References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to Concord Acquisition Corp III. References to our "management"
or our "management team" refer to our officers and directors, references to the
"Sponsors" refer to Concord Sponsor Group III 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 report 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"). 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. 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 six months ended June 30, 2022, we had net income of $15,556,968 which
consisted of formation and operating costs of $609,220 and income taxes of
$57,969 offset by the change in the fair value of the warrant liability and
sponsor loans of $15,696,000 and income from investments held in Trust Account
of $528,157.
For the period from February 18, 2021 (inception) through June 30, 2021, we had
a net loss of $473, consisting of formation costs.
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For the three months ended June 30, 2022, we had net income of $7,379,953 which
consisted of formation and operating costs of $282,565 and income taxes of
$57,969 offset by the change in the fair value of the warrant liability and
sponsor loans of $7,301,500 and income from investments held in the Trust
Account of $418,987.
For the three months ended June 30, 2021, we had no activity and no net income
or loss.
Liquidity and Capital Resources
Until the consummation of the IPO, as described below, our only source of
liquidity was an initial purchase of ordinary shares by the sponsors and loans
from our Sponsor.
On November 8, 2021, the Company completed its IPO of 34,500,000 Units,
including the issuance of 4,500,000 Units as a result of the underwriters'
exercise in full of their over-allotment option at an offering price of $10.00
per Unit, generating gross proceeds of $345,000,000.
Simultaneously with the closing of the IPO, the Company consummated the sale of
8,260,606 Private Placement Warrants to the Sponsor and 1,139,394 Private
Placement Warrants to CA2 Co-Investment, each at a price of $1.00 per Private
Placement Warrant, generating total proceeds of $9,400,000.
The Company also executed promissory notes with the Sponsors (the "Sponsors
Loans"), evidencing loans to the Company in the aggregate amount of $6,900,000.
The Sponsor Loans shall be repaid or converted into warrants ("Sponsor Loan
Warrants") at a conversion price of $1.00 per warrant, at the Sponsors'
discretion. The Sponsor Loan Warrants will be identical to the Private Placement
Warrants.
Offering costs amounted to $18,394,829, consisting of $6,900,000 of underwriting
discount, $12,075,000 of deferred underwriting discount, and $455,576 of other
offering costs offset by $1,035,747 of offering costs attributable to the
warrant liability. In addition, $2,089,239 of cash was held outside of the Trust
Account on November 8, 2021 and is available for working capital purposes.
Upon the closing of the IPO and the sale of the Private Placement Warrants, a
total of $351,900,000 ($10.20 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.
On May 3, 2022, the Sponsor agreed to loan the Company up to $350,000 to be used
to pay operating expenses. This loan is non-interest bearing, unsecured, is not
convertible into warrants or any other securities, and due at the closing of a
business combination. The Company had not borrowed any amount under the
promissory note.
As of June 30, 2022, we had available to us approximately $541,119 of proceeds
held outside the Trust Account. In addition, the Sponsor agreed to loan the
Company up to $350,000 to be used to pay any operating expenses. 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.
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 become 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.
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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 May 8, 2023 (or until August 8, 2023, or
November 8, 2023, if extended) to consummate a Business Combination. If a
Business Combination is not consummated by this date and an extension not
obtained, there will be a mandatory liquidation and subsequent dissolution of
the Company. Although the Company intends to consummate a Business Combination
on or before May 8, 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 an
extension is not obtained, 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 or obtain an extension
by this time. No adjustments have been made to the carrying amounts of assets or
liabilities should the Company be required to liquidate after May 8, 2023.
Off-Balance Sheet Arrangements; Commitments and Contractual Obligations
We have no obligations, assets or liabilities which would be considered
off-balance sheet arrangements as of June 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.
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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