References to "we", "us", "our" or the "Company" are to CF Finance Acquisition
Corp. III, except where the context requires otherwise. The following discussion
should be read in conjunction with our financial statements and related notes
thereto included elsewhere in this Report.
Cautionary Note Regarding Forward-Looking Statements
This Report includes forward-looking statements within the meaning of
Section 27A of the Securities Act, and Section 21E of 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. Factors that might cause or contribute to such a discrepancy
include, but are not limited to, those described in our other SECfilings.
Overview
We are a blank check company incorporated in Delaware on March 15, 2016 for the
purpose of effecting an initial business combination. Our sponsor is CF Finance
Holdings III, LLC.
Although we are not limited to a particular industry or sector for purpose of
consummating an 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, subject to all of the risks associated with early stage
and emerging growth companies.
Our registration statement for our initial public offering became effective on
November 12, 2020. On November 17, 2020, we consummated the initial public
offering of 23,000,000 units, including 3,000,000 units sold upon the exercise
of the underwriters' overallotment option in full, at a purchase price of $10.00
per unit, generating gross proceeds of $230,000,000. Each unit consists of one
share of Class A common stock and one-third of one redeemable warrant. Each
whole warrant entitles the holder to purchase one share of Class A common stock
at a price of $11.50. Each warrant will become exercisable on the later of 30
days after the completion of the initial business combination or until November
17, 2021 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 500,000 units at a price of $10.00 per private placement unit to the
sponsor in a private placement, generating gross proceeds of $5,000,000.
Following the closing of the initial public offering and sale of private
placement units on November 17, 2020, an amount of $230,000,000 ($10.00 per
unit) from the net proceeds of the sale of the units in the initial public
offering and the sale of the private placement units was placed in a trust
account located in the United States at J.P. Morgan Chase Bank, N.A., with
Continental acting as trustee, which may be invested only in U.S. government
securities, within the meaning set forth in Section 2(a)(16) of the Investment
Company Act, with a maturity of 185 days or less or in any open-ended investment
company that holds itself out as a money market fund selected by us meeting the
conditions of paragraphs (d)(2), (d)(3) and (d)(4) of Rule 2a-7 of the
Investment Company Act, as determined by us, until the earlier of: (i) the
completion of an initial business combination and (ii) the distribution of the
trust account, as described below.
We have until May 17, 2021 or prior to the expiration of the applicable
four-month extension period, as described below, to consummate an initial
business combination (the "Combination Period"). If we are unable to complete an
initial business combination by the end of the Combination Period, we will (i)
cease all operations except for the purpose of winding up, (ii) as promptly as
reasonably possible but not more than ten business days thereafter, redeem the
public shares, at a per-share price, payable in cash, equal to the aggregate
amount then on deposit in the trust account including interest earned on the
funds held in the trust account and not previously released to the Company to
pay taxes (less up to $100,000 of interest to pay dissolution expenses), divided
by the number of then outstanding public shares, which redemption will
completely extinguish public stockholders' rights as stockholders (including the
right to receive further liquidating distributions, if any), subject to
applicable law, and (iii) as promptly as reasonably possible following such
redemption, subject to the approval of our remaining stockholders and our board
of directors, dissolve and liquidate, subject in the case of clauses (ii) and
(iii) to our obligations under Delaware law to provide for claims of creditors
and the requirements of other applicable law. There will be no redemption rights
or liquidating distributions with respect to our warrants, which will expire
worthless if we fail to complete an initial business combination within the
Combination Period.
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If we anticipate that we may not be able to consummate an initial business
combination by May 17, 2021, and subject to the sponsor depositing additional
funds into the trust account as set out below, the time to consummate an initial
business combination shall be extended for an additional four months up to four
times, for a total of up to 22 months to complete an initial business
combination. The stockholders will not be entitled to vote or redeem their
shares in connection with any such extension. Pursuant to the terms of the
Charter and the trust agreement entered into between us and Continental, in
order for the time available for us to consummate an initial business
combination to be extended, the sponsor or its affiliates or permitted
designees, upon five days advance notice prior to the applicable deadline, must
deposit into the trust account $2,300,000 ($0.10 per public unit), on or prior
to the date of the applicable deadline, for each of the available four month
extensions providing a total possible business combination period of 22 months
at a total payment value of $9,200,000 ($0.10 per public unit). Any such
payments would be made in the form of a non-interest bearing loan which would be
due and payable on the consummation of the initial business combination out of
the proceeds of the trust account released to us. If we do not complete an
initial business combination, we may repay such loans solely from assets not
held in the trust account, if any. The sponsor and its affiliates or designees
intend, but are not obligated, to fund the trust account to extend the time for
us to complete our initial business combination.
Liquidity and Capital Resources
As of December 31, 2020, we had $1,250 of cash in our operating account, working
capital deficit of approximately $45,900, and approximately $800 of interest
income in the trust account available to pay franchise and income taxes.
Our liquidity needs through December 31, 2020 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 $140,000 from the sponsor pursuant to a
promissory note (the "Pre-IPO Note"), the proceeds from the consummation of the
private placement with the sponsor not held in the trust account, and the
Sponsor Loan (as defined below). We fully repaid the Pre-IPO Note upon
completion of the initial public offering. In addition, in order to finance
transaction costs in connection with an initial business combination, 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
Company's 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 intend, but are not obligated to, provide us additional
loans. As of December 31, 2020, there was approximately $428,000 outstanding
under the Sponsor Loan.
Based on the foregoing, management believes that we will have sufficient working
capital and borrowing capacity from the sponsor to meet our needs through the
earlier of the consummation of an initial business combination or one year from
the date of this Report. Over this time period, we will be using these funds for
paying existing accounts payable, identifying and evaluating prospective target
businesses, performing due diligence on prospective target businesses, paying
for travel expenditures, selecting the target business to merge with or acquire,
and structuring, negotiating and consummating the initial business combination.
It is the current intention of the sponsor to exercise, at a minimum, two four
month extensions should an initial business combination not occur, as noted
above, such that the life of the Company will be at least one year and one day
from the issuance of the Report.
Results of Operations
Our entire activity from inception through December 31, 2020 related to our
formation, the preparation for the initial public offering, and since the
closing of the initial public offering, the search for a prospective 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 trust account. We
expect to incur increased expenses as a result of being a public company (for
legal, financial reporting, accounting and auditing compliance), as well as for
due diligence expenses.
For the year ended December 31, 2020, we incurred a net loss of approximately
$153,000, which consisted of approximately $116,000 in general and
administrative expenses, $14,000 in administrative expenses paid to the sponsor
and approximately $24,000 of franchise tax expense, which was partially offset
by an approximately $800 interest income on investments held in the trust
account.
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For the year ended December 31, 2019, we incurred a net loss of approximately
$500, which consisted of approximately $100 in general and administrative
expenses and $400 of franchise tax expense.
Contractual Obligations
Business Combination Marketing Agreement
We engaged Cantor, an affiliate of the sponsor, as an advisor in connection with
the Company's 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 the Company's 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
Cantor a cash fee ("Marketing Fee") for such services upon the consummation of
the initial business combination in an amount 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 full 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 Company's initial business combination. As of December 31, 2020, we
had borrowed approximately $428,000 under the Sponsor Loan.
The sponsor pays expenses on our behalf. We reimburse the sponsor for such
expenses paid on our behalf. As of December 31, 2020, we had accounts payable
outstanding to the sponsor for such expenses paid on our behalf of approximately
$4,300.
Critical Accounting Policies and Estimates
The Company has identified the following as its critical accounting polices:
Use of Estimates
The preparation of 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 financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates.
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.
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 Accounting Standards Codification ("ASC") Topic
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 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. Our Class A common stock features certain
redemption rights that are considered to be outside of our control and subject
to the occurrence of uncertain future events. Accordingly, as of December 31,
2020, 22,531,950 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.
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Net Income (Loss) Per Common Share
We comply with accounting and disclosure requirements of ASC Topic 260,
"Earnings Per Share." Net income per common share is computed by dividing net
income (loss) applicable to common stockholders by the weighted average number
of shares of common stock outstanding for the period. We have not considered the
effect of the warrants sold in the initial public offering and the concurrent
private placement to purchase an aggregate of 7,833,333 shares of Class A common
stock 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 common share is the same as basic earnings per common share for the
period.
Our statement of operations includes a presentation of income per share for
common stock subject to redemption in a manner similar
to the two-class method of income per share. Net income per share, basic and
diluted for shares of Class A common stock are calculated by dividing the
interest income (loss) earned on cash equivalents and investments and held in
the trust account, net of applicable taxes available to be withdrawn from the
trust account, by the weighted average number of shares of Class A common stock
outstanding for the applicable period, excluding 500,000 shares of Class A
common stock held by the sponsor, which is not subject to redemption. Net loss
per share, basic and diluted for shares of Class B common stock is calculated by
dividing the net income, less income attributable to the shares of redeemable
Class A common stock by the weighted average number of shares of Class B common
stock and 500,000 shares of Class A common stock held by the sponsor outstanding
for the applicable period.
Off-Balance Sheet Arrangements and Contractual Obligations
As of December 31, 2020, 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
Our management does not believe there are any other recently issued, but not yet
effective, accounting pronouncements, if currently adopted, that would have a
material effect on our financial statements.
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