Business Context and Reporting Period
Company: Western Acquisition Ventures Corp. (WAVS), a Special Purpose Acquisition Company (SPAC) formed to merge with Cycurion, Inc. (Cycurion).
Reporting Period: Quarter ended September 30, 2024 (Q3 2024).
Status: The Company is a shell company with no operating revenues. It is in the process of consummating a business combination with Cycurion. The deadline to complete the merger has been extended to January 11, 2025, following a Sixth Charter Amendment filed in October 2024.
Key Financial Metrics
| Metric | Q3 2024 (3 Months) | YTD 2024 (9 Months) | YTD 2023 (9 Months) |
|---|---|---|---|
| Net Loss | $(375,004) | $(670,325) | $(757,781) |
| Operating Expenses | $375,004 | $1,208,217 | $812,132 |
| Trust Account Balance | $2,600,462 | $2,600,462 | $3,293,966 (Dec 31, 2023) |
| Working Capital Deficit | $(3,664,323) | $(3,664,323) | N/A |
| Restricted Cash | $45,150 | $45,150 | $8,651 (Dec 31, 2023) |
| Total Liabilities | $3,978,042 | $3,978,042 | $3,305,832 (Dec 31, 2023) |
| Excise Tax Payable | $1,149,502 | $1,149,502 | $1,143,296 (Dec 31, 2023) |
Note: The Company generated no operating revenue. Non-operating income/loss is driven by changes in fair value of derivative liabilities and interest on trust assets.
Material Changes vs. Prior Period
- Net Loss Reduction: The net loss for the nine months ended September 30, 2024, decreased to $(670,325) compared to $(757,781) in the prior year period. This improvement was primarily due to a $665,116 gain from the change in fair value of the Forward Purchase Agreement (FPA), which was terminated in January 2024.
- Trust Account Depletion: The Trust Account balance decreased from $3,293,966 at December 31, 2023, to $2,600,462 at September 30, 2024. This reduction is attributed to significant share redemptions ($620,636 withdrawn in the period) and withdrawals to pay franchise and income taxes ($72,866).
- Liability Increases: Total liabilities increased by approximately $672,000 year-over-year, driven by an increase in accounts payable and accrued expenses ($1.85M vs $1.10M) and the accrual of excise taxes related to share redemptions.
- Related Party Transactions: The Company borrowed $230,000 from the Sponsor and $554,269 from Cycurion (Loan Payable) to fund transaction expenses. Conversely, the Company loaned $185,000 to Cycurion.
Outlook, Risks, and Contingencies
- Going Concern: Management has raised substantial doubt about the Company's ability to continue as a going concern for twelve months from the issuance of the financial statements. This is due to the mandatory liquidation and dissolution if the Business Combination is not completed by January 11, 2025.
- Liquidity: The Company has a working capital deficit of $3.66 million. Liquidity is dependent on loans from the Sponsor, officers, or third parties. There is no assurance that additional financing will be available.
- Internal Controls: The Company identified material weaknesses in internal controls over financial reporting, specifically regarding the withdrawal of funds from the Trust Account and the timely filing of the Form 10-Q. Disclosure controls and procedures were deemed ineffective as of September 30, 2024.
- Nasdaq Compliance: The Company received a delisting notice from Nasdaq regarding the late filing of its Q2 2024 report. The Company believes it has regained compliance with the filing of this Q3 2024 report.
- Excise Tax Liability: A significant liability of $1.15 million exists for the 1% excise tax on stock repurchases (redemptions) under the Inflation Reduction Act.
- Merger Status: The merger with Cycurion is subject to shareholder approval and regulatory conditions. The termination date has been extended to January 11, 2025.
Investor Verification Checklist
- Merger Completion Probability: Verify the likelihood of closing the Cycurion merger by the January 11, 2025 deadline, given the current liquidity constraints.
- Internal Control Remediation: Assess the specific steps taken to remediate the material weaknesses in internal controls and the effectiveness of the new auditor (WWC, P.C.).
- Capital Sufficiency: Confirm the availability of additional funding from the Sponsor or third parties to cover the $3.66 million working capital deficit and transaction costs.
- Redemption Risk: Evaluate the impact of further shareholder redemptions on the Trust Account balance and the ability to meet the minimum cash condition for the merger.
- Excise Tax Payment: Determine the source of funds for the $1.15 million excise tax liability, as this amount is not currently held in cash.