Business context and reporting period
Entity clarification: The supplied filing is CF Acquisition Corp. VI’s Form 10-K, not a filing under the name RUM Group Inc. It covers the fiscal year ended December 31, 2021 and was signed March 24, 2022.
CF Acquisition Corp. VI was a SPAC with no operating business or revenue. It completed its $300 million IPO in February 2021 and had entered into a business combination agreement with Rumble Inc. on December 1, 2021. The proposed transaction remained subject to closing conditions; the filing does not report its completion.
Financial results and liquidity
- Revenue: None. The company had not begun operations and expected no operating revenue before a business combination.
- Net loss: $17.9 million in 2021, compared with a $1,294 loss from inception (April 17, 2020) through December 31, 2020. The periods are not comparable in length.
- Loss drivers: $10.4 million loss from changes in warrant fair value; $4.5 million loss from changes in forward purchase securities (FPS) fair value; $2.8 million general and administrative costs; $0.2 million franchise tax; and $0.1 million related-party administrative expenses, partly offset by $23,000 of trust-account interest income.
- Cash flow: No net cash provided by operating activities in 2021. Investing cash flow was a $300 million trust-account deposit; financing cash flow was $300 million net. Ending operating cash was $25,000.
- Assets and liquidity: Total assets were $300.6 million, including $300.0 million in the trust account. Working capital deficit was approximately $2.5 million, versus $157,000 at December 31, 2020.
- Debt and liabilities: $949,000 was outstanding under the sponsor loan commitment at year-end, with a further $1.75 million commitment. Total liabilities were $27.4 million, including $20.0 million warrant liability and $4.5 million FPS liability. All 30 million public shares were classified as temporary equity at a $10-per-share redemption value.
- Margins: Not meaningful because the company had no revenue or operating business.
Material changes and unusual items
- The company reported a material weakness in internal control over financial reporting relating to accounting for complex financial instruments. Management concluded disclosure controls and internal control over financial reporting were ineffective as of December 31, 2021; no auditor attestation was included.
- Previously issued February 23, 2021 financial statements were restated. The company reclassified warrants and FPS as liabilities and reclassified all public shares subject to redemption as temporary equity, with related changes to reported equity and deficit.
- Fair-value changes in warrants and FPS produced substantial non-cash losses and volatility in reported earnings.
- The auditor’s report was unqualified but highlighted substantial doubt about the company’s ability to continue as a going concern if it did not complete a business combination by February 23, 2023.
Transaction outlook, risks and contingencies
The proposed Rumble transaction set base arrangement consideration at $3.15 billion, plus Rumble’s closing cash and cash equivalents net of debt, and the aggregate exercise price of outstanding options. The agreement contemplated an $85 million PIPE at $10 per share and a $15 million sponsor forward purchase. A proposed $11 million share repurchase from Rumble’s founder was contingent on closing. The filing provides no completed-transaction results or operating guidance for Rumble.
The agreement also contemplated escrowed earnout shares tied to post-closing share-price thresholds of $15 and $17.50, and a structure under which Rumble founder Christopher Pavlovski would hold 85% of voting power on a fully diluted basis after closing. These terms, dilution, financing availability, redemptions and closing conditions are material investor considerations.
The SPAC had until February 23, 2023 to complete a business combination or liquidate. If no transaction closed, public shareholders were generally entitled to a pro rata share of trust assets, subject to creditor claims and other legal requirements; warrants would expire worthless. The company cited financing and redemption risks, sponsor and management conflicts, competition for targets, possible trust-account claims, COVID-19 effects, market volatility, inflation, interest rates and the Ukraine conflict. It also stated that sponsor indemnification may not fully protect the trust because the sponsor’s ability to pay had not been verified.
Most important facts for investors to verify
- Confirm the filer’s identity: this document is for CF Acquisition Corp. VI, despite the request metadata naming RUM Group Inc.
- Check the current status and final terms of the Rumble business combination, including closing conditions, redemptions, PIPE funding and forward-purchase funding.
- Review the Rumble registration statement for target-company financials, risks, valuation assumptions, dilution and governance terms, including the founder’s proposed voting control.
- Assess remediation of the material weakness and the effect of the prior-period restatements on the reliability of reported figures.
- Verify trust-account assets, sponsor-loan balances and the sponsor’s capacity to meet any indemnification obligations.