References to the "Company," "our," "us" or "we" refer to CF Acquisition Corp.
IV. The following discussion and analysis of the Company's financial condition
and results of operations should be read in conjunction with the unaudited
condensed 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.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q (this "Report") includes forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). We have based these forward-looking statements on our current
expectations and projections about future events. These forward-looking
statements are subject to known and unknown risks, uncertainties and assumptions
about us that may cause our actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by such
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "may," "should," "could," "would," "expect,"
"plan," "anticipate," "believe," "estimate," "continue," or the negative of such
terms or other similar expressions. Such statements include, but are not limited
to, possible business combinations and the financing thereof, and related
matters, as well as all other statements other than statements of historical
fact included in this Form 10-Q. Factors that might cause or contribute to such
a discrepancy include, but are not limited to, those described in our other
Securities and Exchange Commission ("SEC") filings.
Overview
We are a blank check company incorporated in Delaware on January 23, 2020 for
the purpose of effecting a merger, capital stock exchange, asset acquisition,
stock purchase, reorganization or similar business combination with one or more
businesses (the "Initial Business Combination"). Our sponsor is CFAC Holdings
IV, LLC (the "Sponsor").
Although we are not limited in our search for target businesses to a particular
industry or sector for the purpose of consummating the 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, we are subject
to all of the risks associated with early stage and emerging growth companies.
Our registration statements for our initial public offering (the "Initial Public
Offering") became effective on December 22, 2020. On December 28, 2020, we
consummated the Initial Public Offering of 50,000,000 units (each, a "Unit" and
with respect to the shares of Class A common stock included in the Units sold,
the "Public Shares"), including 5,000,000 Units sold upon the partial exercise
of the underwriter's over-allotment option, at a purchase price of $10.00 per
Unit, generating gross proceeds of $500,000,000. Each Unit consists of one share
of Class A common stock and one-third 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 the Initial Public Offering, we consummated
the sale of 1,000,000 Units (the "Private Placement Units") at a price of $10.00
per Private Placement Unit to the Sponsor in a private placement (the "Private
Placement"), generating gross proceeds of $10,000,000.
Following the closing of the Initial Public Offering and sale of the Private
Placement Units on December 28, 2020, an amount of $500,000,000 ($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 (the "Trust Account") located in the United States at J.P. Morgan Chase
Bank, N.A., with Continental Stock Transfer & Trust Company 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 of 1940, as amended (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 December 28, 2022 (24 months from the closing of the Initial
Public Offering), or a later date approved by our stockholders in accordance
with the Amended and Restated Certificate of Incorporation, 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 June 30, 2022 and December 31, 2021, we had $25,000 of cash in our
operating account. As of June 30, 2022 and December 31, 2021, we had a working
capital deficit of approximately $2,172,000 and $1,525,000, respectively. As of
June 30, 2022 and December 31, 2021, we had approximately $135,000 and $33,000,
respectively, 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 June 30, 2022 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 $158,000 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 June
30, 2022 and December 31, 2021, there was approximately $1,419,000 and $857,000,
respectively, outstanding 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 June 30, 2022 related to our
formation, the Initial Public Offering, and to our efforts toward 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 three months ended June 30, 2022, we had net income of approximately
$7,084,000, which consisted of approximately $5,192,000 of gain from the change
in fair value of warrant liability, approximately $1,213,000 of interest income
on investments held in the Trust Account, and approximately $1,012,000 of gain
from the change in fair value of FPS liability, partially offset by
approximately $193,000 of income tax expense, approximately $44,000 of general
and administrative expenses, approximately $66,000 of franchise tax expense, and
$30,000 of administrative expenses paid to the Sponsor.
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For the six months ended June 30, 2022, we had net income of approximately
$12,722,000, which consisted of approximately $10,975,000 of gain from the
change in fair value of warrant liability, approximately $1,225,000 of interest
income on investments held in the Trust Account, and approximately $1,206,000 of
gain from the change in fair value of FPS liability, partially offset by
approximately $315,000 of general and administrative expenses, approximately
$193,000 of income tax expense, approximately $116,000 of franchise tax expense,
and $60,000 of administrative expenses paid to the Sponsor.
For the three months ended June 30, 2021, we had a net loss of approximately
$3,788,000, which consisted of approximately $3,572,000 of loss from the change
in fair value of warrants liability, approximately $189,000 in general and
administrative expenses, approximately $50,000 of franchise tax expense, and
$30,000 in administrative expenses paid to the Sponsor, which were partially
offset by approximately $41,000 of gain from the change in fair value of FPS
liability and approximately $12,000 in interest income on investments held in
the Trust Account.
For the six months ended June 30, 2021, we had net income of approximately
$3,871,000, which consisted of approximately $4,104,000 of gain from the change
in fair value of warrants liability, approximately $316,000 of gain from the
change in fair value of FPS liability, and approximately $21,000 in interest
income on investments held in the Trust Account, which were partially offset by
approximately $403,000 in general and administrative expenses, approximately
$106,000 of franchise tax expense and approximately $61,000 in administrative
expenses paid to the Sponsor.
Contractual Obligations
Business Combination Marketing Agreement
We engaged Cantor Fitzgerald & Co. ("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 any 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 $18,500,000,
which is equal to, in the aggregate, 3.5% of the gross proceeds of the base
offering in the Initial Public Offering, and 5.5% of the gross proceeds from the
partial exercise of the underwriters' over-allotment option.
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 the Initial Business Combination. As of June 30, 2022 and December 31,
2021, we had borrowed approximately $1,419,000 and $857,000, 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 June 30, 2022, we had $700,000 of accounts
payable outstanding to the Sponsor for such expenses paid on our behalf. As of
December 31, 2021, we had no accounts payable outstanding to the Sponsor for
such expenses paid on our behalf.
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Critical Accounting Policies and Estimates
We have identified the following as our critical accounting polices:
Use of Estimates
The preparation of our unaudited condensed 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 unaudited condensed 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 unaudited condensed balance sheets,
unaudited condensed statements of operations, unaudited condensed statements of
stockholders' deficit and unaudited condensed 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 Accounting Standards Codification
("ASC") 205-40, Presentation of Financial Statements - Going Concern, we have
until December 28, 2022 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 Jumpstart Our Business Startups Act of 2012 (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 registration statement under the Securities Act of
1933, as amended (the "Securities Act") 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.
Warrant and FPS Liability
We account for our outstanding public warrants and private placement warrants
and the securities underlying the forward purchase agreement with the Sponsor
(the "FPA" and such securities, 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
statement of operations in the period of change.
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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 both June 30, 2022 and December 31, 2021, 50,000,000
shares of Class A common stock subject to possible redemption are presented as
temporary equity outside of the stockholders' equity section of our 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 Income (Loss) Per Share of Common Stock
We comply with the accounting and disclosure requirements of ASC 260, Earnings
Per Share. Net income per share of common stock is computed by dividing net
income 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 and allocate net income pro-rata to
shares of Class A common stock subject to possible redemption, nonredeemable
shares of Class A common stock and shares of Class B common stock. 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
16,999,999 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, because their exercise is contingent upon future events and 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 unaudited
condensed financial statements in Part I, Item 1 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 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.
Off-Balance Sheet Arrangements and Contractual Obligations
As of June 30, 2022, 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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