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 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 $10,617,274, which
consisted of formation and operating costs of $613,137 and income taxes of
$38,645 offset by the change in the fair value of the warrant liability of
$10,848,756 and income from investments held in the Trust Account of $420,300.
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 $5,590,023, which
consisted of formation and operating costs of $306,020 and income taxes of
$38,645 offset by the change in the fair value of the warrant liability of
$5,601,545 and income from investments held in the Trust Account of $333,143.
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 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.
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 $1.1 million 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.
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The Company does not believe it will need to raise additional funds in order to
meet the expenditures required for operating its business. However, 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.
Based on the foregoing, management believes that the Company will have
sufficient working capital and borrowing capacity to meet its needs through the
earlier of the consummation of a Business Combination or one year from this
filing. Over this time period, the Company 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.
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. No such loans were made as of June 30, 2022.
Off-Balance Sheet Financing Arrangements
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.
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.
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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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