Overview
We are a blank check company incorporated on July 9, 2014 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 (the "Business Combination"). We intend
to effectuate our Business Combination using cash from the proceeds of our
initial public offering (the "Public Offering"), the sale of units in a private
placement (the "Private Placement") that occurred simultaneously with the
completion of the Public Offering (the "Private Placement Units"), the proceeds
of the sale of our securities in connection with our Business Combination
(pursuant to the forward purchase contract and any backstop agreements we may
enter into following the consummation of this offering or otherwise), and our
capital stock, debt or a combination of cash, stock and debt. CF Finance
Holdings, LLC (the "Sponsor") has committed, pursuant to a forward purchase
contract with us (the "Forward Purchase Contract"), to purchase, in a private
placement for gross proceeds of $30,000,000 to occur concurrently with the
consummation of our Business Combination, 3,000,000 of our Units on
substantially the same terms as the sale of Units in our public offering at
$10.00 per Unit, and 750,000 shares of Class A common stock. In connection with
the execution of the Transaction Agreement, on August 2, 2020, the Company and
Sponsor entered into an Amendment to the forward purchase contract, pursuant to
which, among other things, Sponsor agreed to purchase 3,500,000 shares of GCM
PubCo (as defined below) Class A common stock and 1,500,000 GCM PubCo common
warrants for an aggregate purchase price of $30,000,000.
The issuance of additional shares in connection with a Business Combination to
the owners of the target or other investors:
• may significantly dilute the equity interest of our stockholders, which
dilution would increase if the anti-dilution provisions in the Class B
common stock resulted in the issuance of shares of Class A common stock on
a greater than one-to-one basis upon conversion of the Class B common
stock;
• may subordinate the rights of holders of our 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; and
• may adversely affect prevailing market prices for our Class A common stock
and/or warrants.
Similarly, if we issue debt securities or otherwise incur significant debt to
bank or other lenders or the owners of a target, it could result in:
• default and foreclosure on our assets if our operating revenues after a
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 security is payable on demand;
• our inability to obtain necessary additional financing if the debt
security contains covenants restricting our ability to obtain such
financing while the debt security is outstanding;
3
--------------------------------------------------------------------------------
• 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;
• a possible decrease in prevailing market prices for our Class A common
stock and/or warrants;
• 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, and
execution of our strategy and other purposes and other disadvantages
compared to our competitors who have less debt.
As indicated in the accompanying unaudited condensed financial statements, as of
September 30, 2020, we had approximately $270,600 outside the trust account in
cash. We expect to incur significant costs in the pursuit of our Business
Combination plans. We cannot provide assurance that our plans to complete our
Business Combination will be successful.
On August 2, 2020, we entered into a Transaction Agreement regarding our initial
Business Combination (the "Transaction Agreement") with CF Finance Intermediate
Acquisition, LLC, a Delaware limited liability company and direct wholly owned
subsidiary of the Company, Sponsor, Grosvenor Holdings, LLC, an Illinois limited
liability company, Grosvenor Capital Management Holdings, LLLP, an Illinois
limited liability limited partnership ("Grosvenor Capital"), GCM Grosvenor
Management, LLC, a Delaware limited liability company, Grosvenor Holdings II,
L.L.C., a Delaware limited liability company, GCMH GP, L.L.C., a Delaware
limited liability company, GCM V, LLC, a Delaware limited liability company, and
GCM Grosvenor Inc., a Delaware corporation and a direct wholly owned subsidiary
of Grosvenor Capital ("GCM PubCo"). Pursuant to the Transaction Agreement, the
Company will be merged (the "Merger") with and into GCM PubCo, with GCM PubCo
surviving the Merger, as a result of which GCM PubCo, as the surviving
corporation in the Merger, will indirectly hold approximately 26.1% of the
outstanding equity interests of Grosvenor Capital, assuming that no shares of
the Company's common stock are redeemed in connection with the Merger. The
shares of Class A common stock will automatically convert into shares of GCM
Pubco Class A common stock in connection with the Merger. For more information
about the business combination, see the definitive proxy statement/prospectus
dated October 14, 2020 and filed with the SEC on October 15, 2020.
In connection with the execution of the Transaction Agreement, on August 2,
2020, the Company entered into Subscription Agreements with certain investors
(the "PIPE Investors") pursuant to which, immediately following the consummation
of the Merger, such PIPE Investors will purchase an aggregate of 19,500,000
shares of GCM PubCo Class A common stock at $10.00 per share for an aggregate
purchase price of $195,000,000.
In connection with the execution of the Transaction Agreement, on August 2,
2020, the Company and the Sponsor entered into Amendment No. 1 to Forward
Purchase Contract, pursuant to which, among other things, the Sponsor agreed to
purchase, subject to the Company's consummation of a Business Combination with
GCM PubCo and its affiliates, to a reduction in the total equity issuable under
such contract to a total of 3,500,000 shares of GCM PubCo Class A common stock
and 1,500,000 GCM PubCo common warrants, for the same $30,000,000 in gross
proceeds.
Results of Operations
Since the Public Offering, our activities have consisted of efforts directed
towards locating a suitable target and completing a suitable Business
Combination. Our operating costs for those periods include our search for a
Business Combination and are largely associated with expenses related to being a
public company (for legal, IR, accounting, auditing compliance and other
purposes) as well as expenses as we conduct due diligence on prospective
Business Combination candidates.
4
--------------------------------------------------------------------------------
Liquidity and Capital Resources
In order to finance transaction costs in connection with an intended Business
Combination, our sponsor has committed $750,000 to be provided to us to fund our
expenses relating to investigating and selecting a target business and other
working capital requirements. In addition, our sponsor or an affiliate of our
sponsor or certain of our officers and directors may, but are not obligated to,
loan us additional funds as may be required. In the event that our 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 $1.00 per warrant at the option
of the lender. The warrants would be identical to the warrants included in the
Private Placement Units, including as to exercise price, exercisability and
exercise period. The terms of such additional loans, if any, have not been
determined and no written agreements exist with respect to such loans. We do not
expect to seek loans from parties other than our sponsor or an affiliate of our
sponsor, or our directors or officers, 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.
On December 17, 2018, we closed the Public Offering for the sale of 25,000,000
Units at a price of $10.00 per Unit, yielding gross proceeds of $250,000,000.
Simultaneous with the closing of the Public Offering on December 17, 2018, we
consummated the sale of 600,000 Private Placement Units at a price of $10.00 per
Unit ($6,000,000 in the aggregate) in the Private Placement. On December 31,
2018, the underwriter partially exercised 2,500,000 Units of the over-allotment
option generating additional gross proceeds of $25,000,000. On January 29, 2019,
the underwriter partially exercised the over-allotment option and purchased an
additional 758,413 Units at an offering price of $10.00 per Unit, generating
additional gross proceeds of $7,584,130. Upon the December 17, 2018, December
31, 2018 and January 29, 2019 closings of the Public Offering, and June 15, 2020
Business Combination extension approval the sponsor funded loans in the amount
of $2,500,000, $250,000, $75,841 and $2,489,824, respectively, pursuant to a
promissory notes issued by the Company. The promissory notes are interest free.
The proceeds of the sponsor loans were deposited into the trust account and
will be used to fund the redemption of the public shares (the "Public Shares")
(subject to the requirements of applicable law). Upon the closing of the Public
Offering and the sale of the Private Placement Units, in December 2018 and
January 2019, an aggregate of approximately $286,000,000 (approximately
$211,500,000 after the redemption on June 15, 2020 and September 10, 2020) was
deposited in the trust account. Since the over-allotment option was not
exercised in full, simultaneously with the exercise of the second partial
exercise of the over-allotment option, our sponsor forfeited 122,897 shares of
our Class B common stock.
The net proceeds from the Public Offering and Private Placement was
approximately $286,000,000 (approximately $211,500,000 after the redemptions on
June 15, 2020 and September 10, 2020), net of the underwriting commissions of
$5,100,000 and offering costs and other expenses of approximately $485,900. Such
proceeds have been deposited in the trust account and are not available to us
for operations (except amounts to pay taxes). As of September 30, 2020, we had
approximately $270,600 of cash available outside of the trust account to fund
our activities until we consummate a Business Combination.
Until the consummation of the Public Offering, the Company's only sources of
liquidity were a capital contribution from our sponsor of $50,383 for the
founder shares (Class B common stock) and up to $300,000 in loans made available
from the sponsor under an unsecured promissory note.
The Company believes that it has sufficient working capital as of September 30,
2020 to fund its operations through at least December 17, 2020, its mandatory
liquidation date.
Off-balance sheet financing arrangements
We have no obligations, assets or liabilities which would be considered
off-balance sheet arrangements. 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 entered into any agreements for non-financial assets.
5
--------------------------------------------------------------------------------
Contractual obligations
As of September 30, 2020, we did not have any long-term debt, capital lease
obligations, operating lease obligations or long-term liabilities.
Critical Accounting Policies
Use of Estimates
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
("GAAP") requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. The Company has identified the following as its critical accounting
polices:
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. 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.
Income (Loss) Per Common Share
Net income (loss) per common share is computed by dividing net income (loss)
applicable to common stockholders by the weighted average number of common
shares outstanding during the period (after deducting shares that are subject to
forfeiture in connection with the Public Offering), plus to the extent dilutive
the incremental number of shares of common stock to settle warrants, as
calculated using the treasury stock method. Shares of common stock subject to
possible redemption as of September 30, 2020 have been excluded from the
calculation of basic income (loss) per share for the period from July 9, 2014
(date of inception) to September 30, 2020 since such shares, if redeemed, only
participate in their pro rata share of the trust account. For the period from
July 9, 2014 (date of inception) to September 30, 2020, the fully diluted
calculation adds back the shares subject to redemption.
Financial Instruments
The fair value of the Company's assets and liabilities, which qualify as
financial instruments under FASB ASC 820, Fair Value Measurements and
Disclosures, approximates the carrying amounts represented in the accompanying
balance sheet.
Offering Costs
The Company complies with the requirements of the FASB ASC 340-10-S99-1 and SEC
Staff Accounting Bulletin (SAB) Topic 5A - Expenses of Offering. Public Offering
costs of approximately $5,585,900 consist of underwriter's discounts of
approximately $5,100,000 and approximately $485,900 of professional, printing,
filing, regulatory and other costs associated with the Public Offering were
charged to additional paid in capital upon completion of the Public Offering.
Income Taxes
The Company files income tax returns in the U.S. federal jurisdiction and
various state and local jurisdictions. The Company is currently not under
examination by tax authorities and is not aware of any issues that may result in
significant payments or accruals.
6
--------------------------------------------------------------------------------
Redeemable common stock
All of the approximately 28,260,000 shares of common stock sold as part of the
Units in the Public Offering contain a redemption feature which allows for the
redemption of such common stock under the Company's liquidation or tender
offer/stockholder approval provisions. In accordance with ASC 480, redemption
provisions not solely within the control of the Company require the security to
be classified outside of permanent equity. Ordinary liquidation events, which
involve the redemption and liquidation of all of the entity's equity
instruments, are excluded from the provisions of ASC 480. Although the Company
does not specify a maximum redemption threshold, its amended and restated
certificate of incorporation provides that in no event will the Company redeem
its Public Shares in an amount that would cause its net tangible assets
(stockholders' equity) to be less than $5,000,001.
On June 15, 2020 and September 10, 2020, 593,700 and 6,592,942 shares of common
stock were redeemed by public shareholders in connection with the extension of
the Combination Period, respectively.
The Company recognizes changes in redemption value immediately as they occur and
adjusts the carrying value of the security 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.
As of September 30, 2020 and December 31, 2019, 20,371,594 and 27,972,537
shares, respectively, of the approximately 21,070,000 and 28,260,000 Public
Shares, respectively, were classified outside of permanent equity at redemption
value of $10.19 and $10.10 per share, respectively.
Recent Accounting Pronouncements
Management does not believe that there are any recently issued, but not yet
effective, accounting pronouncements, if currently adopted, would have a
material effect on the Company's unaudited condensed financial statements.
© Edgar Online, source Glimpses