Filing summary: Western Acquisition Ventures Corp. (WAV)
Important entity note: This is Western Acquisition Ventures Corp.’s Form 10-K for the fiscal year ended December 31, 2023, not a Cycurion, Inc. Form 10-K. Cycurion is the proposed merger target. The report was signed April 25, 2024.
Business context and reporting period
WAV is a shell company/SPAC formed to complete a business combination. It had no operations or operating revenue through 2023 and reported activity related to its formation, public-company costs, and search for a target. It had signed a merger agreement with Ontario-based Cycurion in November 2022; completion was not assured and remained subject to approval and other closing conditions.
Financial results and liquidity
| Metric | FY 2023 | FY 2022 |
|---|---|---|
| Revenue | None | None |
| Operating loss | $1.099 million | $2.017 million |
| Net loss | $1.035 million | $701,000 |
| Trust investment interest income | $372,000 | $1.566 million |
| Operating cash used | $941,000 | $1.318 million |
At December 31, 2023, total assets were $3.412 million, including $3.294 million in the Trust Account and $8,651 of restricted cash. Current liabilities totaled $3.306 million, including a $1.143 million excise-tax payable, $1.099 million of accounts payable and accrued expenses, and a $204,000 Cycurion loan payable. Working capital deficit was $3.188 million; shareholders’ deficit was $3.202 million. No meaningful operating margins are available because WAV had no operating revenue.
FY 2023 investing cash inflow of $114.269 million principally reflected Trust Account withdrawals for share redemptions; financing cash outflow of $114.130 million principally reflected the redemption payments, partly offset by $200,000 of Cycurion loan proceeds. The filing reports no material market or interest-rate risk at year-end, given the short-term U.S. government investments.
Material changes, outlook, and risks
- Stockholders redeemed 11,225,733 public shares in connection with extension votes, reducing the Trust Account by approximately $114.7 million. At year-end, 305,410 public shares remained classified as redeemable, with $3.308 million recorded at redemption value; the filing later describes the Trust balance as approximately $3.0 million.
- WAV extended its combination deadline several times. As of the filing, the deadline had been extended to July 11, 2024. If it did not complete a business combination by then, it expected to cease operations, redeem remaining public shares, and liquidate; warrants could expire worthless.
- Management and the auditor identified substantial doubt about WAV’s ability to continue as a going concern, given the liquidation deadline, minimal available operating cash, working-capital deficit, and uncertainty about completing the merger or obtaining additional funding. The auditor’s opinion on the financial statements was unqualified but included a going-concern explanatory paragraph.
- The company reported ineffective disclosure controls and material weaknesses involving account reconciliations, Trust Account withdrawals, and expense reporting/accruals. Management planned remediation; effectiveness was not established.
- After large redemptions, Nasdaq notified WAV that it did not meet the minimum publicly held share requirement. Separately, board resignations led to notices of noncompliance with board-independence and committee requirements. WAV submitted a compliance plan for the share-count issue and said it was working to regain compliance on governance requirements; delisting remained a risk.
- The entire prior board resigned in late December 2023; the filing says the resignations were prompted by potential Inflation Reduction Act excise-tax liability, not disagreements. The company accrued $1.143 million of excise tax associated with redemptions. It also disclosed that $108,611 was withdrawn improperly from the Trust Account for operating expenses; $99,961 was recorded as due from the Sponsor and due back to the Trust.
- The Cycurion merger would require further cash for transaction expenses and working capital, but remaining funds could be reduced by additional redemptions. The filing estimates that, if no further public shares were redeemed, existing public shareholders would own about 0.8% of the combined company; at the maximum permitted redemption level, they could own none. These estimates are conditional and exclude certain potential dilution.
- The $200,000 Cycurion note bore 5% interest and was amended after year-end, with its maturity extended to the earlier of merger closing or July 11, 2024. A forward purchase agreement was recorded as a $665,116 liability at year-end and terminated January 22, 2024 without payment or further liability. A subsequent Series B capital raise was reported to have provided $254,269 for working capital and tax obligations.
Most important facts for investors to verify
- Whether the Cycurion merger closed, its final terms, required financing, and actual post-merger ownership and dilution.
- Current Trust Account funds, remaining redemption requests, and the status and funding of the accrued excise tax and Sponsor reimbursement.
- Whether WAV met Nasdaq’s publicly held share and governance requirements, and whether its securities remained listed.
- Whether the internal-control weaknesses were remediated and whether the company has adequate cash to meet obligations through closing or liquidation.
- The status and repayment terms of the amended Cycurion loan, and the use and terms of proceeds from the reported Series B capital raise.