References to the "Company," "our," "us" or "we" refer to Corner Growth
Acquisition Corp. 2. The following discussion and analysis of the Company's
financial condition and results of operations should be read in conjunction with
the unaudited condensed financial statements and the notes thereto contained
elsewhere in this Quarterly Report on Form 10-Q. Certain information contained
in the discussion and analysis set forth below includes forward-looking
statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). When used in this Quarterly Report on Form 10-Q,
words such as "may," "should," "could," "would," "expect," "plan," "anticipate,"
"believe," "estimate," "continue," or the negative of such terms or other
similar expressions, as they relate to us or our management, identify forward
looking statements. Factors that might cause or contribute to such a discrepancy
include, but are not limited to, those described in our other filings with the
Securities and Exchange Commission ("SEC"). Such forward looking statements are
based on the beliefs of management, as well as assumptions made by, and
information currently available to, our management. No assurance can be given
that results in any forward-looking statement will be achieved and actual
results could be affected by one or more factors, which could cause them to
differ materially. The cautionary statements made in this Quarterly Report on
Form 10-Q should be read as being applicable to all forward-looking statements
whenever they appear in this Quarterly Report. Actual results could differ
materially from those contemplated by the forward-looking statements as a result
of certain factors detailed in our filings with the SEC. All subsequent written
or oral forward-looking statements attributable to us or persons acting on our
behalf are qualified in their entirety by this paragraph.
Overview
We are a blank check company incorporated on February 10, 2021 (inception) as a
Cayman Islands exempted company for the purpose of effecting a merger, share
exchange, asset acquisition, share purchase, reorganization or similar business
combination with one or more businesses (a "Business Combination"). While we may
pursue an acquisition opportunity in any business, industry, sector or
geographical location, we focus on industries that complement our management
team's background, and in our search for targets for our Business Combination
seek to capitalize on the ability of our management team to identify and acquire
a business, focusing on the technology industry in the United States and other
developed countries.
The registration statement for our initial public offering (the "Initial Public
Offering") was declared effective on June 16, 2021. On June 21, 2021, we
consummated our Initial Public Offering of 18,500,000 units, at $10.00 per unit,
generating gross proceeds of $185,000,000, and incurring offering costs of
approximately $698,351, inclusive of $6,475,000 in deferred underwriting
commissions. Each unit consists of one Class A ordinary share, par value $0.0001
per share (the "Class A ordinary shares") and one-third of one redeemable
warrant, each whole public warrant entitling the holder thereof to purchase one
Class A ordinary share at a price of $11.50 per share, subject to adjustment.
Simultaneously with the closing of the Initial Public Offering, we consummated
the private placement of 4,950,000 private placement warrants at a price of
$1.50 per private placement warrant (the "Private Placement") to our sponsor,
generating gross proceeds of $7,425,000. Each private placement warrant is
exercisable for one Class A ordinary share at a price of $11.50 per share.
Transaction costs amounted to $10,873,351, consisting of $3,700,000 of
underwriting discount, $6,475,000 of deferred underwriting discount, and
$698,351 of other offering costs.
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Upon the closing of the Initial Public Offering and private placement,
$185,000,000 ($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 the
trust account, located in the United States at UBS Financial Services Inc., with
Continental Stock Transfer & Trust Company acting as trustee, and are only
invested 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 selected by us 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 assets held in 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 private placement, although
substantially all of the net proceeds are intended to be applied toward
consummating an initial Business Combination.
On June 15, 2022, the Company held an extraordinary general meeting (the
"Extraordinary General Meeting") which amended the Company's Amended and
Restated Memorandum and Articles of Association to extend the date by which the
Company must consummate its initial Business Combination from June 21, 2022 (the
"Original Termination Date") to March 21, 2023 (the "Extended Date"). As part of
the Extraordinary General Meeting, shareholders elected to redeem 11,093,735
Class A ordinary shares, resulting in redemption payments out of the Trust
Account totaling $111,062,537, or approximately $10.01 per share, which includes
$125,817 of earnings in the Trust Account not previously withdrawn. Subsequent
to the redemptions, 7,406,265 Class A ordinary shares remained issued and
outstanding. In order to support the extension to consummate an initial Business
Combination to the Extended Date, the Sponsor agreed to deposit $244,407 into
the Trust Account which is an aggregate of $0.033 per Class A ordinary share for
each month of the extension period up to and until October 21, 2022, pro-rated
for partial months during the extension period, resulting in a maximum
contribution of $977,627, or $0.132 per share of Class A ordinary shares that
was not redeemed in connection with the Extraordinary General Meeting.
Contributions in the amount of $0.033 per Class A ordinary shares were funded on
each of June, July August and September 21, 2022. If the Company does not
consummate its initial Business Combination as of October 21, 2022, the holders
of Class A ordinary shares then outstanding will be provided with the
opportunity to redeem their Class A ordinary shares on or about October 21,
2022. On October 21, 2022, the Company launched a fixed price tender offer (the
"Tender Offer") to purchase and redeem its Class A Ordinary Shares at a purchase
price of $10.21 per share of Class A Ordinary Shares, net to seller in cash and
without interest upon the terms and subject to the conditions set forth in the
Tender Offer. The Tender Offer is expected to expire on December 5, 2022, unless
the offer is extended or earlier terminated (the "Expiration Time"). The Tender
Offer is not conditioned on the tender of any minimum number of Class A Ordinary
Shares and is not subject to any financing condition. Tendered Class A Ordinary
Shares may be withdrawn in accordance with the terms of the Tender Offer at any
time at or prior to the Expiration Time. The Company will pay for Class A
Ordinary Shares validly tendered and accepted for redemption in the Tender Offer
on a date promptly after the Expiration Time.
If we are unable to complete a Business Combination by the Extended Date, we
will (i) cease all operations except for the purpose of winding up, (ii) as
promptly as reasonably possible but not more than ten business days thereafter,
redeem the public shares, at a per-share price, payable in cash, equal to the
aggregate amount then on deposit in the trust account including interest earned
on the funds held in the trust account and not previously released to us to pay
for our income taxes (less up to $100,000 of interest to pay dissolution
expenses), divided by the number of then outstanding public shares, which
redemption will completely extinguish public shareholders' rights as
shareholders (including the right to receive further liquidating distributions,
if any), subject to applicable law, and (iii) as promptly as reasonably possible
following such redemption, subject to the approval of our remaining shareholders
and our board of directors, proceed to commence a voluntary liquidation and
thereby a formal dissolution of our company, subject in each case to our
obligations under Cayman Islands law to provide for claims of creditors and the
requirements of other applicable law.
Liquidity, Capital Resources and Going Concern
As indicated in the accompanying unaudited condensed financial statements, at
September 30, 2022, we had $599,457 in our operating bank account, and negative
working capital of $657,469. We expect to continue to incur significant costs in
pursuit of our initial Business Combination plans.
Our liquidity needs prior to the consummation of the Initial Public Offering
were satisfied through the proceeds of $25,000 from the sale of the founder
shares, and loans from our sponsor of $100,000. The loan was repaid in full on
August 9, 2021. Subsequent to the consummation of the Initial Public Offering,
our liquidity has been satisfied through the net proceeds received from the
consummation of the Initial Public Offering and the Private Placement that were
not placed in the trust account.
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In order to finance transaction costs in connection with an intended 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 the Company funds
as may be required. The terms of such loans have not been determined and no
written agreements exist with respect to such loans.
Based on the foregoing, management believes that we may not have sufficient
working capital to meet our needs through the consummation of a Business
Combination. 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.
In connection with our assessment of going concern considerations in accordance
with FASB ASC Subtopic 205-40, "Presentation of Financial Statements - Going
Concern" management has determined that the date for mandatory liquidation and
dissolution raise substantial doubt about our ability to continue as a going
concern for a period of time which is considered to be one year from the
issuance of these financial statements. The Company demonstrates adverse
conditions that raise substantial doubt about the Company's ability to continue
as a going concern for one year following the issuance of these financial
statements. These adverse conditions are negative financial trends, specifically
working capital deficiency and other adverse key financial ratios. No
adjustments have been made to the carrying amounts of assets or liabilities
should the company be required to liquidate after March 21, 2023, our scheduled
liquidation date if we do not complete the Business Combination prior to such
date.
Material Changes in Financial Condition
As of September 30, 2022 and December 31, 2021, we had cash and marketable
securities held in Trust Account of $75,538,727 and $185,020,263, respectively
and had Class A ordinary shares subject to possible redemption of $75,538,727
and $185,000,000, respectively. The reduction of value in each of the account
balances was primarily driven by redemption payments out of the Trust Account to
shareholders as part of the Extraordinary General Meeting disclosed above.
Results of Operations
Our entire activity since inception through September 30, 2022 related to our
formation, Initial Public Offering and, since the closing of our Initial Public
Offering, the search for initial Business Combination candidates. As of
September 30, 2022, $599,457 was held outside the trust account and was being
used to fund the Company's operating expenses. We are not generating any
operating revenues until the closing and completion of our initial Business
Combination.
For the three and nine months ended September 30, 2022, we had a net income of
$671,890 and $7,654,310 respectively, which consisted of $364,883 and $603,374
in earnings and realized gain (loss) on marketable securities held in the trust
account, respectively, a change in the fair value of warrant liabilities of
$922,632 and $9,370,830, respectively, partially offset by $615,625 and
$2,319,894 in operating and formation costs respectively.
For the three months ended September 30, 2021 and for the period February 10,
2021 (inception) to September 30, 2021, we had a net income of $1,146,617 and
$656,303, respectively, which consisted of $20,757 and $15,531 in earnings and
realized gain (loss) on marketable securities held in the trust account,
respectively, $591,048 and $677,633 in operating and formation costs
respectively, and $0 and $448,003 of transaction costs allocated to warrant
liabilities, partially offset by a change in the fair value of warrant
liabilities of $1,716,908 and $1,766,408, respectively.
Related Party Transactions
Founder Shares
On February 18, 2021, the Sponsor paid $25,000, or approximately $0.005 per
share, to cover certain offering costs in consideration for 5,031,250 Class B
ordinary shares, par value $0.0001 per share (the "Founder Shares"). In March
2021, the Sponsor transferred 50,000 Class B ordinary shares to each of the
company's three independent directors.
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The Founder Shares will automatically convert into Class A ordinary shares on
the first business day following the completion of a Business Combination, or
earlier at the option of the holder, on a one-for-one basis, subject to certain
adjustments, as described in Note 7. As a result of the underwriter's election
to partially exercise their over-allotment option, 406,250 Founder Shares were
forfeited for no consideration on June 24, 2021, resulting in 4,625,000 Class B
ordinary shares outstanding. The per share price of the Founder Shares was
determined by dividing the amount contributed to the Company by the number of
Founder Shares issued. The Founder Shares will be worthless if we do not
complete an initial Business Combination.
The Sponsor has agreed, subject to limited exceptions, not to transfer, assign
or sell any of its Founder Shares or Class A ordinary shares received upon
conversion thereof until the earlier of: (A) one year after the completion of a
Business Combination and (B) subsequent to a Business Combination, (x) if the
last reported sale price of the Class A ordinary shares equals or exceeds $12.00
per share (as adjusted for share splits, share dividends, rights issuances,
subdivisions, reorganizations, recapitalizations and the like) for any 20
trading days within any 30-trading day period commencing at least 150 days after
a Business Combination, or (y) the date on which the company completes a
liquidation, merger, amalgamation, share exchange, reorganization 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.
The Company's Founder Shares are subject to transfer restrictions pursuant to
lock-up provisions in a letter agreement with the Company entered into by the
initial shareholders, and officers and directors. The Sponsor has the right to
transfer its ownership in the Founder Shares at any time, and to any transferee,
to the extent that the sponsor determines, in good faith, that such transfer is
necessary to ensure that it and/or any of its parents, subsidiaries or
affiliates are in compliance with the Investment Company Act of 1940. Any
permitted transferees will be subject to the same restrictions and other
agreements of the initial shareholders with respect to any Founder Shares. Prior
to the closing of the Initial Public Offering, our Sponsor transferred 150,000
Founder Shares to our three independent directors in recognition of and as
compensation for their future services to the Company. The transfer of Founder
Shares to these directors is within the scope of FASB ASC Topic 718,
"Compensation-Stock Compensation" ("ASC 718"). Under ASC 718, stock-based
compensation associated with equity-classified awards is measured at fair value
upon the grant date. Compensation expense related to the Founder Shares is
recognized only when the performance condition (i.e. the remediation of the
lock-up provision) is probable of achievement under the applicable accounting
literature. Stock-based compensation would be recognized at the date the lock-up
provisions have been remediated, or are probable to be remediated, in an amount
equal to the number of Founder Shares times the grant date fair value per share
(unless subsequently modified) less the amount initially received for the
transfer of the Founder Shares. As of September 30, 2022, the Company has not
yet entered into any definitive agreements in connection with any Business
Combination and as such, the lock-up provisions have not been remediated and are
not probable to be remediated. Any such agreements may be subject to certain
conditions to closing, such as, for example, approval by the Company's
shareholders. As a result, the Company determined that, taking into account that
there is a possibility that a Business Combination might not happen, no
stock-based compensation expense should be recognized.
Related Party Loans
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, loan us funds as may be required
("Working Capital Loans"). If we complete a Business Combination, we would repay
the Working Capital Loans out of the proceeds of the trust account released to
us. Otherwise, the Working Capital Loans would be repaid only out of funds held
outside the trust account. In the event that a Business Combination is not
completed, we 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. 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. The Working Capital Loans
would either be repaid upon consummation of a Business Combination, without
interest, or, at the lender's discretion, up to $1,500,000 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. As of the filing date of this report and September
30, 2022, there were no outstanding Working Capital Loans under this
arrangement.
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Administrative Support Agreement
We agreed, commencing on the effective date of the Initial Public Offering
through the earlier of the company's consummation of a Business Combination and
its liquidation, to pay our sponsor a total of $40,000 per month for office
space, utilities and secretarial and administrative support. We recognized
$120,000 and $360,000 in expenses incurred in connection with the aforementioned
arrangements with the related parties on our Condensed Statements of Operations
for the three and nine months ended September 30, 2022, respectively, which is
included in operating and formation costs on the condensed statements of
operations. As of September 30, 2022 and December 31, 2021, there were $140,000
and $60,000, respectively in fees outstanding for these services, which is
included in due to related party on the condensed balance sheets.
Operating and Formation Costs
During the three and nine months ended September 30, 2022, the Sponsor and
affiliates of the Sponsor also paid operating and formation costs of $17,500 on
behalf of the Company. These amounts are included in due to related party on the
condensed balance sheet as of September 30, 2022.
Contractual Obligations
Registration and Shareholder Rights
The holders of founder shares, private placement warrants and warrants that may
be issued upon conversion of Working Capital Loans, if any, will be entitled to
registration rights (in the case of the founder shares, only after conversion of
such shares into Class A ordinary shares) pursuant to a registration and
shareholder rights agreement entered into during the consummation of the Initial
Public Offering. These holders are entitled to certain demand and "piggyback"
registration and shareholder rights. However, the registration and shareholder
rights agreement provides that we will 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
The underwriter was entitled to underwriting discounts of $0.20 per unit sold in
the Initial Public Offering, or $3,700,000 in the aggregate, paid upon the
closing of the Initial Public Offering. An additional fee of $0.35 per unit sold
in the Initial Public Offering, or $6,475,000 in the aggregate will be payable
to the underwriter for deferred underwriting commissions. The deferred
underwriting commissions will become payable to the underwriter 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
Our management's discussion and analysis of our financial condition and results
of operations is based on our condensed financial statements, which have been
prepared in accordance with U.S. generally accepted accounting principles
("GAAP"). The preparation of these financial statements requires us 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 the reported amounts of income and expenses during the
reported period. In accordance with GAAP, we base our estimates on historical
experience and on various other assumptions that we believe are reasonable under
the circumstances. Actual results may differ from these estimates under
different assumptions or conditions.
Our significant accounting policies are fully described in Note 2 to our
unaudited condensed financial statements appearing elsewhere in this Quarterly
Report, and are fully described in Note 2 in our Annual Report on Form 10-K. We
believe those accounting policies are critical to the process of making
significant judgments and estimates in the preparation of these financial
statements. There have been no changes to our significant accounting policies
from our Form 10-K.
Recent Accounting Pronouncements
Our management does not believe that any recently issued, but not yet effective,
accounting standards if currently adopted would have a material effect on the
accompanying unaudited condensed financial statements.
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Off-Balance Sheet Arrangements
For the three and nine months ended September 30, 2022, we did not have any
off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation
S-K and did not have any commitments or contractual obligations.
JOBS Act
On April 5, 2012, the JOBS Act was signed into law. 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 such, our financial statements may not be
comparable to companies that comply with 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 of the
Sarbanes-Oxley Act, (ii) provide all of the compensation disclosure that may be
required of non-emerging growth public companies under the Dodd-Frank Wall
Street Reform and Consumer Protection Act, (iii) comply with any requirement
that may be adopted by the Public Company Accounting Oversight Board 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 principal executive officer'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.
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