Business context and reporting period
Filing identity: Although the request metadata names RUM Group Inc., this filing is for CF Acquisition Corp. VI, a SPAC, for the quarter ended June 30, 2022. It is not an operating-company 10-Q for Rumble or RUM Group. The unaudited statements cover the three and six months ended June 30, 2022, with comparable 2021 periods.
The company had not commenced operations or generated revenue; its activity related to its IPO and pursuit of a business combination. It had a signed agreement to combine with Rumble, Inc. The SEC declared the registration statement effective on August 11, 2022, and the special stockholder meeting was scheduled for September 15, 2022.
Financial performance and position
- Revenue: None. Operating revenue was not expected before a business combination.
- Net income: Q2 2022 net income was $18.76 million, versus $1.80 million in Q2 2021. First-half 2022 net income was $8.66 million, versus a $1.37 million net loss in first-half 2021. These results were driven principally by noncash fair-value gains on warrants and the forward-purchase securities (FPS), not operating activity.
- Expenses and margins: Q2 general and administrative expense was $520,144; first-half expense was $1.10 million. With no revenue, operating margins are not meaningful. Q2 warrant and FPS fair-value gains were $15.70 million and $3.34 million; first-half gains were $9.29 million and $298,391, respectively.
- Cash flow: First-half net cash used in operating activities was $367,461; investing activities provided $25,565 and financing activities provided $531,558. Cash increased by $189,662 to $214,662.
- Liquidity: At June 30, cash outside the trust was $214,662, the trust held $300.35 million, and working capital deficit was approximately $3.68 million, compared with $2.52 million at year-end 2021.
- Borrowings and liabilities: Sponsor loans totaled approximately $2.17 million, up from $949,000 at December 31, 2021, including $423,000 of working-capital loans. Total liabilities were $19.05 million, including $10.67 million of warrant liabilities and $4.15 million of FPS liabilities. The filing does not report conventional third-party borrowings.
- Equity and redemption: 30 million public Class A shares were classified as subject to possible redemption at $10 per share, or $300 million. Stockholders’ deficit was $18.16 million.
Changes versus prior comparable periods
Reported earnings improved substantially versus both 2021 comparison periods, principally because of changes in the fair values of warrants and FPS. The warrant fair-value gain was larger in Q2 2022 than Q2 2021; for the first half, the FPS fair-value movement changed from a $3.02 million loss in 2021 to a $298,391 gain in 2022. Trust interest also increased, while operating and administrative expenses rose. Cash outside the trust increased from $25,000 at year-end 2021, but the working capital deficit widened.
Outlook, risks and unusual items
- Transaction and deadline: The proposed Rumble business combination remained subject to stockholder approval and other closing conditions. The SPAC had until February 23, 2023, unless stockholders approved an extension, to complete a business combination; otherwise it would liquidate and redeem public shares. Warrants could expire worthless.
- Transaction terms and costs: The stated arrangement consideration was $3.15 billion plus Rumble cash and cash equivalents net of debt, plus the exercise price of outstanding options. Subscribers had agreed to a $85 million PIPE, contingent on closing. A $10.5 million marketing fee to Cantor Fitzgerald & Co. was payable at closing. The agreement also included an $11 million share repurchase and contingent earnout/escrow provisions. The filing describes proposed voting arrangements under which Rumble founder Christopher Pavlovski would have 85% of voting power at closing.
- Going concern and funding: Management cited substantial doubt about the company’s ability to continue as a going concern, given the liquidation deadline and financing needs. Management nevertheless believed sponsor funding and borrowing capacity would cover needs through the earlier of a business combination or one year from the filing. Some additional sponsor or affiliate loans were discretionary, not committed.
- Other risks: Management said the possible effects of COVID-19 and the war in Ukraine were not readily determinable; it also cited inflation, interest rates, market conditions, and proposed SEC SPAC rules as risks to timing and completion. Fair-value estimates for warrant and FPS liabilities rely in part on assumptions and can materially affect reported earnings.
- Controls and contingencies: Management concluded disclosure controls were effective and stated that a material weakness relating to complex financial-instrument accounting had been remediated during the quarter. No pending or contemplated litigation was reported. The filing reported no off-balance-sheet arrangements.
- Guidance: No operating forecast or earnings guidance was provided.
Important facts for investors to verify
- Confirm the correct issuer: this 10-Q is CF Acquisition Corp. VI, not RUM Group Inc. or Rumble.
- Check subsequent filings for the stockholder vote, closing status, redemptions, and actual transaction financing.
- Review the definitive proxy and transaction documents for dilution, earnout conditions, voting control, the PIPE, and the $11 million repurchase.
- Assess sponsor-loan availability and repayment terms against the going-concern warning and February 23, 2023 deadline.
- Separate recurring cash costs and liquidity from earnings driven by noncash fair-value remeasurements; verify the related-party marketing fee and other closing costs.