GCT Semiconductor Holding, Inc. quarterly report, Q3 FY2023

Business context and reporting period

Important entity note: This is Concord Acquisition Corp III’s unaudited Form 10-Q for the quarter ended September 30, 2023, not an operating-company 10-Q filed by GCT Semiconductor Holding, Inc. Concord was a blank-check company seeking a business combination and had not begun operations or generated operating revenue.

Financial results and position

MetricQ3 2023 / September 30, 2023Comparable period / prior year-end
RevenueNo operating revenueNo operating revenue
Net income (loss), three months$(1.11) million$3.20 million in Q3 2022
Net income, nine months$0.76 million$18.76 million in nine months 2022
Operating costs$0.50 million for Q3; $3.79 million for nine months$0.29 million and $0.90 million, respectively, in 2022
Cash outside Trust Account$0.21 million$0.52 million at December 31, 2022
Trust Account$43.18 million$356.19 million at December 31, 2022
Total liabilities$21.66 million$15.46 million at December 31, 2022
Operating cash flow$(2.22) million for nine months$(0.80) million for nine months 2022

Q3’s loss reflected $1.06 million of expense from changes in fair value of warrant liabilities and Sponsor loans, partly offset by $0.56 million of Trust Account investment income. Nine-month 2023 income was driven primarily by $6.29 million of Trust Account investment income; the prior-year nine-month result included a $17.92 million fair-value gain. These results do not represent operating performance. No conventional operating margin is applicable because the company had no operating revenue.

At September 30, 2023, the balance sheet included $43.11 million of Class A shares subject to possible redemption, $3.17 million of excise tax payable, a $1.66 million fair value liability for Sponsor loans (with $6.90 million unpaid principal), and a $12.08 million deferred underwriters’ discount payable upon a business combination. The filing reports no long-term debt or off-balance-sheet arrangements.

Material changes and subsequent developments

  • At the May 2023 extension vote, holders redeemed 30,460,066 shares for approximately $317.4 million, reducing Trust Account funds to about $42 million. The redemption reduced shares subject to possible redemption from 34.5 million to 4.04 million by September 30.
  • On November 2, 2023, Concord agreed to combine with GCT Semiconductor, Inc. The stated Company Value is $350 million, adjusted for GCT debt, cash and certain warrant proceeds. The transaction remained subject to closing conditions.
  • PIPE investors committed approximately $29.9 million for 4,484,854 shares at $6.67 per share, contingent on closing. The agreement also provides for up to 20 million earnout shares tied to post-closing stock-price targets.
  • On November 7, stockholders extended the business-combination deadline to August 8, 2024, or an earlier board-determined date. A further 98,573 shares were redeemed for approximately $1.1 million, leaving about $42.2 million in trust and 3,941,361 redeemable public shares.

Outlook, risks, and unusual items

  • Management disclosed substantial doubt about Concord’s ability to continue as a going concern if it cannot complete a business combination by the extended deadline and obtain no further extension; it also cited potentially insufficient working capital. Failure to complete a transaction would require liquidation, and warrants could expire worthless.
  • Management provided no operating or financial guidance. It expected continued transaction-related, public-company, due-diligence and compliance costs.
  • Disclosure controls and procedures were deemed ineffective as of September 30, 2023 because of a material weakness in accounting for complex financial instruments. The company described process enhancements but gave no assurance they would resolve the weakness.
  • The company recorded $3.17 million of excise tax associated with 2023 redemptions. It also accrued a $2.5 million capital-markets-advisor fee, payable only upon a business combination, within approximately $2.73 million of contingent closing fees.
  • Under the proposed transaction, Sponsor parties agreed to forgive amounts outstanding under Sponsor loans and waive anti-dilution protections; the transaction also includes potential sponsor and GCT-recipient earnout shares and warrant adjustments. These terms may affect dilution and proceeds.

Investor facts to verify

  • Confirm the correct issuer and obtain GCT Semiconductor’s own financial filings; this 10-Q reports Concord’s SPAC finances, not GCT’s operating results.
  • Review the latest business-combination filings for closing conditions, final transaction value adjustments, PIPE funding certainty, redemptions, and available cash at closing.
  • Assess the effect of earnout shares, sponsor arrangements, warrants, and other securities on post-closing dilution.
  • Verify Concord’s remaining liquidity, accrued transaction obligations, excise-tax treatment, and ability to fund operations through closing or liquidation.
  • Review remediation of the disclosed material weakness and any updated assessment of disclosure controls.