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Item 7. Management’s Discussion and Analysis

2023-02-27 compared with 2022-03-18 · 58 added, 40 removed, 65 unchanged (60% of the section changed)

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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 year, which ends on

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 year, unless otherwise noted, refer to our fiscal year, which ends on December 31.

As used in this Form 10-K, unless the context suggests otherwise, “we,” “us,” “our,” “the Company” or “Concord” refer to Concord Acquisition Corp III.

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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.

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.

The issuance of additional shares of our stock in a business combination:

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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 and complete 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.

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 the warrant liability and the Sponsor loans.

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.

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, 2022, we had net income of $24,256,284, which consisted of formation and operating costs of $1,172,506, income tax expense of $995,207 offset by the change in the fair value of the warrant liability and sponsor loans of $21,332,800 and income from investments held in Trust Account of $5,091,197.

For the period from February 18, 2021 (inception) through December 31, 2021, we had net income of $9,169,605, which consisted of formation and operating costs of $361,567, fair value of Private Placement Warrants in excess of purchase price of $886,420, and offering costs attributable to the warrant liability of $1,035,747 offset by the change in the fair value of the warrant liability and sponsor loans of $11,431,645 and interest earned on investment held in the Trust Account of $21,694.

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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.

For the period from February 18, 2021 (inception) through December 31, 2021, net cash used in operating activities was $854,869, net cash used in investing activities was $351,900,000, and net cash provided by financing activities was $353,969,424.

For the year ended December 31, 2022, net cash used in operating activities was $1,516,064, net cash provided by investing activities was $822,658, and no net cash provided by financing activities.

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.

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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 income taxes.

We expect the only taxes payable by us out of the funds in the Trust Account will be for 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.

As of December 31, 2021, we had available to us approximately $1.2 million of proceeds held outside the trust account.

As of December 31, 2022, we had available to us $521,149 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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As of December 31, 2022, no such loans had been arranged.

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.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management 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 income and expenses during the periods reported.

Actual results could materially differ from those estimates.

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.

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 extension(s) are 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.

In connection with the Company’s assessment of going concern considerations in accordance with ASC Subtopic 205-40, “Presentation of Financial Statements – Going Concern”, 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 its business prior to a Business Combination, raise substantial doubt about the Company’s ability to continue as a going concern.

No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after May 8, 2023 (or until August 8, 2023 or November 8, 2023, as applicable, if we extend the period of time to consummate a business combination).

Off-Balance Sheet Financing Arrangements

We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of December 31, 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 November 3, 2021 and will continue to incur these fees monthly until the earlier of the completion of our initial Business Combination and our liquidation.

Additionally, our underwriters are entitled to a deferred underwriting discount of $12,075,000 of the gross proceeds of the IPO held in the Trust Account upon the completion of the Company’s initial Business Combination subject to the terms of the underwriting agreement.

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, income 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.

We have identified the following critical accounting policies:

Warrant Liability

We account for the private and public warrants issued in connection with our Initial Public Offering in accordance with the guidance contained in ASC 815-40 under which the warrants do not meet the criteria for equity treatment and must be recorded as liabilities.

Accordingly, we classify the warrants as liabilities at their fair value and adjust the warrants to fair value at each reporting period.

This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statement of operations.

The initial and subsequent fair value measurement of the Public Warrants and the Private Placement Warrants was estimated using a modified Black-Scholes option pricing model.

The Company accounts for the 26,650,000 warrants issued in connection with the Initial Public Offering (the 17,250,000 Public Warrants and the 9,400,000 Private Placement Warrants) in accordance with the guidance contained in ASC 815-40.

Such guidance provides that because the warrants do not meet the criteria for equity treatment thereunder, each warrant must be recorded as a liability.

Accordingly, the Company classifies each warrant as a liability at its fair value.

This liability is subject to re-measurement at each balance sheet date.

With each such re-measurement, the warrant liability will be adjusted to fair value, with the change in fair value recognized in the Company’s statement of operations.

Sponsor Loans

The Company has elected to account for the $6,900,000 in Sponsor Loans using the fair value option in accordance with the guidance contained in ASC 825-10-25.

The Company has elected to account for the $6,900,000 (original principal amount) in Sponsor Loans using the fair value option in accordance with the guidance contained in ASC 825-10-25.

The fair value option provides an option to elect fair value as an alternative measurement for selected financial assets, financial liabilities, unrecognized firm commitments, and written loan commitments.

The Company has elected to apply the fair value option to the Sponsor Loans to simplify the accounting model applied to that class of financial instruments.

Accordingly, we classify the sponsor loans as liabilities at their fair value and adjust the sponsor loans to fair value at each reporting period.

This liability is subject to re-measurement at each balance sheet date until maturity, and any change in fair value is recognized in our statement of operations.

The initial fair value measurement of the sponsor loans was estimated using the transaction prices that serve as a proxy for fair value that were observed on that date.

The subsequent fair value measurement of the sponsor loans was estimated by using a bond plus call approach pricing method.

Common Stock Subject to Possible Redemption

We account for our common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified as a liability instrument and measured at fair value.

Conditionally redeemable common stock (including common stock 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) is classified as temporary equity.

At all other times, common stock is classified as stockholders’ equity.

Our common stock features certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events.

Accordingly, all shares of common stock subject to possible redemption are presented at redemption value as temporary equity, outside of the stockholders’ equity section of our balance sheet.

Net Income (Loss) per Common Share

We comply with the accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” We have one class of shares, which are referred to as redeemable common stock and non-redeemable common stock.

Income and losses are shared pro rata between redeemable and non-redeemable common stock.

Net income (loss) per common share is calculated by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the respective period.

We did not consider the effect of the warrants issued in connection with the initial public offering, the private placement, and the sponsor loans in the calculation of diluted income (loss) per common stock because their exercise is contingent upon future events.

Remeasurement associated with the redeemable common stock is excluded from income (loss) per common share as the redemption value approximates fair value.

The Company accounts for its shares of Class A common stock subject to possible redemption in accordance with the guidance in ASC Topic 480, “Distinguishing Liabilities from Equity.” Shares of Class A common stock subject to mandatory redemption (if any) are classified as a liability instrument and is measured at fair value.

Conditionally redeemable shares of Class A common stock (including 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, shares of Class A common stock are classified as stockholders’ equity.

The Company’s shares of Class A common stock feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events.

Accordingly, all shares of Class A common stock subject to possible redemption are presented at redemption value as temporary equity, outside of the stockholders’ deficit section of the Company’s balance sheet.

The Company accounts for income taxes under ASC 740 Income Taxes (“ASC 740”).

ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards.

ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.

Net Income per Common Share

We comply with the accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” We have two classes of shares, which are referred to as Class A common stock and Class B common stock.

Earnings and losses are shared pro rata between the two classes of stock.

For purposes of computing diluted earnings per share, the weighted-average shares outstanding of common stock reflects the dilutive effect that could occur if convertible securities or other contracts to issue common stock were converted into or exercised for common stock as of the beginning of the period in which the conditions were satisfied (or as of the date of the contingent stock agreement, if later).

The calculation of diluted net income per share does not consider the effect of the warrants issued in connection with the (i) IPO, (ii) exercise of over-allotment (iii) Private Placement and (iv) sponsor loans since the exercise of the warrants and sponsor loans would be anti-dilutive.

The warrants (including warrants issuable in conjunction with the Sponsor Loans) are exercisable to purchase 33,550,000 shares of Class A common stock in the aggregate.

Remeasurement associated with the

redeemable shares of Class A common stock to redemption value is excluded from earnings per share as the redemption value approximates fair value.

On April 5, 2012, the JOBS Act was signed into law.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis