XBP Global Holdings, Inc 10-Q/A for FY2021 Q3
XBP Global Holdings, Inc. (XBP)
About this 10-Q/A
XBP Global Holdings, Inc filed this 10-Q/A on December 20, 2021, covering the quarter ended September 30, 2021 (FY2021 Q3).
Headline figures
Quarter ended September 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $1.06M
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Amendment No. 1)
(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 Number) |
| | ||
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including
area code:
Not Applicable
(Former name or former address, 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-fourth of one redeemable warrant | CFFEU | The Nasdaq Capital Market | ||
$0.0001 per share | The | |||
| Redeemable warrants, each whole warrant exercisable for one share of Class A common stock at an exercise price of $11.50 | CFFEW | The Nasdaq Capital Market |
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 December 20, 2021, there were
EXPLANATORY NOTE
CF Acquisition Corp. VIII (the “Company,” “we,” “us” or “our”) is filing this Amendment No. 1 on Form 10-Q/A (this “Amendment”) to amend and restate certain items in its Quarterly Report on Form 10-Q as of September 30, 2021 and for the quarterly period ended September 30, 2021, originally filed with the U.S. Securities and Exchange Commission (the “SEC”) on November 15, 2021.
Background of Restatement
On December 17, 2021, the audit committee of the board of directors of the Company (the “Audit Committee”) concluded, after discussion with the Company’s management, that it is appropriate to restate the Company’s previously issued audited balance sheet as of March 16, 2021, as previously restated in the Company’s Quarterly Report on Form 10-Q filed with the SEC on May 17, 2021 (the “Q1 Form 10-Q”), the Company’s unaudited quarterly financial statements as of and for the three months ended March 31, 2021 included in the Q1 Form 10-Q, and the Company’s unaudited quarterly financial statements as of and for the six months ended June 30, 2021 included in the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 12, 2021 (the “Q2 Form 10-Q” and, together with the Q1 Form 10-Q, the “Non-Reliance Financial Statements”). Considering the restatement of such financial statements, the Company concluded that the Non-Reliance Financial Statements should no longer be relied upon. This Amendment includes restatements of the Non-Reliance Financial Statements.
In connection with the change in presentation for shares of Class A common stock subject to possible redemption in the Company’s financial statements for the quarter ended September 30, 2021, the Company re-evaluated its accounting of the Public Shares (as defined below). As a result, the Company determined that at the closing of the Initial Public Offering (as defined below), it had improperly valued the Public Shares. The Company has previously determined the Public Shares subject to possible redemption to be equal to the redemption value of $10.00 per share, while also taking into consideration that pursuant to the Company’s amended and restated certificate of incorporation, a redemption cannot result in net tangible assets being less than $5,000,001. Pursuant to the updated analysis, management determined that all Public Shares can be redeemed or become redeemable subject to the occurrence of future events considered outside the Company’s control. Therefore, management concluded that the redemption value should include all Public Shares subject to possible redemption, resulting in the shares of Class A common stock subject to possible redemption being equal to their redemption value, and reclassified the remaining Public Shares from permanent equity to temporary equity on the Company’s condensed balance sheet.
In connection with the change in presentation for the shares of Class A common stock subject to redemption, the Company also restated its earnings per share calculation to allocate net income (loss) pro-rata to shares of Class A common stock subject to possible redemption, non-redeemable shares of Class A common stock and shares of Class B common stock. This presentation contemplates a Business Combination as the most likely outcome, in which case all classes of common stock share pro-rata in the net income (loss) of the Company.
Effects of Restatement
As a result of the factors described above, the Company has included in this Amendment a restatement of its financial statements for the periods affected by the Non-Reliance Financial Statements. See Note 1 to the Notes to Financial Statements included in Part I, Item 1 of this Amendment for additional information on the restatement and the related financial statement effects. These changes do not impact the Company’s cash position or cash held in the Trust Account established in connection with the Initial Public Offering.
Internal Control Considerations
The Company’s management has concluded that in light of the classification error described above, a material weakness exists in the Company’s internal control over financial reporting and that the Company’s disclosure controls and procedures were not effective. For a discussion of management’s consideration of the material weakness identified, see Part I, Item 4, Controls and Procedures of this Amendment.
CF ACQUISITION CORP. VIII
Quarterly Report on Form 10-Q
Table of Contents
i
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
CF ACQUISITION CORP. VIII
CONDENSED BALANCE SHEETS
| September 30, 2021 | December 31, 2020 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Other assets | ||||||||
| Cash equivalents held in Trust Account | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity (Deficit) | ||||||||
| Current Liabilities: | ||||||||
| Accrued expenses | $ | $ | ||||||
| Payables to related party | ||||||||
| Sponsor loan – promissory notes | ||||||||
| Franchise tax payable | ||||||||
| Total Current Liabilities | ||||||||
| Warrant liability | ||||||||
| Forward purchase securities liability | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Class A common stock subject to possible redemption, | ||||||||
| Stockholders’ Equity (Deficit) | ||||||||
| Preferred stock, $ | ||||||||
| Class A common stock, $ | ||||||||
| Class B common stock, $ | ||||||||
| Additional paid-in-capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity (Deficit) | ( | ) | ||||||
| Total Liabilities and Stockholders’ Equity (Deficit) | $ | $ | ||||||
| (1) | This number includes up to 825,000 shares of Class B common stock subject to forfeiture if the over-allotment option was not exercised in full or in part by the underwriters. This number has been adjusted to reflect the recapitalization of the Company in the form of a 1.1-for-1 stock split. On March 16, 2021, 75,000 shares of Class B common stock were forfeited by the Sponsor (see Note 6). |
The accompanying notes are an integral part of these unaudited condensed financial statements.
1
CF ACQUISITION CORP. VIII
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
| For the Three Months Ended September 30, 2021 | For the Nine Months Ended September 30, 2021 | For the Period from July 8, 2020 (Inception) through September 30, 2020 | ||||||||||
| 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 forward purchase securities liability | ( | ) | ||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | |||||
| Weighted average number of shares of common stock outstanding: | ||||||||||||
| Class A - Public shares | ||||||||||||
| Class A - Private placement | ||||||||||||
| Class B - Common stock (1) | ||||||||||||
| Basic and diluted loss per share: | ||||||||||||
| Class A - Public shares | $ | ( | ) | $ | ( | ) | $ | |||||
| Class A - Private placement | $ | ( | ) | $ | ( | ) | $ | |||||
| Class B - Common stock | $ | ( | ) | $ | ( | ) | $ | |||||
| (1) |
The accompanying notes are an integral part of these unaudited condensed financial statements.
2
CF ACQUISITION CORP. VIII
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
(UNAUDITED)
| For the Three and Nine Months Ended September 30, 2021 | ||||||||||||||||||||||||||||
| Common Stock | Additional | Total Stockholders’ | ||||||||||||||||||||||||||
| Class A | Class B | Paid-In | Accumulated | Equity | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||
| Balance - December 31, 2020 | $ | (1) | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||
| Sale of Private Placement Class A common stock | - | |||||||||||||||||||||||||||
| Forfeiture of common stock to sponsor at $ | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Accretion from carrying value to redemption value for redeemable shares of Class A common stock | - | - | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance – March 31, 2021 (as restated, see Note 1) | $ | $ | $ | - | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| Balance – June 30, 2021 (as restated, see Note 1) | $ | $ | - | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance – September 30, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| (1) | This number includes up to 825,000 shares of Class B common stock subject to forfeiture if the over-allotment option was not exercised in full or in part by the underwriters. This number has been adjusted to reflect the recapitalization of the Company in the form of a 1.1-for-1 stock split. On March 16, 2021, 75,000 shares of Class B common stock were forfeited by the Sponsor (see Note 6). |
| For the Period from July 8 (Inception) through September 30, 2020 | ||||||||||||||||||||||||||||
| Common Stock | Additional | Total | ||||||||||||||||||||||||||
| Class A | Class B | Paid-In | Accumulated | Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares(1) | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Balance – July 8, 2020 | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Issuance of Class B common stock to Sponsor | ||||||||||||||||||||||||||||
| Balance – September 30, 2020 | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| (1) |
The accompanying notes are an integral part of these unaudited condensed financial statements.
3
CF ACQUISITION CORP. VIII
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| For the Nine Months Ended September 30, | For the Period from July 8, 2020 through | |||||||
| 2021 | 2020 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ||||
| Adjustments to reconcile net loss 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 forward purchase securities liability | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accrued expenses | ||||||||
| Franchise tax payable | ||||||||
| Other assets | ||||||||
| Payables to related party | ||||||||
| Net cash provided by operating activities | ||||||||
| Cash flows from investing activities: | ||||||||
| Cash deposited to Trust Account | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of Class B common stock to Sponsor | ||||||||
| Proceeds from related party – Sponsor loan | ||||||||
| Proceeds received from initial public offering | ||||||||
| Proceeds received from private placement | ||||||||
| Offering costs paid | ( | ) | ||||||
| Payment of related party payable | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net change in cash | ||||||||
| Cash - beginning of the period | ||||||||
| Cash - end of the period | $ | $ | ||||||
| Supplemental disclosure of noncash financing activities: | ||||||||
| Prepaid expenses paid with payables to related party | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
4
CF ACQUISITION CORP. VIII
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 1—Description of Organization, Business Operations and Basis of Presentation
CF Acquisition Corp. VIII (the “Company”) was incorporated in Delaware on July 8, 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 September 30, 2021, the Company had not commenced operations. All activity through September 30, 2021 relates to the Company’s formation and the initial public offering (the “Initial Public Offering”) described below, and all activity since the Initial Public Offering, relates to 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 on investments in money market funds that invest in U.S. Treasury Securities and 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 VIII,
LLC (the “Sponsor”). The registration statements for the Initial Public Offering became effective on March 11, 2021. On March
16, 2021, 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 Private Placement Units on March 16, 2021, an amount of $
5
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 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 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
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 $
6
Failure to Consummate a Business Combination
– The Company has until March 16, 2022 to consummate a Business Combination, or a later date approved by the Company’s
stockholders in accordance with the Amended and Restated Certificate of Incorporation (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 $
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 September 30, 2021 and December 31,
2020, 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.
7
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 September 30, 2021 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. The accompanying unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Form 8-K and the final prospectus filed by the Company with the SEC on March 22, 2021 and March 15, 2021, respectively.
Going Concern
In connection with the Company’s going concern
considerations in accordance with guidance in Accounting Standards Update (“ASU”) No. 2014-15, Disclosures of Uncertainties
about an Entity’s Ability to Continue as a Going Concern, the Company has until March 16, 2022 to consummate a Business Combination.
The Company’s mandatory liquidation date, if a Business Combination is not consummated, raises substantial doubt about the entity’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 franchise and income 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.
Restatement of Previously Issued Financial Statements
In connection with the change in presentation
for shares of Class A common stock subject to possible redemption in the Company’s financial statements for the quarter ended September
30, 2021, the Company re-evaluated its accounting of the Public Shares. As a result, the Company determined that at the closing of the
Initial Public Offering, it had improperly valued the Public Shares. The Company has previously determined the Public Shares subject to
possible redemption to be equal to the redemption value of $
8
The Company assessed the materiality of these corrections on its prior periods’ financial statements in accordance with SEC Staff Accounting Bulletins Topic 1.M, Materiality and Topic 1.A, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements and the guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 250, Accounting Changes and Error Corrections. As a result of this assessment, the Company determined that the corrections were material to the previously filed financial statements that contained the error as initially reported in the Company’s Form 8-K as of March 16, 2021, and the Forms 10-Q for the quarterly periods ended March 31, 2021 and June 30, 2021 (collectively, the “Affected Periods”). Therefore, the Company concluded that the Affected Periods should be restated to present all Public Shares as temporary equity and recognized accretion from the initial book value to redemption value at the time of the Initial Public Offering, with a resulting decrease in Additional paid-in capital and increase in Accumulated deficit. As such, the Company is reporting these restatements to the Affected Periods in this Amendment.
In connection with the change in presentation for the shares of Class A common stock subject to redemption, the Company also restated its earnings per share calculation to allocate net income (loss) pro-rata to shares of Class A common stock subject to possible redemption, non-redeemable shares of Class A common stock and shares of Class B common stock. This presentation contemplates a Business Combination as the most likely outcome, in which case, all classes of common stock share pro-rata in the net income (loss) of the Company.
There has been no change in the Company’s total assets, liabilities, or operating results for all periods presented.
The impact of the restatement on the financial statements for the Affected Periods is presented below.
The table below presents the effect of the financial statement adjustments related to the restatement of the Company’s previously reported balance sheet as of March 16, 2021:
| As of March 16, 2021 | ||||||||||||
| As Previously Revised | Adjustment | As Restated | ||||||||||
| Balance Sheet | ||||||||||||
| Class A common stock subject to possible redemption | $ | $ | $ | |||||||||
| Class A common stock | $ | $ | ( | ) | $ | |||||||
| Additional paid-in-capital | $ | $ | ( | ) | $ | — | ||||||
| Accumulated deficit | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Total Stockholders’ Equity/(Deficit) | $ | $ | ( | ) | $ | ( | ) | |||||
The table below presents the effect of the financial statement adjustments related to the restatement of the Company’s previously reported balance sheet as of March 31, 2021:
| As of March 31, 2021 (Unaudited) | ||||||||||||
| As Previously Reported | Adjustment | As Restated | ||||||||||
| Balance Sheet | ||||||||||||
| Class A common stock subject to possible redemption | $ | $ | $ | |||||||||
| Class A common stock | $ | $ | ( | ) | $ | |||||||
| Additional paid-in-capital | $ | $ | ( | ) | $ | — | ||||||
| Accumulated deficit | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Total Stockholders’ Equity/(Deficit) | $ | $ | ( | ) | $ | ( | ) | |||||
The table below presents the effect of the financial statement adjustments related to the restatement of the Company’s previously reported statement of cash flows for the three months ended March 31, 2021:
| Three Months Ended March 31, 2021 (Unaudited) | ||||||||||||
| As Previously Reported | Adjustment | As Restated | ||||||||||
| Statement of Cash Flows | ||||||||||||
| Supplemental disclosure of noncash financing activities | ||||||||||||
| Change in Class A common stock subject to possible redemption | $ | $ | ( | ) | $ | |||||||
9
The table below presents the effect of the financial statement adjustments related to the restatement of the Company’s previously reported balance sheet as of June 30, 2021:
| As of June 30, 2021 (Unaudited) | ||||||||||||
| As Previously Reported | Adjustment | As Restated | ||||||||||
| Balance Sheet | ||||||||||||
| Class A common stock subject to possible redemption | $ | $ | $ | |||||||||
| Class A common stock | $ | $ | ( | ) | $ | |||||||
| Additional paid-in-capital | $ | $ | ( | ) | $ | — | ||||||
| Accumulated deficit | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Total Stockholders’ Equity/(Deficit) | $ | $ | ( | ) | $ | ( | ) | |||||
The table below presents the effect of the financial statement adjustments related to the restatement of the Company’s previously reported statement of cash flows for the six months ended June 30, 2021:
| Six Months Ended June 30, 2021 (Unaudited) | ||||||||||||
| As Previously Reported | Adjustment | As Restated | ||||||||||
| Statement of Cash Flows | ||||||||||||
| Supplemental disclosure of noncash financing activities | ||||||||||||
| Change in Class A common stock subject to possible redemption | $ | $ | ( | ) | $ | |||||||
The impact to the reported amounts of weighted average number of shares of common stock outstanding and basic and diluted earnings per common share is presented below for the Affected Periods:
| Three Months Ended March 31, 2021 (Unaudited) | ||||||||||||
| As Previously Reported | Adjustment | As Restated | ||||||||||
| Statement of Operations | ||||||||||||
| Class A – Public shares | ( | ) | ||||||||||
| Class A – Private placement | ( | ) | ||||||||||
| Class B – Common stock | ||||||||||||
| Basic and diluted net income (loss) per share, Class A – Public shares | $ | $ | ( | ) | $ | ( | ) | |||||
| Basic and diluted net income (loss) per share, Class A – Private placement | $ | ( | ) | $ | $ | ( | ) | |||||
| Basic and diluted net income (loss) per share, Class B – Common stock | $ | ( | ) | $ | $ | ( | ) | |||||
10
| Three Months Ended June 30, 2021 (Unaudited) | ||||||||||||
| Statement of Operations | As Previously Reported | Adjustment | As Restated | |||||||||
| Class A – Public shares | ||||||||||||
| Class A – Private placement | ||||||||||||
| Class B – Common stock | ||||||||||||
| Basic and diluted net income (loss) per share, Class A – Public shares | $ | $ | $ | |||||||||
| Basic and diluted net income (loss) per share, Class A – Private placement | $ | $ | ( | ) | $ | |||||||
| Basic and diluted net income (loss) per share, Class B – Common stock | $ | $ | ( | ) | $ | |||||||
| Six Months Ended June 30, 2021 (Unaudited) | ||||||||||||
| Statement of Operations | As Previously Reported | Adjustment | As Restated | |||||||||
| Class A – Public shares | ( | ) | ||||||||||
| Class A – Private placement | ( | ) | ||||||||||
| Class B – Common stock | ( | ) | ||||||||||
| Basic and diluted net income (loss) per share, Class A – Public shares | $ | $ | ( | ) | $ | ( | ) | |||||
| Basic and diluted net income (loss) per share, Class A – Private placement | $ | ( | ) | $ | $ | ( | ) | |||||
| Basic and diluted net income (loss) per share, Class B – Common stock | $ | ( | ) | $ | $ | ( | ) | |||||
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 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, therefore, the actual results could differ significantly from those estimates.
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 September 30, 2021 and December 31, 2020. The Company’s investments held in the Trust Account as of September 30, 2021 were comprised of cash equivalents.
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 $
11
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 balance sheets, primarily due to their short-term nature, with the exception of 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.
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. 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 common shares 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 7 for further discussion of the pertinent terms of the Warrants and Note 8 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. As discussed in Note 1, 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 September 30, 2021 and December 31, 2020,
Income Taxes
Income taxes are accounted for under ASC 740, Income Taxes (“ASC 740”), using the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the unaudited condensed 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. 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.
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ASC 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 statement of operations.
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. 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
The following table reflects the calculation of basic and diluted net income (loss) per share of common stock:
| For the Three Months Ended September 30, 2021 | For the Nine Months Ended September 30, 2021 | For the Period from July 8, 2020 (Inception) to September 30, 2020 | ||||||||||||||||||||||
| Class A - Public shares | Class A Private placement shares and Class B Common stock | Class A - Public shares | Class A Private placement shares and Class B Common stock | Class A - Public shares | Class A Private placement shares and Class B Common stock | |||||||||||||||||||
| Basic and diluted net loss per share of common stock | ||||||||||||||||||||||||
| Numerator: | ||||||||||||||||||||||||
| Allocation of net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||
| Denominator: | ||||||||||||||||||||||||
| Basic and diluted weighted average number of shares of common stock outstanding | ||||||||||||||||||||||||
| Basic and diluted net loss per share of common stock | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||
Recent Accounting Pronouncements
In August 2020, the FASB issued 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.
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
Note 3—Initial Public Offering
Pursuant to the Initial Public Offering, the Company
sold
Note 4—Related Party Transactions
Founder Shares
On July 8, 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 Private Placement Warrants will expire five years after the completion of the Business Combination or earlier upon redemption or liquidation.
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.
Underwriter
The lead underwriter, Cantor Fitzgerald & Co. ("CF&Co."), is an affiliate of the Sponsor (see Note 5).
Business Combination Marketing Agreement
The Company has engaged an affiliate of the Sponsor, as an advisor in connection with the Business Combination to assist the Company
in holding meetings with its stockholders to discuss the 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 CF&Co. a cash fee (the “Marketing Fee”) for such services upon the consummation of the
Business Combination in an amount of $
14
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.
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 balance sheet. As of September 30, 2021 and December 31, 2020, the Company had accounts payable outstanding
to the Sponsor for such expenses paid on the Company’s behalf of approximately $
Note 5—Commitments and Contingencies
Registration Rights
Pursuant to a registration rights agreement entered into on March 11, 2021, 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.
Underwriting Agreement
The Company granted CF&Co., the lead underwriter
and an affiliate of the Sponsor, 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 $
15
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 is continuing to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the pandemic could have an effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is 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 this uncertainty.
Note 6—Stockholders’ Equity
Class A Common Stock - The Company
is authorized to issue
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 March 8, 2021, the Sponsor transferred an aggregate
of
Preferred Stock - The Company is
authorized to issue
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Note 7—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 Initial 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 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.
The Company may redeem the Public Warrants:
| ● | 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 |
17
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 8—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. |
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 table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2021 and indicates the fair value hierarchy of the inputs that the Company utilized to determine such fair value.
| September 30, 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. - Treasury Securities | $ | $ | $ | $ | ||||||||||||
| Liabilities: | ||||||||||||||||
| Warrant liability | $ | $ | $ | $ | ||||||||||||
| FPS liability | ||||||||||||||||
| Total Liabilities | $ | $ | $ | $ | ||||||||||||
Level 1 assets as of September 30, 2021 include investments in a money market fund that holds U.S. Treasury 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.
18
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.
Initial Measurement
The Company established the initial fair value for the Warrants on March 16, 2021, the date of the closing of the Initial Public Offering. The Public Warrants and Private Placement Warrants were measured at fair value on a recurring basis, using an Options Pricing Model (the “OPM”). The Company allocated the proceeds received from (i) the sale of Units in the Initial Public Offering (which is inclusive of one share of Class A common stock and one-fourth of one Public Warrant), (ii) the sale of the Private Placement Units (which is inclusive of one share of Class A common stock and one-fourth of one Private Placement Warrant), and (iii) the issuance of Class B common stock, first to the Warrants based on their fair values as determined at initial measurement, with the remaining proceeds allocated to shares of Class A common stock subject to possible redemption. The Warrants were classified as Level 3 at the initial measurement date due to the use of unobservable inputs.
The Company utilized the OPM to value the Warrants as of March 16, 2021, with any subsequent changes in fair value recognized in the statement of operations. The estimated fair value of the warrant liability as of March 16, 2021, 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 March 16, 2021:
March 16, (initial measurement) | ||||
| Risk-free interest rate | % | |||
| Expected term (years) | ||||
| Expected volatility | % | |||
| Exercise price | $ | |||
| Stock price | $ | |||
| Dividend yield | % | |||
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Subsequent Measurement
During the nine months ended September 30, 2021, the fair value measurement of the Public Warrants was reclassified from Level 3 to Level 2 due to the use of an observable quoted price in an inactive 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 also reclassified from Level 3 to Level 2 during the nine months ended September 30, 2021.
As of September 30, 2021, the aggregate fair values
of the Private Placement Warrants and Public Warrants were approximately $
The following table presents the changes in the fair value of warrant liability:
| Private Placement | Public | Warrant Liability | ||||||||||
| Fair value as of March 16, 2021 | $ | $ | $ | |||||||||
| 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 | $ | $ | $ | |||||||||
| Change in valuation inputs or other assumptions(1) | ( | ) | ( | ) | ( | ) | ||||||
| Fair value as of September 30, 2021(2) | $ | $ | $ | |||||||||
| (1) | Changes in valuation inputs or other assumptions are recognized in Change in fair value of warrant liability in the statement of operations. |
| (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 table presents a summary of the changes in the fair value of the FPS liability:
| FPS Liability | ||||
| Fair value as of March 16, 2021 | $ | |||
| 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 | $ | |||
| Change in valuation inputs or other assumptions(1) | ( | ) | ||
| Fair value as of September 30, 2021 | $ | |||
| (1) |
Note 9—Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the financial statements date through the date that the unaudited condensed financial statements were available to be 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.
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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. VIII. 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 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 July 8, 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 VIII, 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 March 11, 2021. On March 16, 2021, we consummated the Initial Public Offering of 25,000,000 units (each, a “Unit” and with respect to the shares of Class A common stock included in the Units sold, the “Public Shares”), including 3,000,000 Units sold upon the partial exercise of the underwriters’ over-allotment option, at a purchase price of $10.00 per Unit, generating gross proceeds of $250,000,000. Each Unit consists of one share of Class A common stock and one-fourth 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 on the later of 30 days after the completion of the Initial Business Combination or March 16, 2022 (12 months from the closing of the Initial Public Offering) 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 540,000 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 $5,400,000.
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Following the closing of the Initial Public Offering and sale of the Private Placement Units on March 16, 2021, an amount of $250,000,000 ($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 UMB 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 the Initial Business Combination and (ii) the distribution of the Trust Account, as described below.
We have until March 16, 2022 (12 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 (the “Combination Period”). If we are unable to complete the 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 our 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 our 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) above 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 the Initial Business Combination within the Combination Period.
Liquidity and Capital Resources
As of both September 30, 2021 and December 31, 2020, we had $25,000 of cash in our operating account. As of September 30, 2021, we had a working capital deficit of approximately $1,745,000. As of December 31, 2020, we had working capital of approximately $24,000. As of September 30, 2021, we had approximately $11,000 of interest income in the Trust Account available to pay taxes (less up to $100,000 of such net interest to pay dissolution expenses).
Our liquidity needs through September 30, 2021 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 $79,000 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 the Initial Business Combination, our 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 the 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 September 30, 2021 and December 31, 2020, there was approximately $676,000 and $0, 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 the 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 September 30, 2021 related to our formation, the preparation for the Initial Public Offering, and since the closing of the Initial Public Offering, 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.
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For the three months ended September 30, 2021, we had a net loss of approximately $1,055,000, which consisted of approximately $1,137,000 in general and administrative expenses, $60,000 of franchise tax expense and $30,000 in administrative expenses paid to the Sponsor, which were partially offset by approximately $102,000 of gain from the change in fair value of the forward purchase securities liability, approximately $64,000 of gain from the change in fair value of the warrant liability, and approximately $6,000 in interest income on investments held in the Trust Account.
For the nine months ended September 30, 2021, we had a net loss of approximately $2,441,000, which consisted of approximately $2,001,000 of loss from the change in fair value of the forward purchase securities liability, approximately $1,539,000 in general and administrative expenses, approximately $141,000 of franchise tax expense and approximately $65,000 in administrative expenses paid to the Sponsor, which were partially offset by approximately $1,294,000 of gain from the change in fair value of the warrant liability and approximately $11,000 in interest income on investments held in the Trust Account.
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 the Initial Business Combination and the target business’ attributes, introduce us to potential investors that are interested in purchasing our securities, assist us in obtaining stockholder approval for the Initial Business Combination and assist us with our press releases and public filings in connection with the 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 $9,350,000, 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 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 September 30, 2021 and December 31, 2020, we had borrowed approximately $676,000 and $0, respectively, under the Sponsor Loan.
The Sponsor pays expenses on our behalf. We reimburse the Sponsor for such expenses paid on our behalf. As of September 30, 2021 and December 31, 2020, we had accounts payable outstanding to the Sponsor for such expenses paid on our behalf of approximately $527,000 and $0, respectively.
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, disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. These accounting estimates require the use of assumptions about matters, some of which are highly uncertain at the time of estimation. To the extent actual experience differs from the assumptions used, our unaudited condensed balance sheets, unaudited condensed statements of operations 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.
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Going Concern
In connection with our going concern considerations in accordance with ASU 2014-15, Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern, we have until March 16, 2022 to consummate a Business Combination. Our mandatory liquidation date raises substantial doubt about the entity’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 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 franchise and income 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 Forward Purchase Securities 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 Financial Accounting Standards Board Accounting Standards Codification (“ASC”) 815-40, Derivatives and Hedging - Contracts in Entity’s Own Equity, under which the warrants and FPS do not meet the criteria for equity classification and must be recorded as liabilities. As both the public and private placement warrants and FPS meet the definition of a derivative under ASC 815, Derivatives and Hedging, they are measured at fair value at inception and at each reporting date in accordance with the guidance in ASC 820, Fair Value Measurement, with any subsequent changes in fair value recognized in the statement of operations in the period of change.
Class A Common Stock Subject to Possible Redemption
We account for our Class A common stock subject to possible redemption in accordance with the guidance in ASC 480, Distinguishing Liabilities from Equity. Shares of Class A common stock subject to mandatory redemption (if any) are classified as liability instruments and are 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 September 30, 2021, 25,000,000 shares of Class A common stock subject to possible redemption are presented as temporary equity outside of the stockholders’ equity section of our balance sheet. We recognize any subsequent changes in redemption value immediately as they occur and adjust the carrying value of redeemable 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 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 (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. We apply the two-class method in calculating earnings per share. Accretion associated with the redeemable shares of Class A common stock is excluded from earnings per share as the redemption value approximates fair value.
We have not considered the effect of the warrants to purchase an aggregate of 6,385,000 shares of Class A common stock sold in the Initial Public Offering and the Private Placement in the calculation of diluted earnings per share, since 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.
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Off-Balance Sheet Arrangements and Contractual Obligations
As of September 30, 2021, 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.
Recent Accounting Pronouncements
See Note 2—“Summary of Significant Accounting Policies” to our unaudited condensed financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for information regarding recent accounting pronouncements.
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.
Item 4. 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 September 30, 2021, 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 not effective as of the end of the period covered by this Quarterly Report on Form 10-Q, as amended due to a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Specifically, the Company’s management has concluded that our control around the interpretation and accounting for complex financial instruments issued by the Company was not effectively designed or maintained. This material weakness resulted in the restatement of the Company’s balance sheet as of March 16, 2021, and its interim financial statements for the quarters ended March 31, 2021 and June 30, 2021. We have performed additional analyses as deemed necessary to ensure that our financial statements were prepared in accordance with U.S. GAAP. Accordingly, management believes that the financial statements included in this Report present fairly in all material respects our financial position, results of operations and cash flows for the period presented.
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 September 30, 2021 covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
In light of the restatement, we plan to enhance our system of evaluating and implementing the accounting standards that apply to our financial statements, including enhanced analyses by our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors.
There have been no material changes from the risk factors previously disclosed in our most recent prospectus for the Initial Public Offering as filed with the SEC on March 15, 2021 and our Form 10-Q for the quarter ended March 31, 2021 as filed with the SEC on May 17, 2021.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities
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. VIII | ||
| Date: December 20, 2021 | By: | /s/ Howard W. Lutnick |
| Name: | Howard W. Lutnick | |
| Title: | Chairman and Chief Executive Officer | |
| (Principal Executive Officer) | ||
| Date: December 20, 2021 | By: | /s/ Jane Novak |
| Name: | Jane Novak | |
| Title: | Chief Financial Officer | |
| (Principal Financial and Accounting Officer) | ||
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