Cautionary Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this Report
including, without limitation, statements in this section regarding our
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 our management, identify
forward-looking statements. Such forward-looking statements are based on the
beliefs of our management, as well as assumptions made by, and information
currently available to, our 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 our
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.
Overview
We are a blank check company incorporated in Delaware on January 23, 2020 for
the purpose of effecting an initial business combination. Our sponsor is CFAC
Holdings IV, LLC.
Although we are not limited in our search for target businesses to a particular
industry or sector for the purpose of consummating an initial business
combination, we have focused 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.
The Registration Statement for our initial public offering became effective on
December 22, 2020. On December 28, 2020, we consummated the initial public
offering of 50,000,000 units, including 5,000,000 units sold upon the partial
exercise of the underwriters' 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 our initial public offering, we consummated
the sale of 1,000,000 units at a price of $10.00 per private placement unit to
the sponsor in the private placement, generating gross proceeds of $10,000,000.
Following the closing of the initial public offering and sale of 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 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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On December 22, 2022, at a special meeting of our stockholders, our stockholders
approved the Extension. In connection with the Extension, the sponsor agreed to
loan us an aggregate amount of up to $2,767,883 under the Extension Loan, with
(i) $461,314 ($0.045 for each public share that was not redeemed in connection
with the Extension) deposited into the trust account in connection with the
first funding of the Monthly Amount on December 28, 2022, and (ii) $461,314
being deposited into the trust account for each calendar month (commencing on
January 29, 2023 and ending on the 28th day of each subsequent month), or
portion thereof, that is needed by us to complete an initial business
combination. The Extension Loan does not bear interest and is repayable by us to
the sponsor or its designees upon consummation of our initial business
combination. In connection with the stockholder vote to approve the Extension,
39,748,580 public shares were redeemed at $10.11 per share, resulting in a
reduction of $402,003,579 in the amount held in the trust account.
We have until the end of the Combination Period to consummate an initial
business combination. 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 December 31, 2022 and 2021, we had approximately $370,000 and $25,000,
respectively, of cash in our operating account. As of December 31, 2022 and
2021, we had a working capital deficit of approximately $5,096,000 and
$1,525,000, respectively. As of December 31, 2022 and 2021, we had approximately
$1,022,000 and $46,000, respectively, of interest income from the trust account
available to pay taxes.
Our liquidity needs through December 31, 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
the Pre-IPO Note, the proceeds from the consummation of the private placement
with the sponsor not held in the trust account, the Sponsor Loan and the 2022
Working Capital Loan. 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, pursuant to the Sponsor Loan,
the sponsor loaned us $1,750,000 to fund our expenses relating to investigating
and selecting a target business and other working capital requirements after our
initial public offering and prior to our initial business combination, which
Sponsor Loan has been fully drawn by us. 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 Working Capital Loans.
On September 30, 2022, the Company entered into the 2022 Working Capital Loan
with the sponsor in the amount of up to $1,000,000 in connection with advances
the sponsor will make to us for working capital expenses.
On December 22, 2022, the Company entered into the Extension Loan with the
sponsor in the amount of up to $2,767,883. The funding of the first Monthly
Amount under the Extension Loan was deposited in the trust account on December
28, 2022, and additional fundings of the Monthly Amount will be deposited into
the trust account for each calendar month (commencing on January 29, 2023 and
ending on the 28th day of each subsequent month), or portion thereof, that is
needed by us to complete an initial business combination. As of December 31,
2022, a total of $461,314 has been drawn down under the Extension Loan.
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As of December 31, 2022 and 2021, there was approximately $3,009,000 and
$857,000, respectively, outstanding under the loans payable by us to the
sponsor. As of December 31, 2022 and 2021, these amounts included $1,750,000 and
approximately $857,000, respectively, outstanding under the Sponsor Loan,
approximately $461,000 and $0, respectively, outstanding under the Extension
Loan, and approximately $798,000 and $0, respectively, outstanding under the
2022 Working Capital 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 an initial business combination.
Results of Operations
Our entire activity from inception through December 31, 2022 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, 2022 we had net income of approximately
$11,071,000, which consisted of approximately $11,273,000 of gain from the
change in fair value of warrant liability, approximately $4,800,000 of interest
income on investments held in the trust account, and approximately $1,737,000 of
gain from the change in fair value of FPS liability, partially offset by
approximately $4,518,000 of interest expense on mandatorily redeemable Class A
common stock, approximately $973,000 of general and administrative expenses,
approximately $925,000 of income tax expense, approximately $203,000 of
franchise tax expense and $120,000 of administrative expenses paid to the
sponsor.
For the year ended December 31, 2021 we had net income of approximately
$8,455,000, which consisted of approximately $10,054,000 of gain from the change
in fair value of warrant liability, approximately $596,000 of gain from the
change in fair value of FPS liability, and approximately $46,000 of interest
income on investments held in the trust account, partially offset by
approximately $1,915,000 of general and administrative expenses, approximately
$205,000 of franchise tax expense, and approximately $121,000 of administrative
expenses paid to the sponsor.
Contractual Obligations
Business Combination Marketing Agreement
We engaged CF&Co., an affiliate of the sponsor, pursuant to the BCMA 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. the Marketing Fee upon the consummation of our
initial business combination.
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Related Party Loans
In order to finance transaction costs in connection with an intended initial
business combination, the sponsor loaned us $1,750,000 pursuant to the Sponsor
Loan to fund expenses relating to investigating and selecting a target business
and other working capital requirements after the IPO and prior to our initial
business combination, which Sponsor Loan has been fully drawn by us.
On September 30, 2022, we entered into the 2022 Working Capital Loan. The 2022
Working Capital Loan bears no interest and is due and payable on the date on
which we consummate our initial business combination. The principal balance of
the 2022 Working Capital Loan may be prepaid at any time.
On December 22, 2022, the Company entered into the Extension Loan with the
sponsor in the amount of up to $2,767,883.
As of December 31, 2022 and 2021, there was approximately $3,009,000 and
$857,000, respectively, outstanding under the loans payable by us to the
sponsor. As of December 31, 2022 and 2021, these amounts included $1,750,000 and
approximately $857,000, respectively, outstanding under the Sponsor Loan,
approximately $461,000 and $0, respectively, outstanding under the Extension
Loan, and approximately $798,000 and $0, respectively, outstanding under the
2022 Working Capital Loan.
The sponsor pays expenses on our behalf and we reimburse the sponsor for such
expenses paid on our behalf. As of December 31, 2022 and 2021, we had accounts
payable outstanding to the sponsor for such expenses paid on our behalf of
approximately $39,000 and $0, respectively.
Critical Accounting Policies and 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 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 balance sheets, statements of operations, statements of stockholders'
equity (deficit) and 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 ASC 205-40, Presentation of Financial Statements - Going Concern, we have
until June 28, 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.
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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.
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 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, 2022 and 2021, 10,251,420 and 50,000,000
shares of Class A common stock subject to possible redemption, respectively, are
presented as temporary equity outside of the stockholders' deficit 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 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. 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 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 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 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.
Recent Developments
We have instructed Continental to liquidate the investments held in the trust
account and instead to hold the funds in the trust account in an
interest-bearing demand deposit account at Citibank, N.A., with Continental
continuing to act as trustee, until the earlier of the consummation of our
initial business combination or our liquidation. As a result, following the
liquidation of investments in the trust account, the remaining proceeds from the
initial public offering and private placement are no longer invested in U.S.
government debt securities or money market funds that invest in U.S. government
debt securities.
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