Business context and reporting period
This is BYTE Acquisition Corp.’s unaudited Form 10-Q for the three and nine months ended September 30, 2023, filed November 1, 2023. Despite the request metadata, the filer is Byte Acquisition Corp., a SPAC, not Airship AI Holdings, Inc. Byte had not commenced operating activities and reported no revenue; its purpose was to complete a business combination. It had signed a merger agreement with Airship AI in June 2023, amended in September.
Financial results and position
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| General and administrative expense | $796,831 | $268,259 | $3,379,510 | $904,975 |
| Net income (loss) | $(1,489,541) | $1,510,836 | $(2,146,711) | $8,680,745 |
| Operating cash flow | Not presented quarterly | $(1,044,399) | $(471,856) |
Q3 2023 net loss included a $1.0 million noncash loss from remeasurement of warrant liabilities, partly offset by $307,275 of trust-account investment income. The nine-month loss included a $2.5 million noncash warrant remeasurement loss and $3.7 million of trust-account investment income. The prior-year profits were materially supported by warrant-liability fair-value gains ($7.7 million for nine months).
At September 30, 2023, total assets were $25.3 million, including $25.25 million in the trust account and only $18,752 of operating cash. Current liabilities were $3.07 million; working capital deficit was approximately $3.0 million. Total liabilities were $23.82 million, including $11.33 million of deferred underwriting commissions and $3.84 million of warrant liabilities. The filing reports no long-term debt. Shareholders’ deficit was $18.10 million. No operating margin is meaningful because the SPAC had no revenue.
Material changes versus prior comparable periods
- Cash outside the trust account fell from $1.05 million at December 31, 2022 to $18,752; trust-account assets declined from $328.23 million to $25.25 million, principally due to shareholder redemptions.
- Redeemable public shares declined from 32.37 million at year-end 2022 to 1.84 million at September 30, 2023. Approximately 30.0 million shares were redeemed in March for $306.69 million; a further 525,624 shares were redeemed in September for $5.59 million, which remained payable at quarter-end.
- G&A expense rose substantially year over year, while warrant fair-value movements shifted from gains in 2022 to losses in 2023; together these factors changed reported net income to net loss.
- Accrued expenses rose to $2.45 million from $349,835 at year-end 2022. The company also reported $140,560 of related-party advances.
Outlook, risks, contingencies and unusual items
- The business combination with Airship AI was pending at quarter-end. The September shareholder approval extended Byte’s business-combination deadline to December 26, 2023, with a possible board-elected three-month extension to March 25, 2024. The merger agreement’s outside-date provisions refer to March 26, 2024 if the extension proposal is approved, and potentially later approved extensions; investors should confirm the operative dates in subsequent filings.
- Management states that limited liquidity and the mandatory liquidation requirement raise substantial doubt about Byte’s ability to continue as a going concern. If no combination is completed within the applicable period, Byte must cease operations, redeem public shares from the trust account and liquidate. Warrants may expire worthless.
- The $11.33 million deferred underwriting commission was waived by the underwriters only if the Airship AI business combination closes; the filing says it is also waived if Byte fails to complete a combination within the permitted period.
- Byte disclosed a material weakness in internal control over financial reporting involving accounting for complex financial instruments and accruals. The weakness had led to restatements of earlier financial statements, including the March 2023 quarter; management said remediation efforts were continuing.
- Other disclosed risks include possible treatment as an unregistered investment company, which could impede or prevent a transaction; CFIUS review or intervention for a U.S. target; high shareholder redemptions; and the risk that a transaction or extension is not completed. Byte moved trust funds to an interest-bearing demand deposit account in February 2023 to address investment-company concerns.
- There is no operating-business guidance or revenue outlook in this filing. A related party advanced an additional $224,500 on November 1, 2023, after quarter-end.
Most important facts for investors to verify
- Whether the Airship AI merger closed, and the current transaction status, deadlines, required approvals and financing conditions.
- Current trust-account balance, redemption activity, redemption payable, and cash available outside the trust.
- Whether additional related-party funding was provided and on what terms, given the going-concern warning and minimal operating cash.
- Whether the material weakness has been remediated and whether later filings report further restatements or control deficiencies.
- The treatment of the deferred underwriting commission, sponsor share forfeitures/contributions, non-redemption agreements and outstanding warrants if the merger closes or fails.