10-Q 1 f10q0322_concordacq.htm QUARTERLY REPORT

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2022

 

OR

 

 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                      to                    

 

Concord Acquisition Corp

(Exact name of registrant as specified in its charter)

 

Delaware   001-39770   85-2665549
(State or other jurisdiction of
incorporation or organization)
  (Commission File Number)   (I.R.S. Employer
Identification Number)

 

477 Madison Avenue

New YorkNY

  10022
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code: (212) 883-4330

 

Not Applicable 

(Former name or former address, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act: 

 

Title of Each Class:   Trading Symbol:   Name of Each Exchange on Which Registered:
Units, each consisting of one share of Class A common stock and one-half of one redeemable warrant   CND.U   The New York Stock Exchange
Class A common stock, par value $0.0001 per share   CND   The New York Stock Exchange
Redeemable warrants, each whole warrant exercisable for one share of Class A common stock at an exercise price of $11.50   CND WS   The New York Stock Exchange

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company    

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No ☐

 

As of May 11, 2022, there were 28,352,000 shares of Class A common stock, par value $0.0001 per share, and 6,900,000 shares of Class B common stock, par value $0.0001 per share, issued and outstanding.

 

 

 

 

 

 

CONCORD ACQUISITION CORP

QUARTERLY REPORT ON FORM 10-Q

 

Table of Contents

 

        PAGE
         
PART I. FINANCIAL INFORMATION   1
         
Item 1.   Financial Statements (Unaudited)   1
         
    Condensed Balance Sheets (Unaudited)   1
         
    Condensed Statements of Operations (Unaudited)   2
         
    Condensed Statements of Changes in Stockholders’ Deficit (Unaudited)   3
         
    Condensed Statements of Cash Flows (Unaudited)   4
         
    Notes to Condensed Financial Statements (Unaudited)   5
         
Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations   17
         
Item 3.   Quantitative and Qualitative Disclosures About Market Risk   20
         
Item 4.   Controls and Procedures   20
         
PART II. OTHER INFORMATION   22
         
Item 1.   Legal Proceedings   22
         
Item 1A.   Risk Factors   22
         
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds   22
         
Item 3.   Defaults Upon Senior Securities   22
         
Item 4.   Mine Safety Disclosures   22
         
Item 5.   Other Information   23
       
Item 6.   Exhibits   23

 

i

 

 

PART I. FINANCIAL INFORMATION

 

Item I. Financial Statements

 

CONCORD ACQUISITION CORP

CONDENSED BALANCE SHEETS

 

  

March 31,

2022

   December 31,
2021
 
Assets:  (Unaudited)     
Current assets:        
Cash  $206,702   $191,825 
Prepaid expenses   230,013    216,330 
Total current assets   436,715    408,155 
Investments held in Trust Account   276,113,444    276,050,495 
Total Assets  $276,550,159   $276,458,650 
           
Liabilities and Stockholders’ Deficit          
Current liabilities:          
Accounts payable and accrued expenses  $134,869   $193,766 
Note payable - related party   100,000    
-
 
Total current liabilities   234,869    193,766 
           
Warrant liability   16,888,731    38,335,318 
Total Liabilities   17,123,600    38,529,084 
           
Commitments and Contingencies   
 
    
 
 
           
Common stock subject to possible redemption; 27,600,000 shares at redemption value   276,000,000    276,000,000 
           
Stockholders’ Deficit:          
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding   
-
    
-
 
Class A common stock, $0.0001 par value; 200,000,000 shares authorized; 752,000 shares issued and outstanding, excluding 27,600,000 shares subject to possible redemption   76    76 
Class B common stock, $0.0001 par value; 20,000,000 shares authorized; 6,900,000 shares issued and outstanding   690    690 
Additional paid-in capital   
-
    
-
 
Accumulated deficit   (16,574,207)   (38,071,200)
Total Stockholders’ Deficit   (16,573,441)   (38,070,434)
Total Liabilities and Stockholders’ Deficit  $276,550,159   $276,458,650 

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

1

 

 

CONCORD ACQUISITION CORP

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited) 

 

   For the
three months ended
March 31,
2022
  

For the
three months ended
March 31,

2021

 
         
Operating costs, net (See Note 1)  $12,543   $181,324 
           
Loss from operations   (12,543)   (181,324)
           
Other income (expense)          
Change in fair value of warrant liability   21,446,587    (853,358)
Interest income from investments held in Trust Account   62,949    23,451 
Total other income (expense), net   21,509,536    (829,907)
           
Income (loss) before income taxes   21,496,993    (1,011,231)
Benefit from (provision for) income taxes   
-
    
-
 
Net income (loss)  $21,496,993   $(1,011,231)
           
Basic and diluted weighted average shares outstanding, Class A common stock subject to possible redemption   27,600,000    27,600,000 
Basic and diluted net income (loss) per share, Class A common stock subject to possible redemption  $0.61   $(0.03)
Basic and diluted weighted average shares outstanding, Class A and Class B non-redeemable common stock   7,652,000    7,652,000 
Basic and diluted net income (loss) per share, Class A and Class B non-redeemable common stock  $0.61   $(0.03)

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

2

 

 

CONCORD ACQUISITION CORP 

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

(Unaudited)

 

 

For the Three Months Ended March 31, 2022

 

   Class A
Common Stock
   Class B
Common Stock
   Additional Paid-in   Accumulated   Stockholders’ 
   Shares   Amount   Shares   Amount   Capital   Deficit   Deficit 
Balance as of December 31, 2021   752,000   $76    6,900,000   $690   $
-
   $(38,071,200)  $(38,070,434)
Net income   -    
-
    -    
-
    
-
    21,496,993    21,496,993 
Balance as of March 31, 2022 (unaudited)   752,000   $76    6,900,000   $690   $
-
   $(16,574,207)  $(16,573,441)

 

For the Three Months Ended March 31, 2021

 

   Class A
Common Stock
   Class B
Common Stock
   Additional Paid-in   Accumulated   Stockholders’ 
   Shares   Amount   Shares   Amount   Capital   Deficit   Deficit 
Balance as of December 31, 2020   752,000   $76    6,900,000   $690   $
-
   $(10,459,909)  $(10,459,143)
Net loss   -    
-
    -    
-
    
-
    (1,011,231)   (1,011,231)
Balance as of March 31, 2021 (unaudited)   752,000   $76    6,900,000   $690   $
-
   $(11,471,140)  $(11,470,374)

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

3

 

 

CONCORD ACQUISITION CORP 

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

 

  

For the
three months ended

March 31,

2022

  

For the
three months ended

March 31,

2021

 
         
Cash flows from operating activities:        
Net income (loss)  $21,496,993    (1,011,231)
Adjustments to reconcile net loss to net cash used in operating activities:          
Interest income from investments held in Trust Account   (62,949)   (23,451)
Change in fair value of warrant liability   (21,446,587)   853,358 
Changes in operating assets and liabilities:          
Prepaid expenses   (13,683)   63,324 
Accounts payable and accrued expenses   (58,897)   (12,253)
Net cash used in operating activities   (85,123)   (130,253)
           
Cash flows from financing activities:          
Proceeds from note payable-related party   100,000    
-
 
Net cash provided by financing activities   100,000    
-
 
           
Net change in cash   14,877    (130,253)
Cash, beginning of the period   191,825    1,082,101 
Cash, end of the period  $206,702    951,848 

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

4

 

 

CONCORD ACQUISITION CORP

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2022

(Unaudited)

 

Note 1 – Organization and Business Operations

 

Organization and General

 

Concord Acquisition Corp (the “Company”) is a blank check company incorporated as a Delaware corporation on August 20, 2020. The Company was 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 (“Business Combination”).

 

As of March 31, 2022, the Company had not commenced any operations. All activity for the period from August 20, 2020 (inception) through March 31, 2022 relates to the Company’s formation, the Initial Public Offering (as defined below), and activities related to seeking an acquisition target. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company generates non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the initial public offering, and non-operating income or expense from the changes in the fair value of warrant liabilities.

 

The Company’s sponsors are Concord Sponsor Group LLC (the “Sponsor”) (an affiliate of Atlas Merchant Capital LLC), and CA Co-Investment LLC (an affiliate of one of the underwriters of the Initial Public Offering) (“CA Co-Investment” and, together with the Sponsor, the “Sponsors”).

 

Financing

 

The registration statements for the Initial Public Offering were declared effective by the U.S. Securities and Exchange Commission (the “SEC”) on December 7, 2020 (the “Effective Date”). On December 10, 2020, the Company consummated the initial public offering (the “Initial Public Offering” or “IPO”) of 27,600,000 units (the “Units” and, with respect to the shares of Class A common stock included in the Units sold, the “public shares”), including the issuance of 3,600,000 Units as a result of the exercise in full of the underwriters’ over-allotment option, at $10.00 per Unit, generating gross proceeds of $276,000,000, which is discussed in Note 3.

 

Simultaneously with the closing of the IPO, the Company consummated the private placement of 510,289 units to the Sponsor and 241,711 units to CA Co-Investment LLC (an affiliate of one of the underwriters of the IPO) (“CA Co-Investment”) (together, the “Private Units”), each at a price of $10.00 per Private Unit, generating total proceeds of $7,520,000, which is described in Note 4.

 

Trust Account

 

Following the closing of the IPO, an aggregate of $10.00 per Unit sold in the IPO was held in a trust account (“Trust Account”) and may only be invested in United States “government securities” within the meaning of Section 2(a) (16) of the Investment Company Act having a maturity of 185 days or less or in money market funds meeting certain conditions of Rule 2a-7 promulgated under the Investment Company Act which only in direct U.S. government treasury obligations. Except with respect to interest earned on the funds held in the Trust Account that may be released to the Company to pay its tax obligations, the proceeds from the IPO and the sale of the Private Units will not be released from the Trust Account until the earliest of (a) the completion of the Company’s initial Business Combination, (b) the redemption of any public shares properly submitted in connection with a stockholder vote to amend the Company’s amended and restated certificate of incorporation (i) to modify the substance or timing of the Company’s obligation to allow redemptions in connection with its initial Business Combination or to redeem 100% of the public shares if the Company does not complete its initial Business Combination within 18 months from the closing of the IPO or any Extension Period (as defined below) or (ii) with respect to any other provision relating to stockholders’ rights or pre-initial Business Combination activity, and (c) the redemption of the Company’s public shares if the Company is unable to complete the initial Business Combination within 18 months from the closing of the IPO or any Extension Period, subject to applicable law. The proceeds deposited in the Trust Account could become subject to the claims of the Company’s creditors which would have higher priority than the claims of the Company’s public stockholders.

 

Initial Business Combination

 

The Company’s Business Combination must be with one or more target businesses that together have a fair market value equal to at least 80% of the balance in the Trust Account (net of taxes payable) at the time of the signing an agreement to enter into a Business Combination. However, the Company will only complete a Business Combination if the post-Business Combination company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. There is no assurance that the Company will be able to successfully effect a Business Combination.

 

The Company will provide its public stockholders with the opportunity to redeem all or a portion of their public shares upon the completion of the initial business combination either (i) in connection with a stockholder meeting called to approve the initial business combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a proposed initial business combination or conduct a tender offer will be made by the Company, solely in its discretion. The stockholders will be entitled to redeem their shares for a pro rata share of the aggregate amount then on deposit in the Trust Account (initially $10.00 per share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations). While the Company may use earnings on the trust account to pay its tax obligations, as of March 31, 2022, no amounts have been withdrawn by the Company from the Trust Account to pay its tax obligations.

 

5

 

 

CONCORD ACQUISITION CORP

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2022

(Unaudited)

 

The shares of common stock subject to redemption are recorded at a redemption value and classified as temporary equity upon the completion of the IPO, in accordance with Accounting Standards Codification (“ASC”) Topic 480, “Distinguishing Liabilities from Equity.” In such case, the Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 upon such consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the issued and outstanding shares voted are voted in favor of the Business Combination.

 

The Company will have 18 months (or 24 months if the Company extends the period of time to consummate a Business Combination) from the closing of the IPO (June 10, 2022 or December 10, 2022 if extended) to consummate a Business Combination (the “Combination Period”). However, if the Company is unable to complete a Business Combination within the Combination Period, the Company will redeem 100% of the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to the Company to pay its taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, subject to applicable law, and then seek to dissolve and liquidate.

 

The initial stockholders, officers and directors have agreed to (i) waive their redemption rights with respect to their founder shares, private placement shares and public shares in connection with the completion of the initial business combination, (ii) waive their redemption rights with respect to their founder shares, private placement shares and public shares in connection with a stockholder vote to approve an amendment to the Company’s amended and restated certificate of incorporation, and (iii) waive their rights to liquidating distributions from the trust account with respect to their founder shares and private placement shares if the Company fails to complete the initial business combination within the Combination Period.

 

The Company’s Sponsor has agreed that, in general, it will be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has entered into a written letter of intent, confidentiality or similar agreement or business combination agreement, reduce the amount of funds in the trust account to below the lesser of (i) $10.00 per public share and (ii) the actual amount per public share held in the trust account as of the date of the liquidation of the trust account, if less than $10.00 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the trust account (whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act. However, the Company has not asked its Sponsor to reserve for such indemnification obligations, nor has the Company independently verified whether its Sponsor has sufficient funds to satisfy its indemnity obligations and believe that the Company’s Sponsor’s only assets are securities of the Company. Therefore, the Company cannot assure that its Sponsor would be able to satisfy those obligations.

 

As of March 31, 2022, the Company has incurred approximately $2.0 million in fees contingent on the closing of a business combination. These costs may be paid for using the proceeds of the cash available once the business combination is complete. Further, as part of the Transaction Agreement as defined below, Circle has agreed to pay or procure the payment of all Concord expenses, not to exceed $10,000,000 in the aggregate, incurred in connection with the Transaction Agreement. Refer to the “Proposed Business Combination with Circle Internet Financial Limited” section below for more information.

 

Proposed Business Combination with Circle Internet Financial Limited

 

On February 16, 2022, immediately following the termination of the Business Combination Agreement (as defined and described below), the Company entered into a Transaction Agreement (the “Transaction Agreement”) with Circle Internet Financial Limited, a private company limited by shares incorporated in Ireland (“Circle”), Circle Internet Finance Public Limited Company (formerly Circle Acquisition Public Limited Company), a public company limited by shares incorporated in Ireland (“Topco”), and Topco (Ireland) Merger Sub, Inc., a Delaware corporation (“Merger Sub”).

 

The business combination contemplated by the Transaction Agreement is comprised of two separate transactions (collectively, the “Proposed Transactions”):

 

(a) pursuant to an Irish law court-approved scheme of arrangement (the “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 Delaware General Corporation Law (the “DGCL”), Merger Sub will merge with and into Concord (the “Merger”), with the Company surviving the Merger as a wholly-owned subsidiary of Topco.

 

6

 

 

CONCORD ACQUISITION CORP

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2022

(Unaudited)

 

Pursuant to the Scheme, at the Scheme effective time, each holder of shares of any class in the capital of Circle appearing in the register of members of Circle at the Scheme record time (“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 ordinary shares of Topco (“Topco Ordinary Shares”) comprising that Scheme shareholder’s pro rata portion of an amount of Topco Ordinary Shares equal to the Company Equity Value (as defined below) divided by $10.00 and rounded down to the nearest whole number of Topco Ordinary Shares (collectively, the “Scheme Consideration”). 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 the Company’s Class A common stock and each share of the Company’s Class B common stock (other than shares held by the Company as treasury stock or owned by the Company 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 Company 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 by the Company’s stockholders in accordance with the Company’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 the Company, 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 the Company 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.

 

Also on February 16, 2022, the Company, 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, dated as of July 7, 2021 (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 the Company 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.

 

As part of the Transaction Agreement, Circle has agreed to pay or procure the payment of all Concord expenses, not to exceed $10,000,000 in the aggregate, incurred in connection with the Transaction Agreement. Further, Circle shall pay or procure the payment of up to $500,000 of Concord expenses (which amounts shall be included in the overall $10,000,000 cap) promptly following request by Concord before the transaction is complete. For the three months ended March 31, 2022, $245,567 was been reimbursed by Circle which is included within the Operating costs, net line item in the condensed statement of operations.

 

In addition, Circle has agreed to deposit or procure the deposit of the amount required to extend Concord’s liquidation date into the Trust Account prior to June 8, 2022. Refer to the Liquidity and Capital Resources section below for more details.

 

7

 

 

CONCORD ACQUISITION CORP

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2022

(Unaudited)

 

Liquidity and Capital Resources

 

As of March 31, 2022, the Company had cash of $206,702 held outside of the Trust Account and available for working capital purposes. Further, on November 2, 2021, 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 and due at the closing of a business combination. As of March 31, 2022, the Company had borrowed $100,000 under the promissory note.

 

The Company does not believe it will need to raise additional funds in order to meet the expenditures required for operating the 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 the 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 prior to 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 will have until June 10, 2022 (or December 10, 2022 if extended) to consummate an initial Business Combination. However, if the Company anticipates that it may not be able to consummate its initial Business Combination by June 10, 2022, the Company may, by resolution of its board of directors if requested by the Sponsor, extend the period of time to consummate a Business Combination one time, by an additional six months to December 10, 2022, subject to the Sponsor depositing additional funds into the Trust Account as described in Note 5 (“Extension Period”). As noted above, Circle has committed to deposit or procure the deposit of the amount required to extend Concord’s liquidation date into the Trust Account prior to June 8, 2022.

 

Risks and Uncertainties

 

Management is continuing to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position or results of its operations, the specific impact is not readily determinable as of the date of these condensed financial statements. The condensed financial statements do not include any adjustments that might results from the outcome of this uncertainty.

 

Note 2 – Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.

 

The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 as filed with the SEC on March 4, 2022, which contains the audited financial statements and notes thereto. The accompanying condensed balance sheet as of December 31, 2021 has been derived from those audited financial statements. The interim results for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any future interim periods.

 

Certain prior period information has been reclassified to conform to current period presentation. Such reclassifications had no impact on prior year net loss, total assets, total liabilities, total cash flows from operating, investing, and financing activities, or stockholder’s deficit.

 

Emerging Growth Company

 

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities Act”), as modified by the Jumpstart our Business Startups Act of 2012, (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

  

8

 

 

CONCORD ACQUISITION CORP

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2022

(Unaudited)

 

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s condensed financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

 

Use of Estimates

 

The preparation of condensed financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

 

Cash and Cash Equivalents

 

The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.

 

Investment Held in Trust Account

 

As of March 31, 2022 and December 31, 2021, investments held in Trust Account consisted of United States Treasury securities and U.S. Money Market Funds, respectively. The Company classifies its United States Treasury securities as held-to-maturity in accordance with FASB ASC Topic 320, “Investments - Debt and Equity Securities.” Held-to-maturity securities are those securities which the Company has the ability and intent to hold until maturity. Held-to-maturity treasury securities are recorded at amortized cost and adjusted for the amortization or accretion of premiums or discounts. Investments in U.S. Money Market Funds are classified as cash and cash equivalents within Trust assets on the condensed balance sheets.

 

A decline in the market value of held-to-maturity securities below cost that is deemed to be other than temporary, results in an impairment that reduces the carrying costs to such securities’ fair value. The impairment is charged to earnings and a new cost basis for the security is established. To determine whether an impairment is other than temporary, the Company considers whether it has the ability and intent to hold the investment until a market price recovery and considers whether evidence indicating the cost of the investment is recoverable outweighs evidence to the contrary. Evidence considered in this assessment includes the reasons for the impairment, the severity and the duration of the impairment, changes in value subsequent to year-end, forecasted performance of the investee, and the general market condition in the geographic area or industry the investee operates in.

 

Premiums and discounts are amortized or accreted over the life of the related held-to-maturity security as an adjustment to yield using the effective-interest method. Such amortization and accretion is included in the “interest income” line item in the condensed statements of operations. Accretion of the discounts amounted to $62,949 and $23,451 for the three months ended March 31, 2022 and 2021, respectively. Interest income is recognized when earned.

 

The Company’s Trust Account balances at March 31, 2022 and December 31, 2021 are characterized as Level 1 investments within the fair value hierarchy under ASC Topic 820 (as defined below).

 

Fair Value of Financial Instruments

 

The fair value of the Company’s assets and liabilities, which qualify as financial instruments under the Financial Accounting Standards Board (“FASB”) ASC Topic 820, “Fair Value Measurement”, approximates the carrying amounts represented in the condensed balance sheets.

 

Warrant Liability

 

The Company accounts for the Warrants as either equity-classified or liability-classified instruments based on an assessment of the specific terms of the Warrants and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC Topic 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the Warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and meet all of the requirements for equity classification under ASC 815, including whether the Warrants are indexed to the Company’s own common stock and whether the holders of the Warrants could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of issuance of the Warrants and as of each subsequent quarterly period end date while the Warrants are outstanding. For issued or modified warrants that meet all of the criteria for equity classification, such warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, liability-classified warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of such warrants are recognized as a non-cash gain or loss on the condensed statements of operations.

 

9

 

 

CONCORD ACQUISITION CORP

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2022

(Unaudited)

 

Fair Value Measurements

 

FASB ASC Topic 820 “Fair Value Measurements and Disclosures” (“ASC 820”) defines fair value, the methods used to measure fair value and the expanded disclosures about fair value measurements. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between the buyer and the seller at the measurement date. In determining fair value, the valuation techniques consistent with the market approach, income approach and cost approach shall be used to measure fair value. ASC 820 establishes a fair value hierarchy for inputs, which represent the assumptions used by the buyer and seller in pricing the asset or liability. These inputs are further defined as observable and unobservable inputs. Observable inputs are those that buyer and seller would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs reflect the Company’s assumptions about the inputs that the buyer and seller would use in pricing the asset or liability developed based on the best information available in the circumstances. 

  

The fair value hierarchy is categorized into three levels based on the inputs as follows:

 

Level 1 — Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not being applied. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment.

 

Level 2 — Valuations based on (i) quoted prices in active markets for similar assets and liabilities, (ii) quoted prices in markets that are not active for identical or similar assets, (iii) inputs other than quoted prices for the assets or liabilities, or (iv) inputs that are derived principally from or corroborated by market through correlation or other means.

 

Level 3 — Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

 

The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC 820, approximates the carrying amounts represented in the condensed balance sheets. The fair values of cash and cash equivalents, prepaid assets, accounts payable and accrued expenses are estimated to approximate the carrying values as of March 31, 2022 and December 31, 2021 due to the short maturities of such instruments. 

  

Concentration of Credit Risk

 

Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage of $250,000. At March 31, 2022 and December 31, 2021, the Company has not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.

 

Common Stock Subject to Possible Redemption

 

The Company accounts for its shares of Class A common stock subject to possible redemption in accordance with the guidance in FASB ASC Topic 480. 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 of Class A common stock 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 sold in the IPO 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 common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s condensed balance sheets. Shares of Class A common stock sold in the Private Placement discussed in Note 4 do not have such redemption rights and as such are classified within stockholders’ equity on the Company’s condensed balance sheets.

 

All of the 27,600,000 shares of Class A common stock sold as part of the Units in the IPO contain a redemption feature which allows for the redemption of such public shares in connection with the Company’s liquidation, if there is a shareholder vote or tender offer in connection with the Business Combination and in connection with certain amendments to the Company’s amended and restated certificate of incorporation. In accordance with the accounting treatment for redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within the control of the Company require Class A common stock subject to redemption to be classified outside of permanent equity. Therefore, all Class A common stock have been classified outside of permanent equity.

 

The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid in capital and accumulated deficit. For the three months ended March 31, 2022 and 2021, there were no changes recognized in the redemption value of the Class A common stock.

 

10

 

 

CONCORD ACQUISITION CORP

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2022

(Unaudited)

 

Income Taxes

 

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 condensed 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.

 

ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

 

The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of March 31, 2022 and December 31, 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company maintained a full valuation allowance against its net deferred tax assets in both periods which caused the statutory federal income tax rate of 21% to differ from the Company’s effective tax rate of 0% for the three months ended March 31, 2022 and 2021.

 

The Company has identified the United States as its only “major” tax jurisdiction.

 

The Company is subject to income tax examinations by major taxing authorities since inception. These examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.

 

Net Income (Loss) Per Common Share

 

The Company has two classes of shares, which are referred to as Class A redeemable common stock and Class A and Class B non-redeemable common stock. Earnings and losses are shared pro rata between the two classes of stock, based on weighted average shares outstanding. Private and public warrants to purchase a total of 14,176,000 Class A common stock at $11.50 per share were issued on December 7, 2020. No warrants were exercised during the three months ended March 31, 2022 and 2021. The calculation of diluted net income (loss) per common share does not consider the effect of the warrants issued in connection with the IPO since the exercise of the warrants would be anti-dilutive. As a result, diluted net income (loss) per common share is the same as basic net income (loss) per common share for each period. 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.

 

  

For the three
months ended

March 31, 2022

   For the three
months ended
March 31, 2021
 
   Class A
redeemable
common stock
   Class A and
Class B non-
redeemable
common stock
   Class A
redeemable
common stock
   Class A and
Class B non-
redeemable
common stock
 
Basic and diluted net income (loss) per share                
Numerator:                
Allocation of net income (loss)  $16,830,733   $4,666,260   $(791,727)  $(219,504)
                     
Denominator                    
Weighted-average shares outstanding   27,600,000    7,652,000    27,600,000    7,652,000 
Basic and diluted net income (loss) per share  $0.61   $0.61   $(0.03)  $(0.03)

 

11

 

 

CONCORD ACQUISITION CORP

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2022

(Unaudited)

 

Recent Accounting Pronouncements

 

In August 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging --Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas. The provisions of ASU 2020-06 are applicable to the Company for fiscal years beginning after December 15, 2023, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. The Company is currently evaluating the impact of ASU 2020-06 on its condensed financial statements.

 

The Company’s management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying condensed financial statements. 

 

Note 3 – Initial Public Offering

 

Pursuant to the IPO, the Company sold 27,600,000 Units, at a purchase price of $10.00 per Unit, including 3,600,000 Units issued pursuant to the exercise in full of the underwriters’ over-allotment option. Each Unit consists of one share of Class A common stock and one-half of one redeemable warrant. Each whole warrant will entitle the holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment. Each warrant will become exercisable on the later of 30 days after the completion of the initial Business Combination or 12 months from the closing of the IPO and will expire five years after the completion of the initial Business Combination, or earlier upon redemption or liquidation.

 

Warrants

 

Each whole warrant (both public and private) entitles the holder to purchase one share of the Company’s Class A common stock at a price of $11.50 per share, subject to adjustment as discussed herein.

 

The warrants will become exercisable on the later of 12 months from the closing of the IPO or 30 days after the completion of its initial Business Combination, and will expire five years after the completion of the Company’s initial Business Combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation. The private placement warrants issued to CA Co-Investment will not be exercisable more than five years from the commencement of sales in the IPO in accordance with FINRA Rule 5110(g)(8).

 

The Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the shares of Class A common stock underlying the warrants is then effective and a prospectus relating thereto is current. No warrant will be exercisable and the Company will not be obligated to issue shares of Class A common stock upon exercise of a warrant unless Class A common stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants. In no event will the Company be required to net cash settle any warrant. In the event that a registration statement is not effective for the exercised warrants, the purchaser of a unit containing such warrant will have paid the full purchase price for the unit solely for the share of Class A common stock underlying such unit.

 

Once the warrants become exercisable, the Company may call the warrants for redemption:

 

in whole and not in part;

 

at a price of $0.01 per warrant;

 

upon not less than 30 days’ prior written notice of redemption (the “30-day redemption period”) to each warrant holder; and

 

if, and only if, the reported last sale price of the Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period commencing once the warrants become exercisable and ending three business days before the Company sends the notice of redemption to the warrant holders.

 

If the Company calls the warrants for redemption as described above, the management will have the option to require any holder that wishes to exercise its warrant to do so on a “cashless basis.” If the management takes advantage of this option, each holder would pay the exercise price by surrendering the warrants for that number of shares of Class A common stock equal to the lesser of (A) the quotient obtained by dividing (x) the product of the number of shares of Class A common stock underlying the warrants, multiplied by the excess of the “fair market value” (defined below) over the exercise price of the warrants by (y) the fair market value and (B) 0.361. The “fair market value” shall mean the average last reported sale price of the Class A common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of exercise is sent to the warrant agent.

 

In addition, commencing 90 days after the warrants become exercisable, the Company may redeem the outstanding public warrants:

 

in whole and not in part;

 

at a price of $0.10 per warrant provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares of Class A common stock determined by reference to an agreed table;

 

12

 

 

CONCORD ACQUISITION CORP

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2022

(Unaudited)

 

upon a minimum of 30 days’ prior written notice of redemption;

 

if, and only if, the last reported sale price of the Class A common stock equals or exceeds $10.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) on the trading day prior to the date on which the Company sends the notice of redemption to the warrant holders; and

 

if, and only if, there is an effective registration statement covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants and a current prospectus relating thereto available throughout the 30-day period after written notice of redemption is given.

 

The “fair market value” of the Class A common stock for such purposes shall mean the average last reported sale price of the Class A common stock for the ten trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants. In no event will the warrants be exercisable in connection with this redemption feature for more than 0.361 shares of Class A common stock per warrant (subject to adjustment).

 

Note 4 – Private Placement

 

Simultaneously with the closing of the IPO, the Sponsor purchased an aggregate of 510,289 Private Units (including 48,858 Private Units as a result of the exercise in full of the underwriters’ over-allotment option) and CA Co-Investment purchased an aggregate of 241,711 Private Units (including 23,142 Private Units as a result of the exercise in full of the underwriters’ over-allotment option), at a price of $10.00 per Private Unit, for an aggregate purchase price of $7,520,000. Each Private Unit consists of one share of the Class A common stock and one-half of one redeemable warrant. The private placement units are identical to the public units, except that the private placement units (including the underlying securities) are subject to certain transfer restrictions and the holders hereof are entitled to certain registration rights, as described herein, and the underlying warrants: (1) will not be redeemable by us so long as they are held by our sponsors or their permitted transferees; (2) may be exercised by the holders on a cashless basis; and (3) with respect to private placement warrants held by CA Co-Investment, will not be exercisable more than five years from the commencement of sales in this offering in accordance with FINRA Rule 5110(g)(8). A portion of the proceeds from the Private Units were added to the net proceeds from the IPO held in the Trust Account.

 

The Company’s initial stockholders, officers and directors have agreed to (i) waive their redemption rights with respect to their Founder Shares, private placement shares and public shares in connection with the completion of the Company’s initial Business Combination, (ii) waive their redemption rights with respect to their Founder Shares, private placement shares and public shares in connection with a stockholder vote to approve an amendment to the Company’s amended and restated certificate of incorporation (A) to modify the substance or timing of the Company’s obligation to offer redemption rights in connection with any proposed initial Business Combination or certain amendments to the Company’s charter prior thereto or to redeem 100% of the Company’s public shares if the Company does not complete its initial Business Combination within 18 months (or 24 months if the Company extends the period of time to consummate a Business Combination) from the closing of the IPO or (B) with respect to any other provision relating to stockholders’ rights or pre-initial Business Combination activity, and (iii) waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares and private placement shares if the Company fails to complete its initial Business Combination within 18 months (or 24 months if the Company extends the period of time to consummate a Business Combination) from the closing of the IPO. In addition, the Company’s initial stockholders, officers and directors have agreed to vote any Founder Shares, private placement shares and any public shares in favor of the Company’s initial Business Combination.

 

Note 5 – Related Party Transactions

 

Founder Shares

 

In September 2020, the Company’s initial stockholders purchased an aggregate of 7,187,500 shares of Class B common stock (the “Founder Shares”) for a capital contribution of $25,000. The Sponsor and CA Co-Investment purchased 5,675,000 and 1,437,500 of the Founder Shares, respectively, and each of the Company’s three independent director nominees purchased 25,000 of the Founder Shares. On December 2, 2020, the Sponsor forfeited 1,150,000 Founder Shares and CA Co-Investment forfeited 287,500 Founder Shares, such that the initial stockholders owned an aggregate of 5,750,000 Founder Shares. On December 7, 2020, the Company effected a stock dividend of 1,150,000 shares with respect to the Company’s Class B common stock, resulting in the Company’s initial stockholders holding an aggregate of 6,900,000 Founder Shares. The Founder Shares included an aggregate of up to 900,000 shares that were subject to forfeiture if the over-allotment option was not exercised in full by the underwriters so that the number of Founder Shares would equal 20% of the Company’s issued and outstanding common stocks after the IPO. On December 10, 2020, the underwriters fully exercised their over-allotment option, such that the 900,000 Founder Shares were no longer subject to forfeiture.

 

With certain limited exceptions, the Founder Shares are not transferable, assignable or salable (except to the Company’s officers and directors and other persons or entities affiliated with the initial stockholders, each of whom will be subject to the same transfer restrictions) until the earlier of (A) one year after the completion of the initial Business Combination, (B) subsequent to the initial Business Combination, (x) the date on which the Company completes a liquidation, merger, stock exchange, reorganization or other similar transaction that results in all of the Company’s public stockholders having the right to exchange their shares of common stock for cash, securities or other property or (y) if the last reported sale price of the Company’s Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination.

  

13

 

 

CONCORD ACQUISITION CORP

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2022

(Unaudited)

 

Related Party Loans

 

In order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of the working capital held outside the Trust Account to repay the Working Capital Loans but no proceeds from the Trust Account would be used to repay the Working Capital Loans. Up to $1,500,000 of such Working Capital Loans may be convertible into units at a price of $10.00 per unit at the option of the lender. The units would be identical to the Private Units issued to sponsors. At March 31, 2022 and December 31, 2021, no such Working Capital Loans were outstanding. 

 

On November 2, 2021, 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 borrowed $100,000 and $0, under the promissory note as of March 31, 2022 and December 31, 2021, respectively.

 

Related Party Extension Loans

 

The Company will have up to 18 months from December 10, 2020 to consummate an initial Business Combination. However, if the Company anticipates that it may not be able to consummate its initial Business Combination within 18 months, the Company may, by resolution of its board of directors if requested by the Sponsor, extend the period of time to consummate a Business Combination one time, by an additional six months (for a total of up to 24 months to complete a Business Combination), subject to the Sponsor depositing additional funds into the Trust Account as set out below (an “Extension Period”). The Company’s stockholders will not be entitled to vote or redeem their shares in connection with any such extension. Pursuant to the terms of the Company’s amended and restated certificate of incorporation and the trust agreement entered into between the Company and Continental Stock Transfer & Trust Company on December 7, 2020, in order for the time available for the Company to consummate its initial Business Combination to be extended for such six-month period, the Company’s Sponsor or its affiliates or designees, upon five days advance notice prior to the 18-month deadline, must deposit into the Trust Account $2,760,000 ($0.10 per unit sold in the IPO) on or prior to the date of the applicable deadline, for the six-month extension. Any such payment would be made in the form of a non-interest-bearing loan. Such loan may be converted into units at the price of $10.00 per unit at the option of the lender at the time of the Business Combination. The units would be identical to the Private Units issued to the Company’s Sponsors. The Sponsor and its affiliates or designees are not obligated to fund the Trust Account to extend the time for the Company to complete its initial Business Combination. If the Company is unable to consummate an initial Business Combination within such time period, it will redeem 100% of its issued and outstanding public shares for a pro rata portion of the funds held in the Trust Account, equal to the aggregate amount then on deposit in the Trust Account including interest (which interest shall be net of taxes payable, and less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, subject to applicable law and as further described herein, and then seek to dissolve and liquidate. Refer to Note 1 for more details.

 

Administrative Support Agreement

 

The Company has agreed to pay an affiliate of its Sponsor, commencing on the date of the closing of the IPO, a total of $10,000 per month for office space, utilities and secretarial and administrative support. Upon completion of the Company’s Business Combination or its liquidation, the Company will cease paying these monthly fees. For the three months ended March 31, 2022 and 2021, the Company expensed an aggregate of $30,000, to an affiliate of the Sponsor under this agreement which is recorded within operating costs, net on the condensed statements of operations.

 

In the normal course of business, certain expenses of the Company may be paid by, and then reimbursed to an affiliate of the Sponsor. As of March 31, 2022 and December 31, 2021, the Company had an outstanding balance due to the affiliate of the Sponsor of $20,000 and $2,984, respectively. The amount is included in accounts payable and accrued expenses on the condensed balance sheets and includes but is not limited to legal expense, expense related to identifying a target business, and other expenses.

 

Note 6 – Recurring Fair Value Measurements

 

At March 31, 2022 and December 31, 2021, the Company’s warrant liabilities were valued at $16,888,731 and $38,335,318, respectively. Under the guidance in ASC 815-40 the warrants do not meet the criteria for equity treatment. As such, the warrants must be recorded on the condensed balance sheets at fair value. This valuation is subject to re-measurement at each balance sheet date. With each re-measurement, the warrant valuation will be adjusted to fair value, with the change in fair value recognized in the Company’s condensed statements of operations.

 

As of March 31, 2022 and December 31, 2021, investments held in Trust Account consisted of United States Treasury securities and U.S. Money Market Funds, respectively. Fair values of these investments are determined by Level 1 inputs utilizing quoted prices (unadjusted) in active markets for identical assets.

 

The Company’s warrant liability for the Private Warrants is based on a Monte Carlo valuation model utilizing management judgment and pricing inputs from observable and unobservable markets with less volume and transaction frequency than active markets. Significant deviations from these estimates and inputs could result in a material change in fair value. The fair value of the Private Warrant liability is classified within Level 3 of the fair value hierarchy. During the quarter ended March 31, 2021, the Company’s Public Warrants began trading on the New York Stock Exchange. Subsequent to commencement of trading of the Public Warrants, the Company’s warrant liability for the Public Warrants is based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. The fair value of the Public Warrant liability is classified within Level 1 of the fair value hierarchy

 

14

 

 

CONCORD ACQUISITION CORP

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2022

(Unaudited)

 

The following tables present fair value information as of March 31, 2022 and December 31, 2021 for the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value. 

 

March 31, 2022  Level 1   Level 2   Level 3 
Assets            
Investments held in Trust Account  $276,113,444   $
-
   $
-
 
Liabilities               
Public Warrants  $16,422,000   $
-
   $
-
 
Private Warrants  $
-
   $
-
   $466,731 

 

December 31, 2021  Level 1   Level 2   Level 3 
Assets            
Investments held in Trust Account  $276,050,495   $
   $
 
Liabilities               
Public Warrants  $37,122,000   $
   $
 
Private Warrants  $
   $
   $1,213,318 

 

Measurement

 

The Company used a Monte Carlo valuation model to value the Private Warrants as of March 31, 2022 and a lattice valuation model as of December 31, 2021.

 

The key inputs into the Monte Carlo valuation model used to value the private warrants were as follows at March 31, 2022 and at December 31, 2021. 

 

Input  March 31,
2022
   December 31,
2021
 
Common stock price  $9.95   $10.40 
Expected term (years)   5.67    4.94 
Risk-free rate of interest   2.4%   1.26%
Expected volatility   14.12%   37.51%
Exercise price  $11.50   $11.50 
Warrant price  $1.24   $3.22 

 

The following table provides a reconciliation of changes in fair value of the beginning and ending balances for our warrants classified as Level 3:

 

Fair value at December 31, 2020 – public and private warrants  $11,912,642 
Public Warrants reclassified to level 1(1)   (12,420,000)
Change in fair value   853,358
Fair Value at March 31, 2021 – private warrants  $346,000 

 

(1)Assumes the Public Warrants were reclassified on March 31, 2021.

 

Fair value at December 31, 2021 – private warrants  $1,213,317 
Change in fair value   (746,586)
Fair Value at March 31, 2022 – private warrants  $446,731 

 

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CONCORD ACQUISITION CORP

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2022

(Unaudited)

 

Note 7 – Commitments and Contingencies

 

Registration Rights

 

The holders of the Founder Shares, Private Units, private placement warrants, and warrants that may be issued upon conversion of Working Capital Loans or the Extension Loan have registration rights to require the Company to register a sale of any of its securities held by them pursuant to a registration rights agreement entered into in connection with the consummation of the IPO. These holders will be entitled to make up to three demands, excluding short form registration demands, that the Company registers such securities for sale under the Securities Act. In addition, these holders will have “piggy-back” registration rights to include their securities in other registration statements filed by the Company.

 

Business Combination Marketing Agreement

 

The Company has engaged the underwriters as advisors in connection with business combinations to assist the Company in holding meetings with its stockholders to discuss the potential business combination and the target business’s attributes, introduce the Company to potential investors that are interested in purchasing the securities in connection with the potential business combination, assist the Company in obtaining stockholder approval for the business combination and assist with its press releases and public filings in connection with the business combination. The Company will pay the underwriters a fee (the “Marketing Fee”) for such services upon the consummation of an initial Business Combination in an amount equal to, in the aggregate, 3.5% of the gross proceeds of the IPO, or $9,660,000.

 

Transaction Agreement with Circle Internet Financial Limited

 

On February 16, 2022, the Company entered into the Transaction Agreement and the Termination Agreement, as described in Note 1.

 

Note 8 – Stockholders’ Deficit

 

Preferred Stock — The Company is authorized to issue a total of 1,000,000 preferred shares at par value of $0.0001 each. At March 31, 2022 and December 31, 2021, there were no preferred shares issued or outstanding.

 

Class A Common Stock — The Company is authorized to issue a total of 200,000,000 Class A common shares at par value of $0.0001 each. As of March 31, 2022 and December 31, 2021, there were 752,000 shares of Class A common stock outstanding classified within stockholders’ deficit, excluding 27,600,000 shares of Class A common stock subject to possible redemption.

 

Class B Common Stock — The Company is authorized to issue a total of 20,000,000 shares of Class B common stock at par value of $0.0001 each. As of March 31, 2022 and December 31, 2021, there were 6,900,000 shares of Class B common stock issued and outstanding.

 

The Company’s initial stockholders have agreed, subject to certain limited exceptions, not to transfer, assign or sell their Founder Shares until the earlier to occur of (A) one year after the completion of the Company’s initial Business Combination or (B) subsequent to the Company’s initial Business Combination, (x) if the last reported sale price of the Company’s Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the Company’s initial Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of its stockholders having the right to exchange their shares of common stock for cash, securities or other property.

 

The shares of Class B common stock will automatically convert into shares of the Company’s Class A common stock at the time of its initial Business Combination on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like, and subject to further adjustment as provided herein. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts offered in this prospectus and related to the closing of the initial Business Combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis, 20% of the sum of the total number of all shares of common stock outstanding upon the completion of the IPO (not including the shares of Class A common stock underlying the Private Placement Units) plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with the initial Business Combination (net of the number of shares of Class A common stock redeemed in connection with the initial Business Combination), excluding any shares or equity-linked securities issued, or to be issued, to any seller in the initial Business Combination. In no event shall the Class B Common Stock convert into Class A Common Stock at a ratio that is less than one-for-one.

 

Holders of the Class A common stock and holders of the Class B common stock will vote together as a single class on all matters submitted to a vote of the Company’s stockholders, with each share of common stock entitling the holder to one vote.

 

Note 9 –Subsequent Events

 

The Company’s management reviewed all material events that have occurred after the balance sheet date through the date which these unaudited condensed financial statements were issued. Based upon this review the Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited condensed financial statements except as noted below.

 

On April 8, 2022, the Company repaid $100,000 of the related party loan provided by the Sponsor. Refer to Note 5 for more details.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to Concord Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, references to the “Sponsors” refer to Concord Sponsor Group LLC and CA 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 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;

 

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;

 

17

 

 

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 by Concord’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.

 

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.

 

As part of the Transaction Agreement, Circle has agreed to pay or procure the payment of all Concord expenses, not to exceed $10,000,000 in the aggregate, incurred in connection with the Transaction Agreement. Further, Circle shall pay or procure the payment of up to $500,000 of Concord expenses (which amounts shall be included in the overall $10,000,000 cap) promptly following request by Concord before the transaction is complete. For the three months ended March 31, 2022, $245,567 was been reimbursed by Circle which is included within the Operating costs, net line item in the condensed statement of operations.

 

In addition, Circle has agreed to deposit or procure the deposit of the amount required to extend Concord’s liquidation date into the Trust Account prior to June 8, 2022. Refer to the Liquidity and Capital Resources section below for more details.

 

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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 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 investments held in the Trust Account 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 as of and for the year ended December 31, 2021. 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 three months ended March 31, 2022, we had a net income of $21,496,993 which consisted of an unrealized gain of $21,446,587 from the change in the fair value of our warrant liability and interest earned on our investments in the Trust Account of $62,949, partially offset by general operating expenses of $12,543.

 

For the three months ended March 31, 2021, we had a net loss of $1,011,231 which consisted of an unrealized loss of $853,358 from the change in the fair value of our warrant liability and general operating expenses of $181,324, partially offset by interest earned on our investments in the Trust Account of $23,451.

 

Liquidity and Capital Resources

 

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, multiplied by (3) the number of our authorized shares. Based on the number of shares of our common stock authorized and outstanding, 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. Further, as part of the Transaction Agreement, Circle has agreed to pay or procure the payment of all Concord expenses, not to exceed $10,000,000 in the aggregate, incurred in connection with the Transaction Agreement. Further, Circle shall pay or procure the payment of up to $500,000 of Concord expenses (which amounts shall be included in the overall $10,000,000 cap) promptly following request by Concord before the transaction is complete. For the three months ended March 31, 2022, $245,567 was been reimbursed by Circle which is included within the Operating costs, net line item in the condensed statement of operations.

 

As of March 31, 2022, we had available to us approximately $207,000 of proceeds held outside the trust account. We will use these funds primarily to 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. Circle has agreed to deposit or procure the deposit of the amount required to extend Concord’s liquidation date into the Trust Account prior to June 8, 2022. Refer to the Liquidity and Capital Resources section below for more details.

 

For three months ended March 31, 2022 and 2021, cash used in operating activities was $85,123 and $130,253, respectively, which was used to pay expenses. For three months ended March 31, 2022, cash provided by financing activities was $100,000 related to the proceeds received from a related party note payable. For three months ended March 31, 2021, there were no financing activities.

 

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 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.

  

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Critical Accounting Policies and Significant Judgments and Estimates

 

We prepare our condensed 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 condensed financial statements and the related notes and other financial information included in our Form 10-K on file with the SEC.

 

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 March 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. 

 

Administrative Support Agreement

 

We agreed to pay an affiliate of our Sponsor, commencing on the date of the closing of the IPO, a total of $10,000 per month for office space, utilities and secretarial and administrative support. Upon completion of the Company’s Business Combination or its liquidation, we will cease paying these monthly fees. For the three months ended March 31, 2022 and 2021, the Company expensed an aggregate of $30,000 to an affiliate of the Sponsor under this agreement which is expensed to operating costs on the condensed statements of operations.

 

Business Combination Marketing Agreement

 

We engaged the underwriters as advisors in connection with business combinations to assist us in holding meetings with our stockholders to discuss the potential business combination and the target business’s attributes, introduce us to potential investors that are interested in purchasing the securities in connection with the potential business combination, assist us in obtaining stockholder approval for the business combination and assist with its press releases and public filings in connection with the business combination. We will pay the underwriters a fee (the “Marketing Fee”) for such services upon the consummation of an initial Business Combination in an amount equal to, in the aggregate, 3.5% of the gross proceeds of the IPO, or $9,660,000.

 

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 condensed 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.

  

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item. 

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

 

20

 

 

We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

 

As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2022. Based upon their evaluation, and due to a material weakness in our internal control over financial reporting over the accounting for complex financial instruments, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective as of March 31, 2022.

 

Changes in Internal Control over Financial Reporting

 

There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended March 31, 2022, covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting except for the below.

 

The Company has made changes in its internal control over financial reporting to enhance our processes to identify and appropriately apply applicable accounting requirements to better evaluate and understand the nuances of the complex accounting standards that apply to our condensed financial statements, including providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. The Company can offer no assurance that these changes will ultimately have the intended effects.

 

21

 

 

PART II—OTHER INFORMATION

 

Item 1. Legal Proceedings

 

None.

 

Item 1A. Risk Factors

 

Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 4, 2022 (the “Annual Report”), as well as in Amendment No. 3 to the Registration Statement on Form S-4 filed by Circle on May 6, 2022 (the “Amended S-4”). Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in our Annual Report, or in the Amended S-4, except for the amended and restated risk factor set forth below, and that we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.

 

Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect our business, including our ability to negotiate and complete our initial business combination, and results of operations.

 

We are subject to laws and regulations enacted by national, regional and local governments. In particular, we will be required to comply with certain SEC and other legal requirements. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly. Those laws and regulations and their interpretation and application may also change from time to time and those changes could have a material adverse effect on our business, investments and results of operations. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business, including our ability to negotiate and complete our initial business combination, and results of operations.

 

On March 30, 2022, the SEC issued proposed rules that would, among other items, impose additional disclosure requirements in business combination transactions involving SPACs and private operating companies; amend the financial statement requirements applicable to business combination transactions involving such companies; update and expand guidance regarding the general use of projections in SEC filings, as well as when projections are disclosed in connection with proposed business combination transactions; increase the potential liability of certain participants in proposed business combination transactions; and impact the extent to which SPACs could become subject to regulation under the Investment Company Act of 1940. These rules, if adopted, whether in the form proposed or in revised form, may materially adversely affect our business, including our ability to negotiate and complete our initial business combination and may increase the costs and time related thereto.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

Unregistered Sales of Equity Securities

 

Simultaneously with the consummation of the Initial Public Offering and the full exercise of the over-allotment, we consummated a private placement of an aggregate of 752,000 private units (the “Private Units”) at a price of $10.00 per Private Unit in a private placement to the sponsor, generating total proceeds of $7,520,000. Such securities were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.

 

The Private Units are identical to the public units sold in the Initial Public Offering (the “Units”), except that the Private Units (including the underlying securities) are subject to certain transfer restrictions and the holders thereof are entitled to certain registration rights, and the underlying warrants: (1) will not be redeemable by us so long as they are held by our sponsor, CA Co-Investment or their permitted transferees; (2) may be exercised by the holders on a cashless basis; and (3) with respect to private placement warrants held by CA Co-Investment, will not be exercisable more than five years from the commencement of sales in the Initial Public Offering in accordance with FINRA Rule 5110(g)(8).

 

Use of Proceeds

 

On December 10, 2020, we consummated our Initial Public Offering of 27,600,000 Units, including the issuance of 3,600,000 Units as a result of the exercise in full of the underwriters’ over-allotment option, at an offering price of $10.00 per Unit, generating total gross proceeds of $276,000,000. Cowen and Company LLC served as book-running manager. The securities sold in the offering were registered under the Securities Act on registration statements on Form S-1 (Nos. 333-249654 and 333-251189). The registration statements became effective on December 7, 2020.

 

Of the gross proceeds received from the Initial Public Offering and the private placements of Private Units, $27,600,000 was placed in the Company’s trust account, with Continental Stock Transfer & Trust Company acting as trustee.

 

We paid a total of $5,520,000 in underwriting discounts and approximately $460,708 for other offering costs and expenses related to the Initial Public Offering. In addition, the underwriters agreed to defer $9,660,000 in underwriting discounts and commissions.

 

For a description of the use of the proceeds generated in our Initial Public Offering, see Part I, Item 2 of this Quarterly Report.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

22

 

 

Item 5. Other Information

 

None.

 

Item 6. Exhibits.

 

Exhibit
Number
  Description
10.1(1)  

Transaction Agreement, dated as of February 16, 2022, by and among Concord Acquisition Corp, Circle Internet Financial Limited, Circle Internet Finance Public Limited Company and Topco (Ireland) Merger Sub, Inc.

     
10.2(1)  

Transaction Support Agreement, dated as of February 16, 2022, by and among Concord Acquisition Corp and certain shareholders of Circle Internet Financial Limited.

     
10.3(1)  

Transaction Support Agreement, dated as of February 16, 2022, by and among Concord Acquisition Corp and Jeremy Allaire.

     
10.4(1)   Termination Agreement, dated as of February 16, 2022, by and among Concord Acquisition Corp, Circle Internet Financial Limited, Circle Internet Finance Public Limited Company and Topco (Ireland) Merger Sub, Inc.
     
31.1   Certification of Principal Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
     
31.2   Certification of Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
     
32.1*  

Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.

 

32.2*   Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
   
101.INS   Inline XBRL Instance Document.
     
101.SCH   Inline XBRL Taxonomy Extension Schema Document.
     
101.CAL   Inline XBRL Taxonomy Extension Calculation Linkbase Document.
     
101.DEF   Inline XBRL Taxonomy Extension Definition Linkbase Document.
     
101.LAB   Inline XBRL Taxonomy Extension Label Linkbase Document.
     
101.PRE   Inline XBRL Taxonomy Extension Presentation Linkbase Document.
     
104   Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

 

*These certifications are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.

 

(1)

Incorporated by reference to an exhibit to the Company’s current report on Form 8-K filed with the SEC on February 17, 2022.

 

23

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on this 13th day of May 2022.

 

  CONCORD ACQUISITION CORP
     
  By: /s/ Jeff Tuder
  Name:  Jeff Tuder
  Title:

Chief Executive Officer

(Principal Executive Officer)

     
  By: /s/ Michele Cito
  Name:  Michele Cito
  Title:

Chief Financial Officer

(Principal Financial and Accounting Officer)

 

 

24

 

 

 

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