Notes to Condensed Financial Statements
June 30, 2016
(Unaudited)
Note 1 – Description of Organization
and Business Operations
CF Corporation (the “Company”)
is a newly organized blank check company incorporated in the Cayman Islands on February 26, 2016. The Company was formed for
the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination
with one or more businesses (“Business Combination”). Although the Company is not limited to a particular industry
or geographic region for purposes of consummating a Business Combination, the Company intends to focus on the financial, technology
and services industries in the United States or globally.
On April 21, 2016,
the Company effected a share capitalization of approximately 4.217 shares for each outstanding Class B ordinary share, resulting
in an aggregate of 15,000,000 Class B ordinary shares outstanding. All share amounts presented in the financial statements herein
have been retroactively restated to reflect the share capitalization.
All activity from February
26, 2016 (inception) through June 30, 2016 relates to the Company’s formation, commencement of the initial public offering
(“Initial Public Offering”), forward purchase agreement, and, since the closing of the Initial Public Offering, the
search for a Business Combination candidate described below. The Company has selected December 31 as its fiscal year end.
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.
In April 2016, the Company
entered into forward purchase agreements pursuant to which certain investors (“Anchor Investors”) (including two affiliates
of the Sponsor, as defined below) agreed to purchase an aggregate of 51,000,000 Class A ordinary shares (“forward purchase
shares”), plus an aggregate of 19,083,333 redeemable warrants (“forward purchase warrants”) for $10.00 per Class
A ordinary share, for an aggregate purchase price of $510 million, in a private placement to occur concurrently with the
closing of the Business Combination. In connection with the forward purchase agreements, the Company agreed to compensate the placement
agents an aggregate amount of up to $20.675 million, including deferred placement agent fees of $20.4 million and reimbursement
of legal fees of $275,000, payable upon the consummation of the Business Combination (Note 6). As the placements agents already
performed services related to the forward purchase shares and the closing of a Business Combination was deemed probable by the
management, the Company accrued a deferred placement agent fee and reimbursement of legal fees in the accompanying Balance Sheet.
The registration statement
for the Company’s Initial Public Offering was declared effective on May 19, 2016. The Company consummated the Initial Public
Offering of 60,000,000 units (“Units” and, with respect to the Class A ordinary shares included in the Units, the “Public
Shares”) for $10.00 per Unit on May 25, 2016, generated gross proceeds of $600 million and, in connection therewith, incurred
offering costs of approximately $34.5 million, inclusive of $33 million of underwriting commissions in connection with the Initial
Public Offering. Each Unit consists of one Class A ordinary share, $0.0001 par value per share, and one–half of one redeemable
warrant. Each whole warrant entitles the holder thereof to purchase one Class A ordinary share at a purchase price of $11.50 per
share, subject to adjustment, terms and limitations (“Public Warrant(s)”). The Company paid $12 million of underwriting
commissions upon the closing of the Initial Public Offering and deferred $21 million of underwriting commissions until the consummation
of its initial Business Combination (Note 3).
Simultaneously with the
closing of the Initial Public Offering, the Company consummated the private placement (“Initial Private Placement”)
of 14,000,000 warrants (“Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant with
the Company’s sponsor, CF Capital Growth, LLC (“Sponsor”), generating gross proceeds of $14 million (Note 4).
On June 29, 2016, the
Company consummated the closing of the sale of 9,000,000 additional Units upon receiving notice of the underwriter’s election
to fully exercise its over-allotment option (“Over-allotment”), generating additional gross proceeds of $90 million
and, in connection therewith, paid additional offering costs of $1.8 million in underwriting commissions. Additional underwriting
commissions of $3.15 million were deferred until the completion of the Company’s initial Business Combination. Simultaneously
with the consummation of the Over-allotment, the Company consummated a private placement of an additional 1,800,000 Private Placement
CF CORPORATION
Notes to Condensed Financial Statements
June 30, 2016
(Unaudited)
Warrants to the Sponsor (together with the
Initial Private Placement, the “Private Placement”), generating gross proceeds of $1.8 million.
Upon the closing of the
Initial Public Offering, the Over-allotment, and the Private Placement, an amount of $690 million ($10.00 per Unit) from the net
proceeds of the sale was placed in a U.S.-based trust account at J.P. Morgan Chase Bank, N.A, maintained by Continental Stock
Transfer & Trust Company, acting as trustee (“Trust Account”), and is invested in a money market fund selected
by the Company until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the funds held
in the Trust Account as described below.
At June 30, 2016, the
Company has approximately $1.3 million in cash held outside of the Trust Account. The Company’s management has broad discretion
with respect to the specific application of the net proceeds of its Initial Public Offering, the Over-allotment, and the Private
Placement, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination.
The Company’s initial Business Combination must be with one or more target businesses that together have an aggregate fair
market value of at least 80% of the assets held in the Trust Account (excluding the deferred underwriting commissions and 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 1940, as amended, or the Investment Company Act.
The Company will provide
the holders of its Public Shares (“public shareholders”) 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 shareholder meeting called to approve
the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek shareholder approval
of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The public shareholders
will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially estimated
to be approximately $10.00 per share, plus any pro rata interest earned on the funds held in the Trust Account and not previously
released to the Company to pay its tax obligations). The per-share amount to be distributed to public shareholders who redeem
their Public Shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters (as
discussed in Note 6). 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. If a shareholder vote is not required by the law and
the Company does not decide to hold a shareholder vote for business or other reasons, the Company will, pursuant to its Amended
and Restated Memorandum and Articles of Association, conduct redemptions pursuant to the tender offer rules of the U.S. Securities
and Exchange Commission (“SEC”), and file tender offer documents with the SEC prior to completing a Business Combination.
If, however, shareholder approval of the proposed Business Combination is required by law, or the Company decides to obtain shareholder
approval for business reasons, the Company will offer to redeem the Public Shares in conjunction with a proxy solicitation
pursuant to the proxy rules and not pursuant to the tender offer rules. Additionally, each public shareholder may elect to redeem
their Public Shares irrespective of whether they vote for or against the proposed Business Combination. If the Company seeks shareholder
approval in connection with a Business Combination, the initial shareholders (as defined below) and Anchor Investors have agreed
to vote their founder shares (as defined in Note 5) and any Public Shares purchased during or after the Initial Public Offering
in favor of such Business Combination. In addition, the initial shareholders and Anchor Investors have agreed to waive their redemption
rights with respect to their founder shares and, with respect to our initial shareholders only, Public Shares in connection with
the completion of a Business Combination.
Notwithstanding the foregoing,
the Company’s Amended and Restated Memorandum and Articles of Association provides that a public shareholder, together with
any affiliate of such shareholder or any other person with whom such shareholder 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 ordinary shares sold in the Initial
Public Offering, without the prior consent of the Company.
CF CORPORATION
Notes to Condensed Financial Statements
June 30, 2016
(Unaudited)
If the Company is unable
to complete a Business Combination by May 25, 2018 (the “Combination Period”), the Company will (i) cease all operations
except for the purpose of winding up, (ii) as promptly as reasonably possible but no more than ten business days thereafter, redeem
100% of the outstanding Public Shares which redemption will completely extinguish public shareholders’ rights as shareholders
(including the right to receive further liquidation distributions, if any), subject to applicable law and (iii) as promptly as
reasonably possible following such redemption, subject to the approval of the remaining shareholders and the Company’s board
of directors, proceed to commence a voluntary liquidation and thereby a formal dissolution of the Company, subject in each case
to its obligations to provide for claims of creditors and the requirements of applicable law.
In connection with the
redemption of 100% of the Company’s outstanding Public Shares if the Company fails to complete a Business Combination prior
to the expiration of the Combination Period, each public shareholder will receive a full pro rata portion of the amount then in
the Trust Account, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the
Company to pay the Company’s taxes payable (less taxes payable and up to $100,000 of interest to pay dissolution expenses).
The Company’s Sponsor, officers and
directors (the “initial shareholders”) and Anchor Investors 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
shareholders 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. The underwriters have agreed to waive their rights to their deferred underwriting commission held in the Trust Account
in the event the Company does not complete a Business Combination within the Combination Period and, in such event,
such amounts will be included with the funds held in the Trust Account that will be available to fund the redemption of the Company’s
Public Shares. 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 $10.00 per share. 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 third parties, such as 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 below $10.00 per share. 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 (other than the Company’s independent auditors), 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 Sponsor will not be required to indemnify the Trust Account with respect
to any claims by a third party who executed such 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 underwriters of the Initial Public Offering
against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”).
In addition, 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.
Note 2 – Basis of presentation
The accompanying unaudited
condensed financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S.
GAAP”) for interim financial information and pursuant to rules and regulations of the SEC. Accordingly, they do not include
all of the information and footnotes required by U.S. GAAP. In the opinion of management, all adjustments (consisting of normal
accruals) considered for a fair presentation have been included. Operating results for the period from February 26, 2016 (inception)
to June 30, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016. For
further information, refer to the balance sheet included in the Company’s Form 8-K as of May 25, 2016, filed with the Securities
and Exchange Commission on June 1, 2016.
Liquidity
As of June 30, 2016, the
Company had approximately $1.3 million in its operating bank account, approximately $690 million in cash and cash equivalents held
in the Trust Account and working capital of approximately $522,000.
CF CORPORATION
Notes to Condensed Financial Statements
June 30, 2016
(Unaudited)
Through June 30, 2016,
the Company’s liquidity needs have been satisfied through receipt of a $25,000 capital contribution from the Sponsor in exchange
for the issuance of the founder shares to the Sponsor, $225,733 in loans from the Sponsor, and the proceeds not held in Trust resulted
from the consummation of the Private Placement.
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 will repay the Working Capital Loans out of the proceeds of the Trust
Account released to the Company. Otherwise, the Working Capital Loans will be repaid only out of funds held outside the Trust Account.
In the event that the Company does not complete a Business Combination, 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 may be used to repay the Working
Capital Loans, other than the interest on such proceeds that may be released to fund the Company’s tax obligations. 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 will 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. Any such warrants would be identical to the Private Placement
Warrants.
Based on the foregoing, management believes
that the Company will have sufficient working capital and borrowing capacity to meet the Company's needs through the earlier of
consummation of a Business Combination or May 25, 2018. Over this time period, the Company will be using these funds for paying
existing accounts payable, identifying and evaluating prospective merger or acquisition candidates, 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.
Note 3 - Significant Accounting Policies
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.
Cash and Cash Equivalents Held in Trust
Account
The amounts held in the
Trust Account represent substantially all of the proceeds of the Initial Public Offering and are classified as restricted assets
since such amounts can only be used by the Company in connection with the consummation of a Business Combination. As of June 30,
2016, there was approximately $25,000 of interest income held in the Trust Account available to be released to the Company.
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. At June 30, 2016, the Company had not experienced losses
on these accounts and management believes the Company is not exposed to significant risks on such accounts.
Ordinary shares Subject to Possible Redemption
The Company accounts for
its ordinary shares subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”)
Topic 480 “
Distinguishing Liabilities from Equity
.” Ordinary shares subject to mandatory redemption (if any)
are classified as a liability instrument and are measured at fair value. Conditionally redeemable ordinary shares (including ordinary
shares that features 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, ordinary
shares are classified as
CF CORPORATION
Notes to Condensed Financial Statements
June 30, 2016
(Unaudited)
shareholders’ equity.
The Company’s ordinary shares feature certain redemption rights that are considered to be outside of the Company’s
control and subject to occurrence of uncertain future events. Accordingly, ordinary shares subject to possible redemption at redemption
value are presented as temporary equity, outside of the shareholders’ equity section of the Company’s Balance Sheet.
Although the Company did
not specify a maximum redemption threshold, its charter provides that in no event will it redeem its Public Shares in an amount
that would cause its net tangible assets (shareholders' equity) to be less than $5,000,001. The Company recognizes changes in redemption
value immediately as they occur and will adjust the carrying value of the security to equal the redemption value at the end of
each reporting period. Increases or decreases in the carrying amount of redeemable common stock shall be affected by charges against
additional paid-in capital. Accordingly, at June 30, 2016 64,028,863 Class A ordinary shares were classified outside of permanent
equity at their redemption value.
Offering costs
Offering costs consisting
principally of legal, accounting, underwriting commissions and other costs incurred through the balance sheet date that are directly
related to the Initial Public Offering totaled approximately $39.5 million, inclusive of $24.15 million in deferred underwriting
commissions in connection with the Initial Public Offering. Offering costs were charged to shareholders’ equity upon the
completion of the Initial Public Offering.
In addition, an aggregate
of approximately $20.4 million in deferred placement agent fees incurred through the balance sheet date that are directly related
to the forward purchase agreements were also charged to shareholders’ equity upon the issuance of Class B shares to the Anchor
Investors.
Net Loss per Share
Net loss per share is
computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period. An aggregate
of 64,028,863 shares of Class A ordinary shares subject to possible redemption at June 30, 2016 have been excluded from the calculation
of basic loss per ordinary share since such shares, if redeemed, only participate in their pro rata share of the trust earnings.
The Company has not considered the effect of the warrants sold in the Initial Public Offering (including the consummation of the
over-allotment) and Private Placement to purchase 50,300,000 shares of the Company’s class A ordinary shares in the calculation
of diluted loss per share, since their inclusion would be anti-dilutive.
Fair Value Measurements
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. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs 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 tiers include:
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Level 1, defined as observable inputs such as quoted prices for identical instruments in active
markets;
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Level 2, defined as 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
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Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring
an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant
inputs or significant value drivers are unobservable.
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Fair Value of Financial Instruments
ASC 820,
Fair Value
Measurement and Disclosures
, requires all entities to disclose the fair value of financial instruments, both assets and liabilities
for which it is practicable to estimate fair value, and defines fair value of a financial instrument as the amount at which the
instrument could be exchanged in a current transaction between
CF CORPORATION
Notes to Condensed Financial Statements
June 30, 2016
(Unaudited)
willing parties. As of June 30, 2016, the recorded
values of cash and cash equivalents, prepaid expenses, accounts payable, and accrued expenses approximate the fair values due to
the short-term nature of the instruments.
Recent accounting pronouncements
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 Balance Sheet.
Subsequent Events
The Company evaluates
events that have occurred after the balance sheet date through the date, which these financial statements were issued.
Note 4 – Initial Public Offering
On May 25, 2016, the Company
consummated the sale of 60,000,000 Units at a price of $10.00 per Unit in the Initial Public Offering. On June 29, 2016, the Company
consummated the sale of 9,000,000 additional Units upon receiving notice of the underwriter’s election to fully exercise
its over-allotment option. Each Unit consists of one Public Share, and one-half of one Public Warrant. No fractional Public Warrants
will be issued upon separation of the Units and only whole Public Warrants will trade.
The Company incurred approximately
$39.5 million of offering costs in connection with the Initial Public Offering, inclusive of $24.15 million of deferred underwriting
commissions payable to the underwriters from the amounts held in the Trust Account solely in the event the Company completes a
Business Combination. The underwriters are not entitled to any interest accrued on the deferred discount.
Note 5 – Private Placement
Concurrently with the
closing of the Initial Public Offering and the Over-allotment, the Sponsor purchased an aggregate of 15,800,000 Private
Placement Warrants at $1.00 per Private Placement Warrant, generating gross proceeds of $15.8 million in the aggregate in a private
placement. Each Private Placement Warrant is exercisable to purchase one Class A ordinary share for $11.50 per share. A portion
of the proceeds from the sale of the Private Placement Warrants was added to the proceeds from the Initial Public Offering to
be held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the Private
Placement Warrants will expire worthless.
Note 6 – Related Party Transactions
Founder shares
On March 2, 2016,
the Company issued an aggregate of 15,000,000 Class B ordinary shares to the Sponsor in exchange for a capital contribution of
$25,000. On April 19, 2016, the Sponsor surrendered 3,750,000 Class B ordinary shares to the Company for no consideration,
which the Company cancelled. The Company then issued 3,750,000 Class B ordinary shares to the Anchor Investors for an aggregate
price of approximately $7,000 in connection with the forward purchase agreements. The Sponsor and the Anchor Investors currently
own 11,250,000 and 3,750,000 Class B ordinary shares, respectively (together, the “founder shares”). The founder shares
will automatically convert into Class A ordinary shares upon the consummation of a Business Combination at a ratio such that the
number of Class A ordinary shares issuable upon conversion of all founder shares will equal, in the aggregate, on an as-converted
basis, 20% of the sum of (i) the total number of Class A ordinary shares outstanding upon completion of the Initial Public
Offering, plus (ii) the sum of (a) the total number of Class A ordinary shares issued or deemed issued or issuable upon
conversion or exercise of any equity-linked securities or rights issued or deemed issued, by the Company in connection with or
in relation to the consummation of the initial Business Combination (including forward purchase shares, but not forward purchase
warrants), excluding any Class A ordinary shares or equity-linked securities exercisable for or convertible into Class A ordinary
shares issued, or to be issued, to any seller in the initial Business Combination and any Private Placement Warrants issued to
the Sponsor
CF CORPORATION
Notes to Condensed Financial Statements
June 30, 2016
(Unaudited)
upon conversion of Working Capital Loans, minus
(b) the number of Public Shares redeemed by public shareholders in connection with the initial Business Combination.
The Sponsor, Chinh E.
Chu and William P. Foley, II have agreed not to transfer, assign or sell any of their founder shares until the earliest of
(a) one year after the completion of the initial Business Combination with respect 50% of their founder shares, (b) two years after
the completion of the initial Business Combination with respect to the remaining 50% of their founder shares, and (c) the date
on which the Company completes a liquidation, merger, share exchange or other similar transaction after an initial Business Combination
that results in all of the Company’s shareholders having the right to exchange their Class A ordinary shares for cash, securities
or other property. The Anchor Investors have agreed not to transfer, assign or sell any of their founder shares until the earlier
to occur of: (i) one year after the completion of the initial Business Combination or (ii) the date on which the Company completes
a liquidation, merger, share exchange or other similar transaction after the initial Business Combination that results in all of
the Company’s shareholders having the right to exchange their Class A ordinary shares for cash, securities or other property
(except to certain permitted transferees). Any permitted transferees will be subject to the same restrictions and other agreements
of the initial shareholders or Anchor Investors, as applicable, with respect to any founder shares. Notwithstanding the foregoing,
if the closing price of the Class A ordinary shares equals or exceeds $12.00 per share (as adjusted for share splits, share capitalizations,
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, the founder shares held by investors other than the Sponsor, Chinh E. Chu and William
P. Foley, II will be released from the lock-up.
Private Placement Warrants
On May 25, 2016
and June 29, 2016, the Sponsor purchased from the Company an aggregate of 15,800,000 Private Placement Warrants as described in
Note 4. Each Private Placement Warrant entitles the holder to purchase one Class A ordinary share at $11.50 per share. The Private
Placement Warrants (including the Class A ordinary shares issuable upon exercise of the Private Placement Warrants) will not be
transferable, assignable or salable until 30 days after the completion of the initial Business Combination, and they will be non-redeemable
so long as they are held by the initial purchasers of the Private Placement Warrants or their permitted transferees. If the Private
Placement Warrants are held by someone other than the initial purchasers of the Private Placement Warrants 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. Otherwise, the Private Placement Warrants have terms and provisions that are identical to those of the
Public Warrants and have no net cash settlement provisions.
If the Company does not
complete a Business Combination, then the proceeds of the sale of the Private Placement Warrants will be part of the liquidating
distribution to the public shareholders and the Private Placement Warrants will expire worthless.
Due to related party
The Company’s Sponsor and other related
parties have loaned the Company an aggregate amount of $225,733 to be used for the payment of costs related to the Initial Public
Offering. These borrowings are non-interest bearing, unsecured and due upon the closing of the Initial Public Offering. The Company
has not yet repaid this amount as of June 30, 2016.
Administrative service fee
The Company has agreed,
commencing on May 25, 2016 through the earlier of the Company’s consummation of a Business Combination and its liquidation,
to pay an affiliate of the Sponsor a monthly fee of $10,000 for office space, and secretarial and administrative services. The
Company recorded $10,000 during the three months ended June 30, 2016 and for the period from February 26, 2016 (inception) to June
30, 2016 in connection to this agreement in the accompanying unaudited condensed Statements of Operations.
CF CORPORATION
Notes to Condensed Financial Statements
June 30, 2016
(Unaudited)
Note 7 – Commitments &
Contingencies
Registration rights
The Sponsor is entitled
to registration rights pursuant to a registration rights agreement entered into on May 19, 2016 with respect to the founder shares
and Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any Class A ordinary
shares issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working
Capital Loans). The Sponsor may make up to three demands, excluding short form demands, that the Company register such securities.
In addition, the Sponsor has “piggy-back” registration rights with respect to registration statements filed subsequent
to the consummation of a Business Combination. However, the registration rights agreement provides that the Company will not permit
any registration statement filed under the Securities Act to become effective until termination of the applicable lock-up period.
The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Pursuant to the forward
purchase agreements described below, the Company agreed to file within 30 days after the closing of the Business Combination a
registration statement for a secondary offering of the forward purchase shares and the forward purchase warrants (and underlying
Class A ordinary shares) and to maintain the effectiveness of such registration statement until the earliest of (A) the
date on which the Anchor Investors cease to hold the securities covered thereby, (B) the date all of the securities covered thereby
can be sold publicly without restriction or limitation under Rule 144 under the Securities Act and (C) the second anniversary of
the date of effectiveness of such registration statement, subject to certain conditions and limitations set forth in the forward
purchase agreements.
Underwriting agreement
The Company granted the
underwriters a 45-day option to purchase up to 9,000,000 additional Units to cover over-allotments at the Initial Public Offering
price less the underwriting discounts and commissions. The underwriters fully exercised their over-allotment option on June 29,
2016, generating an additional gross proceeds of $90 million.
The Company paid $0.20
per unit, or $13.8 million in the aggregate, to the underwriters, upon the closing of the Public Offering. $0.35 per unit, or $24.15
million in the aggregate will be payable to the underwriters for deferred underwriting commissions. The deferred fee will become
payable to the underwriter from the amounts held in the Trust Account solely in the event that the Company completes a Business
Combination, subject to the terms of the underwriting agreement.
Forward purchase agreements
On April 19, 2016, the
Company entered into forward purchase agreements pursuant to which the Anchor Investors agreed to purchase an aggregate of 51,000,000
Class A ordinary shares plus an aggregate of 19,083,333 redeemable warrants at $10.00 per Class A ordinary share for an aggregate
purchase price of $510 million, in a private placement to occur concurrently with the closing of the Business Combination.
In connection with these agreements, the Company issued an aggregate of 3,750,000 Class B ordinary shares to such investors. The
shares issued to such investors are subject to similar contractual conditions and restrictions as the founder shares issued to
the Sponsor. The Anchor Investors will have redemption rights with respect to any Public Shares they own. The forward purchase
agreements also provide that the investors are entitled to a right of first offer to with respect to any proposed sale of additional
equity or equity-linked securities by the Company for capital raising purposes in connection with the closing of the Business Combination
(other than shares and warrants pursuant to forward purchase agreements) and registration rights with respect to the shares, warrants
and Class A ordinary shares underlying the forward purchase warrants.
On April 22, 2016, the
Company entered into an agreement with Citigroup Global Markets Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and
Credit Suisse Securities (USA) LLC in connection with the forward purchase agreements described above, to act as placement agents
(the “Placement Agents”) in the related private placement. In connection therewith, the Placement Agents are entitled
to placement agent fees in an aggregate amount of: (i) up to 3.5% of the aggregate proceeds received from the forward purchase
shares (or $17.85 million),
CF CORPORATION
Notes to Condensed Financial Statements
June 30, 2016
(Unaudited)
contingently payable at the consummation of
the Company’s Business Combination, (ii) an additional placement agent fee of 0.5% of the aggregate proceeds received from
the sales of the forward purchase agreements (or $2.55 million) at the Company’s sole discretion as determined at the time
of the consummation of a Business Combination, and (iii) reimbursement of reasonable legal counsel fees and expenses up to an aggregate
amount of $275,000, which will be paid upon the earlier of the consummation of the Business Combination and December 1, 2017.
Note 8 – Shareholders’ Equity
Class A ordinary
shares
- The Company is authorized to issue 400,000,000 Class A ordinary shares with a par value of $0.0001 per
share. Holders of the Company’s Class A ordinary shares are entitled to one vote for each share. At June 30, 2016, there
are 69,000,000 Class A ordinary shares issued and outstanding, including 64,028,863 shares of Class A ordinary shares subject to
possible redemption.
Class B ordinary
shares
- The Company is authorized to issue 50,000,000 Class B ordinary shares with a par value of $0.0001 per share.
Holders of the Company’s Class B ordinary shares are entitled to one vote for each share. The Class B ordinary shares and
will automatically convert into Class A ordinary shares on the first business day following the consummation of the initial Business
Combination. The ratio at which Class B ordinary shares will convert into Class A ordinary shares will be such that the number
of Class A ordinary shares issuable upon conversion of all Class B ordinary shares will equal, in the aggregate, on an as-converted
basis, 20% of the sum of (i) the total number of Class A ordinary shares outstanding upon the completion of the Initial
Public Offering (including pursuant to the underwriters’ over-allotment option), plus (ii) the sum of (a) the total
number of Class A ordinary shares issued or deemed issued or issuable upon conversion or exercise of any equity-linked securities
or rights issued or deemed issued, by the Company in connection with or in relation to the consummation of the initial Business
Combination (including forward purchase shares, but not forward purchase warrants), excluding any Class A ordinary shares or equity-linked
securities exercisable for or convertible into Class A ordinary shares issued, or to be issued, to any seller in the initial Business
Combination and any Private Placement Warrants issued to the Sponsor upon conversion of Working Capital Loans, minus (b) the number
of Public Shares redeemed by Public Shareholders in connection with the initial Business Combination.
As of June 30, 2016,
the Company has 15,000,000 Class B ordinary shares issued and outstanding.
Holders of Class A ordinary
shares and Class B ordinary shares will vote together as a single class on all matters submitted to a vote of shareholders except
as required by law, except that prior to a Business Combination, only holders of Class B ordinary shares have the right to elect
the Company’s directors.
Preferred shares
- The Company is authorized to issue 1,000,000 preferred shares with a par value of $0.0001 per share. At June 30, 2016, there
are no preferred shares issued or outstanding.
Warrants
-
The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination
or (b) May 26, 2017; provided in each case that the Company has an effective registration statement under the Securities Act covering
the Class A ordinary shares issuable upon exercise of the Public Warrants and a current prospectus relating to them is available
(or the Company permits holders to exercise their Public Warrants on a cashless basis and such cashless exercise is exempt from
registration under the Securities Act). 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 best efforts to file with the SEC a registration statement
for the registration, under the Securities Act, of the Class A ordinary shares issuable upon exercise of the Public Warrants. The
Company will use its 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. If a registration statement covering the Class A ordinary shares issuable upon exercise of the warrants
is not effective by the sixtieth (60th) day after the closing of the initial Business Combination, warrant holders may, until such
time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective
registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities
Act or another exemption. The Public Warrants will expire five years after the completion of a Business Combination or earlier
upon redemption or
CF CORPORATION
Notes to Condensed Financial Statements
June 30, 2016
(Unaudited)
liquidation.
The Private Placement
Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private
Placement Warrants and the Class A ordinary shares issuable upon exercise of the Private Placement Warrants will not be 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 non-redeemable so long as they are held by the initial purchasers or such purchasers’
permitted transferees. If the Private Placement Warrants are held by someone other than the initial shareholders 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 call the
Public Warrants for redemption (except with respect to the Private Placement Warrants):
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·
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in whole and not in part;
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·
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at a price of $0.01 per warrant;
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·
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upon a minimum of 30 days prior written notice of redemption; and
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·
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if, and only if, the last reported closing price of the ordinary shares equals or exceeds $18.00
per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the
Company sends the notice of redemption to the warrant holders.
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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. In no event will the Company be required to net cash settle the warrants shares. If the Company is
unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust
Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution
from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants
may expire worthless.
Note 9 - Fair Value
Measurements
The following table presents information about the Company’s
assets that are measured on a recurring basis as of June 30, 2016 and indicates the fair value hierarchy of the valuation techniques
that the Company utilized to determine such fair value.
Description
|
|
|
Quoted
Prices in Active Markets (Level 1)
|
|
|
|
Significant Other
Observable Inputs (Level 2)
|
|
|
|
Significant Other
Unobservable Inputs (Level 3)
|
|
Cash equivalents held in Trust Account
|
|
$
|
600,024,685
|
|
|
$
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—
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|
|
$
|
—
|
|
$90 million of the balance in the Trust Account was held
in cash as of June 30, 2016.