References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to Concord Acquisition Corp II. References to our "management"
or our "management team" refer to our officers and directors, references to the
"Sponsors" refer to Concord Sponsor Group II LLC and CA2 Co-Investment, LLC. The
following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the condensed financial
statements and the notes thereto contained elsewhere in this Quarterly Report.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), that are not historical facts and involve risks and
uncertainties that could cause actual results to differ materially from those
expected and projected. All statements, other than statements of historical fact
included in this Quarterly Report including, without limitation, statements in
this "Management's Discussion and Analysis of Financial Condition and Results of
Operations" regarding the Company's financial position, the business strategy,
plans and objectives of management for future operations, and the impact of the
coronavirus (COVID-19) pandemic on the Company's search for a Business
Combination (as defined below), are forward-looking statements. Words such as
"expect," "believe," "anticipate," "intend," "estimate," "seek" and variations
and similar words and expressions are intended to identify such forward-looking
statements. Such forward-looking statements relate to future events or future
performance, but reflect management's current beliefs, based on information
currently available. A number of factors could cause actual events, performance
or results to differ materially from the events, performance and results
discussed in the forward-looking statements. For information identifying
important factors that could cause actual results to differ materially from
those anticipated in the forward-looking statements, please refer to the
Company's annual report on Form 10-K and quarterly reports on Form 10-Q filed
with the U.S. Securities and Exchange Commission (the "SEC"). The Company's
securities filings can be accessed on the EDGAR section of the SEC's website at
www.sec.gov. Except as expressly required by applicable securities law, the
Company disclaims any intention or obligation to update or revise any
forward-looking statements whether as a result of new information, future events
or otherwise.
Overview
We are a blank check company incorporated on February 18, 2021, 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 (a "Business Combination"). We intend to effectuate our initial
business combination using cash from the proceeds of our offering and the sale
of the private placement warrants, our shares, debt or a combination of cash,
equity and debt.
We expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to complete a Business
Combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities since inception have been organizational activities and
those necessary for our initial public offering ("IPO") and activities related
to seeking and consummating an acquisition target. We do not expect to generate
any operating revenues until after completion of our initial business
combination. Until such time that a business combination occurs, we will
generate non-operating income in the form of interest income on cash and cash
equivalents in the form of specified U.S. government treasury bills or specified
money market funds after the IPO and non-operating income or expense from the
changes in the fair value of warrant liabilities. There has been no significant
change in our financial or trading position and no material adverse change has
occurred since the date of our audited financial statements. Until the
completion of our initial business combination, 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.
For the nine months ended September 30, 2022, we had net income of $11,500,638,
which consisted of formation and operating costs of $883,350 and income taxes of
$293,686 offset by the change in the fair value of the warrant liability of
$10,992,894 and income from investments held in the Trust Account of $1,684,780.
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For the period from February 18, 2021 (inception) through September 30, 2021, we
had a net income of $ $4,638,326, which consisted of formation and operating
costs of $191,047 and offering costs attributable to warrant liability of
$1,029,225 offset by the change in the fair value of the warrant liability of
$5,853,167 and income from investments held in the Trust Account of $5,431.
For the three months ended September 30, 2022, we had net income of $883,364,
which consisted of formation and operating costs of $270,213 and income taxes of
$255,041 offset by the change in the fair value of the warrant liability of
$144,138 and income from investments held in the Trust Account of $1,264,480.
For the three months ended September 30, 2021, we had net income of $4,638,799,
which consisted of formation and operating costs of $190,574 and offering costs
attributable to warrant liability of $1,029,225 offset by the change in the fair
value of the warrant liability of $5,853,167 and income from investments held in
the Trust Account of $5,431.
Liquidity and Capital Resources
Until the consummation of the Initial Public Offering, as described below, our
only source of liquidity was an initial purchase of shares of our Class B common
stock by Concord Sponsor Group II LLC (the "Sponsor") and loans from our
Sponsor.
On September 3, 2021, the Company consummated the IPO of 25,000,000 units (the
"Units" and, with respect to the Class A common stock included in the Units
sold, the "public shares") at $10.00 per Unit, generating gross proceeds of
$250,000,000.
Simultaneously with the closing of the IPO, the Company consummated the private
placement of 4,262,121 warrants to the Sponsor, 587,879 warrants to CA2
Co-Investment LLC (an affiliate of one of the underwriters of the IPO) ("CA2
Co-Investment"), and 75,000 warrants each to two of our anchor investors
(together, the "Private Warrants"), each at a price of $1.50 per Private
Warrant, generating total proceeds of $7,500,000.
The Company had granted the underwriters in the Initial Public Offering (the
"Underwriters") a 45-day option to purchase up to 3,750,000 additional Units to
cover over-allotments, if any. On September 27, 2021, the Underwriters partially
exercised the over-allotment option and, on September 28, 2021, purchased an
additional 3,009,750 Units (the "Over-Allotment Units"), generating gross
proceeds of $30,097,500, and incurred $601,950 in cash underwriting fees and
deferred underwriting fees of $1,053,413.
Simultaneously with the closing of the exercise of the over-allotment option,
the Company consummated the sale of 401,300 warrants (the "Over-Allotment
Warrants") at a purchase price of $1.50 per warrant in a private placement to
the Sponsor and CA2 Co-Investment, which generated gross proceeds of $601,950.
Upon the closing of the Initial Public Offering, the sale of the Private
Placement Warrants, the sale of the Over-Allotment Warrants, and the sale of the
Over-Allotment Units, a total of $280,097,500 ($10.00 per Unit) was placed in a
U.S.-based trust account, with Continental Stock Transfer & Trust Company acting
as trustee, and invested only 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 the Company meeting certain conditions of
Rule 2a-7 of the Investment Company Act, as determined by the Company, until the
earlier of: (i) the completion of a Business Combination and (ii) the
distribution of the funds held in the Trust Account.
As of September 30, 2022, we had available to us $985,388 of proceeds held
outside the Trust Account. We will use these funds primarily to identify and
evaluate target businesses, perform business due diligence on prospective target
businesses, travel to and from the offices or similar locations of prospective
target businesses or their representatives or owners, review corporate documents
and material agreements of prospective target businesses, structure, negotiate
and complete a business combination, and to pay taxes to the extent the interest
earned on the Trust Account is not sufficient to pay our taxes.
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If the estimate of the costs of identifying a target business, undertaking
in-depth due diligence and negotiating a Business Combination are less than the
actual amount necessary to do so, the Company may have insufficient funds
available to operate our business prior to a Business Combination. Moreover, the
Company may need to obtain additional financing either to complete a Business
Combination or because the Company becomes obligated to redeem a significant
number of public shares upon consummation of a Business Combination, in which
case the Company may issue additional securities or incur debt in connection
with such Business Combination. Subject to compliance with applicable securities
laws, the Company would only complete such financing simultaneously with the
completion of a Business Combination. If the Company is unable to complete a
Business Combination because it does not have sufficient funds available, the
Company will be forced to cease operations and liquidate the Trust Account. In
addition, following a Business Combination, if cash on hand is insufficient, the
Company may need to obtain additional financing in order to meet its
obligations.
In connection with the Company's assessment of going concern considerations in
accordance with ASC Subtopic 205-40, "Presentation of Financial Statements -
Going Concern", the Company has until September 3, 2023 to consummate a Business
Combination. If a Business Combination is not consummated by this date, there
will be a mandatory liquidation and subsequent dissolution of the Company.
Although the Company intends to consummate a Business Combination on or before
September 3, 2023, it is uncertain whether the Company will be able to
consummate a Business Combination by this time. Management has determined that
the mandatory liquidation, should a Business Combination not occur and potential
subsequent dissolution, as well as the potential for the Company to have
insufficient funds available to operate our business prior to a Business
Combination, raise substantial doubt about the Company's ability to continue as
a going concern. It is uncertain whether the Company will be able to consummate
a Business Combination by this time. No adjustments have been made to the
carrying amounts of assets or liabilities should the Company be required to
liquidate after September 3, 2023.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of September 30, 2022. We do not participate
in transactions that create relationships with unconsolidated entities or
financial partnerships, often referred to as variable interest entities, which
would have been established for the purpose of facilitating off-balance sheet
arrangements. We have not entered into any off-balance sheet financing
arrangements, established any special purpose entities, guaranteed any debt or
commitments of other entities, or purchased any non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than an agreement to pay an
affiliate of the Sponsor a monthly fee of $20,000 for office space,
administrative and support services. We began incurring these fees on August 31,
2021 and will continue to incur these fees monthly until the earlier of the
completion of our initial Business Combination and our liquidation.
Critical Accounting Policies and Significant Judgments and Estimates
We prepare our financial statements in accordance with accounting principles
generally accepted in the United States of America. The preparation of financial
statements also requires us to make estimates and assumptions that affect the
reported amounts of assets, liabilities, costs and expenses and related
disclosures. We base our estimates on historical experience and on various other
assumptions that we believe to be reasonable under the circumstances. Actual
results could differ significantly from the estimates made by our management.
There have been no material changes to our critical accounting policies and
estimates from those disclosed in our financial statements and the related notes
and other financial information included in our Form 10-K for the year ended
December 31, 2021, on file with the SEC.
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