XBP Global Holdings, Inc. quarterly report, Q2 FY2022

Business context and reporting period

Important issuer mismatch: Although the request identifies XBP Global Holdings, Inc., the supplied Form 10-Q is for CF Acquisition Corp. VIII, a blank-check SPAC, for the quarter ended June 30, 2022, filed August 15, 2022. It does not report XBP Global Holdings’ operating results.

CF Acquisition Corp. VIII had not commenced operations and was searching for a business combination. It reported no operating revenue. The filing says its original combination deadline was extended to September 30, 2022; on August 12, 2022, it filed a preliminary proxy seeking a further extension to March 16, 2023.

Key financial metrics

Profit was principally driven by non-operating fair-value gains: $429,072 on warrant liabilities and $657,626 on the forward purchase securities (FPS) liability in Q2; for the first half, respective gains were $3,622,210 and $704,955. First-half results also included $579,294 of other income. These gains are valuation changes, not operating cash generation. No operating margin is meaningful because the SPAC had no revenue.

• Cash and liquidity: Operating cash was $1,474,727 at June 30, versus $25,000 at year-end 2021. Working capital deficit was approximately $6.801 million, compared with $2.634 million.
• Trust assets: Approximately $225.727 million, comprising $1.571 million in cash equivalents and $224.156 million in available-for-sale U.S. government securities. Public shares subject to redemption were recorded at $225.625 million, or $10.20 per share.
• Debt and liabilities: Sponsor-related loans totaled approximately $6.902 million, up from $734,000 at year-end; total liabilities were $11.540 million. Loans are non-interest-bearing and generally payable upon a business combination. Trust assets are subject to redemption and are not equivalent to unrestricted operating cash.
• Cash flow: Net cash provided by operating activities was reported as zero for the first half. Investing activities provided $24.399 million, while financing activities used $22.950 million; cash increased by $1.450 million.
• Other comprehensive loss: $329,250 from unrealized depreciation of available-for-sale securities, attributed to non-credit factors.

Material changes versus prior comparable periods

Q2 net income increased from $437,711 in Q2 2021. First-half results shifted from a $1.385 million net loss in 2021 to $4.378 million net income in 2022, mainly reflecting different fair-value movements in warrants and FPS, higher trust interest, and reported other income. General and administrative costs rose to $804,255 for the first half from $401,709. Public shares subject to redemption declined from 25.0 million to 22.12 million after 2,879,927 redemptions in connection with the March 2022 extension vote.

Trust investments moved from cash equivalents at year-end to include direct Treasury securities classified as available-for-sale. Sponsor borrowings increased substantially, including a $4.424 million extension loan deposited into the trust and working-capital advances.

Outlook, risks and unusual items

• Going concern: Management disclosed substantial doubt about the company’s ability to continue as a going concern if it cannot complete a business combination by the deadline. Management nevertheless believed sponsor borrowing capacity and working capital would cover needs through the earlier of a combination or one year from the filing.
• Deadline and liquidation: Failure to complete a business combination by September 30, 2022, absent another approved extension, would trigger winding up and redemption of public shares. Warrants could expire worthless. The proposed extension to March 16, 2023 required stockholder approval and could prompt further redemptions.
• Commitments and related parties: A $9.35 million marketing fee is payable to Cantor Fitzgerald & Co., an affiliate of the sponsor, upon completion of a business combination. The sponsor also pays certain expenses on the company’s behalf; approximately $1.45 million was payable to it at quarter-end.
• Valuation uncertainty: Warrant and FPS fair-value changes materially affected reported earnings. The FPS valuation used a 43% estimated business-combination completion probability at June 30, down from 80% at year-end 2021.
• Other risks: The filing cites COVID-19, the Ukraine conflict, inflation, rising interest rates, market volatility and proposed SEC SPAC rules as factors that could delay or impede a transaction. It reports that a material weakness in complex-financial-instrument accounting controls was remediated during the quarter; disclosure controls were considered effective.

Investor facts to verify

• Confirm the intended issuer: this filing is for CF Acquisition Corp. VIII, not XBP Global Holdings, Inc.
• Check whether stockholders approved the proposed extension beyond September 30, 2022, and the resulting redemptions and trust balance.
• Assess whether sponsor funding is available and sufficient given the working-capital deficit, outstanding loans and related-party payables.
• Separate noncash fair-value gains from recurring operating performance and verify the reported other-income item.
• Review the business-combination outcome, the $9.35 million marketing fee, and potential warrant dilution or expiration.