ARCLIGHT CLEAN TRANSITION CORP. II Discussion and analysis by management of the financial position and operating results. (form 10-Q)

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References to the "Company," "our," "us" or "we" refer to ArcLight Clean
Transition Corp. II. The following discussion and analysis of the Company's
financial condition and results of operations should be read in conjunction with
the unaudited condensed financial statements and the notes thereto contained
elsewhere in this report. Certain information contained in the discussion and
analysis set forth below includes forward-looking statements that involve risks
and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form
10-Q
includes forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to known and unknown
risks, uncertainties and assumptions about us that may cause our actual results,
levels of activity, performance or achievements to be materially different from
any future results, levels of activity, performance or achievements expressed or
implied by such forward-looking statements. In some cases, you can identify
forward-looking statements by terminology such as "may," "should," "could,"
"would," "expect," "plan," "anticipate," "believe," "estimate," "continue," or
the negative of such terms or other similar expressions. Such statements
include, but are not limited to, possible business combinations and the
financing thereof, and related matters, as well as all other statements other
than statements of historical fact included in this Form
10-Q.
Factors that might cause or contribute to such a discrepancy include, but are
not limited to, those described in our other Securities and Exchange Commission
("SEC") filings.
Overview
We are a blank check company incorporated on January 13, 2021 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 or entities (the "Business
Combination"), that we have not yet identified. Our sponsor is ArcLight CTC
Holdings II, L.P., a Delaware limited partnership (our "Sponsor").
Our registration statement for our initial public offering (the "Initial Public
Offering") was declared effective on March 22, 2021. On March 25, 2021, we
consummated our Initial Public Offering of 31,116,305 units (the "Units" and,
with respect to the Class A ordinary shares included in the Units being offered,
the "Public Shares"), including the partial exercise of the underwriters' option
to purchase 3,616,305 additional Units (the "Over-Allotment Units"), at $10.00
per Unit, generating gross proceeds of approximately $311.2 million, and
incurring offering costs of approximately $17.6 million, of which approximately
$10.9 million was for deferred underwriting commissions.
Simultaneously with the closing of the Initial Public Offering, we consummated
the private placement ("Private Placement") of 9,223,261 warrants (each, a
"Private Placement Warrant" and collectively, the "Private Placement Warrants"),
at a price of $1.00 per Private Placement Warrant with the Sponsor, generating
gross proceeds of approximately $9.2 million.
Upon the closing of the Initial Public Offering and the Private Placement,
approximately $311.2 million of the net proceeds of the Initial Public Offering
and certain of the proceeds of the Private Placement were placed in a trust
account ("Trust Account") with Continental Stock Transfer & Trust Company acting
as trustee and invested in United States "government securities" within the
meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended,
or the Investment Company Act, having a maturity of 185 days or less or in money
market funds meeting certain conditions under Rule
2a-7
promulgated under the Investment Company Act which invest only in direct U.S.
government treasury obligations, as determined by the Company, until the earlier
of: (i) the completion of a Business Combination and (ii) the distribution of
the Trust Account as described below.

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If we are unable to complete a Business Combination within 24 months from the
closing of the Initial Public Offering, or March 25, 2023 (the "Combination
Period"), we will (i) cease all operations except for the purpose of winding up;
(ii) as promptly as reasonably possible but not more than ten business days
thereafter, redeem the Public Shares, at a
per-share
price, payable in cash, equal to the aggregate amount then on deposit in the
Trust Account, including interest earned on the funds held in the Trust Account
and not previously released to us to pay its income taxes, if any (less up to
$100,000 of interest to pay dissolution expenses) divided by the number of the
then-outstanding Public Shares, which redemption will completely extinguish
Public Shareholders' rights as shareholders (including the right to receive
further liquidation distributions, if any); and (iii) as promptly as reasonably
possible following such redemption, subject to the approval of the remaining
shareholders and the board of directors, liquidate and dissolve, subject in the
case of clauses (ii) and (iii), to the Company's obligations under Cayman
Islands law to provide for claims of creditors and the requirements of other
applicable law.
Results of Operations
Our entire activity since inception through September 30, 2021 relates to our
formation, the preparation for the Initial Public Offering, and since the
closing of the Initial Public Offering, the search for a prospective initial
Business Combination. We have neither engaged in any operations nor generated
any revenues to date. We will not generate any operating revenues until after
completion of our initial Business Combination. We will generate
non-operating
income in the form of interest income on cash and cash equivalents. We expect to
incur increased expenses as a result of being a public company (for legal,
financial reporting, accounting and auditing compliance), as well as for due
diligence expenses. Additionally, we recognize
non-cash
gains and losses within other income (expense) related to changes in recurring
fair value measurement of our warrant liabilities at each reporting period.
For the three months ended September 30, 2021, we had a net income of
approximately $8.2 million from changes in the value of derivative warrant
liabilities of approximately $9.0 million and $4,000 gain on investments held in
Trust Account partially offset by approximately $750,000 in general and
administrative costs.
For the period from January 13, 2021 (inception) through September 30, 2021, we
had a net loss of approximately
$3.7 million from changes in the value of derivative warrant liabilities of
approximately $2.0 million, financing costs attributable to the warrant
liabilities of approximately $463,000 and approximately $1.3 million in general
and administrative costs, partially offset by an $8,000 gain on investments held
in Trust Account.
Liquidity and Capital Resources
As of September 30, 2021, we had approximately $1.1 million in our operating
bank account and working capital of approximately $1.3 million.
Our liquidity needs up to September 30, 2021 had been satisfied through a
payment of $25,000 from the Sponsor to cover certain expenses on behalf of the
Company in exchange for the issuance of the Founder Shares (as defined below), a
loan under a promissory note from our Sponsor of approximately $172,000 (the
"Note"), and the net proceeds from the consummation of the Private Placement not
held in the Trust Account. The Note was repaid in full on March 26, 2021. In
addition, in order to finance transaction costs in connection with a Business
Combination, our officers, directors and Initial Shareholders may, but are not
obligated to, provide the Company with Working Capital Loans. To date, there are
no amounts outstanding under any Working Capital Loans.
Based on the foregoing, management believes that we will have sufficient working
capital and borrowing capacity from the Sponsor or an affiliate of the Sponsor,
or certain of our officers and directors to meet our needs through the earlier
of the consummation of a Business Combination or one year from this filing. Over
this time period, we will be using these funds for paying existing accounts
payable, identifying and evaluating prospective initial Business Combination
candidates, performing due diligence on prospective target businesses, paying
for travel expenditures, selecting the target business to merge with or acquire,
and structuring, negotiating and consummating the Business Combination.
We continue to evaluate the impact of the
COVID-19
pandemic and has concluded that the specific impact is not readily determinable
as of the date of the condensed balance sheet. The financial statement does not
include any adjustments that might result from the outcome of this uncertainty.

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Contractual Obligations
We do not have any long-term debt obligations, capital lease obligations,
operating lease obligations, purchase obligations or long-term liabilities,
other than an administrative services agreement to pay our Sponsor $10,000 per
month for office space, secretarial and administrative services provided to us.
Critical Accounting Policies
This management's discussion and analysis of our financial condition and results
of operations is based on our financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America. The preparation of our financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses and the disclosure of contingent assets and liabilities in
our financial statements. On an ongoing basis, we evaluate our estimates and
judgments, including those related to fair value of financial instruments and
accrued expenses. We base our estimates on historical experience, known trends
and events and various other factors that we believe to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions. We have identified the following as its critical
accounting policies:
Class A Ordinary shares subject to possible redemption
We account for our Class A ordinary shares subject to possible redemption in
accordance with the guidance in ASC Topic 480 "Distinguishing Liabilities from
Equity." Class A ordinary shares subject to mandatory redemption (if any) is
classified as liability instruments and are measured at fair value.
Conditionally redeemable Class A ordinary shares (including Class ordinary
shares that features redemption rights that are either within the control of the
holder or subject to redemption upon the occurrence of uncertain events not
solely within our control) are classified as temporary equity. At all other
times, Class A ordinary shares are classified as shareholders' equity. Our
Class A ordinary shares feature certain redemption rights that are considered to
be outside of our control and subject to the occurrence of uncertain future
events. Accordingly, as of September 30, 2021, 31,116,305 Class A ordinary
shares subject to possible redemption is presented at redemption value as
temporary equity, outside of the shareholders' equity section of our condensed
balance sheet.
Immediately upon the closing of the Initial Public Offering, we recognized the
accretion from initial book value to redemption amount. The change in the
carrying value of redeemable shares of Class A ordinary shares resulted in
charges against additional
paid-in
capital and accumulated deficit.
Derivative Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or
foreign currency risks. We evaluate all of our financial instruments, including
issued share purchase warrants, to determine if such instruments are derivatives
or contain features that qualify as embedded derivatives, pursuant to ASC 480
and FASB ASC Topic 815, "Derivatives and Hedging" ("ASC 815"). The
classification of derivative instruments, including whether such instruments
should be recorded as liabilities or as equity, is
re-assessed
at the end of each reporting period. The classification of derivative
instruments, including whether such instruments should be recorded as
liabilities or as equity, is
re-assessed
at the end of each reporting period.
The warrants issued in our Initial Public Offering, the underwriters' exercise
of their overallotment option and Private Placement Warrants are recognized as
derivative liabilities in accordance with ASC 815. Accordingly, we recognize the
warrant instruments as liabilities at fair value and adjust the instruments to
fair value at each reporting period. The liabilities are subject to
remeasurement at each balance sheet date until exercised, and any change in fair
value is recognized in the Company's unaudited condensed statement of
operations. The fair value of warrants issued in connection with the Initial
Public Offering and Private Placement were initially measured at fair value
using a Monte Carlo simulation model and subsequently, the fair value of the
Private Placement warrants have been estimated using a Monte Carlo simulation
model each measurement date. The fair value of Warrants issued in connection
with our Initial Public Offering have subsequently been measured based on the
listed market price of such warrants.

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Net Income (Loss) Per Ordinary Share
We have two classes of shares: 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 computed by dividing net income (loss)
by the weighted-average number of ordinary shares outstanding during the
periods. We have not considered the effect of the warrants sold in the Initial
Public Offering and the Private Placement to purchase an aggregate of
15,446,522, of the Company's Class A ordinary shares in the calculation of
diluted net income (loss) per share, since their inclusion would be
anti-dilutive under the treasury stock method. As a result, diluted net income
(loss) per share is the same as basic net income (loss) per share for the three
and nine months ended September 30, 2021. Accretion associated with the Class A
ordinary shares subject to possible redemption is excluded from earnings per
share as the redemption value approximates fair value.
Recent Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") 2020-06, Debt - Debt with Conversion and
Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in
Entity's Own Equity (Subtopic 815-40) ("ASU 2020-06") to simplify accounting for
certain financial instruments. ASU2020-06 eliminates the current models that
require separation of beneficial conversion and cash conversion features from
convertible instruments and simplifies the derivative scope exception guidance
pertaining to equity classification of contracts in an entity's own equity. The
new standard also introduces additional disclosures for convertible debt and
freestanding instruments that are indexed to and settled in an entity's own
equity. ASU 2020-06 amends the diluted earnings per share guidance, including
the requirement to use the if-converted method for all convertible instruments.
ASU 2020-06 is effective January 1, 2022 and should be applied on a full or
modified retrospective basis, with early adoption permitted beginning on January
1, 2021. The Company is currently assessing the impact, if any, that ASU
2020-06
would have on its financial position, results of operations or cash flows.
Our management does not believe that any other recently issued, but not yet
effective, accounting standards if currently adopted would have a material
effect on the Company's unaudited condensed financial statements.
Off-Balance
Sheet Arrangements
As of September 30, 2021, we did not have any
off-balance
sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation
S-K.
JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We qualify as an "emerging growth company" and
under the JOBS Act are allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded)
companies. We are electing to delay the adoption of new or revised accounting
standards, and as a result, we may not comply with new or revised accounting
standards on the relevant dates on which adoption of such standards is required
for
non-emerging
growth companies. As a result, the unaudited condensed financial statements may
not be comparable to companies that comply with new or revised accounting
pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the
other reduced reporting requirements provided by the JOBS Act. Subject to
certain conditions set forth in the JOBS Act, if, as an "emerging growth
company," we choose to rely on such exemptions we may not be required to, among
other things, (i) provide an auditor's attestation report on our system of
internal controls over financial reporting pursuant to Section 404, (ii) provide
all of the compensation disclosure that may be required of
non-emerging
growth public companies under the Dodd-Frank Wall Street Reform and Consumer
Protection Act, (iii) comply with any requirement that may be adopted by the
PCAOB regarding mandatory audit firm rotation or a supplement to the auditor's
report providing additional information about the audit and the financial
statements (auditor discussion and analysis) and (iv) disclose certain executive
compensation related items such as the correlation between executive
compensation and performance and comparisons of the CEO's compensation to median
employee compensation. These exemptions will apply for a period of five years
following the completion of our Initial Public Offering or until we are no
longer an "emerging growth company," whichever is earlier.

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