UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File No.
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CF FINANCE ACQUISITION CORP. |
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(Exact name of registrant as specified in its charter) |
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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(Address of Principal Executive Offices, including zip code) |
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(Registrant’s telephone number, including area code) |
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N/A |
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(Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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The |
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The |
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The |
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.
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Large accelerated filer |
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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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 10, 2020, there were
CF FINANCE ACQUISITION CORP.
Quarterly Report on Form 10-Q
TABLE OF CONTENTS
2
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements.
CF Finance Acquisition Corp.
Condensed Balance Sheets
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June 30, 2020 |
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December 31, 2019 |
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(Unaudited) |
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Assets |
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Current assets |
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Cash |
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$ |
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$ |
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Other assets |
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— |
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Total current assets |
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Cash and investments held in Trust Account |
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Total assets |
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$ |
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$ |
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Liabilities and Stockholders’ Equity |
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Sponsor loan – promissory note |
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$ |
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$ |
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Payables to related party |
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Accrued liabilities |
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Total liabilities |
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Common stock subject to possible redemption, |
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Stockholders’ equity |
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Preferred stock, $ |
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Common stock, Class A $ |
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Common stock, Class B $ |
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Additional paid-in-capital |
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Retained earnings |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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See accompanying notes to unaudited condensed financial statements.
F-1
CF Finance Acquisition Corp.
Condensed Statements of Operations
(Unaudited)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2020 |
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2019 |
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2020 |
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2019 |
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Revenue |
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$ |
— |
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$ |
— |
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$ |
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$ |
— |
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Expense |
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Other expenses |
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Loss from operations |
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Other income – Interest income on Trust Account |
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(Loss) income before (benefit)/provision for income taxes |
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Income tax (benefit)/provision for income taxes |
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Net (loss) income attributable to common stock |
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$ |
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$ |
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$ |
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$ |
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Weighted average number of common stock outstanding: |
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Class A - Public shares |
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Class A - Private placement |
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Class B - Common stock |
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(1) |
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(1) |
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Basic and diluted net income (loss) per share: |
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Class A - Public shares |
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$ |
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$ |
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$ |
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$ |
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Class A - Private placement |
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$ |
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$ |
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$ |
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$ |
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Class B - Common stock |
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$ |
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$ |
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$ |
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$ |
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(1) |
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See accompanying notes to unaudited condensed financial statements.
F-2
CF Finance Acquisition Corp.
Condensed Statements of Changes in Stockholders’ Equity
For the three and six months ended June 30, 2020 and 2019
(Unaudited)
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Common Stock |
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Class A |
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Class B |
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Additional Paid-In-Capital |
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Retained Earnings (Deficit) |
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Total Stockholders’ Equity |
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Shares |
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Amount |
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Shares |
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Amount |
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Balances, January 1, 2020 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Shares subject to possible redemption |
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— |
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— |
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— |
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Net income |
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— |
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— |
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— |
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— |
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— |
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Balances, March 31, 2020 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Shares subject to possible redemption |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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Balances, June 30, 2020 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Common Stock |
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Class A |
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Class B |
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Additional Paid-In-Capital |
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Retained Earnings (Deficit) |
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Total Stockholders’ Equity |
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Shares |
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Amount |
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Shares |
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Amount |
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Balances, January 1, 2019 |
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$ |
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$ |
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(2) |
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$ |
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$ |
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$ |
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Sale of Class A common stock to the public |
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— |
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— |
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— |
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Forfeiture of common stock to sponsor at $0.0001 par value |
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— |
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— |
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(1) |
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— |
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- |
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Shares subject to possible redemption |
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( |
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— |
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— |
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— |
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Net income |
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— |
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— |
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— |
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— |
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— |
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Balances, March 31, 2019 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Shares subject to possible redemption |
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( |
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( |
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— |
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— |
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— |
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Net income |
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— |
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— |
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— |
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— |
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— |
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Balances, June 30, 2019 |
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$ |
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$ |
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$ |
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$ |
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$ |
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(1) |
On January 29, 2019, an aggregate of |
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(2) |
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See accompanying notes to unaudited condensed financial statements.
F-3
CF Finance Acquisition Corp.
Condensed Statements of Cash Flows
(Unaudited)
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Six Months Ended June 30, |
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2020 |
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2019 |
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Cash flows from operating activities |
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Net (loss) income |
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$ |
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$ |
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Adjustments to reconcile net (loss) income to net cash used in operating activities |
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Interest earned on investments held in Trust Account |
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Increase in operating assets |
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Other assets |
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Increase (decrease) in operating liabilities |
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Payable to related party |
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— |
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Accrued liabilities |
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Net cash used in operating activities |
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Cash flows from investing activities |
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Proceeds deposited in Trust Account |
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Proceeds from Trust Account |
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— |
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Net cash provided by (used in) investing activities |
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Cash flows from financing activities |
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Redemption of units disbursement |
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— |
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Proceeds from sale of units in the initial public offering, net of underwriting discount and offering cost paid |
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— |
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Proceeds from related party promissory notes |
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Payment of related party payable |
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— |
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Net cash (used in) provided by financing activities |
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Net increase (decrease) in cash |
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Cash at beginning of period |
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Cash at end of period |
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$ |
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$ |
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Supplemental disclosure of non-cash financing activities |
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Change in common stock subject to possible redemption |
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$ |
( |
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$ |
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See accompanying notes to unaudited condensed financial statements.
F-4
CF Finance Acquisition Corp.
Notes to Unaudited Condensed Financial Statements
1. Description of Business and Operations
Description of Business - CF Finance Acquisition Corp. (the “Company”) was incorporated in Delaware on
Although the Company is not limited 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 or real estate 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, 2020, the Company had not yet commenced operations. All activity for the three and six months ended June 30, 2020 and 2019 relates to the Company’s formation and Public Offering described below and, subsequent to the Public Offering, efforts have been directed 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 on cash and cash equivalents from the proceeds derived from the Public Offering. The Company has selected December 31st as its fiscal year end.
The Company’s Sponsor is CF Finance Holdings, LLC (the “Sponsor”). The registration statement for the Public Offering (see Note 3) was declared effective by the United States Securities and Exchange Commission (the “SEC”) on December 12, 2018. The Company intends to finance a Business Combination with the proceeds of approximately $
On June 15, 2020, the stockholders of the Company approved the extension of the termination of the Company from June 17, 2020 to September 17, 2020. In conjunction with the termination date extension vote, public stockholders exercised their right to elect to redeem their
F-5
CF Finance Acquisition Corp.
Notes to Unaudited Condensed Financial Statements (continued)
1. Description of Business and Operations (continued)
Initial Business Combination - The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Public Offering and the sale of 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
The Company will provide its holders of the outstanding shares of its Class A common stock, par value $
F-6
CF Finance Acquisition Corp.
Notes to Unaudited Condensed Financial Statements (continued)
1. Description of Business and Operations (continued)
Notwithstanding the foregoing, the Amended and Restated Certificate of Incorporation provides
The initial stockholders, officers and directors 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 redeem
Forward Purchase Contract – In connection with the Public Offering, the Sponsor committed, pursuant to a forward purchase contract with the Company, to purchase, in a Private Placement for gross proceeds of $
Failure to Consummate a Business Combination - If the Company is
F-7
CF Finance Acquisition Corp.
Notes to Unaudited Condensed Financial Statements (continued)
1. Description of Business and Operations (continued)
The initial stockholders, officers and directors 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, officers and directors acquire Public Shares in or after the 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 only $
The Trust Account - The proceeds in the Trust Account will be invested only in U.S. government treasury bills with a maturity of one hundred and eighty (180) days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940 which invest only in direct U.S. government obligations. Funds will remain in the Trust Account until the earlier of (i) the consummation of the Company’s initial Business Combination or (ii) the distribution of the Trust Account proceeds as described below. The remaining proceeds outside the Trust Account may be used to pay for business, legal and accounting due diligence expenses for prospective acquisition targets and continuing general and administrative expenses. As of June 30, 2020 and December 31, 2019, investment securities in the Trust Account consisted of $
During three and six months ended June 30, 2020, $
2. Summary of Significant Accounting Policies
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, 2020 and the results of operations and cash flows for the periods presented. Certain information and disclosures normally included in financial statements prepared in accordance with US GAAP have been omitted pursuant to such rules and regulations. Interim results are not necessarily indicative of results for a full year. 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 filed by the Company with the SEC on March 6, 2020.
F-8
CF Finance Acquisition Corp.
Notes to Unaudited Condensed Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
In connection with the Company’s going concern considerations in accordance with ASU 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern” as of June 30, 2020, the Company may not have sufficient liquidity to meet its current obligations over the next year from issuance of the unaudited condensed financial statements. However, management has determined that the Company has access to funds from the Sponsor, the Sponsor has committed, in the form of a loan, 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, 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 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. This may make comparison of the Company’s unaudited condensed financial statements with another public company, which is neither an emerging growth company nor an emerging growth company, which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates - The preparation of unaudited condensed 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 unaudited condensed 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 unaudited condensed financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
F-9
CF Finance Acquisition Corp.
Notes to Unaudited Condensed Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Cash and investments held in Trust Account - As of June 30, 2020 and December 31, 2019, the assets held in the Trust Account were held in money market funds.
Income Taxes – Income taxes are accounted for under ASC Topic 740, Income Taxes, using the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements 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 included the enactment date. To the extent that it is more likely than not that deferred tax assets will not be recognized, a valuation allowance would be established to offset their benefit. As of June 30, 2020 and December 31, 2019, the Company had no material deferred tax assets or liabilities.
ASC Topic 740 prescribes a recognition threshold that a tax position is required to meet before being recognized in the unaudited condensed financial statements. The Company provides for uncertain tax positions based upon management’s assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. The Company recognizes interest and penalties related to unrecognized tax benefits as provision for income taxes on the unaudited condensed statements of operations. There were
The Company may be subject to examination by federal, state and city taxing authorities in the areas of income taxes. 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. Accordingly, the Company does not believe that the amounts of unrecognized tax benefits will materially change over the next twelve months.
Net Income (Loss) per Common Share - The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, Earnings Per 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 for the period, after deducting shares that are subject to forfeiture in connection with the Public Offering.
As of June 30, 2020, the Company has not considered the effect of the warrants sold in the Public Offering and Private Placement to purchase an aggregate of
Net income per share, for Class A – public shares common stock is calculated by dividing the interest income earned on the Trust Account of approximately $
F-10
CF Finance Acquisition Corp.
Notes to Unaudited Condensed Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
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 depository insurance coverage of $
Financial Instruments - The fair value of the Company’s assets and liabilities, which qualify as financial instruments under FASB ASC Topic 820, Fair Value Measurements and Disclosures, approximates the carrying amounts represented in the accompanying balance sheets, primarily due to their short-term nature.
Recently Issued Accounting Pronouncements - The Company’s management does not believe that 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.
3. Public Offering
The Company closed the Public Offering for the sale of approximately
Each Unit consists of one share of Class A common stock, and three-quarters of one redeemable warrant (each, a “Public Warrant”). Each whole Public Warrant entitles the holder to purchase one share of Class A common stock at a price of $
Simultaneous with the closing of the Public Offering on December 17, 2018, the Sponsor purchased an aggregate of
Upon the December 2018 and January 2019 closings of the Public Offering, and June 2020 termination extension vote (see Note 1), the Sponsor funded loans in the amount of $
Upon the closing of the Public Offering and the sale of the Private Placement Units, and taking into consideration the offering costs, an aggregate of approximately $
F-11
CF Finance Acquisition Corp.
Notes to Unaudited Condensed Financial Statements (continued)
4. Related Party Transactions
Founder shares
In July 2014, the Sponsor purchased
On January 17, 2018, the Sponsor effectuated a recapitalization of the Company, which included a
Holders of Founder Shares may also elect to convert their shares of Class B common stock into an equal number of shares of Class A common stock, subject to adjustment, at any time. In January 2019,
The initial stockholders, officers and directors 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 $
Private Placement Units
Upon the December 17, 2018 closing of the Public Offering, the Sponsor paid the Company $
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
Underwriter
The underwriter is an affiliate of the Sponsor (see Note 5).
F-12
CF Finance Acquisition Corp.
Notes to Unaudited Condensed Financial Statements (continued)
4. Related Party Transactions (continued)
Related Party Loans
In order to finance transaction costs in connection with a Business Combination, 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. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $
In order to finance transaction costs in connection with an intended initial Business Combination, the Sponsor has committed, in the form of a loan, up to $
The Sponsor previously made available to the Company, under a promissory note, up to $
Sponsor Loan
Upon the closings of the Public Offering, the Sponsor funded loans in the amount of $
F-13
CF Finance Acquisition Corp.
Notes to Unaudited Condensed Financial Statements (continued)
5. Commitments and Contingencies
Registration Rights
The holders of Founder Shares, Private Placement Units (and component securities) and warrants that may be issued upon conversion of Working Capital Loans, if any, will be entitled to registration rights (in the case of the Founder Shares, only after conversion of such shares to shares of Class A common stock). The registration rights agreement was signed on December 12, 2018. These holders are entitled to certain demand and “piggyback” registration rights. However, the registration rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until the termination of the applicable lock-up period for the securities to be registered. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
In connection with the Business Combination, the registration rights agreement is being amended to provide that GCM Pubco will register for resale certain shares of common stock and other equity securities that are held by the parties thereto from time to time.
Underwriting Agreement
Cantor Fitzgerald & Co., the underwriter of the Public Offering and an affiliate of the Sponsor, purchased approximately
The underwriter was entitled to an 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 and Additional Fees Payable to Affiliates
The Company has engaged Cantor Fitzgerald & Co. as an advisor in connection with the Company’s initial Business Combination to assist the Company in holding meetings with its stockholders to discuss the potential Business Combination and the target business’ attributes, introduce the Company to potential investors that are interested in purchasing the Company’s securities, assist the Company in obtaining stockholder approval for the Business Combination and assist the Company with its press releases and public filings in connection with the Business Combination. The Company will pay Cantor Fitzgerald & Co. a cash fee for such services upon the consummation of the Business Combination in an amount equal to, in the aggregate, 3.5% of the gross proceeds of the Public Offering, including any proceeds from the partial exercise of the underwriters’ over-allotment option.
In addition, upon completion of the Business Combination, and assuming no change in the amount of the PIPE Transaction (as defined in Note 8), an aggregate amount of approximately $
F-14
CF Finance Acquisition Corp.
Notes to Unaudited Condensed Financial Statements (continued)
6. Fair Value Measurement
Fair Value – U.S. GAAP defines fair value as the price received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and requires certain disclosures about such fair value measurements. The Company follows the guidance in ASC 820 for its financial assets that are re-measured and reported at fair value at each reporting period.
The guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure 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).
The three levels of the fair value hierarchy are as follows:
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Level 1 measurements – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. |
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Level 2 measurements – Quoted prices in markets that are not active or financial instruments for which all-significant inputs are observable, either directly or indirectly. |
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Level 3 measurements – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. |
As required by U.S. GAAP guidance, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
The following tables present information about the Company’s assets that are measured at fair value on a recurring basis as of June 30, 2020 and December 31, 2019, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
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Assets at Fair Value at June 30, 2020 |
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Description |
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Level 1 |
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Level 2 |
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Level 3 |
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Total |
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Cash and investments held in Trust Account |
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Money market fund |
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$ |
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$ |
— |
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$ |
— |
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$ |
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Total |
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$ |
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$ |
— |
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$ |
— |
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$ |
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Assets at Fair Value at December 31, 2019 |
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Description |
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Level 1 |
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Level 2 |
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Level 3 |
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Total |
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Cash and investments held in Trust Account |
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Money market fund |
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$ |
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$ |
— |
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$ |
— |
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$ |
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Total |
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$ |
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$ |
— |
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$ |
— |
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$ |
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F-15
CF Finance Acquisition Corp.
Notes to Unaudited Condensed Financial Statements (continued)
7. Stockholders’ Equity
Class A Common Stock - The Company is authorized to issue
Class B Common Stock - The Company is authorized to issue
The shares of Class B common stock will automatically convert into shares of Class A common stock at the time of the initial 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 sold in the Public Offering and related to the closing of the initial 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, 20% of the sum of the total number of all shares of common stock outstanding upon the completion of the Public Offering, not including the Private Placement Units, plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with the initial Business Combination (excluding any shares or equity-linked securities issued, or to be issued, to any seller in the initial Business Combination and any private placement-equivalent warrants issued to the Sponsor or its affiliates upon conversion of loans made to the Company). Holders of Founder Shares may also elect to convert their shares of Class B common stock into an equal number of shares of Class A common stock, subject to adjustment as provided above, at any time.
Preferred stock - The Company is authorized to issue
F-16
CF Finance Acquisition Corp.
Notes to Unaudited Condensed Financial Statements (continued)
7. Stockholders’ Equity (continued)
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 on the later of (a) 30 days after the completion of a Business Combination or (b) 12 months from the closing of the Public Offering; provided in each case that the Company has an effective registration statement under the Securities Act covering the shares of common stock issuable upon exercise of the Public Warrants and a current prospectus relating to them is available. 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 five years after the completion of a Business Combination or earlier upon redemption or liquidation.
The warrants included in the Private Placement Units are identical to the Public Warrants underlying the Units being sold in the Public Offering, except that the warrants included in the Private Placement Units and the Class A common stock issuable upon the exercise of the warrants included in the Private Placement Units are not transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions.
Additionally, the warrants included in the Private Placement Units 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 warrants included in the Private Placement Units are held by someone other than the initial purchasers or their permitted transferees, the warrants included in the Private Placement Units will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants. The warrants will expire five years after the completion of the Company’s Business Combination or earlier upon redemption or liquidation.
F-17
CF Finance Acquisition Corp.
Notes to Unaudited Condensed Financial Statements (continued)
7. Stockholders’ Equity (continued)
The Company may redeem the Public Warrants (except with respect to the warrants included in the Private Placement Units):
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in whole and not in part; |
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at a price of $ |
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at any time during the exercise period; |
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upon a minimum of 30 days’ prior written notice of redemption; |
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if, and only if, the last reported sale price of the Company’s common stock equals or exceeds $ |
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if, and only if, there is a current registration statement in effect with respect to the shares of common stock underlying such warrants. |
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.
On January 17, 2018, the Sponsor effectuated a recapitalization of the Company, which included a
8. Subsequent Events
The Company has evaluated subsequent events through the date the unaudited condensed financial statements were issued. There have been no additional material subsequent events that would require recognition in these unaudited condensed financial statements or disclosure in the notes to the unaudited condensed financial statements, except for the events described below.
On August 2, 2020, the Company entered into a Transaction Agreement (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 hold approximately
F-18
CF Finance Acquisition Corp.
Notes to Unaudited Condensed Financial Statements (continued)
8. Subsequent Events (continued)
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
F-19
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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:
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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; |
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may subordinate the rights of holders of our common stock if preferred stock is issued with rights senior to those afforded our common stock; |
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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; |
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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 |
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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:
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default and foreclosure on our assets if our operating revenues after a Business Combination are insufficient to repay our debt obligations; |
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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; |
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our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand; |
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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; |
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our inability to pay dividends on our common stock; |
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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; |
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limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate; |
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a possible decrease in prevailing market prices for our Class A common stock and/or warrants; |
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increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; and |
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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 June 30, 2020, we had approximately $2,001,400 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.
Subsequent Events
On August 2, 2020, we entered into a Transaction Agreement regarding our initial Business Combination (the “Transaction Agreement”). Pursuant to the Transaction Agreement, the Company will be merged (the “Merger”) with and into GCM Grosvenor Inc., a Delaware corporation (“GCM PubCo”), with GCM PubCo surviving the Merger, as a result of which GCM PubCo, as the surviving corporation in the Merger, will hold approximately 21.4% of the outstanding equity interests of Grosvenor Capital. 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 proxy statement/prospectus, filed with the SEC on August 7, 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.
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
4
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 $279,900,000 after the redemption on June 15, 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 $279,900,000 after the redemption on June 15, 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 June 30, 2020, we had approximately $2,001,400 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 June 30, 2020 to fund its operations through at least September 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.
Contractual obligations
As of June 30, 2020, we did not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities.
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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 June 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 June 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 June 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.
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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, 593,700 shares of common stock were redeemed by public shareholders in connection with the extension of the Combination Period.
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 June 30, 2020 and December 31, 2019, 27,123,813 and 27,972,537 shares, respectively, of the approximately 27,660,000 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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The net proceeds of our initial public offering and the sale of the private units held in the trust account are invested in U.S. government treasury bills with a maturity of 180 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure controls and procedures are controls and other procedures that are 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 our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2020. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act) were effective.
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Changes in Internal Control Over Financial Reporting
During the most recently completed fiscal quarter, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
To the knowledge of our management, there is no litigation currently pending against us, any of our officers or directors in their capacity as such or against any of our property.
ITEM 1A. RISK FACTORS.
Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in our Annual Report on Form 10-K for the period ended December 31, 2019 (the “Form 10-K”), as supplemented by our Quarterly Report on Form 10-Q for the period on March 31, 2020. 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. As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in the Form 10-K, as supplemented by our Quarterly Report on Form 10-Q for the period on March 31, 2020, except we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
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.
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
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No. |
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Description of Exhibit |
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2.1 |
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3.1 |
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10.1 |
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10.2 |
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10.3 |
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10.4 |
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31.1* |
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31.2* |
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32.1** |
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32.2** |
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101.INS* |
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Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because iXBRL tags are embedded within the Inline XBRL document |
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101.CAL* |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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101.SCH* |
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Inline XBRL Taxonomy Extension Schema Document |
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101.DEF* |
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Inline XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB* |
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Inline XBRL Taxonomy Extension Labels Linkbase Document |
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101.PRE* |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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104 |
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Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
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* Filed herewith.
** Furnished.
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SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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CF FINANCE ACQUISTION CORP. |
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Date: August 10, 2020 |
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/s/ Howard W. Lutnick |
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Name: |
Howard W. Lutnick |
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Title: |
Chairman and Chief Executive Officer |
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(Principal Executive Officer) |
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Date: August 10, 2020 |
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/s/ Paul Pion |
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Name: |
Paul Pion |
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Title: |
Chief Financial Officer |
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(Principal Financial and Accounting Officer) |
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