UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the quarterly period ended
OR
For the transition period from to
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (Commission File Number) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Units, each consisting of one share of Class A common stock and one-third of one redeemable warrant | CFIVU | The Nasdaq Stock Market LLC | ||
$0.0001 per share | ||||
Redeemable warrants, each whole warrant exercisable for one share of Class A common stock at an exercise price of $11.50 per share | CFIVW | The Nasdaq Stock Market LLC |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
Emerging growth company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As
of August 12, 2022, there were
CF ACQUISITION CORP. IV
Quarterly Report on Form 10-Q
Table of Contents
i
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
CF ACQUISITION CORP. IV
CONDENSED BALANCE SHEETS
June 30, 2022 | December 31, 2021 | |||||||
(Unaudited) | ||||||||
Assets: | ||||||||
Current Assets: | ||||||||
Cash | $ | $ | ||||||
Prepaid expenses | ||||||||
Total current assets | ||||||||
Cash equivalents held in Trust Account | ||||||||
Available-for-sale debt securities held in Trust Account, at fair value (no allowance for credit losses, amortized cost $ | ||||||||
Total Assets | ||||||||
Liabilities and Stockholders’ Deficit: | ||||||||
Current Liabilities: | ||||||||
Accrued expenses | $ | $ | ||||||
Sponsor loan – promissory notes | ||||||||
Franchise tax payable | ||||||||
Payables to related party | — | |||||||
Total Current Liabilities | ||||||||
Warrant liability | ||||||||
FPS liability | ||||||||
Total Liabilities | ||||||||
Commitments and Contingencies | ||||||||
Class A common stock subject to possible redemption, | ||||||||
Stockholders’ Deficit: | ||||||||
Preferred stock, $ | ||||||||
Class A common stock, $ | ||||||||
Class B common stock, $ | ||||||||
Additional paid-in-capital | ||||||||
Accumulated deficit | ( | ) | ( | ) | ||||
Accumulated other comprehensive loss | ( | ) | ||||||
Total Stockholders’ Deficit | ( | ) | ( | ) | ||||
Total Liabilities and Stockholders’ Deficit | $ | $ |
The accompanying notes are an integral part of these unaudited condensed financial statements.
1
CF ACQUISITION CORP. IV
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
General and administrative costs | $ | $ | $ | $ | ||||||||||||
Administrative expenses – related party | ||||||||||||||||
Franchise tax expense | ||||||||||||||||
Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Interest income on investments held in Trust Account | ||||||||||||||||
Changes in fair value of warrant liability | ( | ) | ||||||||||||||
Changes in fair value of FPS liability | ||||||||||||||||
Net income (loss) before provision for income tax | ( | ) | ||||||||||||||
Income tax provision for income taxes | ||||||||||||||||
Net income (loss) | $ | $ | ( | ) | $ | $ | ||||||||||
Weighted average number of shares of common stock outstanding: | ||||||||||||||||
Class A - Public shares | ||||||||||||||||
Class A - Private placement | ||||||||||||||||
Class B - Common stock | ||||||||||||||||
Basic and diluted net income (loss) per share of common stock: | ||||||||||||||||
$ | $ | ( | ) | $ | $ | |||||||||||
$ | $ | ( | ) | $ | $ | |||||||||||
$ | $ | ( | ) | $ | $ | |||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
2
CF ACQUISITION CORP. IV
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Net income (loss) | $ | $ | ( | ) | $ | $ | ||||||||||
Other comprehensive loss | ||||||||||||||||
Change in unrealized depreciation of available-for-sale debt securities | ( | ) | — | ( | ) | — | ||||||||||
Total other comprehensive loss | ( | ) | — | ( | ) | — | ||||||||||
Comprehensive income (loss) | $ | $ | ( | ) | $ | $ |
The accompanying notes are an integral part of these unaudited condensed financial statements.
3
CF ACQUISITION CORP. IV
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(UNAUDITED)
For the Three and Six Months Ended June 30, 2022
Common Stock | Additional | Accumulated Other | Total | |||||||||||||||||||||||||||||
Class A | Class B | Paid-In | Accumulated | Comprehensive | Stockholders’ | |||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Loss | Deficit | |||||||||||||||||||||||||
Balance - December 31, 2021 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||
Net income | — | — | ||||||||||||||||||||||||||||||
Balance - March 31, 2022 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||
Net income | — | — | ||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
Balance - June 30, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) |
For the Three and Six Months Ended June 30, 2021
Common Stock | Additional | Total | ||||||||||||||||||||||||||
Class A | Class B | Paid-In- | Accumulated | Stockholders’ | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
Balance – December 31, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
Net income | — | — | ||||||||||||||||||||||||||
Balance – March 31, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
Balance – June 30, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) |
The accompanying notes are an integral part of these unaudited condensed financial statements.
4
CF ACQUISITION CORP. IV
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended June 30, | ||||||||
2022 | 2021 | |||||||
Cash flows from operating activities | ||||||||
Net income | $ | $ | ||||||
Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
General and administrative expenses paid by related party | ||||||||
Interest income on investments held in Trust Account | ( | ) | ( | ) | ||||
Changes in fair value of warrant liability | ( | ) | ( | ) | ||||
Changes in fair value of FPS liability | ( | ) | ( | ) | ||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses | ||||||||
Other assets | ||||||||
Accrued expenses | ( | ) | ||||||
Payable to related party | ( | ) | ||||||
Franchise tax payable | ( | ) | ||||||
Net cash used in operating activities | ( | ) | ( | ) | ||||
Cash flows from investing activities | ||||||||
Proceeds from Trust Account to pay franchise taxes | ||||||||
Purchase of available-for-sale debt securities held in Trust Account | ( | ) | ||||||
Sale of cash equivalents held in Trust Account | ||||||||
Net cash provided by investing activities | ||||||||
Cash flows from financing activities | ||||||||
Proceeds from related party – Sponsor loan | ||||||||
Payment of related party payable | ( | ) | ( | ) | ||||
Net cash used in financing activities | ( | ) | ( | ) | ||||
Net change in cash | ( | ) | ||||||
Cash - beginning of the period | ||||||||
Cash - end of the period | $ | $ | ||||||
Supplemental disclosure of non-cash financing activities | ||||||||
Prepaid expenses paid with payables to related party | $ | $ |
The accompanying notes are an integral part of these unaudited condensed financial statements.
5
CF ACQUISITION CORP. IV
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 1—Description of Organization, Business Operations and Basis of Presentation
CF Acquisition Corp. IV (the “Company”) was incorporated in Delaware on January 23, 2020. The Company was 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”).
Although the Company is not limited in its search for target businesses to a particular industry or sector for the purpose of consummating a Business Combination, the Company intends to focus its search on companies operating in the financial services, healthcare, real estate services, technology and software industries. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of June 30, 2022, the Company had not commenced operations. All activity through June 30, 2022 relates to the Company’s formation, the initial public offering (the “Initial Public Offering”) described below, and the Company’s efforts toward locating and completing a suitable Business Combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company has generated non-operating income in the form of interest income from direct investments in U.S. government debt securities and investments in money market funds that invest in U.S. government debt securities and classified as cash equivalents from the proceeds derived from the Initial Public Offering, and recognized changes in the fair value of the warrant liability and FPS (as defined below) liability as other income (expense).
The
Company’s sponsor is CFAC Holdings IV, LLC (the “Sponsor”). The registration statements for the Initial Public Offering
became effective on December 22, 2020. On December 28, 2020, the Company consummated the Initial Public Offering of
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the sale of
Offering
costs amounted to approximately $
Following
the closing of the Initial Public Offering and sale of the Private Placement Units on December 28, 2020, an amount of $
Initial
Business Combination — The Company’s management has broad discretion with respect to the specific application of
the net proceeds of the Initial Public Offering and the sale of the Private Placement Units, although substantially all of the net proceeds
are intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company will be able
to complete a Business Combination successfully. The Company must complete one or more initial Business Combinations having an aggregate
fair market value of at least
6
CF ACQUISITION CORP. IV
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The
Company will provide the holders of the Public Shares (the “public stockholders”) with the opportunity to redeem all or a
portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called
to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder
approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The public stockholders
will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially $
Notwithstanding
the foregoing, the Amended and Restated Certificate of Incorporation provides that a public stockholder, together with any affiliate
of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under
Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), will be restricted from redeeming its
shares with respect to more than an aggregate of
The
Sponsor and the Company’s officers and directors (the “initial stockholders”) have agreed not to propose an amendment
to the Amended and Restated Certificate of Incorporation (i) that would affect the substance or timing of the Company’s obligation
to allow redemption in connection with its initial Business Combination or to redeem
Forward
Purchase Contract — In connection with the Initial Public Offering, the Sponsor committed, pursuant to a forward purchase
contract with the Company (the “FPA”), to purchase, in a private placement for gross proceeds of $
Failure
to Consummate a Business Combination —The Company has until December 28, 2022, or a later date approved by the Company’s
stockholders in accordance with the Amended and Restated Certificate of Incorporation, to consummate a Business Combination (the “Combination
Period”). If the Company is unable to complete a Business Combination by the end of the Combination Period, the Company 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 the Company to pay taxes (less
up to $
7
CF ACQUISITION CORP. IV
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The
initial stockholders have agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete
a Business Combination within the Combination Period. However, if the initial stockholders acquire Public Shares in or after the Initial
Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the
Company fails to complete a Business Combination within the Combination Period. In the event of such distribution, it is possible that
the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than $
Liquidity and Capital Resources
As
of both June 30, 2022 and December 31, 2021, the Company had $
Based on the foregoing, management believes that the Company will have sufficient working capital and borrowing capacity from the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors, to meet its needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, the Company 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 Business Combination.
Basis of Presentation
The unaudited condensed financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the SEC and reflect all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the financial position as of June 30, 2022 and the results of operations and cash flows for the periods presented. Certain information and disclosures normally included in unaudited condensed financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to such rules and regulations. Interim results are not necessarily indicative of results for a full year or any future period. The accompanying unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Form 10-K and the final prospectus filed by the Company with the SEC on March 31, 2022 and December 28, 2020, respectively.
8
CF ACQUISITION CORP. IV
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Going Concern
In
connection with the Company’s 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, the Company has until December 28, 2022 to consummate a Business Combination. The Company’s mandatory liquidation
date, if a Business Combination is not consummated, raises substantial doubt about the Company’s ability to continue as a going
concern. These financial statements do not include any adjustments related to the recovery of the recorded assets or the classification
of the liabilities should the Company be unable to continue as a going concern. As discussed in Note 1, in the event of a mandatory liquidation,
within ten business days, the Company 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
the Company to pay taxes (less up to $
Emerging Growth Company
The Company is an “emerging growth company”, as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, 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 an emerging growth 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 an 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.
This may make comparison of the Company’s unaudited condensed financial statements with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Note 2—Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. One of the more significant accounting estimates included in these unaudited condensed financial statements is the determination of the fair value of the warrant liability and FPS liability. Such estimates may be subject to change as more current information becomes available and accordingly, the actual results could differ significantly from those estimates.
9
CF ACQUISITION CORP. IV
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company had no cash equivalents in its operating account as of both June 30, 2022 and December 31, 2021. Certain of the Company’s investments held in the Trust Account as of both June 30, 2022 and December 31, 2021 were comprised of cash equivalents.
Available-for-Sale Debt Securities
Certain of the Company’s investments held in the Trust Account as of June 30, 2022 comprised of a direct investment in U.S. government treasury bills.
The Company accounts for its investment in debt securities in accordance with the guidance in ASC 320, Investments — Debt and Equity Securities. When the Company has the ability and positive intent to hold debt securities until maturity, such securities are classified as held-to-maturity and carried at amortized cost. None of the Company’s debt securities met the criteria for held-to-maturity classification as of June 30, 2022. As the Company does not have the ability or positive intent to hold its debt securities until maturity, the securities are classified as available-for-sale. Unrealized gains and losses from available-for-sale debt securities carried at fair value are reported as a separate component of Accumulated other comprehensive income (loss), net of deferred income taxes, in stockholders’ equity. Interest income recognized on the unaudited condensed statements of operations reflects accretion of discount. Investments in debt securities are recorded on a trade-date basis.
Concentration of Credit Risk
Financial
instruments that potentially subject the Company to concentration of credit risk consist of cash accounts in a financial institution
which, at times, may exceed the Federal Deposit Insurance Corporation maximum coverage limit of $
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC 820, Fair Value Measurement, approximates the carrying amounts represented in the condensed balance sheets, primarily due to their short-term nature, with the exception of the available-for-sale debt securities, and the warrant and FPS liabilities.
Offering Costs Associated with the Initial Public Offering
Offering costs consisted of legal, accounting, and other costs incurred in connection with the preparation for the Initial Public Offering. These costs, together with the underwriting discount, were charged against the carrying value of the shares of Class A common stock upon the completion of the Initial Public Offering.
10
CF ACQUISITION CORP. IV
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Warrant and FPS Liability
The Company accounts for the warrants and FPS as either equity-classified or liability-classified instruments based on an assessment of the specific terms of the warrants and FPS using applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants and FPS are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and meet all of the requirements for equity classification under ASC 815, including whether the warrants and FPS are indexed to the Company’s own shares of common stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of issuance of the warrants and execution of the FPA and as of each subsequent quarterly period end date while the warrants and FPS are outstanding. For issued or modified warrants and for instruments to be issued pursuant to the FPA that meet all of the criteria for equity classification, such warrants and instruments are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants and for the FPA instruments that do not meet all the criteria for equity classification, such warrants and instruments are required to be recorded at their initial fair value on the date of issuance, and on each balance sheet date thereafter. Changes in the estimated fair value of liability-classified warrants and the FPS are recognized on the statements of operations in the period of the change.
The Company accounts for the warrants and FPS in accordance with guidance in ASC 815-40, Derivatives and Hedging – Contracts in Entity’s Own Equity (“ASC 815-40”), pursuant to which the warrants and FPS do not meet the criteria for equity classification and must be recorded as liabilities. See Note 8 for further discussion of the pertinent terms of the warrants and Note 9 for further discussion of the methodology used to determine the fair value of the warrants and FPS.
Class A Common Stock Subject to Possible Redemption
The
Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in ASC 480. 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 the
Company’s 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 the Company’s
control and subject to the occurrence of uncertain future events. Accordingly, as of both June 30, 2022 and December 31, 2021,
Net Income (Loss) Per Share of Common Stock
The Company complies with the accounting and disclosure requirements of ASC 260, Earnings Per Share. Net income (loss) per share of common stock is computed by dividing net income (loss) applicable to stockholders by the weighted average number of shares of common stock outstanding for the applicable periods. The Company applies the two-class method in calculating earnings per share and allocates net income (loss) 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.
The
Company has not considered the effect of the warrants to purchase an aggregate of
11
CF ACQUISITION CORP. IV
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The following table reflects the calculation of basic and diluted net income (loss) per share of common stock:
For the Three Months Ended June 30, 2022 | For the Three Months Ended June 30, 2021 | |||||||||||||||||||||||
Class A – Public shares | Class A – Private placement shares | Class B – Common stock | Class A – Public shares | Class A – Private placement shares | Class B – Common stock | |||||||||||||||||||
Basic and diluted net income (loss) per share of common stock | ||||||||||||||||||||||||
Numerator: | ||||||||||||||||||||||||
Allocation of net income (loss) | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||
Denominator: | ||||||||||||||||||||||||
Basic and diluted weighted average number of shares of common stock outstanding | ||||||||||||||||||||||||
Basic and diluted net income (loss) per share of common stock | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) |
For the Six Months Ended June 30, 2022 | For the Six Months Ended June 30, 2021 | |||||||||||||||||||||||
Class A – Public shares | Class A – Private placement shares | Class B – Common stock | Class A – Public shares | Class A – Private placement shares | Class B – Common stock | |||||||||||||||||||
Basic and diluted net income per share of common stock | ||||||||||||||||||||||||
Numerator: | ||||||||||||||||||||||||
Allocation of net income | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Denominator: | ||||||||||||||||||||||||
Basic and diluted weighted average number of shares of common stock outstanding | ||||||||||||||||||||||||
Basic and diluted net income per share of common stock | $ | $ | $ | $ | $ | $ |
Income Taxes
The Company complies with the accounting and reporting requirements of ASC 740, Income Taxes (“ASC 740”) which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. As of both June 30, 2022 and December 31, 2021, the Company had deferred tax assets with a full valuation allowance recorded against them.
12
CF ACQUISITION CORP. IV
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by tax authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense.
No amounts were accrued for the payment of interest and penalties as of both June 30, 2022 and December 31, 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company is subject to income tax examinations by major taxing authorities since inception.
The Company’s current taxable income primarily consists of interest
income on investments held in the Trust Account. The Company’s general and administrative costs are generally considered start-up
costs and are not currently deductible. During the three and six months ended June 30, 2022 and 2021, the Company recorded income tax
expense of approximately $
Recent Accounting Pronouncements
In August 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The standard is expected to reduce complexity and improve comparability of financial reporting associated with accounting for convertible instruments and contracts in an entity’s own equity. The ASU also enhances information transparency by making targeted improvements to the related disclosures guidance. Additionally, the amendments affect the diluted EPS calculation for instruments that may be settled in cash or shares and for convertible instruments. The new standard will become effective for the Company beginning January 1, 2024, can be applied using either a modified retrospective or a fully retrospective method of transition and early adoption is permitted. Management is currently evaluating the impact of the new standard on the Company’s unaudited condensed financial statements.
The Company’s management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s unaudited condensed financial statements.
13
CF ACQUISITION CORP. IV
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 3—Initial Public Offering
Pursuant to the Initial Public Offering, the Company
sold
Note 4—Related Party Transactions
Founder Shares
On January 23, 2020, the Sponsor purchased
The initial stockholders have agreed, subject to limited exceptions, not to transfer, assign or sell any of its Founder Shares until the earlier to occur of: (A) one year after the completion of the initial Business Combination or (B) subsequent to the initial Business Combination, (x) if the last reported sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20-trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Private Placement Units
Simultaneously with the closing of the Initial
Public Offering, the Sponsor purchased an aggregate of
The Sponsor and the Company’s officers and directors have agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Units until 30 days after the completion of the initial Business Combination.
14
CF ACQUISITION CORP. IV
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Underwriter
Cantor Fitzgerald & Co. (“CF&Co.”), the lead underwriter of the Initial Public Offering, is an affiliate of the Sponsor (see Note 5).
Business Combination Marketing Agreement
The Company has engaged CF&Co. as an advisor
in connection with the Business Combination to assist the Company in holding meetings with its stockholders to discuss any potential Business
Combination and the target business’ attributes, introduce the Company to potential investors that are interested in purchasing
the Company’s securities, and assist the Company with its press releases and public filings in connection with any Business Combination.
The Company will pay CF&Co. a cash fee (the “Marketing Fee”) for such services upon the consummation of the Business Combination
in an amount equal to $
Related Party Loans
The Sponsor made available to the Company, under
the Pre-IPO Note, up to $
In order to finance transaction costs in connection
with an intended initial Business Combination, the Sponsor has committed, pursuant to the Sponsor Loan, up to $
If the Sponsor Loan is insufficient to cover the working capital requirements of the Company, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. As of both June 30, 2022 and December 31, 2021, there were no amounts outstanding under the Working Capital Loans.
The Sponsor pays expenses on the Company’s behalf. The Company reimburses the Sponsor for such expenses paid on its behalf. The unpaid balance is included in Payables to related parties on the accompanying condensed balance sheets.
Note 5—Commitments and Contingencies
Registration Rights
Pursuant to a registration rights agreement entered into on December 22, 2020, the holders of Founder Shares and Private Placement Units (and component securities) are entitled to registration rights (in the case of the Founder Shares, only after conversion of such shares to shares of Class A common stock). These holders are entitled to certain demand and “piggyback” registration rights. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
15
CF ACQUISITION CORP. IV
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Underwriting Agreement
The Company granted CF&Co. a 45-day option
to purchase up to
CF&Co. was paid a cash underwriting discount
of $
The Company also engaged a qualified independent
underwriter to participate in the preparation of the registration statement and exercise the usual standards of “due diligence”
in respect thereto. The Company paid the independent underwriter a fee of $
Business Combination Marketing Agreement
The Company has engaged CF&Co. as an advisor in connection with the Company’s Business Combination (see Note 4).
Risks and Uncertainties
Management continues to evaluate the impacts of the COVID-19 pandemic and the military conflict in Ukraine on the financial markets and on the industry, and has concluded that while it is reasonably possible that the pandemic and the conflict could have an effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impacts are not readily determinable as of the date of the unaudited condensed financial statements. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of these uncertainties.
Note 6—Available-for-Sale Debt Securities
The following table presents the amortized cost, gross unrealized gains (losses), fair value and other information for the available-for-sale debt securities held in the Trust Account:
June 30, 2022 | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||
U.S. government debt securities(1) (2) | $ | $ | $ | ( | ) | $ |
(1) |
(2) |
The Company did not recognize the unrealized losses in earnings on its available-for-sale debt securities during the three and six months ended June 30, 2022, because it was determined that such losses were due to non-credit factors. Additionally, as of June 30, 2022, the Company neither intended to sell nor did it believe that it was more likely than not that it will be required to sell these securities before recovery of their amortized cost basis.
The Company did not have any sales of its available-for-sale debt securities during the three and six months ended June 30, 2022.
Note 7—Stockholders’ Deficit
Class A Common Stock - The Company
is authorized to issue
16
CF ACQUISITION CORP. IV
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Class B Common Stock - The Company
is authorized to issue
Prior to the consummation of the Business Combination, only holders of Class B common stock have the right to vote on the election of directors. Holders of Class A common stock are not entitled to vote on the election of directors during such time. Holders of Class A common stock and Class B common stock vote together as a single class on all other matters submitted to a vote of stockholders except as required by law.
The shares of Class B common stock will automatically
convert into shares of Class A common stock at the time of the Business Combination on a one-for-one basis, subject to adjustment. In
the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts
offered in the Initial Public Offering and related to the closing of the Business Combination, the ratio at which shares of Class B common
stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the outstanding shares of
Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares
of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted
basis,
On September 23, 2020, the Company effected a
1.25-for-1 stock split. On November 3, 2020, the Sponsor returned to the Company, at no cost, an aggregate of
Preferred Stock - The Company is
authorized to issue
Note 8—Warrants
Public Warrants may only be exercised for a whole
number of shares. No fractional shares will be issued upon exercise of the Public Warrants. The Public Warrants will become exercisable
The Company has agreed that as soon as practicable,
but in no event later than 15 business days after the closing of a Business Combination, the Company will use its commercially reasonable
best efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the shares of Class A common
stock issuable upon exercise of the Public Warrants. The Company will use its commercially reasonable best efforts to cause the same to
become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the
expiration of the Public Warrants in accordance with the provisions of the warrant agreement. Notwithstanding the foregoing, if a registration
statement covering the shares of Class A common stock issuable upon exercise of the Public Warrants is not effective within a specified
period following the consummation of Business Combination, warrant holders may, until such time as there is an effective registration
statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants
on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is available.
If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis. The
Public Warrants will expire
The Private Placement Warrants are identical to the Public Warrants, except that the Private Placement Warrants and the Class A common stock issuable upon the exercise of the Private Placement Warrants are not transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions.
Additionally, the Private Placement Warrants will be exercisable on a cashless basis and be non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
17
CF ACQUISITION CORP. IV
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The Company may redeem the Public Warrants:
● | in whole and not in part; |
● | at a price of $0.01 per warrant; |
● | at any time during the exercise period; |
● | upon a minimum of 30 days’ prior written notice of redemption; |
● | if, and only if, the last reported sale price of the Company’s common stock equals or exceeds $18.00 per share for any 20-trading days within a 30-trading day period ending on the third business day prior to the date on which the Company sends the notice of redemption to the warrant holders; and |
If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis”, as described in the warrant agreement.
The exercise price and number of shares of Class A common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuance of Class A common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
Note 9—Fair Value Measurements on a Recurring Basis
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs to valuation techniques used in measuring fair value.
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These three levels of the fair value hierarchy are:
● | Level 1 measurements - unadjusted observable inputs such as quoted prices for identical instruments in active markets; |
● | Level 2 measurements - inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
● | Level 3 measurements - unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
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CF ACQUISITION CORP. IV
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021, and indicate the fair value hierarchy of the inputs that the Company utilized to determine such fair value.
June 30, 2022
Description | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | Total | ||||||||||||
Assets: | ||||||||||||||||
Assets held in Trust Account – U.S. government debt securities | $ | $ | $ | $ | ||||||||||||
Liabilities: | ||||||||||||||||
Warrant liability | $ | - | $ | $ | $ | |||||||||||
FPS liability | ||||||||||||||||
Total Liabilities | $ | - | $ | $ | $ |
December 31, 2021
Description | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | Total | ||||||||||||
Assets: | ||||||||||||||||
Assets held in Trust Account – U.S. government debt securities | $ | $ | $ | $ | ||||||||||||
Liabilities: | ||||||||||||||||
Warrant liability | $ | $ | $ | - | $ | |||||||||||
FPS liability | ||||||||||||||||
Total Liabilities | $ | $ | $ | $ |
Level 1 assets as of both June 30, 2022 and December 31, 2021 include investments in a money market fund classified as cash equivalents; the fund holds U.S. government debt securities. As of June 30, 2022, Level 1 assets also include a direct investment in the U.S. government treasury bills classified as available-for-sale-debt securities. The Company uses inputs such as actual trade data, benchmark yields, quoted market prices from dealers or brokers, and other similar sources to determine the fair value of its investments.
Warrant Liability
The warrants are accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liability on the Company’s balance sheet. The warrant liability is measured at fair value at inception and on a recurring basis, with any subsequent changes in fair value presented within change in fair value of warrant liability in the Company’s statement of operations.
19
CF ACQUISITION CORP. IV
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Initial Measurement
The Company established the initial fair value
for the warrants on December 28, 2020, the date of the closing of the Initial Public Offering, and subsequent fair value as of December
31, 2020. As of December 31, 2020,
The Company utilized the OPM to value the warrants as of December 31, 2020, with any subsequent changes in fair value recognized in the statement of operations. The estimated fair value of the warrant liability as of December 31, 2020 was determined using Level 3 inputs. Inherent in the OPM are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimated the volatility of its shares of common stock based on historical volatility that matches the expected remaining life of the warrants. The risk-free interest rate was based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants was assumed to be equivalent to their remaining contractual term. The dividend rate was based on the historical rate, which the Company anticipated to remain at zero. The aforementioned warrant liability is not subject to qualified hedge accounting.
The following table provides quantitative information about the inputs utilized by the Company in the fair value measurement of the warrants as of December 31, 2020:
December 31, 2020 | ||||
Risk-free interest rate | % | |||
Expected term (years) | ||||
Expected volatility | % | |||
Exercise price | $ | |||
Stock price | $ | |||
Dividend yield | % |
Subsequent Measurement
During the year ended December 31, 2021, the fair value measurement of the Public Warrants was reclassified from Level 3 to Level 1 due to the use of an observable quoted price in an active market. As the transfer of Private Placement Warrants to anyone who is not a permitted transferee would result in the Private Placement Warrants having substantially the same terms as the Public Warrants, the Company determined that the fair value of the Private Placement Warrants is equivalent to that of the Public Warrants. As such, the Private Placement Warrants were reclassified from Level 3 to Level 2 during the year ended December 31, 2021. There were no transfers into or out of Level 3 fair value measurement during the three and six months ended June 30, 2022.
The following tables present the changes in the fair value of warrant liability for the three and six months ended June 30, 2022 and 2021:
Private Placement | Public | Warrant Liability | ||||||||||
Fair value as of December 31, 2021 | $ | $ | $ | |||||||||
Change in valuation inputs or other assumptions(1) | ( | ) | ( | ) | ( | ) | ||||||
Fair value as of March 31, 2022 | $ | $ | $ | |||||||||
Change in valuation inputs or other assumptions(1) | ( | ) | ( | ) | ( | ) | ||||||
Fair value as of June 30, 2022 | $ | $ | $ |
20
CF ACQUISITION CORP. IV
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Private Placement | Public | Warrant Liability | ||||||||||
Fair value as of December 31, 2020 | $ | $ | $ | |||||||||
Change in valuation inputs or other assumptions(1) | ( | ) | ( | ) | ( | ) | ||||||
Fair value as of March 31, 2021(2) | $ | $ | $ | |||||||||
Change in valuation inputs or other assumptions(1) | ||||||||||||
Fair value as of June 30, 2021 | $ | $ | $ |
(1) |
(2) |
FPS Liability
The liability for the FPS was valued using an
adjusted net assets method, which is considered to be a Level 3 fair value measurement. Under the adjusted net assets method utilized,
the aggregate commitment of $
The following tables present the changes in the fair value of the FPS liability for the three and six months ended June 30, 2022 and 2021:
FPS Liability | ||||
Fair value as of December 31, 2021 | $ | |||
Change in valuation inputs or other assumptions(1) | ( | ) | ||
Fair value as of March 31, 2022 | $ | |||
Change in valuation inputs or other assumptions(1) | ( | ) | ||
Fair value as of June 30, 2022 | $ |
FPS Liability | ||||
Fair value as of December 31, 2020 | $ | |||
Change in valuation inputs or other assumptions(1) | ( | ) | ||
Fair value as of March 31, 2021 | $ | |||
Change in valuation inputs or other assumptions(1) | ( | ) | ||
Fair value as of June 30, 2021 | $ |
(1) |
Note 10—Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the unaudited condensed financial statements were issued and determined that there have been no events that have occurred that would require adjustments to the disclosures in the unaudited condensed financial statements.
21
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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.
22
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.
23
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.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
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Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer (together, the “Certifying Officers”), as of June 30, 2022, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on the foregoing, our Certifying Officers concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Report.
Disclosure controls and procedures are controls and other procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Certifying Officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended June 30, 2022 covered by this Report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. The material weakness discussed below was remediated during the quarter ended June 30, 2022.
Remediation of a Material Weakness in Internal Control over Financial Reporting
We recognize the importance of the control environment as it sets the overall tone for the Company and is the foundation for all other components of internal control. Consequently, we designed and implemented remediation measures to address the material weakness pertaining to the accounting for complex financial instruments and enhanced our control over financial reporting. As a result, we enhanced our system of evaluating and implementing the accounting standards that apply to our financial statements, including through enhanced analyses by our personnel and third-party professionals with whom we consult regarding complex accounting applications.
As part of our remediation efforts, we took the following steps:
● | We implemented procedures intended to ensure that we identify and apply the applicable accounting guidance to all complex transactions. |
● | We established additional monitoring and oversight controls designed to ensure the accuracy and completeness of our condensed financial statements and related disclosures. |
As a result of our actions, we believe our material weakness has been remediated as of June 30, 2022.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings
To the knowledge of our management team, there is no litigation currently pending or contemplated against us, any of our officers or directors in their capacity as such or against any of our property.
Item 1A. Risk Factors.
As a smaller reporting company, we are not required to include risk factors in this Report. However, as of the date of this Report, other than as set forth below, there have been no material changes with respect to those risk factors previously disclosed in our (i) Registration Statement on Form S-1with respect to our initial public offering, initially filed with the SEC on December 7, 2020, as amended and declared effective on December 22, 2020 (File No. 333-251184), (ii) Annual Reports on Forms 10-K/A and 10-K for the years ended December 31, 2020 and 2021, as filed with the SEC on December 23, 2021 and March 31, 2022, and (iii) Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, as filed with the SEC on May 13, 2022. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC.
The SEC has recently issued proposed rules relating to certain activities of SPACs. Certain of the procedures that we, a potential business combination target, or others may determine to undertake in connection with such proposals may increase our costs and the time needed to complete our Initial Business Combination and may make it more difficult to complete an Initial Business Combination. The need for compliance with the SPAC Rule Proposals may cause us to liquidate the funds in the Trust Account or liquidate the Company at an earlier time than we might otherwise choose.
On March 30, 2022, the SEC issued proposed rules (the “SPAC Rule Proposals”) relating, among other items, to disclosures in SEC filings in connection with business combination transactions involving special purpose acquisition companies (“SPACs”) and private operating companies; the financial statement requirements applicable to transactions involving shell companies; the use of projections in SEC filings in connection with proposed business combination transactions; the potential liability of certain participants in proposed business combination transactions; and the extent to which SPACs could become subject to regulation under the Investment Company Act, including a proposed rule that would provide SPACs a safe harbor from treatment as an investment company if they satisfy certain conditions that limit a SPAC’s duration, asset composition, business purpose and activities. The SPAC Rule Proposals have not yet been adopted and may be adopted in the proposed form or in a different form that could impose additional regulatory requirements on SPACs.
Certain of the procedures that we, a potential business combination target, or others may determine to undertake in connection with the SPAC Rule Proposals, or pursuant to the SEC’s views expressed in the SPAC Rule Proposals, may increase the costs and time of negotiating and completing an Initial Business Combination, and may make it more difficult to complete an Initial Business Combination. The need for compliance with the SPAC Rule Proposals may cause us to liquidate the funds in the Trust Account or liquidate the Company at an earlier time than we might otherwise choose.
If we are deemed to be an investment company for purposes of the Investment Company Act, we would be required to institute burdensome compliance requirements and our activities would be severely restricted and, as a result, we may abandon our efforts to consummate an Initial Business Combination and liquidate the Company.
As described further above, the SPAC Rule Proposals relate, among other matters, to the circumstances in which SPACs such as the Company could potentially be subject to the Investment Company Act and the regulations thereunder. The SPAC Rule Proposals would provide a safe harbor for such companies from the definition of “investment company” under Section 3(a)(1)(A) of the Investment Company Act, provided that a SPAC satisfies certain criteria, including a limited time period to announce and complete an Initial Business Combination. Specifically, to comply with the safe harbor, the SPAC Rule Proposals would require a company to file a report on Form 8-K announcing that it has entered into an agreement with a target company for a business combination no later than 18 months after the effective date of its registration statement for its initial public offering (the “IPO Registration Statement”). The company would then be required to complete its Initial Business Combination no later than 24 months after the effective date of the IPO Registration Statement.
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Because the SPAC Rule Proposals have not yet been adopted, there is currently uncertainty concerning the applicability of the Investment Company Act to a SPAC, including a company like ours, that has not entered into a definitive agreement within 18 months after the effective date of its IPO Registration Statement or that does not complete its initial business combination within 24 months after the effective date of its IPO Registration Statement. We do not believe that our principal activities will subject us to regulation as an investment company under the Investment Company Act. However, if we are deemed to be an investment company and subject to compliance with and regulation under the Investment Company Act, our activities would be severely restricted. In addition, we would be subject to additional burdensome regulatory requirements and expenses for which we have not allotted funds. As a result, if we are deemed an investment company under the Investment Company Act, we may abandon our efforts to consummate an Initial Business Combination and instead liquidate the Company.
There is substantial doubt about our ability to continue as a “going concern.”
In connection with the Company’s assessment of going concern considerations under applicable accounting standards, management has determined that our possible need for additional financing to enable us negotiate and complete our Initial Business Combination, as well as the deadline by which we may be required to liquidate our Trust Account, raise substantial doubt about the Company’s ability to continue as a going concern through approximately one year from the date the financial statements were issued.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
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Item 6. Exhibits.
* | Filed herewith. |
** | Furnished herewith |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
CF ACQUISITION CORP. IV | ||
Date: August 12, 2022 | By: | /s/ Howard W. Lutnick |
Name: | Howard W. Lutnick | |
Title: | Chairman and Chief Executive Officer | |
(Principal Executive Officer) | ||
Date: August 12, 2022 | By: | /s/ Jane Novak |
Name: | Jane Novak | |
Title: | Chief Financial Officer | |
(Principal Financial and Accounting Officer) |
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