References to the "Company," "us," "our" or "we" refer to CF Acquisition Corp.
VI. The following discussion and analysis of our financial condition and results
of operations should be read in conjunction with our audited financial
statements and related notes included herein.
Cautionary Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this Report
including, without limitation, statements under this "Management's Discussion
and Analysis of Financial Condition and Results of Operations" regarding the
Company's financial position, business strategy and the plans and objectives of
management for future operations, are forward- looking statements. When used in
this Report, words such as "anticipate," "believe," "estimate," "expect,"
"intend" and similar expressions, as they relate to us or the Company's
management, identify forward-looking statements. Such forward-looking statements
are based on the beliefs of management, as well as assumptions made by, and
information currently available to, the Company's management. Actual results
could differ materially from those contemplated by the forward- looking
statements as a result of certain factors detailed in our filings with the SEC.
All subsequent written or oral forward-looking statements attributable to us or
persons acting on the Company's behalf are qualified in their entirety by this
paragraph.
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the financial statements and the
notes thereto contained elsewhere in this Report. Certain information contained
in the discussion and analysis set forth below includes forward-looking
statements that involve risks and uncertainties.
Overview
We are a blank check company incorporated in Delaware on April 17, 2020 for the
purpose of effecting an initial business combination. Our sponsor is CFAC
Holdings VI, LLC.
Although we are not limited to a particular industry or sector for purpose of
consummating an initial business combination, we are focusing our search on
companies operating in the financial services, healthcare, real estate services,
technology and software industries. We are an early stage and emerging growth
company and, as such, subject to all of the risks associated with early stage
and emerging growth companies.
Our Registration Statement for our initial public offering became effective on
February 18, 2021. On February 23, 2021, we consummated the initial public
offering of 30,000,000 units, at a purchase price of $10.00 per unit, generating
gross proceeds of $300,000,000. Each unit consists of one share of Class A
common stock and one-fourth of one redeemable warrant. Each whole warrant
entitles the holder to purchase one share of Class A common stock at a price of
$11.50. Each warrant will become exercisable 30 days after the completion of the
initial business combination and will expire 5 years after the completion of the
initial business combination, or earlier upon redemption or liquidation.
Simultaneously with the closing of our initial public offering, we consummated
the sale of 700,000 units at a price of $10.00 per private placement unit to the
sponsor in a private placement, generating gross proceeds of $7,000,000.
Following the closing of the initial public offering and sale of private
placement units on February 23, 2021, an amount of $300,000,000 ($10.00 per
unit) from the net proceeds of the sale of the units in the initial public
offering and the sale of the private placement units was placed in a trust
account located in the United States at J.P. Morgan Chase Bank, N.A., with
Continental acting as trustee, which may be invested only in U.S. government
securities, within the meaning set forth in Section 2(a)(16) of the Investment
Company Act, with a maturity of 185 days or less or in any open-ended investment
company that holds itself out as a money market fund selected by us meeting the
conditions of paragraphs (d)(2), (d)(3) and (d)(4) of Rule 2a-7 of the
Investment Company Act, as determined by us, until the earlier of: (i) the
completion of an initial business combination and (ii) the distribution of the
trust account, as described below.
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We have until February 23, 2023 (24 months from the closing of the initial
public offering), or a later date approved by our stockholders in accordance
with the Charter, to consummate an initial business combination (the
"Combination Period"). If we are unable to complete an initial business
combination by the end of the Combination Period, we will (i) cease all
operations except for the purpose of winding up, (ii) as promptly as reasonably
possible but not more than ten business days thereafter, redeem 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 us to pay taxes (less up to
$100,000 of interest to pay dissolution expenses), divided by the number of then
outstanding public shares, which redemption will completely extinguish public
stockholders' rights as stockholders (including the right to receive further
liquidating distributions, if any), subject to applicable law, and (iii) as
promptly as reasonably possible following such redemption, subject to the
approval of our remaining stockholders and our board of directors, dissolve and
liquidate, subject in the case of clauses (ii) and (iii) to our obligations
under Delaware law to provide for claims of creditors and the requirements of
other applicable law. There will be no redemption rights or liquidating
distributions with respect to our warrants, which will expire worthless if we
fail to complete an initial business combination within the Combination Period.
Liquidity and Capital Resources
As of both December 31, 2021 and 2020, we had $25,000 of cash in our operating
account. As of December 31, 2021 and 2020, we had a working capital deficit of
approximately $2,516,000 and $157,000, respectively. For the year ended December
31, 2021, we had approximately $23,000 of interest income from the trust account
available to pay taxes (less up to $100,000 of interest to pay dissolution
expenses).
Our liquidity needs through December 31, 2021 have been satisfied through a
contribution of $25,000 from the sponsor in exchange for the issuance of the
founder shares, a loan of approximately $151,000 from the sponsor pursuant to a
promissory note (the "Pre-IPO Note"), the proceeds from the consummation of the
private placement with the sponsor not held in the trust account, and the
Sponsor Loan (as defined below). We fully repaid the Pre-IPO Note upon
completion of the initial public offering. In addition, in order to finance
transaction costs in connection with an initial business combination, the
sponsor has committed up to $1,750,000 to be provided to us to fund our expenses
relating to investigating and selecting a target business and other working
capital requirements after the initial public offering and prior to our initial
business combination (the "Sponsor Loan"). If the Sponsor Loan is insufficient,
the sponsor or an affiliate of the sponsor, or certain of our officers and
directors may, but are not obligated to, provide us additional loans. As of
December 31, 2021 and 2020, there was approximately $949,000 and $0 outstanding,
respectively, under the Sponsor Loan.
Based on the foregoing, management believes that we will have sufficient working
capital and borrowing capacity from the sponsor to meet our needs through the
earlier of the consummation of an initial business combination or one year from
the date of this Report. Over this time period, we will be using these funds for
paying existing accounts payable, identifying and evaluating prospective target
businesses, performing due diligence on prospective target businesses, paying
for travel expenditures, selecting the target business to merge with or acquire,
and structuring, negotiating and consummating the initial business combination.
Results of Operations
Our entire activity from inception through December 31, 2021 related to our
formation, the preparation for the initial public offering, and since the
closing of the initial public offering, to locating and completing a suitable
initial business combination. We have neither engaged in any operations nor
generated any revenues to date. We will not generate any operating revenues
until after completion of our initial business combination. We will generate
non-operating income in the form of interest income on investments held in the
trust account. We expect to incur increased expenses as a result of being a
public company (for legal, financial reporting, accounting and auditing
compliance), as well as for due diligence expenses.
For the year ended December 31, 2021 we had a net loss of approximately
$17,908,000, which consisted of approximately $10,418,000 of loss from the
change in fair value of warrant liability, approximately $4,453,000 of loss from
the change in fair value of FPS liability, approximately $2,756,000 of general
and administrative expenses, approximately $202,000 of franchise tax expense,
and approximately $102,000 of administrative expenses paid to the sponsor,
partially offset by approximately $23,000 of interest income on investments held
in the trust account.
For the period from inception to December 31, 2020, we had a net loss of
approximately $1,300, which consisted of approximately $1,300 of general and
administrative expenses.
Contractual Obligations
Business Combination Marketing Agreement
We engaged CF&Co., an affiliate of the sponsor, as an advisor in connection with
the initial business combination to assist us in holding meetings with our
stockholders to discuss any potential initial business combination and the
target business' attributes, introduce us to potential investors that are
interested in purchasing our securities and assist us with our press releases
and public filings in connection with the initial business combination. We will
pay CF&Co. a cash fee for such services upon the consummation of the initial
business combination in an amount of $10,500,000, which is equal to 3.5% of the
gross proceeds of the initial public offering.
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Related Party Loans
In order to finance transaction costs in connection with an intended initial
business combination, the sponsor has committed up to $1,750,000 in the Sponsor
Loan to be provided to us to fund expenses relating to investigating and
selecting a target business and other working capital requirements, including
$10,000 per month for office space, administrative and shared personnel support
services that will be paid to the sponsor, after the initial public offering and
prior to our initial business combination. As of December 31, 2021 and 2020, we
had borrowed approximately $949,000 and $0, respectively, under the Sponsor
Loan.
The sponsor pays expenses on our behalf and we reimburse the sponsor for such
expenses paid on our behalf. As of December 31, 2021 and 2020, we had accounts
payable outstanding to the sponsor for such expenses paid on our behalf of
approximately $557,000 and $106,000, respectively.
Critical Accounting Policies and Estimates
We have identified the following as our critical accounting polices:
Use of Estimates
The preparation of our financial statements and related disclosures in
conformity with U.S. GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, income and expenses,
and the disclosure of contingent assets and liabilities, in our consolidated
financial statements. These accounting estimates require the use of assumptions
about matters, some of which are highly uncertain at the time of estimation.
Management bases its estimates on historical experience and on various other
assumptions it believes to be reasonable under the circumstances, the results of
which form the basis for making judgments, and we evaluate these estimates on an
ongoing basis. To the extent actual experience differs from the assumptions
used, our consolidated balance sheets, consolidated statements of operations,
consolidated statements of stockholders' equity (deficit) and consolidated
statements of cash flows could be materially affected. We believe that the
following accounting policies involve a higher degree of judgment and
complexity.
Going Concern
In connection with our going concern considerations in accordance with guidance
in the Financial Accounting Standards Board (the "FASB") Accounting Standards
Codification ("ASC") 205-40, Presentation of Financial Statements - Going
Concern, we have until February 23, 2023 to consummate an initial business
combination. Our mandatory liquidation date, if an initial business combination
is not consummated, raises substantial doubt about our ability to continue as a
going concern. our financial statements included in this Report do not include
any adjustments related to the recovery of the recorded assets or the
classification of the liabilities should we be unable to continue as a going
concern. In the event of a mandatory liquidation, within ten business days, we
will redeem 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 us
to pay taxes (less up to $100,000 of interest to pay dissolution expenses),
divided by the number of then outstanding public shares.
Emerging Growth Company
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. We have 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, we, as an
emerging growth company, can adopt the new or revised standard at the time
private companies adopt the new or revised standard.
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Warrant and FPS Liability
We account for our outstanding public warrants and private placement warrants
and the FPS in accordance with guidance in ASC 815-40, Derivatives and Hedging -
Contracts in Entity's Own Equity, under which the warrants and the FPS do not
meet the criteria for equity classification and must be recorded as liabilities.
As both the public and private placement warrants and the FPS meet the
definition of a derivative under ASC 815, Derivatives and Hedging, they are
measured at fair value at inception and at each reporting date in accordance
with the guidance in ASC 820, Fair Value Measurement, with any subsequent
changes in fair value recognized in the consolidated statement of operations in
the period of change.
Class A Common Stock Subject to Possible Redemption
We account for our Class A common stock subject to possible redemption in
accordance with the guidance in ASC 480, Distinguishing Liabilities from Equity.
Shares of Class A common stock subject to mandatory redemption (if any) are
classified as liability instruments and measured at fair value. Shares of
conditionally redeemable 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 our control) are classified as temporary equity. At all other
times, shares of Class A common stock are classified as stockholders' equity.
All of the public shares feature certain redemption rights that are considered
to be outside of our control and subject to the occurrence of uncertain future
events. Accordingly, as of December 31, 2021 and December 31, 2020, 30,000,000
and 0 shares of Class A common stock subject to possible redemption,
respectively, are presented as temporary equity outside of the stockholders'
equity section of our consolidated balance sheets. We recognize any subsequent
changes in redemption value immediately as they occur and adjust the carrying
value of redeemable shares of Class A common stock to the redemption value at
the end of each reporting period. Immediately upon the closing of the initial
public offering, we recognized the accretion from initial book value to
redemption amount value of redeemable Class A common stock. This method would
view the end of the reporting period as if it were also the redemption date for
the security. The change in the carrying value of redeemable shares of Class A
common stock also resulted in charges against Additional paid-in capital and
Accumulated deficit.
Net Loss Per Share of Common Stock
We comply with the accounting and disclosure requirements of ASC 260, Earnings
Per Share. Net loss per share of common stock is computed by dividing net loss
applicable to stockholders by the weighted average number of shares of common
stock outstanding for the applicable periods. We apply the two-class method in
calculating earnings per share. Accretion associated with the redeemable shares
of Class A common stock is excluded from earnings per share as the redemption
value approximates fair value.
We have not considered the effect of the warrants to purchase an aggregate of
7,675,000 shares of Class A common stock sold in the initial public offering and
the concurrent private placement in the calculation of diluted earnings per
share, since their inclusion would be anti-dilutive under the treasury stock
method. As a result, diluted earnings per share of common stock is the same as
basic earnings per share of common stock for the periods presented.
See Note 2-Summary of Significant Accounting Policies to our consolidated
financial statements in Part IV, Item 15 of this Report for additional
information regarding these critical accounting policies and other significant
accounting policies.
Factors That May Adversely Affect Our Results of Operations
Our results of operations and our ability to complete an initial business
combination, including the Rumble Business Combination, may be adversely
affected by various factors that could cause economic uncertainty and volatility
in the financial markets, many of which are beyond our control. Our business
could be impacted by, among other things, downturns in the financial markets or
in economic conditions, increases in oil prices, inflation, increases in
interest rates, supply chain disruptions, declines in consumer confidence and
spending, the ongoing effects of the COVID-19 pandemic, including resurgences
and the emergence of new variants, and geopolitical instability, such as the
military conflict in the Ukraine. We cannot at this time fully predict the
likelihood of one or more of the above events, their duration or magnitude or
the extent to which they may negatively impact our business and our ability to
complete an initial business combination, including the Rumble Business
Combination.
Off-Balance Sheet Arrangements and Contractual Obligations
As of December 31, 2021, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments
or contractual obligations.
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