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 Form 10-Q 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/A 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 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 (other than searching for a Business
Combination after our Initial Public Offering) nor generated any revenues to
date. Our only activities from inception through March 31, 2021 were
organizational activities, those necessary to prepare for the Initial Public
Offering, described below, and, subsequent to the Initial Public Offering,
identifying a target company for a Business Combination. We do not expect to
generate any operating revenues until after the completion of our Business
Combination, at the earliest. 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, 2021, we had a net income of $6,243,479,
which consists of a change in the fair value warrant liabilities of $6,446,833
and interest income on marketable securities held in the trust account of
$35,544, offset by operating costs of $238,898.
Liquidity and Capital Resources
On December 14, 2020, we consummated the 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 the 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 the 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, $15,137,500 of deferred underwriting fees and
$446,292 of other offering costs.
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.
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As of March 31, 2021, we had investments held in the Trust Account of
$402,542,675. 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 Business Combination. We may withdraw interest to pay taxes.
During the three months ended March 31, 2021, we did not withdraw any interest
income from the Trust Account. To the extent that our capital stock or debt is
used, in whole or in part, as consideration to complete our Business
Combination, the remaining proceeds held in the Trust Account will be used as
working capital to finance the operations of the target business or businesses,
make other acquisitions and pursue our growth strategies.
As of March 31, 2020, we had $644,827 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 a Business Combination.
In order to fund working capital deficiencies or 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,
loan us funds as may be required. If we complete a Business Combination, we may
repay such loaned amounts out of the proceeds of the Trust Account released to
us. In the event that a Business Combination does not close, we may use a
portion of the working capital held outside the Trust Account to repay such
loaned amounts, but no proceeds from our Trust Account would be used for such
repayment. Up to $1,500,000 of such 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.
We do not believe we will need to raise additional funds in order to meet the
expenditures required for operating our business. However, if our estimate of
the costs of identifying a target business, undertaking in-depth due diligence
and negotiating a Business Combination are less than the actual amount necessary
to do so, we may have insufficient funds available to operate our business prior
to our Business Combination. Moreover, we may need to obtain additional
financing either to complete our Business Combination or because we become
obligated to redeem a significant number of our public shares upon consummation
of our Business Combination, in which case we may issue additional securities or
incur debt in connection with such Business Combination. Subject to compliance
with applicable securities laws, we would only complete such financing
simultaneously with the completion of our Business Combination. If we are unable
to complete our 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 Business Combination, if cash on hand is
insufficient, we may need to obtain additional financing in order to meet our
obligations.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of March 31, 2021.
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 the 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 the 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 a Business Combination, subject to the
terms of the underwriting agreement.
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 Liability
We account for the Warrants issued in connection with our Initial Public
Offering in accordance with the guidance contained in ASC 815-40 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 sheet date until
exercised, and any change in fair value is recognized in our statement 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 the Financial Accounting Standards Board's
("FASB") Accounting Standards Codification ("ASC") Topic 480 "Distinguishing
Liabilities from Equity." Shares of Class A common stock subject to mandatory
redemption are classified as a liability instrument and are 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' equity section of our balance sheets.
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Net Income (Loss) per Common Share
We apply the two-class method in calculating earnings per share. Net income per
common share, basic and diluted, for Class A redeemable common stock is
calculated by dividing the interest income earned on the Trust Account, net of
applicable taxes, by the weighted average number of shares of Class A redeemable
common stock outstanding for the periods presented. Net income (loss) per common
share, basic and diluted, for Class A and Class B non-redeemable common stock is
calculated by dividing net income less income attributable to Class A redeemable
common stock, by the weighted average number of shares of Class A and Class B
non-redeemable common stock outstanding for the periods presented.
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) ("ASU 2020-06") to simplify accounting for
certain financial instruments. ASU 2020-06 eliminates the current models that
require separation of beneficial conversion and cash conversion features from
convertible instruments and simplifies the derivative scope exception guidance
pertaining to equity classification of contracts in an entity's own equity. The
new standard also introduces additional disclosures for convertible debt and
freestanding instruments that are indexed to and settled in an entity's own
equity. ASU 2020-06 amends the diluted earnings per share guidance, including
the requirement to use the if-converted method for all convertible instruments.
ASU 2020-06 is effective January 1, 2022 and should be applied on a full or
modified retrospective basis, with early adoption permitted beginning on January
1, 2021. We adopted ASU 2020-06 effective January 1, 2021. The adoption of ASU
2020-06 did not have an impact on our financial statements.
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 unaudited condensed financial statements.
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