The statements in the discussion and analysis regarding industry outlook, our
expectations regarding the performance of our business and the forward-looking
statements are subject to numerous risks and uncertainties, including, but not
limited to, the risks and uncertainties described in "Risk Factors" and
"Cautionary Note Regarding Forward-Looking Statements." Our actual results may
differ materially from those contained in or implied by any forward-looking
statements. You should read the following discussion together with the sections
entitled "Risk Factors"," "Business" and the audited financial statements,
including the related notes, appearing elsewhere in this Form 10-K. All
references to years, unless otherwise noted, refer to our fiscal years, which
end on December 31.
Overview
We are a blank check company incorporated as a Delaware corporation and formed
for the purpose of effecting a merger, capital stock exchange, asset
acquisition, stock purchase, reorganization or similar business combination with
one or more businesses. We intend to effectuate our initial business combination
using cash from the proceeds of our initial public offering and the sale of the
private placement warrants, our capital stock, debt or a combination of cash,
stock and debt.
The issuance of additional shares of our stock in a business combination:
? may significantly dilute the equity interest of investors in our
securities, which dilution would increase if the anti-dilution
provisions in the Class B common stock resulted in the issuance of
Class A shares on a greater than one-to-one basis upon conversion of
the Class B common stock;
? may subordinate the rights of holders of common stock if preferred
stock is issued with rights senior to those afforded our common
stock;
? could cause a change of control if a substantial number of shares of
our common stock is issued, which may affect, among other things,
our ability to use our net operating loss carry forwards, if any,
and could result in the resignation or removal of our present
officers and directors;
? may have the effect of delaying or preventing a change of control of
us by diluting the stock ownership or voting rights of a person
seeking to obtain control of us;
? may adversely affect prevailing market prices for our units, Class A
common stock and/or warrants; and
? may not result in adjustment to the exercise price of our warrants.
Similarly, if we issue debt securities or otherwise incur significant
indebtedness, it could result in:
? default and foreclosure on our assets if our operating revenues
after an initial business combination are insufficient to repay our
debt obligations;
60
? acceleration of our obligations to repay the indebtedness even if we
make all principal and interest payments when due if we breach
certain covenants that require the maintenance of certain financial
ratios or reserves without a waiver or renegotiation of that
covenant;
? our immediate payment of all principal and accrued interest, if any,
if the debt is payable on demand;
? our inability to obtain necessary additional financing if the debt
contains covenants restricting our ability to obtain such financing
while the debt is outstanding;
? our inability to pay dividends on our common stock;
? using a substantial portion of our cash flow to pay principal and
interest on our debt, which will reduce the funds available for
dividends on our common stock if declared, expenses, capital
expenditures, acquisitions and other general corporate purposes;
? limitations on our flexibility in planning for and reacting to
changes in our business and in the industry in which we operate;
? increased vulnerability to adverse changes in general economic,
industry and competitive conditions and adverse changes in
government regulation; and
? limitations on our ability to borrow additional amounts for
expenses, capital expenditures, acquisitions, debt service
requirements, execution of our strategy and other purposes and other
disadvantages compared to our competitors who have less debt.
Proposed Business Combination
On February 16, 2022, immediately following the termination of the Business
Combination Agreement, we entered into the Transaction Agreement with Circle,
Topco and Merger Sub, Circle is a global financial technology firm that provides
internet-native payments and treasury infrastructure. Circle's mission of
raising global economic prosperity through the frictionless exchange of
financial value is being met through a series of transaction and treasury
services that help businesses and financial institutions globally to take
advantage of the shift to a digital asset and blockchain powered global
financial system. Circle is the principal operator of one of the fastest growing
dollar digital assets, USD Coin (USDC).
The Proposed Transactions contemplated by the Transaction Agreement are
comprised of two separate transactions: (a) pursuant to an Irish law
court-approved Scheme, Circle's shareholders will transfer their holdings of
shares in the capital of Circle to Topco in exchange for the issuance of new
shares in Topco, with the result that, at the effective time of the Scheme,
Circle will become a wholly-owned subsidiary of Topco; and (b) on the first
business day following the Scheme effective time, subject to the conditions of
the Transaction Agreement and in accordance with the DGCL, Merger Sub will merge
with and into Concord, with Concord surviving the Merger as a wholly-owned
subsidiary of Topco.
Pursuant to the Scheme, at the Scheme effective time, each holder of Scheme
Shares will transfer all of his, her or its Scheme Shares to Topco in exchange
for the allotment and issuance by Topco of that number of Topco Ordinary Shares
comprising that Scheme shareholder's pro rata portion of an amount of Topco
Ordinary Shares equal to the Company Equity Value divided by $10.00 and rounded
down to the nearest whole number of Topco Ordinary Shares. The "Company Equity
Value" means $9,000,000,000 plus (i) the aggregate amount of the net proceeds of
any equity or convertible debt issued by Circle after March 6, 2021, plus (ii)
the proceeds from any private placement completed by Topco or Circle after the
date of the Transaction Agreement, plus (iii) the net equity value of any
acquisition transaction completed by Circle in which equity interests of Circle
or Topco are issued or sold completed after the date of the Transaction
Agreement minus (iv) any indebtedness of Circle that will not convert into
equity in connection with the Proposed Transactions. At the effective time of
the Merger: (a) each share of Concord Class A common stock and each share of
Concord Class B common stock (other than shares held by Concord as treasury
stock or owned by Concord immediately prior to the Merger effective time) issued
and outstanding immediately prior to the Merger effective time will be cancelled
and automatically converted into and become the right to receive one Topco
Ordinary Share (the "Merger Consideration"); and (b) each Concord warrant that
is outstanding immediately prior to the Merger effective time will be converted
into a Topco warrant on substantially the same terms as were in effect
immediately prior to the Merger effective time. In addition, following the
closing of the Proposed Transactions, Topco will issue, as earnout shares, up to
an aggregate number of Topco Ordinary Shares equal to 20% of the Topco Ordinary
shares in issue (on a fully diluted basis) immediately following the closing to
certain of Circle's existing shareholders, based on the volume weighted average
trading price of the Topco Ordinary Shares meeting certain share price
thresholds set forth in the Transaction Agreement.
Following the Proposed Transactions, it is expected that the Topco Ordinary
Shares will be listed on the New York Stock Exchange.
Consummation of the transactions contemplated by the Transaction Agreement is
subject to customary conditions of the respective parties, including the
approval of the Proposed Transactions byConcord's stockholders in accordance
with Concord's amended and restated certificate of incorporation.
Concurrently with the execution of the Transaction Agreement, certain
securityholders of Circle entered into a Transaction Support Agreement with
Concord, pursuant to which, among other things, such securityholders agreed to
vote their Circle shares in favor of the Transaction Agreement, the Scheme and
the transaction documents to which Circle is or will be a party. In addition,
Circle's Chief Executive Officer entered into a Transaction Support Agreement
with Concord pursuant to which he further agreed not to vote in favor of any
Alternative Transaction (as defined in the Transaction Agreement, but excluding
for such purpose an initial public offering of Circle) for a period of six
months following the termination of the Transaction Agreement under certain
circumstances.
61
Also on February 16, 2022, Concord, Circle, Topco and Merger Sub entered into a
Termination of Business Combination Agreement, pursuant to which the parties
agreed to mutually terminate the Business Combination Agreement previously
entered into among the parties. As a result of the termination of the Business
Combination Agreement, effective as of February 16, 2022, the Business
Combination Agreement is of no further force and effect, and certain transaction
agreements entered into in connection with the Business Combination Agreement,
including the subscription agreements, dated as of July 7, 2021, between Concord
and certain investors, pursuant to which such investors committed to purchase
$415 million of equity upon the closing of the transactions contemplated by the
Business Combination Agreement, were terminated in accordance with their
respective terms.
Results of Operations and Known Trends or Future Events
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 to prepare for the IPO. Following the IPO, we do not expect to
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 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 year ended December 31, 2021, we had a net loss of $27,611,291,
primarily driven by formation and operating costs of $1,233,168 and a change in
the fair value of the warrant liability of $26,422,676, partially offset by
interest income of $44,533.
During the period from August 20, 2020 (inception) through December 31, 2020, we
had a net loss of $230,981, driven by transaction costs of $254,150, related to
the IPO, and formation and operating costs of $121,735, partially offset by a
change in the fair value of the warrant liability of $138,962 and interest
income of $5,942.
Liquidity and Capital Resources
Our liquidity needs have been satisfied prior to the completion of our initial
public offering through receipt of a $25,000 capital contribution from our
sponsors in exchange for the issuance of the founder shares and up to $200,000
in loans from our sponsors under unsecured promissory notes.
We intend to use substantially all of the funds held in our trust account,
including any amounts representing interest earned on the trust account (which
interest shall be net of taxes payable) to complete our initial business
combination. We may withdraw interest to fund our working capital requirements
(subject to a limit of $250,000 per year) and/or to pay our taxes. Delaware
franchise tax is based on our authorized shares or on our assumed par and
non-par capital, whichever yields a lower result. Under the authorized shares
method, each share is taxed at a graduated rate based on the number of
authorized shares with a maximum aggregate tax of $200,000 per year. Under the
assumed par value capital method, Delaware taxes each $1,000,000 of assumed par
value capital at the rate of $350; where assumed par value would be (1) our
total gross assets following the IPO, divided by (2) our total issued shares of
common stock following the IPO, multiplied by (3) the number of our authorized
shares following the IPO. Based on the number of shares of our common stock
authorized and outstanding and our estimated total gross proceeds after the
completion of the IPO, our annual franchise tax obligation is expected to be
capped at the maximum amount of annual franchise taxes payable by us as a
Delaware corporation of $200,000. Our annual income tax obligations will depend
on the amount of interest and other income earned on the amounts held in the
trust account. We expect the only taxes payable by us out of the funds in the
trust account will be for income taxes. We expect the interest earned on the
amount in the trust account will be sufficient to pay our taxes. To the extent
that our capital stock or debt is used, in whole or in part, as consideration to
complete our initial business combination, the remaining proceeds held in the
trust account will be used as working capital to finance the operations of the
target business or businesses, make other acquisitions and pursue our growth
strategies.
62
As of December 31, 2021, we had available to us approximately $200,000 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. We will have until June 10, 2022 to consummate an initial
business combination. However, if we anticipate that we may not be able to
consummate our initial business combination by that date, we may, by resolution
of our board if requested by our sponsor, extend the period of time to
consummate a business combination one time, by an additional six months (until
December 10, 2022), subject to the sponsor depositing additional funds into the
trust account.
In order to fund working capital deficiencies or finance transaction costs in
connection with an intended initial business combination, our sponsors, an
affiliate of our sponsors or our officers and directors may, but are not
obligated to, loan us funds as may be required. If we complete our initial
business combination, we may repay such loaned amounts out of the proceeds of
the trust account released to us. In the event that our initial business
combination does not close, we may use a portion of the working capital held
outside the trust account to repay such loaned amounts but no proceeds from our
trust account would be used for such repayment. Up to $1,500,000 of such loans
may be convertible into warrants at a price of $1.50 per warrant at the option
of the lender. The warrants would be identical to the private placement warrants
issued to our sponsors. The terms of such loans by our sponsors, an affiliate of
our sponsors or our officers and directors, if any, have not been determined and
no written agreements exist with respect to such loans. Prior to the completion
of our business combination, we do not expect to seek loans from parties other
than our sponsors, an affiliate of our sponsors or our officers and directors,
if any, as we do not believe third parties will be willing to loan such funds
and provide a waiver against any and all rights to seek access to funds in our
trust account.
We do not believe we will need to raise additional funds following our initial
public offering in order to meet the expenditures required for operating our
business. However, if our estimates of the costs of identifying a target
business, undertaking in-depth due diligence and negotiating an initial business
combination are less than the actual amount necessary to do so, we may have
insufficient funds available to operate our business prior to our initial
business combination. Moreover, we may need to obtain additional financing
either to complete our initial business combination or because we become
obligated to redeem a significant number of our public shares upon completion of
our initial business combination, in which case we may issue additional
securities or incur debt in connection with such business combination.
63
Off-Balance Sheet Arrangements; Commitments and Contractual Obligations;
As of December 31, 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 will qualify as an "emerging growth company" and
under the JOBS Act will be 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, our 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: (1) provide an auditor's attestation report on our system of
internal controls over financial reporting pursuant to Section 404 of the
Sarbanes-Oxley Act; (2) 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; (3) 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
(4) 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 the IPO or until we
are no longer an "emerging growth company," whichever is earlier.
© Edgar Online, source Glimpses