Business context and reporting period
Important issuer distinction: The supplied filing is a Form 10-Q for CF Acquisition Corp. VIII, a blank-check company—not a filing in the name of XBP Global Holdings, Inc. The unaudited period ended September 30, 2022; the report was signed November 14, 2022. The company had not commenced operating activities and was seeking a business combination.
After quarter-end, on October 9, 2022, CF Acquisition Corp. VIII agreed to merge with XBP Europe, Inc. The proposed transaction remained subject to stockholder approval, regulatory approvals and other customary closing conditions; the filing anticipated a 2023 closing.
Financial results and liquidity
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Revenue | No operating revenue | No operating revenue |
| Net income (loss), 2022 | $(811,420) | $3,566,429 |
| Net income (loss), 2021 | $(1,055,126) | $(2,440,529) |
| Operating loss, 2022 | $(1,188,906) | $(2,115,695) |
| Trust investment interest income, 2022 | $518,498 | $956,908 |
- Results are not indicative of operating performance: 2022 nine-month net income included a $4.73 million noncash gain from the change in warrant liability fair value, $579,294 of other income, and a $248,606 gain from the change in FPS liability fair value. The quarter’s loss included a $1.10 million warrant-liability gain, partly offset by a $456,349 FPS-liability loss and $689,606 of interest expense associated with redeemable Class A shares.
- Margins: Not meaningful; the company reported no operating revenue.
- September 30 balance sheet: Cash outside the trust was $265,188; trust assets were $31.19 million; total assets were $31.47 million. Current liabilities were $9.11 million, including $8.15 million in Sponsor loans. Total liabilities were $11.44 million, and stockholders’ deficit was $11.14 million. Redeemable Class A shares of $31.17 million were presented as temporary equity.
- Cash flows, nine months: Operating cash flow was reported as zero (“—”). Investing activities provided $219.78 million and financing activities used $219.54 million, primarily reflecting trust-account movements and public-share redemptions. Cash increased by $240,188 to $265,188.
- Liquidity: Working capital deficit was approximately $8.83 million, versus $2.63 million at December 31, 2021. Management relied on Sponsor funding and believed available working capital and borrowing capacity would cover needs through a business combination or one year from the filing. Trust funds are restricted and are not equivalent to operating cash.
Material changes, outlook and risks
- Public-share redemptions reduced the trust substantially: 2,879,927 shares were redeemed in the March extension and 19,159,975 in the September extension. At September 30, 2,960,098 public shares remained subject to redemption; trust value was approximately $10.53 per remaining public share.
- Stockholders extended the business-combination deadline to March 16, 2023. If no combination is completed by then (absent a further extension), the company must wind up and redeem public shares; warrants may expire worthless.
- Sponsor loans outstanding totaled approximately $8.15 million at September 30, including extension loans deposited in the trust. The loans are non-interest-bearing and generally payable upon a business combination. Under the proposed XBP Europe transaction, Sponsor loans would convert into Class A shares, subject to the merger agreement.
- The filing states that the liquidation deadline raises substantial doubt about the company’s ability to continue as a going concern. The financial statements include no related adjustments.
- In connection with the proposed XBP Europe transaction, Cantor Fitzgerald & Co. agreed to waive the $9.35 million marketing fee if the transaction closes. The Sponsor also agreed to forfeit 733,400 founder shares, subject to closing.
- The company cited potential effects from market volatility, inflation, interest rates, COVID-19 and the Ukraine conflict. A 1% federal excise tax on certain repurchases after December 31, 2022 could reduce funds available for a transaction. The company also discussed the possibility of holding trust funds in cash, which could reduce interest earned.
- Disclosure controls were assessed as effective; no material quarterly change in internal control over financial reporting was reported. Management reported no pending or contemplated litigation known to it.
Most important facts for investors to verify
- Confirm the issuer and filing match the intended investment: this document names CF Acquisition Corp. VIII, while the request identifies XBP Global Holdings, Inc.
- Check the latest status, terms, approvals and closing conditions of the XBP Europe merger, including any changes after this 10-Q.
- Verify the remaining business-combination deadline, trust balance, public-share redemptions and any further extension or redemption activity.
- Review Sponsor-loan conversion terms, dilution from founder shares and warrants, and the proposed founder-share forfeiture.
- Assess the going-concern warning, working-capital deficit, reliance on Sponsor financing and any excise-tax impact on transaction proceeds.