UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of | (Commission | (I.R.S. Employer |
(Address of principal executive offices) | (Zip Code) |
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 |
| Name of each 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.
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).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 | ☐ |
☒ | 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
As of November 19, 2021,
CORNER GROWTH ACQUISITION CORP. 2
Quarterly Report on Form 10-Q
TABLE OF CONTENTS
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PART I—FINANCIAL INFORMATION
Item 1.Financial Statements
CORNER GROWTH ACQUISITION CORP. 2
UNAUDITED CONDENSED BALANCE SHEET
September 30, | |||
| 2021 | ||
ASSETS |
|
| |
Current assets |
|
| |
Cash | $ | | |
Prepaid expenses |
| | |
Total current assets |
| | |
Cash and marketable securities held in trust account |
| | |
Total Assets | $ | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
| |
Current liabilities |
|
| |
Accounts payable | $ | | |
Offering costs payable | | ||
Accrued expenses |
| | |
Total current liabilities | | ||
Warrant liabilities |
| | |
Deferred underwriting fee payable |
| | |
Total Liabilities | | ||
COMMITMENTS |
|
| |
Class A ordinary shares subject to possible redemption, | | ||
Shareholders’ Equity |
|
| |
Preference Shares, $ |
| ||
Class A ordinary Shares, $ |
| — | |
Class B ordinary Shares, $ |
| | |
Additional paid-in capital |
| — | |
Accumulated deficit |
| ( | |
Total Shareholders’ Deficit | ( | ||
TOTAL LIABILITIES, CLASS A ORDINARY SHARES SUBJECT TO REDEMPTION AND SHAREHOLDERS' DEFICIT | $ | |
The accompanying notes are an integral part of these unaudited condensed financial statements
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CORNER GROWTH ACQUISITION CORP. 2
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM FEBRUARY 10, 2021 (INCEPTION) TO SEPTEMBER 30, 2021
AND THE THREE MONTHS ENDED SEPTEMBER 30, 2021
Three Months | February 10, | |||||
Ended | 2021 (inception) | |||||
September 30, | to September 30, | |||||
| 2021 |
| 2021 | |||
Operating and formation costs | $ | ( | $ | ( | ||
Loss from operations |
| ( |
| ( | ||
Other Income (loss): |
|
| ||||
Unrealized gain (loss) on marketable securities held in trust account |
| |
| | ||
Transaction costs allocated to warrant liabilities | — | ( | ||||
Change in fair value of warrant liabilities |
| |
| | ||
Net income | $ | | $ | | ||
Basic and diluted weighted average shares outstanding of Class A ordinary shares |
| |
| | ||
Basic and diluted net income per ordinary share, Class A | | | ||||
Basic and diluted weighted average shares outstanding of Class B ordinary shares |
| |
| | ||
Basic and diluted net income per ordinary share, Class B | | |
The accompanying notes are an integral part of these unaudited condensed financial statements
2
CORNER GROWTH ACQUISITION CORP. 2
UNAUDITED CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE PERIOD FROM FEBRUARY 10, 2021 (INCEPTION) TO SEPTEMBER 30, 2021
THE THREE MONTHS AND THE SIX MONTHS ENDED SEPTEMBER 30, 2021
Class A | Class B | Total | |||||||||||||||||
Ordinary Shares | Ordinary Shares | Additional Paid- | Accumulated | Shareholders’ | |||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| in Capital |
| Deficit |
| Equity | ||||||
Balance—February 10, 2021 (inception) |
| | $ | |
| | $ | | $ | | $ | | $ | | |||||
Issuance of Class B Ordinary shares to initial shareholders | — | — | | | | — | | ||||||||||||
Net loss |
| — |
| — |
| — |
| — |
| — |
| ( |
| ( | |||||
Balance, March 31, 2021 |
| — |
| — |
| |
| |
| |
| ( |
| | |||||
Forfeiture of Class B Ordinary shares by initial shareholders |
| — | — |
| ( | ( | | — | — | ||||||||||
Remeasurement of Class A ordinary shares subject to redemption | — | — | — | — | ( | ( | ( | ||||||||||||
Excess cash received over fair value of Private Placement Warrants | — | — | — | — | | — | | ||||||||||||
Net income |
| — |
| — | — | — |
| — | ( |
| ( | ||||||||
Balance, June 30, 2021 | — | — | | | — | ( | ( | ||||||||||||
Net income |
| — |
| — |
| — |
| — |
| — |
| |
| | |||||
Balance, September 30, 2021 |
| — | $ | — |
| | $ | | $ | — | $ | ( | $ | ( |
The accompanying notes are an integral part of these unaudited condensed financial statements
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CORNER GROWTH ACQUISITION CORP. 2
UNAUDITED CONDENSED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM FEBRUARY 10, 2021 (INCEPTION) THROUGH SEPTEMBER 30, 2021
Cash Flows from Operating Activities |
|
| |
Net income | $ | | |
Adjustments to reconcile net income to net cash used in operating activities: |
| ||
Unrealized gain on marketable securities held in Trust Account |
| ( | |
Transaction costs allocated to warrant liabilities | | ||
Change in fair value of warrant liabilities |
| ( | |
Changes in operating assets and liabilities: |
| ||
Accounts payable | | ||
Accrued expenses |
| | |
Prepaid expenses |
| ( | |
Net cash used in operating activities |
| ( | |
Cash Flows from Investing Activities | |||
Investment of cash in Trust Account | ( | ||
Net cash used in investing activities | ( | ||
Cash Flows from Financing Activities |
| ||
Proceeds from promissory note-related party | | ||
Payment of promissory note-related party | ( | ||
Proceeds from issuance of Class B ordinary shares to initial shareholders | | ||
Proceeds from sale of Units, net of underwriting discounts paid | | ||
Proceeds from sale of Private Placement Warrants | | ||
Payment of offering costs |
| ( | |
Net cash provided by financing activities |
| | |
Net change in cash |
| | |
Cash at beginning of the period |
| — | |
Cash at end of the period | $ | | |
Non-cash investing and financing activities: |
| ||
Initial classification of ordinary shares subject to possible redemption | $ | | |
Deferred underwriting fee | $ | | |
Initial classification of warrant liabilities | $ | | |
Offering costs payable | $ | |
The accompanying notes are an integral part of these unaudited condensed financial statements
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CORNER GROWTH ACQUISITION CORP. 2
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 1—Description of Organization, Business Operations and Basis of Presentation
Corner Growth Acquisition Corp. 2 (the “Company”), was incorporated as a Cayman Islands exempted company on
Although the Company is not limited to a particular industry or sector for purposes of consummating a Business Combination, the Company intends to focus on businesses in the technology industries primarily located in the United States. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of September 30, 2021, the Company had not commenced any operations. All activity through September 30, 2021 relates to the Company’s formation, its initial public offering described below (the “Initial Public Offering”) and, since the closing of the Initial Public Offering, the search for initial Business Combination candidates. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the Initial Public Offering and will recognize changes in the fair value of warrant liabilities as other income (expenses). The Company has selected December 31 as its fiscal year end.
The registration statements for the Company’s Initial Public Offering was declared effective on June 16, 2021. On June 21, 2021, the Company consummated the Initial Public Offering of
Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of
Transaction costs amounted to $
Following the closing of the Initial Public Offering on June 21, 2021, an amount of $
The Company will provide 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 shareholder 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 $
5
of at least $
Notwithstanding the foregoing, the Amended and Restated Memorandum and Articles of Association provide 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 in 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
The Company’s Sponsor, officers and directors (the “initial shareholders”) have agreed not to propose an amendment to the Amended and Restated Memorandum and Articles of Association (A) that would modify the substance or timing of the Company’s obligation to allow redemption in connection with its initial Business Combination or to redeem
If the Company is unable to complete a Business Combination within 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
The Sponsor, officers and directors have 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 initial shareholders 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 underwriter has agreed to waive its rights to its deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does not complete a Business Combination during the Combination Period and, in such event, such amount 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 the $
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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 for 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
As of September 30, 2021, the Company had $
Until the consummation of a 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 Business Combination.
Based on its current cash and working capital balances, 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 to pay 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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Note 2 — Restatement of Previously Issued 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 restate its financial statements to classify all Class A common stock subject to possible redemption in temporary equity. ASC 480 paragraph 10-S99 provides that redemption provisions not solely within the control of the Company require common stock subject to redemption to be classified outside of permanent equity. The Company had previously classified a portion of its Class A common stock in permanent equity, or total stockholders’ 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 $
In connection with the change in presentation for the Class A ordinary shares subject to possible redemption, the Company has restated 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.
In accordance with SEC Staff Accounting Bulletin No. 99, “Materiality,” and SEC Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements;” the Company evaluated the changes and has determined that the related impacts are material to previously presented financial statements. Therefore, the Company, in consultation with its Audit Committee, concluded that its previously issued financial statements impacted should be restated to report all public shares as temporary equity. As such the Company is restating those periods in this Quarterly Report.
Impact of the Restatement
The impact to the balance sheet as of March 31, 2021, the balance sheet as of June 21, 2021 and the balance sheet as of June 30, 2021 is presented below:
As of June 21, 2021 |
| As Reported |
| Adjustment |
| As Restated |
Class A ordinary shares subject to possible redemption | | |
| | ||
Class A ordinary shares, $ | | ( |
| — | ||
Class B ordinary shares, $ | | — |
| | ||
Additional Paid in Capital | | ( |
| — | ||
Accumulated Deficit | ( | ( |
| ( | ||
Total Shareholders’ Equity | | ( |
| ( | ||
Number of Class A ordinary shares subject to redemption | |
| |
As of June 30, 2021 |
| As Reported |
| Adjustment |
| As Restated |
Class A ordinary shares subject to possible redemption | | | | |||
Class A ordinary shares, $ | | ( | — | |||
Class B ordinary shares, $ | | — | | |||
Additional Paid in Capital |
| |
| ( |
| — |
Accumulated Deficit |
| ( |
| ( |
| ( |
Total Shareholders' Equity |
| |
| ( |
| ( |
Number of Class A ordinary shares subject to redemption |
| |
| |
| |
8
The impact to the reported amounts of weighted average shares outstanding and basic and diluted earnings per common share is presented below:
| EPS for Class A common stock (redeemable) | ||||||||
Form 10-Q (June 30, 2021) - three months ended June 30, 2021 | As Reported |
| Adjustment |
| As Restated | ||||
Net income | $ | ( | $ | | $ | ( | |||
Weighted average shares outstanding |
| | ( |
| | ||||
Basic and diluted earnings per share | — | ( | ( | ||||||
Form 10-Q (June 30, 2021) - February 10, 2021 (inception) to June 30, 2021 |
|
|
|
|
|
| |||
Net income | $ | ( | $ | | $ | ( | |||
Weighted average shares outstanding |
| | ( |
| | ||||
Basic and diluted earnings per share | — | ( | $ | ( |
| EPS for Class B common stock (non-redeemable) | ||||||||
Form 10-Q (June 30, 2021) - three months ended June 30, 2021 | As Reported |
| Adjustment |
| As Restated | ||||
Net income | $ | ( | $ | — | $ | ( | |||
Weighted average shares outstanding |
| | ( |
| | ||||
Basic and diluted earnings per share | ( | | ( | ||||||
Form 10-Q (June 30, 2021) - February 10, 2021 (inception) to June 30, 2021 |
|
|
|
|
|
| |||
Net income | $ | ( | $ | — | $ | ( | |||
Weighted average shares outstanding |
| | |
| | ||||
Basic and diluted earnings per share | ( | | ( |
Note 3 — 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 (“U.S. GAAP”) and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by U.S. 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.
The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s prospectus for its Initial Public Offering as filed with the SEC on June 21, 2021, as well as the Company’s Current Report on Form 8-K, as filed with the SEC on August 6, 2021. The interim results for the three months ended September 30, 2021 and the period from February 10, 2021 (inception) through September 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any future interim periods.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires the Company’s 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 financial statements and the reported amounts of expenses during the reporting period. 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 did not have any cash equivalents as of September 30, 2021.
Marketable Securities Held in Trust Account
At September 30, 2021, substantially all of the assets held in the Trust Account were held in U.S. Treasury Bills in U.S. based trust accounts at UBS Financial Services Inc., with Continental Stock Transfer & Trust Company acting as trustee.
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The Company accounts for its securities held in the trust account in accordance with the guidance in ASC Topic 320 “Debt and Equity Securities.” These securities are classified as trading securities with unrealized gains or losses recognized through other income.
Warrant Liabilities
The Company accounts for its Public Warrants (as defined below) and its Private Placement warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in FASB ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded as liabilities at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations.
Class A Ordinary Shares Subject to Possible Redemption
At September 30, 2021, the Class A ordinary shares subject to possible redemption reflected in the condensed balance sheet are reconciled in the following table:
Gross proceeds |
| $ | |
Less: |
|
| |
Fair value of Public Warrants at issuance |
| ( | |
Offering costs allocated to Class A common stock subject to possible redemption |
| ( | |
Plus: |
|
| |
Accretion on Class A common stock subject to possible redemption amount |
| | |
Class A common stock 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 are classified as a liability instrument and are measured at fair value. Conditionally redeemable ordinary shares (including 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, ordinary shares are classified as shareholders’ equity. 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 occurrence of uncertain future events. Accordingly, Class A ordinary shares subject to possible redemption are presented at redemption value as temporary equity, outside of the shareholders’ equity section of the Company’s balance sheet.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable ordinary shares to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable ordinary shares are affected by charges against additional paid in capital and accumulated deficit.
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 Deposit Insurance Corporation coverage of $
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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 auditor 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 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 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 financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Fair value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term nature.
Deferred Offering Costs
The Company complies with the requirements of ASC 340-10-S99-1. Deferred offering costs consist of legal, accounting, and other costs incurred through the balance sheet date that are directly related to the Initial Public Offering. Following the consummation of the Initial Public Offering, deferred offering costs and issuance costs incurred in connection with the Initial Public Offering were allocated to the Public Shares, Public Warrants (as defined below), and Private Placement Warrants based on their relative fair values. Issuance costs attributed to the Public Warrants and Private Placement Warrants were charged to operations while issuance costs not allocated to these warrants were charged to shareholders’ equity.
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under FASB ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC 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. There were
11
review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
There is currently no taxation imposed on income by the Government of the Cayman Islands. In accordance with Cayman Islands income tax regulations, income taxes are not levied on the Company. Consequently, income taxes are not reflected in the Company’s 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.
Net Income or Loss Per Ordinary Share
Net income or loss per share is computed by dividing net income or loss by the weighted-average number of ordinary shares outstanding during the period. The Company has not considered the effect of the warrants sold in the Initial Public Offering and Private Placement to purchase an aggregate of
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 calculated by dividing the net income (loss) by the weighted average shares of ordinary shares outstanding for the respective period.
The following table reflects the calculation of basic and diluted net loss per share (in dollars, except per share amounts):
Three Months Ended | February 10, 2021 (inception) | |||||||||||
| September 30, 2021 |
| through September 30, 2021 | |||||||||
| Class A |
| Class B |
| Class A |
| Class B | |||||
Basic and diluted net income (loss) per ordinary share: | ||||||||||||
Numerator: |
| |||||||||||
Allocation of net income (loss) | $ | | $ | | $ | | $ | | ||||
Denominator: | ||||||||||||
Basic and diluted weighted average ordinary shares outstanding | | | | | ||||||||
Basic and diluted net income (loss) per ordinary share | | | | |
Recent Accounting Pronouncements
In August 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging --Contracts in Entity’ Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’ 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 has elected to early adopt ASU 2020-06, and complied with ASU 2020-06 since its inception on February 10, 2021. Adoption of the ASU did not impact the Company’s financial position, results of operations or cash flows.
The Company’s management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements.
Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic on its financial statements 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 the financial statement. The unaudited interim condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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Note 4 — Initial Public Offering
Pursuant to the Initial Public Offering, the Company sold
Following the closing of the Initial Public Offering on June 21, 2021, $
Note 5 — Related Party Transactions
Founder Shares
On February 18, 2021, the Sponsor paid $
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 6. As a result of the underwriter’s election to partially exercise their over-allotment option,
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)
13
Promissory Note – Related Party
On February 24, 2021, the Sponsor agreed to loan the Company up to $
Private Placement Warrants
Simultaneously with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of
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
Working Capital Loans
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. In the event that a Business Combination does not close, the Company may use a portion of 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 $
Administrative Support Agreement
Pursuant to an administrative services agreement (the “Administrative Services Agreement”) entered into on June 16, 2021, the Company has agreed to pay the Sponsor (A) a total of $
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Note 6 — Commitments
Registration Rights
The holders of Founder Shares, Private Placement Warrants, and securities that may be issued upon conversion of Working Capital Loans, if any, are entitled to registration rights pursuant to a registration rights agreement entered in connection with the Initial Public Offering. These holders are entitled to make up to
Underwriting Agreement
The underwriter is entitled to a deferred fee of $
Note 7 — Warrant Liabilities
The Company has accounted for the
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 at $
The warrants will expire
The exercise price and number of shares issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a share dividend or recapitalization, reorganization, merger or consolidation. 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 the initial Business Combination at an issue price or effective issue price of less than $
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price or effective issue price to be determined in good faith by the board of directors and, in the case of any such issuance to the initial shareholders or their affiliates, without taking into account any Founder Shares held by the initial shareholders or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than
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, so long as they are held by the Sponsor or its permitted transferees, (i) are not redeemable by the Company, (ii) may not (including the Class A ordinary shares issuable upon exercise of these warrants), subject to certain limited exceptions, be transferred, assigned or sold by the holders until
Once the warrants become exercisable, the Company may call the Public Warrants for redemption (except with respect to the Private Placement Warrants):
● | in whole and not in part; |
● | at a price of $ |
● | upon a minimum of |
● | if, and only if, the last reported sale price (the “closing price”) of the Class A ordinary shares equals or exceeds $ |
In addition, once the warrants become exercisable, the Company may call the warrants for redemption:
● | in whole and not in part; |
● | at $ |
● | if, and only if, the closing price of the Class A ordinary shares equals or exceeds $ |
● | if the closing price of the Class A ordinary shares for any |
The “fair market value” of the Class A ordinary shares for the above purpose shall mean the volume-weighted average price of the Class A ordinary shares during the
16
the holders of warrants. In no event are the warrants to be exercisable in connection with this redemption feature for more than
If the Company calls the Public Warrants for redemption, management has 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 is the Company to 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 respect to such warrants. Accordingly, the warrants may expire worthless.
Note 8 — Shareholders’ Equity
Preference Shares — The Company is authorized to issue
Class A Ordinary Shares — The Company is authorized to issue
Class B Ordinary Shares — The Company is authorized to issue
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 Company’s shareholders, except as required by law or stock exchange rule; provided that only holders of the Class B ordinary shares have the right to vote on the appointment of the Company’s directors prior to the initial Business Combination.
The Class B ordinary shares will automatically convert into Class A ordinary shares at the time of the initial Business Combination on a one-for-one basis (as adjusted). In the case that additional Class A ordinary shares or equity-linked securities are issued or deemed issued in connection with the initial Business Combination, the number of Class A ordinary shares issuable upon conversion of all Founder Shares will equal, in the aggregate,
Note 9 — Fair Value Measurements
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
Level 1: Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
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Level 2: Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
Level 3: Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
The following table presents information about the Company’s assets that are measured at fair value on a recurring basis at September 30, 2021 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.
Description |
| Level |
| September 30, 2021 | |
Assets: |
|
|
|
| |
Cash and Marketable securities held in trust account |
| 1 | $ | |
At September 30, 2021, $
The following table presents information about the Company’s liabilities that are measured at fair value on a recurring basis at June 21, 2021 (the initial valuation date) and at September 30, 2021 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.
September 30, | ||||||||
Description |
| Level |
| June 21, 2021 |
| 2021 | ||
Liabilities: |
|
|
|
|
|
| ||
Warrant Liability – Public Warrants |
| 3 | $ | | $ | | ||
Warrant Liability – Private Placement Warrants |
| 3 | $ | | $ | | ||
Total Warrant Liabilities | $ | | $ | |
The Warrants are accounted for as liabilities in accordance with ASC 815-40 and are presented within the warrant liabilities on the balance sheet. The warrant liabilities are measured at fair value at the initial valuation date (June 21, 2021) and on a recurring basis, with changes in fair value presented within change in fair value of the warrant liabilities in the statement of operations.
The Warrants are measured at fair value on a recurring basis. The measurement of fair value of the Public Warrants and the Private Placement Warrants as of September 30, 2021 are classified as Level 3 due to the use of unobservable inputs in a Monte Carlo simulation model.
As of September 30, 2021, the Public Warrants and Private Placement Warrants were determined to be $
The following table presents the changes in the fair value of warrant liabilities:
| Private Placement |
| Public |
| Warrant Liabilities | ||||
Fair value as of June 21, 2021 (initial valuation) | $ | | $ | | $ | | |||
Change in valuation inputs or other assumptions |
| ( |
| ( |
| ( | |||
Fair value as of September 30, 2021 | $ | | $ | | $ | |
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The key inputs for the Monte Carlo simulation model for the Public Warrants and the Private Placement warrants were as follows:
| At June 21, 2021 |
|
| ||||
(Initial | At September 30, 2021 |
| |||||
Measurement) |
| ||||||
Input |
|
|
|
| |||
Risk-free interest rate |
| | % | | % | ||
Expected term (years) |
|
| |||||
Expected volatility |
| | % | | % | ||
Exercise price | $ | | $ | | |||
Fair value of the ordinary share price | $ | | $ | | |||
Redemption threshold price | $ | | $ | | |||
Redemption threshold days |
|
| |||||
Redemption price | $ | | $ | |
Level 3 financial liabilities consist of the Public Warrant and Private Placement Warrant liabilities for which there is no current market for these securities such that the determination of fair value requires significant judgment or estimation. Changes in fair value measurements categorized within Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate.
Note 10 — Subsequent Events
The Company evaluated subsequent events and transactions that occurred up to the date financial statements were issued. Based upon this review, the Company did not identify any other subsequent events, not previously disclosed, that would have required adjustment or disclosure in the financial statements.
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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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.
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
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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.
If we are unable to complete a Business Combination within 12 months from the closing of the Initial Public Offering, or June 21, 2022, 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 and Capital Resources
As indicated in the accompanying financial statements, at September 30, 2021, we had $1,734,248 in our operating bank account, and working capital of $2,374,016, and $15,531 of unrealized gains on the proceeds deposited in the trust account. 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.
Based on the foregoing, management believes that we will have sufficient working capital and borrowing capacity to meet its 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.
Results of Operations
Our entire activity since inception through September 30, 2021 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, 2021, $1,734,248 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 months ended September 30, 2021, we had a net income of $1,146,617 which consisted of $20,757 in unrealized gains, dividends and interest, held in the trust account, a change in the fair value of warrant liabilities of $1,716,908, offset by $591,048 in general and administrative expenses.
For the period from February 10, 2021 (inception) through September 30, 2021, we had a net income of $656,303 which consisted of $15,531 in unrealized gains, dividends and interest, held in the trust account, a change in the fair value of warrant liabilities of $1,766,408, offset by $677,633 in general and administrative expenses and by $448,003 of transaction costs related to the issuance of warrants.
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 5. 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 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.
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. For the three months ended September 30, 2021 and the period from February 10, 2021 (inception) through September 30, 2021, there were no outstanding Working Capital Loans under this arrangement.
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 $140,000 in expenses incurred in connection with the aforementioned arrangements with the related parties on our Statements of Operations for the three months ended September 30, 2021 and for the period from February 10, 2021 (inception) through September 30, 2021.
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
22
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 consolidated 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 revenue 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.
The Warrants are accounted for as liabilities in accordance with ASC 815-40 and are presented within the warrant liabilities on the balance sheet. The warrant liabilities are measured at fair value at the initial valuation date (June 21, 2021) and on a recurring basis, with changes in fair value presented within change in fair value of the warrant liabilities in the statement of operations. The Warrants are measured at fair value on a recurring basis. The inputs used in the measurement of fair value of the Public Warrants and the Private Placement Warrants as of September 30, 2021 are classified as Level 3 due to the use of unobservable inputs in a Monte Carlo simulation model.
Our significant accounting policies are fully described in Note 2 to our unaudited condensed financial statements appearing elsewhere in this Quarterly Report, and we believe those accounting policies are critical to the process of making significant judgments and estimates in the preparation of these financial statements.
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.
In August 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-06, Debt --debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging --Contracts in Entity' Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity' 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 has elected to early adopt ASU 2020-06, and complied with ASU 2020-06 since its inception on February 10, 2021. Adoption of the ASU did not impact the Company's financial position, results of operations or cash flows.
Off-Balance Sheet Arrangements
For the three months ended September 30, 2021 and for the period from February 10, 2021 (inception) through September 30, 2021, 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.
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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.
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.
Item 4.Controls and Procedures
Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are 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 Officer, to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2021. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act) were not effective as of September 30, 2021 due to the material weakness in our internal control over financial reporting to the classification of the Company’s Class A common stock subject to possible redemption as permanent equity instead of as temporary equity. 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 the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Specifically, the Company’s management has concluded that our control around the interpretation and accounting for certain complex features of the shares of Class A common stock and issued by the Company was not effectively designed or maintained.
Changes in Internal Control over Financial Reporting
Except as set forth below, during the most recently completed fiscal quarter, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
The Company previously determined the Class A ordinary shares subject to possible redemption to be equal to the redemption value of $10.00 per share of Class A ordinary shares while also taking into consideration a redemption cannot result in net tangible assets being less than $5,000,001. As such, the Company did not consider redeemable shares classified as temporary equity as part of net tangible assets.
ASC 480 paragraph 10-S99 provides that redemption provisions not solely within the control of the Company require ordinary shares subject to redemption to be classified outside of permanent equity. As such, the audit committee of our board of directors, on November 19, 2021, concluded, in consultation with third party professionals that the Company’s audited balance sheet
24
as of June 21, 2021 filed with the SEC on June 25, 2021, and the Company’s quarterly unaudited financial statements and related footnotes as of and for the quarterly period ended June 30, 2021, should be restated to report all public shares as temporary equity and should no longer be relied upon. We have restated our financial statements for the affected periods in this Quarterly Report, as described in Note 2 of the notes to the financial statements included herein. Notwithstanding the identified material weaknesses, management believes that the financial statements and related financial information included in this Quarterly Report fairly present, in all material respects, our balance sheets, statements of operations and cash flows as of and for the periods presented.
Material Weakness in Internal Control over Financial Reporting
We recognize the importance of the control environment as it sets the overall tone for the Company and is the foundation for all other components of internal control. Consequently, we designed remediation measures to address the material weakness previously identified and enhance our internal control over financial reporting. To address the material weakness, we enhanced our processes to a to identify and appropriately apply applicable accounting requirements to better evaluate and understand the nuances of the complex accounting standards that apply to our financial statements, 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 forgoing actions, which we believe will remediate the material weakness in internal control over financial reporting, were put into place as of the date of this filing. As we continue to evaluate and improve our financial reporting process, we may take additional actions to modify certain of the remediation measures described above. The elements of our remediation plan can only be accomplished over time, and we cannot assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to remediate the material weaknesses we have identified or avoid potential future material weaknesses.
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PART II – OTHER INFORMATION
Item 1.Legal Proceedings
None.
Item 1A. Risk Factors
As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors disclosed in our quarterly report on Form 10-Q filed with the SEC on August 16, 2021. We may disclose changes to such risk factors or disclose additional risk factors from time to time in future filings with the SEC.
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities
None.
Item 3.Defaults Upon Senior Securities
None.
Item 4.Mine Safety Disclosures
Not applicable.
Item 5.Other Information
None.
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Item 6.Exhibits
Exhibit |
| Description |
31.1* | ||
31.2* | ||
32.1** | ||
32.2** | ||
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 | |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* | Filed herewith. |
** | Furnished. |
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SIGNATURES
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 thereunto duly authorized on this 19th day of November, 2021.
CORNER GROWTH ACQUISITION CORP.2 | ||
By: | /s/ Jerome “Jerry” Letter | |
Name: | Jerome “Jerry” Letter | |
Title: | Chief Financial Officer and Chief Operating Officer |
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