Notes
to Unaudited Condensed Financial Statements
1.
Description of Business and Operations
Description
of Business -
CF Finance Acquisition Corp. (the “Company”) was incorporated in Delaware on July 9, 2014. 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 to a particular industry or sector for the purpose of consummating a Business Combination, the Company
intends to focus its search on companies operating in the financial services or real estate industries. The Company is an early
stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging
growth companies.
As
of June 30, 2019, the Company had not yet commenced operations. All activity for the three and six months ended June 30,
2019 and 2018 relates to the Company’s formation and Public Offering described below and, subsequent to the Public Offering,
efforts have been directed toward locating and completing a suitable Business Combination. The Company will not generate any operating
revenues until after the completion of its initial Business Combination, at the earliest. The Company has generated non-operating
income in the form of interest income on cash and cash equivalents from the proceeds derived from the Public Offering. The Company
has selected December 31
st
as its fiscal year end.
The
Company’s Sponsor is CF Finance Holdings LLC (the “Sponsor”). The registration statement for the Public Offering
(see Note 3) was declared effective by the United States Securities and Exchange Commission (the “SEC”) on December
12, 2018. The Company intends to finance a Business Combination with the proceeds of approximately $282,600,000 from the Public
Offering, $6,000,000 from the Private Placement (see Note 4) and approximately $2,826,000 from the Sponsor loan (see Note 4).
Offering costs for the Public Offering amounted to approximately $5,585,900, consisting of $5,100,000 of underwriting fees and
approximately $485,900 of other costs.
Initial
Business Combination -
The Company’s management has broad discretion with respect to the specific application of the
net proceeds of the Public Offering and the sale of Private Placement Units, although substantially all of the net proceeds are
intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company will be able
to complete a Business Combination successfully. The Company must complete one or more initial Business Combinations having an
aggregate fair market value of at least 80% of the assets held in the Trust Account (as defined below) (excluding taxes payable
on income earned on the Trust Account) at the time of the agreement to enter into the initial Business Combination. However, the
Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding
voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required
to register as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”).
Upon the closing of the Public Offering and the underwriter’s partial exercises of the over-allotment option, an amount
equal to $10.10 per Unit sold in the Public Offering, including the proceeds of the Private Placement Units and Sponsor Loan (see
Note 4), was held in a Trust Account, with Continental Stock Transfer & Trust Company acting as trustee. The proceeds are
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 180 days or less or in any open-ended Investment Company that holds itself out as a money market fund selected by
the Company meeting the conditions of paragraphs (d)(2), (d)(3) and (d)(4) of Rule 2a-7 of the Investment Company Act, as determined
by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account
as described below.
CF Finance Acquisition Corp.
Notes to Unaudited Condensed Financial Statements
(continued)
1.
Description of Business and Operations (continued)
The
Company will provide its holders of the outstanding shares of its Class A common stock, par value $0.0001 (“Class A common
stock”), sold in the Public Offering (the “public stockholders”) with the opportunity to redeem all or a portion
of their public shares (the “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 (see Note 3) for a pro rata portion
of the amount then in the Trust Account (initially $10.10 per Public Share).These Public Shares will be recorded at a redemption
value and classified as temporary equity upon the completion of the Public Offering in accordance with the Financial Accounting
Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 480
“Distinguishing
Liabilities from Equity”.
In such case, the Company will proceed with a Business Combination if the Company has net
tangible assets of at least $5,000,001 upon such consummation of a Business Combination and a majority of the shares voted are
voted in favor of the Business Combination. If a stockholder vote is not required by law and the Company does not decide to hold
a stockholder vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Certificate of
Incorporation (the “Amended and Restated Certificate of Incorporation”), conduct the redemptions pursuant to the tender
offer rules of the SEC and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder
approval of the transaction is required by law, or the Company decides to obtain stockholder approval for business or legal reasons,
the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant
to the tender offer rules. Additionally, each public stockholder may elect to redeem their Public Shares irrespective of whether
they vote for or against the proposed transaction. If the Company seeks stockholder approval in connection with a Business Combination,
the Company’s Sponsor (the “initial stockholders”), officers and directors have agreed to vote their Founder
Shares (see Note 4) and any Public Shares purchased during or after the Public Offering in favor of a Business Combination. In
addition, the initial stockholders, officers and directors have agreed to waive their redemption rights with respect to their
Founder Shares and shares included in the Private Placement Units held by the initial stockholders, officers and directors in
connection with the completion of a Business Combination.
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 20% or more of the Class A common stock sold in the Public Offering,
without the prior consent of the Company.
The
initial stockholders, officers and directors have agreed not to propose an amendment to the Amended and Restated Certificate of
Incorporation (i) that would affect the substance or timing of the Company’s obligation to redeem 100% of its Public Shares
if the Company does not complete a Business Combination or (ii) with respect to any other provision relating to stockholders’
rights or pre-business combination activity, unless the Company provides the public stockholders with the opportunity to redeem
their Public Shares in conjunction with any such amendment.
Forward
Purchase Contract -
The Sponsor has committed, pursuant to a forward purchase contract with the Company, to purchase, in a
Private Placement for gross proceeds of $30,000,000 to occur concurrently with the consummation of an initial Business Combination,
3,000,000 of the Company’s Units on substantially the same terms as the sale of Units in the initial Public Offering at
$10.00 per Unit, and 750,000 shares of Class A common stock. The funds from the sale of Units will be used as part of the consideration
to the sellers in the initial Business Combination; any excess funds from this Private Placement will be used for working capital
in the post-transaction company. This commitment is independent of the percentage of stockholders electing to redeem their Public
Shares and provides the Company with a minimum funding level for the initial business combination.
CF Finance Acquisition Corp.
Notes to Unaudited Condensed Financial Statements
(continued)
1.
Description of Business and Operations (continued)
Failure
to Consummate a Business Combination -
If the Company is unable to complete a Business Combination within 18 months from the
closing of the Public Offering (the “Combination Period”) by June 17, 2020, 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 franchise and
income 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 the Company’s remaining stockholders and the Company’s board of directors,
dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors
and the requirements of other applicable law.
The
initial stockholders, officers and directors have agreed to waive their liquidation rights with respect to the Founder Shares
if the Company fails to complete a Business Combination within the Combination Period. However, if the initial stockholders, officers
and directors acquire Public Shares in or after the Public Offering, they will be entitled to liquidating distributions from the
Trust Account with respect to such Public Shares if the Company fails to complete a Business Combination within the Combination
Period. In the event of such distribution, it is possible that the per share value of the residual assets remaining available
for distribution (including Trust Account assets) will be only $10.10 per share initially held in the Trust Account. In order
to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any
claims by a vendor for services rendered or products sold to the Company, or a prospective target business with which the Company
has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account. This liability will not
apply with respect to any claims by a third party who executed a waiver of any right, title, interest or claim of any kind in
or to any monies held in the Trust Account or to any claims under the Company’s indemnity of the underwriter of the Public
Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities
Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will
not be responsible to the extent of any liability for such third party claims. The Company will seek to reduce the possibility
that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service
providers, except for the Company’s independent registered public accounting firm, prospective target businesses or other
entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim
of any kind in or to monies held in the Trust Account.
The
Trust Account -
The proceeds in the Trust Account will be invested only in U.S. government treasury bills with a maturity
of one hundred and eighty (180) days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment
Company Act of 1940 which invest only in direct U.S. government obligations. Funds will remain in the Trust Account until the
earlier of (i) the consummation of the Company’s initial Business Combination or (ii) the distribution of the Trust Account
proceeds as described below. The remaining proceeds outside the Trust Account may be used to pay for business, legal and accounting
due diligence expenses for prospective acquisition targets and continuing general and administrative expenses. As of June 30,
2019, investment securities in the Trust Account consisted of $288,755,381 in U.S. government treasury bills and $202,879 in money
market fund. As of December 31, 2018, investment securities in the Trust Account consisted of $252,721,203 in U.S. government
treasury bills and $25,251,806 held as cash. The Amended and Restated Certificate of Incorporation provides that, other than the
withdrawal of interest to pay taxes, if any, none of the funds held in the Trust Account will be released until the earlier of:
(i) the completion of the Business Combination; or (ii) the redemption of 100% of the Public Shares included in the Units being
sold in the Public Offering if the Company is unable to complete a Business Combination by June 17, 2020 (subject to the requirements
of law).
CF Finance Acquisition Corp.
Notes to Unaudited Condensed Financial Statements
(continued)
2.
Summary of Significant Accounting Policies
Basis
of presentation -
The unaudited condensed financial statements are presented in accordance with accounting principles generally
accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the SEC and reflect
all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair
presentation of the financial position as of June 30, 2019 and the results of operations and cash flows for the periods presented.
Certain information and disclosures normally included in financial statements prepared in accordance with GAAP have been omitted
pursuant to such rules and regulations. Interim results are not necessarily indicative of results for a full year. The accompanying
unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto
included in the Form 10-K filed by the Company with the SEC on March 29, 2019.
In
connection with the Company’s going concern considerations in accordance with ASU 2014-15, “
Disclosures of Uncertainties
about an Entity’s Ability to Continue as a Going Concern
” as of June 30, 2019, the Company may not have sufficient
liquidity to meet its current obligations over the next year from issuance of the unaudited condensed financial statements. However,
management has determined that the Company has access to funds from the Sponsor, the Sponsor has committed, in the form of a loan,
up to $750,000 to be provided to the Company (see Note 4), and the Sponsor, along with an affiliate of the Sponsor, has financial
wherewithal to provide such funds, including an aggregate of $1,500,000 intended to be provided under a related party loan (the
“Related Party Loan”) (see Note 4) that are sufficient to fund the working capital needs until the earlier of the
consummation of a Business Combination or a minimum of one year from the date of issuance of these unaudited condensed financial
statements.
Emerging
growth company -
The Company is an “emerging growth company”, as defined in Section 2(a) of the Securities Act,
as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain
exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies
including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley
Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions
from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute
payments not previously approved.
Further,
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial
accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared
effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised
financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and
comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The
Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and
it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the
new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s
unaudited condensed financial statements with another public company, which is neither an emerging growth company nor an emerging
growth company, which has opted out of using the extended transition period difficult or impossible because of the potential differences
in accounting standards used.
Use
of Estimates -
The preparation of unaudited condensed financial statements in conformity with U.S. GAAP requires the Company’s
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the unaudited condensed financial statements and the reported amounts of revenues and expenses
during the reporting period. Making estimates requires management to exercise significant judgment. It is at least reasonably
possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the unaudited
condensed financial statements, which management considered in formulating its estimate, could change in the near term due to
one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
Cash
and investments held in Trust Account -
As of June 30, 2019 and December 31, 2018, the assets held in the Trust
Account were held in cash and U.S. government treasury bills.
CF Finance Acquisition Corp.
Notes to Unaudited Condensed Financial Statements
(continued)
2.
Summary of Significant Accounting Policies (continued)
Deferred
Offering Costs -
Deferred offering costs consist of legal and accounting fees incurred through the balance sheet dates that
are directly related to the Public Offering and that were charged to stockholders’ equity upon the completion of the Public
Offering.
Income
Taxes
- The Company accounts for income taxes using the asset and liability method as prescribed in ASC Topic 740,
Income
Taxes
. Deferred tax assets and liabilities are recognized for the 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.
ASC
Topic 740 prescribes a recognition threshold that a tax position is required to meet before being recognized in the unaudited
condensed financial statements. The Company provides for uncertain tax positions based upon management’s assessment of whether
a tax benefit is more likely than not to be sustained upon examination by tax authorities. The Company recognizes interest and
penalties related to unrecognized tax benefits as provision for income taxes on the unaudited condensed statements of operations.
There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of June 30, 2019 and December 31,
2018.
The
Company may be subject to examination by federal, state and city taxing authorities in the areas of income taxes. The Company
is currently not under examination by tax authorities and is not aware of any issues that may result in significant payments or
accruals. Accordingly, the Company does not believe that the amounts of unrecognized tax benefits will materially change over
the next twelve months.
Net
Income (Loss) per Common Share -
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “
Earnings
Per Share”
. Net income (loss) per common share is computed by dividing net income (loss) applicable to common stockholders
by the weighted average number of common shares outstanding for the period, after deducting shares that are subject to forfeiture
in connection with the Public Offering.
As
of June 30, 2019, the Company has not considered the effect of the warrants sold in the Public Offering and Private Placement
to purchase an aggregate of 21,643,809 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 of June 30, 2019, the Company did not have any
dilutive securities and other contracts that could, potentially, be exercised or converted into shares of common stock and then
share in the earnings of the Company. As a result, diluted income (loss) per share is the same as basic income (loss) per share
for the periods presented.
Net
income per share, for Class A – public shares common stock is calculated by dividing the interest income earned on the Trust
Account less interest to pay taxes permitted to be withdrawn from the Trust Account by the weighted average number of Class A
– public shares common stock outstanding for the period. Net income per share, Class A excludes the shares sold in the private
placement because those shares do not have the same redemption rights as the Class A shares sold in the Public Offering. Net income
per share, Class A – private placement and Class B common stock is calculated by dividing the net income, excluding interest
income earned on the Trust Account and interest to pay taxes permitted to be withdrawn from the Trust Account, by the weighted
average number of Class A – private placement and Class B common stock outstanding for the period.
Concentration
of Credit Risk -
Financial instruments that potentially subject the Company to concentration of credit risk consist of cash
accounts in a financial institution, which, at times may exceed the Federal depository insurance coverage of $250,000. As of June 30,
2019 and December 31, 2018, the Company has not experienced losses on these accounts and management believes the Company
is not exposed to significant risks on such accounts.
CF Finance Acquisition Corp.
Notes to Unaudited Condensed Financial Statements
(continued)
2.
Summary of Significant Accounting Policies (continued)
Financial
Instruments -
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under FASB
ASC Topic 820, “
Fair Value Measurements and Disclosures”
, approximates the carrying amounts represented in
the accompanying balance sheets, primarily due to their short-term nature.
Recently
Issued Accounting Pronouncements
- The Company’s management does not believe that any recently issued, but not yet effective,
accounting pronouncements, if currently adopted, would have a material effect on the Company’s unaudited condensed financial
statements.
3.
Public Offering
The
Company closed the Public Offering for the sale of approximately 28,260,000 Units at a price of $10.00 per Unit, yielding
gross proceeds of approximately $282,600,000. In December 2018, the Company closed the Public Offering for the sale of 27,500,000
Units at a price of $10.00 per Unit, yielding proceeds of $275,000,000. The closings occurred on December 17, 2018 with
respect to 25,000,000 Units and on December 31, 2018 with respect to 2,500,000 Units related to the partial exercise of the underwriter’s
over-allotment option. In January 2019, the underwriter exercised the over-allotment option of 758,413 additional Units at $10.00
per Unit, yielding proceeds of $7,584,130.
Each
Unit consists of one share of Class A common stock, and three-quarters of one redeemable warrant (each, a “Public Warrant”).
Each whole Public Warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share,
subject to adjustment (see Note 7).
Simultaneous
with the closing of the Public Offering on December 17, 2018, the Sponsor purchased an aggregate of 600,000 Private Placement
Units at a price of $10.00 per Unit ($6,000,000 in the aggregate) in a private placement. Each Unit consists of one share of Class
A common stock and three-quarters of one warrant. Each whole warrant entitles the holder to purchase one share of Class A common
stock at a price of $11.50 per share, subject to adjustment (see Note 7). The Private Placement Units are not redeemable from
funds deposited in the Trust Account.
Upon
the December 2018 and January 2019 closings of the Public Offering, the Sponsor funded loans in the amount of $2,750,000 and $75,841,
respectively, pursuant to a promissory note issued by the Company. The promissory note is at nominal or no interest (see Note
4).
Upon
the closing of the Public Offering and the sale of the Private Placement Units, and taking into consideration the offering costs,
an aggregate of approximately $286,000,000 was deposited in the Trust Account.
4.
Related Party Transactions
Founder
shares
In
July 2014, the Sponsor purchased 2,875,000 Founder Shares of the Company’s Class B common stock, par value $0.0001 (“Class
B common stock”) for an aggregate price of $383. During 2015, the Sponsor contributed an additional $50,000 to the Company’s
paid-in capital for no additional shares. The Founder Shares will automatically convert into shares of Class A common stock at
the time of the Company’s initial Business Combination and are subject to certain transfer restrictions (see Note 7).
On
January 17, 2018, the Sponsor effectuated a recapitalization of the Company, which included
a 2.5-for-1 stock split resulting in an aggregate of 7,187,500 Founder Shares outstanding and held by the Sponsor
. Information
contained in the unaudited condensed financial statements has been adjusted for this split.
Holders
of Founder Shares may also elect to convert their shares of Class B common stock into an equal number of shares of Class A common
stock, subject to adjustment, at any time. In January 2019, 122,897 shares were forfeited by the Sponsor so that the Founder Shares
represent 20% of the Company’s issued and outstanding shares after the Public Offering (not including the placement shares).
CF Finance Acquisition Corp.
Notes to Unaudited Condensed Financial Statements
(continued)
4.
Related Party Transactions (continued)
The
initial stockholders, officers and directors have agreed, subject to limited exceptions, not to transfer, assign or sell any of
its Founder Shares until the earlier to occur of: (A) one year after the completion of the initial Business Combination or (B)
subsequent to the initial Business Combination, (x) if the last reported sale price of the Class A common stock equals or exceeds
$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
Upon
the December 17, 2018 closing of the Public Offering, the Sponsor paid the Company $6,000,000 for the purchase of the 600,000
Private Placement Units at a price of $10.00 per Private Placement Unit. Each Unit consists of one share of Class A common stock
and three-quarters of one warrant. Each whole warrant sold as part of each Private Placement Unit is exercisable for one share
of Class A common stock at a price of $11.50 per share. The proceeds from the Private Placement Units were added to the
proceeds from the Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the
Combination Period, the proceeds from the sale of the Private Placement Units held in the trust account will be used to fund the
redemption of the Company’s Public Shares (subject to the requirements of applicable law). The warrants included in the
Private Placement Units will be non-redeemable and exercisable on a cashless basis so long as they are held by the Sponsor or
its permitted transferees. The warrants will expire five years after the completion of the Company’s 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
underwriter is an affiliate of the Sponsor (see Note 5).
Related
Party Loans
In
order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain
of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working
Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out
of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of
funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of
proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be
used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been
determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation
of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of such Working Capital Loans
may be convertible into warrants of the post Business Combination entity at a price of $1.00 per warrant. The warrants
would be identical to the warrants included in the Private Placement Units.
In
order to finance transaction costs in connection with an intended initial Business Combination, the Sponsor has committed, in
the form of a loan, up to $750,000 to be provided to the Company to fund the Company’s expenses relating to investigating
and selecting a target business and other working capital requirements prior to the Company’s initial Business Combination.
Such loan may be convertible into warrants, at a price of $1.00 per warrant at the option of the Sponsor.
CF Finance Acquisition Corp.
Notes to Unaudited Condensed Financial Statements
(continued)
4.
Related Party Transactions (continued)
The
Sponsor previously made available to the Company, under a promissory note, up to $300,000 to be used for a portion of the expenses
of the Public Offering. The promissory note is non-interest bearing and was not repaid in full upon the completion of the Public
Offering. As of June 30, 2019 and December 31, 2018, the Company had amounts outstanding under the promissory note of approximately
$100 and $100,000, respectively.
Sponsor
Loan
Upon
the closings of the Public Offering, the Sponsor funded loans in the amount of $2,750,000 in December 2018 and $75,841 in January
2019 for an aggregate of $2,825,841, pursuant to a promissory note issued by the Company. The promissory note is interest free.
The proceeds of the Sponsor loans were deposited into the Trust Account and will be used to fund the redemption of the Public
Shares (subject to the requirements of applicable law). The Sponsor loans shall be repaid or converted into Sponsor loan units,
at the Sponsor’s discretion, only upon consummation of the Business Combination. The Sponsor loan units would be identical
to the Units sold in the Public Offering except that the Sponsor loan warrants will be non-redeemable and exercisable on a cashless
basis so long as they are held by the Sponsor or its permitted transferees. The Sponsor loan was extended in order to ensure that
the amount in the Trust Account was initially $10.10 per Public Share. If there is no Business Combination, the Sponsor loan will
not be repaid and the loan’s proceeds will be distributed to the public stockholders. The Sponsor has waived any claims
against the Trust Account in connection with the Sponsor loan.
5.
Commitments
Registration
Rights
The
holders of Founder Shares, Private Placement Units (and component securities) and warrants that may be issued upon conversion
of Working Capital Loans, if any, will be entitled to registration rights (in the case of the Founder Shares, only after conversion
of such shares to shares of Class A common stock). The registration rights agreement was signed on December 12, 2018. These holders
are entitled to certain demand and “piggyback” registration rights. However, the registration rights agreement provides
that the Company will not permit any registration statement filed under the Securities Act to become effective until the termination
of the applicable lock-up period for the securities to be registered. The Company will bear the expenses incurred in connection
with the filing of any such registration statements.
Underwriting
Agreement
Cantor
Fitzgerald & Co, the underwriter of the Public Offering and an affiliate of the Sponsor, purchased approximately 3,260,000
additional Units to cover over-allotments, at the Public Offering price less the underwriting discounts and commissions.
The
underwriter was entitled to an underwriting discount of $0.20 per Unit, or $5,000,000 in the aggregate, even if the underwriter’s
over-allotment was exercised in full. The underwriter has paid approximately $32,600,000 for 3,260,000 Units.
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 $100,000
upon the completion of the Public Offering in consideration for its services and expenses as the qualified independent underwriter.
The independent underwriter will receive no other compensation. The fee was charged directly to stockholders' equity upon completion
of the IPO.
Business
Combination Marketing Agreement
The
Company has engaged Cantor Fitzgerald & Co. as an advisor in connection with the Company’s initial Business Combination
to assist the Company in holding meetings with its stockholders to discuss the potential Business Combination and the target business’
attributes, introduce the Company to potential investors that are interested in purchasing the Company’s securities, assist
the Company in obtaining stockholder approval for the Business Combination and assist the Company with its press releases and
public filings in connection with the Business Combination. The Company will pay Cantor Fitzgerald & Co. a cash fee for such
services upon the consummation of the Business Combination in an amount equal to, in the aggregate, 3.5% of the gross proceeds
of the Public Offering, including any proceeds from the partial exercise of the underwriters’ over-allotment option.
CF Finance Acquisition Corp.
Notes to Unaudited Condensed Financial Statements
(continued)
6.
Trust Account and Fair Value Measurements
As
of June 30, 2019 and December 31, 2018, investment securities in the Company Trust Account consisted of $288,755,381
and $252,721,203, respectively, in U.S. government treasury bills, and $202,879 held in money market fund and $25,251,806 held
in cash, respectively. The Company classifies its Treasury Instruments and equivalent securities as held-to-maturity in accordance
with FASB ASC 320 "
Investments - Debt and Equity Securities
". Held-to-maturity securities are those securities
which the Company has the ability and intent to hold until maturity. Held-to-maturity treasury securities are recorded at amortized
cost on the accompanying June 30, 2019 and December 31, 2018 balance sheets and adjusted for amortization or accretion
of premiums or discounts. The following table presents information about the Company's assets that are measured at fair value
on a recurring basis as of June 30, 2019 and December 31, 2018 and indicates the fair value hierarchy of the valuation
techniques the Company utilized to determine such fair value. In addition, the table presents the carrying value under ASC 320,
excluding accrued interest income and gross unrealized holding gain. Since all of the Company's permitted investments consist
of U.S. government treasury bills and cash, fair values of its investments are determined by Level 1 inputs utilizing quoted prices
(unadjusted) in active markets for identical assets as follows:
|
|
June 30, 2019
|
|
Description
|
|
Carrying
Value
|
|
|
Gross
Unrealized
Holding
Gains
|
|
|
Quoted
prices in
Active
Markets
(Level 1)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Money market fund
|
|
$
|
202,879
|
|
|
$
|
—
|
|
|
$
|
202,879
|
|
U.S. government securities
|
|
|
288,755,381
|
|
|
|
106,115
|
|
|
|
288,861,496
|
|
Total
|
|
$
|
288,958,260
|
|
|
$
|
106,115
|
|
|
$
|
289,064,375
|
|
|
|
December 31, 2018
|
|
Description
|
|
Carrying
Value
|
|
|
Gross
Unrealized
Holding
Losses
|
|
|
Quoted
prices in
Active
Markets
(Level 1)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
25,251,806
|
|
|
$
|
—
|
|
|
$
|
25,251,806
|
|
U.S. government securities
|
|
|
252,721,203
|
|
|
|
(30,458
|
)
|
|
|
252,690,745
|
|
Total
|
|
$
|
277,973,009
|
|
|
$
|
(30,458
|
)
|
|
$
|
277,942,551
|
|
7.
Stockholders’ Equity
Class
A Common Stock -
The Company is authorized to issue 100,000,000 shares of Class A common stock with a par value of
$0.0001 per share. As of June 30, 2019 and December 31, 2018, there were 28,858,413 and 28,100,000 shares of Class A
common stock issued and outstanding including 27,746,298 and 26,797,511 of shares subject to redemption, respectively. Class A
Common Stock includes 600,000 shares sold in a Private Placement. The shares sold in the Private Placement do not contain the
same redemption feature contained in the shares sold in the Public Offering.
Class
B Common Stock -
The Company is authorized to issue 10,000,000 shares of Class B common stock with a par value of
$0.0001 per share. Holders of Class B common stock are entitled to one vote for each share. As of June 30, 2019 and December 31,
2018, there were 7,064,603 and 7,187,500 shares of Class B common stock outstanding, respectively, of which none and 312,500 shares,
respectively, were subject to forfeiture to the Company by the Sponsor for no consideration to the extent that the underwriter’s
over-allotment option is not exercised in full, so that the initial stockholders, officers and directors will collectively own
20% of the Company’s issued and outstanding common stock after the Public Offering, not including the Private Placement
Units. Holders of Class A common stock and Class B common stock will vote together as a single class on all other matters submitted
to a vote of stockholders except as required by law. Upon the final exercise of the underwriters' over-allotment option in January
2019, the sponsor forfeited 122,897 shares of Class B common stock.
CF Finance Acquisition Corp.
Notes to Unaudited Condensed Financial Statements
(continued)
7.
Stockholders’ Equity (continued)
The
shares of Class B common stock will automatically convert into shares of Class A common stock at the time of the initial Business
Combination on a one-for-one basis, subject to adjustment. In the case that additional shares of Class A common stock, or equity-linked
securities, are issued or deemed issued in excess of the amounts sold in the Public Offering and related to the closing of the
initial Business Combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock
will be adjusted (unless the holders of a majority of the outstanding shares of Class B common stock agree to waive such adjustment
with respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion
of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis, 20% of the sum of the total number
of all shares of common stock outstanding upon the completion of the Public Offering, not including the Private Placement Units,
plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with the initial Business
Combination (excluding any shares or equity-linked securities issued, or to be issued, to any seller in the initial Business Combination
and any private placement-equivalent warrants issued to the Sponsor or its affiliates upon conversion of loans made to the Company).
Holders of Founder Shares may also elect to convert their shares of Class B common stock into an equal number of shares of Class
A common stock, subject to adjustment as provided above, at any time.
Preferred
stock -
The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per
share with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s
board of directors. As of June 30, 2019 and December 31, 2018, there were no shares of preferred stock issued or outstanding.
Warrants
-
Public Warrants may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise
of the Public Warrants. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of
a Business Combination or (b) 12 months from the closing of the Public Offering; provided in each case that the Company has an
effective registration statement under the Securities Act covering the shares of common stock issuable upon exercise of the Public
Warrants and a current prospectus relating to them is available. The Company has agreed that as soon as practicable, but in no
event later than 15 business days after the closing of a Business Combination, the Company will use its commercially reasonable
best efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the shares of Class
A common stock issuable upon exercise of the Public Warrants. The Company will use its commercially reasonable best efforts to
cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus
relating thereto, until the expiration of the Public Warrants in accordance with the provisions of the warrant agreement. Notwithstanding
the foregoing, if a registration statement covering the shares of Class A common stock issuable upon exercise of the Public Warrants
is not effective within a specified period following the consummation of Business Combination, warrant holders may, until such
time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective
registration statement, exercise warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities
Act, provided that such exemption is available. If that exemption, or another exemption, is not available, holders will not be
able to exercise their warrants on a cashless basis. The Public Warrants will expire five years after the completion of a Business
Combination or earlier upon redemption or liquidation.
The
warrants included in the Private Placement Units are identical to the Public Warrants underlying the Units being sold in the Public
Offering, except that the warrants included in the Private Placement Units and the Class A common stock issuable upon the exercise
of the warrants included in the Private Placement Units are not transferable, assignable or salable until 30 days after the completion
of a Business Combination, subject to certain limited exceptions.
Additionally,
the warrants included in the Private Placement Units will be exercisable on a cashless basis and be non-redeemable so long as
they are held by the initial purchasers or their permitted transferees. If the warrants included in the Private Placement Units
are held by someone other than the initial purchasers or their permitted transferees, the warrants included in the Private Placement
Units will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants. The warrants
will expire five years after the completion of the Company’s Business Combination or earlier upon redemption or liquidation.
CF Finance Acquisition Corp.
Notes to Unaudited Condensed Financial Statements
(continued)
7.
Stockholders’ Equity (continued)
The
Company may redeem the Public Warrants (except with respect to the warrants included in the Private Placement Units):
|
●
|
in
whole and not in part;
|
|
●
|
at
a price of $0.01 per warrant;
|
|
●
|
at
any time during the exercise period;
|
|
●
|
upon
a minimum of 30 days’ prior written notice of redemption;
|
|
●
|
if,
and only if, the last reported sale price of the Company’s common stock equals or exceeds $18.00 per share for any 20-trading
days within a 30-trading day period ending on the third business day prior to the date on which the Company sends the notice of
redemption to the warrant holders; and
|
|
●
|
if,
and only if, there is a current registration statement in effect with respect to the shares of common stock underlying such warrants.
|
If
the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise
the Public Warrants to do so on a “cashless basis”, as described in the warrant agreement.
The
exercise price and number of shares of Class A common stock issuable upon exercise of the warrants may be adjusted in certain
circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However,
the warrants will not be adjusted for issuance of Class A common stock at a price below its exercise price. Additionally, in no
event will the Company be required to net cash settle the warrants. If the Company is unable to complete a Business Combination
within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive
any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held
outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
On
January 17, 2018, the Sponsor effectuated a recapitalization of the Company, which included
a 2.5-for-1 stock
split resulting in an aggregate of 7,187,500 Founder Shares outstanding and held by the Sponsor (312,500
of which were subject to forfeiture as the underwriter’s over-allotment option was not exercised in full by December 31,
2018. After the underwriter exercised the second over-allotment on January 29, 2019, the shares
forfeited
were 122,897). Information
contained in the unaudited condensed financial statements has been adjusted for this split.
8.
Subsequent Events
The
Company has evaluated subsequent events through the date the unaudited condensed financial statements were issued. There have
been no additional material subsequent events that would require recognition in these unaudited condensed financial statements
or disclosure in the notes to the unaudited condensed financial statements.