Business context and reporting period
CF Acquisition Corp. VI filed this unaudited Form 10-Q for the quarter ended March 31, 2022. Although the request identifies RUM Group Inc., the registrant is a blank-check company, not Rumble, and had not begun operating or generating revenue. Its principal activity was pursuing a business combination. It had signed a December 2021 agreement to combine with Rumble, Inc.; the proposed transaction remained subject to closing conditions.
Financial results and position
| Metric | Q1 2022 | Q1 2021 or prior date |
|---|---|---|
| Revenue | None | None |
| Net loss | $10.10 million | $3.17 million |
| Net loss per share | $0.26 | $0.16 |
| Operating cash flow | $(557,123) | $0 |
| Cash outside Trust Account | $25,000 | $25,000 at Dec. 31, 2021 |
| Trust Account investments | $300.00 million | $300.02 million at Dec. 31, 2021 |
| Working capital deficit | Approximately $3.07 million | Approximately $2.52 million at Dec. 31, 2021 |
| Sponsor loans outstanding | Approximately $1.98 million | Approximately $949,000 at Dec. 31, 2021 |
The quarterly loss primarily reflected $6.41 million of expense from increases in the fair value of warrant liabilities and $3.04 million from increases in the fair value of forward purchase securities (FPS) liabilities. General and administrative costs were $576,192, franchise tax expense was $50,000, sponsor administrative expense was $30,000, and Trust Account interest income was $7,399. The filing does not report operating margins; the company had no operating revenue.
Total assets were $300.50 million and total liabilities were $37.42 million at March 31, 2022. Liabilities included $26.36 million of warrant liability and $7.49 million of FPS liability. The 30 million redeemable public shares were carried at $300 million. The filing reported total stockholders’ deficit of $36.92 million. Operating cash was funded in part by sponsor loans; management said available working capital and expected sponsor borrowing capacity would meet needs through the earlier of a business combination or one year from the filing date.
Material changes, outlook and risks
- Net loss increased year over year, chiefly because the warrant-liability fair-value loss rose to $6.41 million from $199,000. The FPS fair-value loss was $3.04 million versus $2.79 million.
- The company had until February 23, 2023, subject to a possible stockholder-approved extension, to complete a business combination. If it failed, it would liquidate and redeem public shares from the Trust Account; warrants would expire worthless.
- The proposed Rumble transaction contemplated $3.15 billion of consideration, adjusted for Rumble cash and cash equivalents net of debt and outstanding option exercise prices. Proposed financing included an $85 million PIPE and a $15 million sponsor forward purchase commitment, both contingent on closing. Other disclosed terms included a $10.5 million business-combination marketing fee, a proposed $11 million share repurchase, and a $1 million Class D investment intended to give Rumble’s CEO 85% of voting power. These are proposed terms, not completed transactions.
- Management identified substantial doubt about the company’s ability to continue as a going concern if it did not complete a business combination by its deadline. The financial statements include no adjustments for a possible failure to continue as a going concern.
- Disclosure controls were deemed ineffective due to a material weakness in controls over accounting for complex financial instruments. Management described remediation steps but gave no assurance they would be effective.
- The company cited potential effects from COVID-19, the war in Ukraine, market and economic volatility, inflation, interest rates, and regulatory changes. Proposed SEC SPAC rules could increase transaction costs or constrain the ability to complete a combination. No legal proceedings were reported.
Important facts for investors to verify
- Confirm the current status, closing conditions, and final terms of the proposed Rumble transaction and related PIPE and forward-purchase financing.
- Review the redemption level and resulting cash available to the combined company; the $300 million Trust Account is subject to public-share redemption rights.
- Assess sponsor funding availability and repayment terms, given the $25,000 operating cash balance, working capital deficit, and outstanding sponsor loans.
- Track the going-concern deadline and the company’s progress in remediating its material weakness in financial-instrument accounting controls.
- Evaluate the proposed voting structure, earnout and escrow provisions, transaction fees, and potential dilution alongside the final transaction documents.