Filing summary
Important context: This is BYTE Acquisition Corp.’s unaudited Form 10-Q for the quarter and six months ended June 30, 2023, not an operating-company 10-Q for Airship AI Holdings, Inc. BYTE was a SPAC and had not commenced operations. It signed a merger agreement with Airship AI on June 27, 2023; the filing reports no completed business combination as of June 30.
Financial performance and position
| Metric | Three months ended June 30 | Six months ended June 30 |
|---|---|---|
| Net income (loss), 2023 | $(1.82) million | $(0.66) million |
| Net income (loss), 2022 | $1.91 million | $7.17 million |
| General and administrative expense, 2023 | $1.91 million | $2.58 million |
| General and administrative expense, 2022 | $0.29 million | $0.64 million |
BYTE had no operating revenue, so operating margins are not applicable. 2023 results included noncash warrant-liability remeasurement losses of $0.33 million for the quarter and $1.50 million for the six months; the corresponding 2022 periods included gains of $1.78 million and $7.35 million. Trust-account investment income was $0.41 million for Q2 2023 and $3.41 million for the first half, versus $0.42 million and $0.45 million in 2022.
- Cash flow: First-half operating cash use was $0.71 million, compared with $0.40 million in 2022. Cash outside the trust account fell by $0.84 million to $0.21 million. Trust withdrawals and redemptions were each $306.69 million.
- Balance sheet at June 30: Total assets were $25.20 million, including $24.95 million in the trust account. Total liabilities were $16.63 million, including $2.46 million of current liabilities, $11.33 million of deferred underwriting commissions, and $2.84 million of warrant liabilities. Working capital deficit was approximately $2.2 million; shareholders’ deficit was $16.28 million.
- Debt and liquidity: No working-capital loans were outstanding, and BYTE reported no long-term debt. It had approximately $214,000 of operating cash. Management said these liquidity conditions and the approaching mandatory liquidation raise substantial doubt about the company’s ability to continue as a going concern.
Material changes and transaction developments
- In March 2023, shareholders extended BYTE’s business-combination deadline from March 23 to September 25, 2023. Holders redeemed 30,006,034 public shares for approximately $306.69 million, leaving about $24.95 million in the trust account at June 30. Redeemable shares fell from 32.37 million at year-end 2022 to 2.36 million.
- BYTE agreed to merge with Airship AI on June 27. The sponsor agreed to forfeit 1 million Class A shares at closing, contribute 2.6 million shares to support non-redemption agreements and/or PIPE financing, and accept a 180-day post-closing lock-up. The filing does not provide a clear value for the proposed transaction or a detailed financing outcome.
- Underwriters waived the $11.33 million deferred commission if the Airship AI business combination closes. The filing also describes March non-redemption payments of $66,000 per month through the extension date and an outstanding related liability of $264,000 at June 30.
- After quarter-end, the sponsor agreed to acquire and hold up to $6 million of public shares, for a monthly fee of $0.033 per share; another shareholder agreed not to redeem $1 million of shares. BYTE also disclosed a $70,560 related-party advance received July 26.
Outlook, risks, and unusual items
- BYTE had until September 25, 2023 to complete a business combination, unless shareholders approved a later date. If it failed, it was required to cease operations, redeem public shares, and liquidate. Management provided no operating guidance; the company expected no operating revenue before a combination.
- The filing identifies substantial going-concern doubt and warns that the company may have to liquidate if it cannot complete a transaction on time. Public warrants could expire worthless in a liquidation.
- Disclosure controls were not effective at June 30 due to a material weakness in accounting for complex financial instruments and accruals. The weakness had resulted in restatements of earlier-period financial statements and could affect warrant liabilities, shares, accruals, and related disclosures. Management said it was undertaking remediation.
- Other highlighted risks include possible treatment as an unregistered investment company, CFIUS review of a U.S. target, and the limited time available to close a transaction. BYTE moved trust funds into an interest-bearing demand deposit account in February 2023 to mitigate investment-company risk.
- Warrant fair-value movements and trust-account interest materially affected reported earnings; these results are not operating performance. The filing reports no legal proceedings.
Key facts investors should verify
- Whether the Airship AI merger closed, its final terms, required approvals, financing, and post-redemption ownership and dilution.
- Whether the September 25, 2023 deadline was extended or the company liquidated, and the final trust value and public-share redemption amount.
- Whether sponsor share purchases, non-redemption commitments, and PIPE financing were completed, and their costs and conditions.
- Progress in remediating the material weakness and whether subsequent filings report effective controls or further restatements.
- The status and treatment of the $11.33 million waived deferred commission and the outstanding non-redemption and related-party liabilities.