section of the
Company's Annual Report on Form
10-K
for the fiscal year ended December 31, 2021 filed with the U.S. Securities and
Exchange Commission (the "SEC"). The Company's securities filings can be
accessed on the EDGAR section of the SEC's website at www.sec.gov. Except as
expressly required by applicable securities law, the Company disclaims any
intention or obligation to update or revise any forward-looking statements
whether as a result of new information, future events or otherwise.

Overview

We are a blank check company formed under the laws of the State of Delaware on August 31, 2020 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses. We intend to effectuate our initial business combination using cash from the proceeds of the Initial Public Offering and the sale of the Placement Units, our capital stock, debt or a combination of cash, stock and debt.

We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a Business Combination will be successful.

Results of Operations

We have neither engaged in any operations nor generated any revenues to date. Our only activities from August 31, 2020 (inception) through March 31, 2022 were organizational activities, those necessary to prepare for our initial public offering, described below, and identifying a target company for an initial business combination. We do not expect to generate any operating revenues until after the completion of our initial business combination. We generate non-operating income in the form of interest income on marketable securities held in the trust account. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.

For the three months ended March 31, 2022, we had net income of $4,536,246, which included interest earned on cash and marketable securities held in trust account of $70,582, change in fair value of warrant liabilities of $4,663,667, change in fair value of convertible note of $76,400, offset by operating and formation costs of $274,403.

For the three months ended March 31, 2021, we had a net income of $6,243,479, which included interest earned on cash and marketable securities held in trust account of $35,544 and change in fair value of warrant liabilities of $6,446,833, offset by operating and formation costs of $238,898.

Liquidity and Capital Resources

On December 14, 2020, we consummated our initial public offering of 40,250,000 units, which included the full exercise by the underwriters of their over-allotment option in the amount of 5,250,000 units, at a price of $10.00 per unit, generating gross proceeds of $402,500,000. Simultaneously with the closing of our initial public offering, we consummated the sale of 900,000 placement units at a price of $10.00 per placement unit in a private placement to our Sponsor, generating gross proceeds of $9,000,000.

Following our initial public offering, the full exercise of the over-allotment option, and the sale of the placement units, a total of $402,500,000 was placed in the trust account. We incurred $22,583,792 in transaction costs, including $7,000,000 of underwriting fees, net of reimbursement, $15,137,500 of deferred underwriting fees and $446,292 of other offering costs.

For the three months ended March 31, 2022, cash used in operating activities was $403,690. Net income of $4,536,246 was affected by interest earned on cash and marketable securities held in the trust account of $70,582, change in fair value of warrant liabilities of $4,663,667, change in fair value of convertible note of $76,400 and changes in operating assets and liabilities, which used $129,287 of cash from operating activities.


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For the three months ended March 31, 2021, cash used in operating activities was $190,381. Net income of $6,243,479 was offset by changes in the fair value of warrant liabilities of $6,446,833 and interest earned on investments and marketable securities held in the trust account of $35,544. Changes in operating assets and liabilities provided $48,517 of cash from operating activities.

As of March 31, 2022, we had cash and marketable securities held in the trust account of $402,531,478. We intend to use substantially all of the funds held in the trust account, including any amounts representing interest earned on the trust account to complete our initial business combination. We may withdraw interest to pay taxes. During the period ended March 31, 2022, we withdrew $108,025 to pay franchise and income taxes. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our initial business combination, the remaining proceeds held in the trust account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.

As of March 31, 2022, we had $131,958 of cash held outside of the trust account. We intend to use the funds held outside the trust account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete an initial business combination.

In order to fund working capital deficiencies or finance transaction costs in connection with an initial business combination, our Sponsor or an affiliate of our sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete an initial business combination, we may repay such loaned amounts out of the proceeds of the trust account released to us. In the event that an initial business combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts, but no proceeds from our trust account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into units, at a price of $10.00 per unit, at the option of the lender. The units would be identical to the placement units.

On January 24, 2022, we issued a promissory note in the principal amount of up to $300,000 to our sponsor. This promissory note was issued in connection with advances our sponsor has made, and may make in the future, to us for working capital expenses. If we complete a business combination, we would repay this promissory note out of the proceeds of the trust account released to us. Otherwise, this promissory note would be repaid only out of funds held outside the trust account. In the event that a business combination does not close, we may use a portion of the working capital held outside the trust account to repay this promissory note but no proceeds from the trust account would be used to repay this promissory note. At the election of our sponsor, all or a portion of the unpaid principal amount of this promissory note may be converted into our units at a price of $10.00 per unit (the "Conversion Units"). The Conversion Units and their underlying securities are entitled to the registration rights set forth in this promissory note.

We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating an initial business combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our initial business combination. Moreover, we may need to obtain additional financing either to complete our initial business combination or because we become obligated to redeem a significant number of our public shares upon consummation of our initial business combination, in which case we may issue additional securities or incur debt in connection with such initial business combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our initial business combination. If we are unable to complete our initial business combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the trust account. In addition, following our initial business combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.

Liquidity and Going Concern

As of March 31, 2022, the Company had $131,958 in its operating bank accounts, $402,520,888 in securities held in the trust account to be used for an initial business combination or to repurchase or redeem its common stock in connection therewith and a working capital of $297,553, which excludes franchise and income taxes payable as such amounts can be paid from the interest earned in the trust account. As of March 31, 2022, approximately $20,888 of the amount on deposit in the trust account represented interest income, which is available to pay the Company's tax obligations. As of March 31, 2022, the Company withdrew an amount of $108,025 to pay franchise and income taxes.

Until the consummation of an initial business combination, the Company will be using the funds not held in the trust account for identifying and evaluating prospective acquisition candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to acquire, and structuring, negotiating and consummating the initial business combination.

We have until December 14, 2022 to consummate an initial business combination. It is uncertain that we will be able to consummate an initial business combination by this time. If an initial business combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution. Management has determined that the mandatory liquidation, should an initial business combination not occur, and potential subsequent dissolution raises substantial doubt about our ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should we be required to liquidate after December 14, 2022.



Off-Balance
Sheet Arrangements

We did not have any
off-balance
sheet arrangements as of March 31, 2022.

Contractual Obligations

We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay affiliate of the sponsor a monthly fee of $15,000 for office space, utilities and secretarial and administrative support services. We began incurring these fees on December 9, 2020 and will continue to incur these fees monthly until the earlier of the completion of our initial business combination and our liquidation.

The underwriters are entitled to a deferred fee of (i) $0.35 per unit of the gross proceeds of the initial 35,000,000 units sold in our initial public offering, or $12,250,000, and (ii) $0.55 per unit of the gross proceeds from the units sold pursuant to the over-allotment option, or $2,887,500. The deferred fee will become payable to the underwriters from the amounts held in the trust account solely in the event we complete an initial business combination, subject to the terms of the underwriting agreement.


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Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies.

Warrant Liabilities

We account for the warrants issued in connection with our initial public offering in accordance with the guidance contained in ASC815-40 under which the warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, we classify the warrants as liabilities at their fair value and adjust the warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheets date until exercised, and any change in fair value is recognized in our statements of operations.

Class A Common Stock Subject to Possible Redemption

We account for our Class A common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification ("ASC") Topic 480 "Distinguishing Liabilities from Equity." Shares of Class A common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that feature redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as temporary equity. At all other times, common stock is classified as stockholders' equity. Our Class A common stock features certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, shares of Class A common stock subject to possible redemption are presented as temporary equity, outside of the stockholders' deficit section of our balance sheets.

Net Income per Common Share

Net income per share of common stock is computed by dividing net income by the weighted average number of common stock outstanding during the period. Accretion associated with the redeemable shares of Class A common stock is excluded from earnings per share as the redemption value approximates fair value.

Convertible Promissory Note



The Company accounts for their convertible promissory note under ASC 815,
Derivatives and Hedging ("ASC 815"). Under
815-15-25,
the election can be at the inception of a financial instrument to account for
the instrument under the fair value option under ASC 825. The Company has made
such election for their convertible promissory note. Using the fair value
option, the convertible promissory note is required to be recorded at its
initial fair value on the date of issuance, and each balance sheet date
thereafter. Changes in the estimated fair value of the notes are recognized as a
non-cash
gain or loss on the statements of operations.

Recent Accounting Standards



In August 2020, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU")
2020-06,
Debt - Debt with Conversion and Other Options (Subtopic
470-20)
and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic
815-40)
("ASU2020-06")
to simplify accounting for certain financial instruments.
ASU2020-06
eliminates the current models that require separation of beneficial conversion
and cash conversion features from convertible instruments and simplifies the
derivative scope exception guidance pertaining to equity classification of
contracts in an entity's own equity. The new standard also introduces additional
disclosures for convertible debt and freestanding instruments that are indexed
to and settled in an entity's own equity.
ASU2020-06
amends the diluted earnings per share guidance, including the requirement to use
the
if-converted
method for all convertible instruments.
ASU2020-06
is effective January 1, 2022 and should be applied on a full or modified
retrospective basis, with early adoption permitted beginning on January 1, 2021.
The Company adopted
ASU2020-06
effective January 1, 2021. The adoption of
ASU2020-06
did not have an impact on our financial statements.

Factors That May Adversely Affect Our Results of Operations

Our results of operations and our ability to complete an initial business combination may be adversely affected by various factors that could cause economic uncertainty and volatility in the financial markets, many of which are beyond our control. Our business could be impacted by, among other things, downturns in the financial markets or in economic conditions, increases in oil prices, inflation, increases in interest rates, supply chain disruptions, declines in consumer confidence and spending, the ongoing effects of the COVID-19 pandemic, including resurgences and the emergence of new variants, and geopolitical instability, such as the military conflict in the Ukraine. We cannot at this time fully predict the likelihood of one or more of the above events, their duration or magnitude or the extent to which they may negatively impact our business and our ability to complete an initial business combination.

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


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