Business context and reporting period
This is Western Acquisition Ventures Corp.’s unaudited Form 10-Q for the quarter and six months ended June 30, 2023, filed August 21, 2023. Despite the request metadata, the filer is not Cycurion, Inc.: Western Acquisition Ventures is a shell SPAC that had not begun operating or generating revenue. It had signed a merger agreement to combine with Ontario-based Cycurion; completion was not assured.
Financial results and position
| Metric | Three months ended June 30 | Six months ended June 30 |
|---|---|---|
| Revenue | None | None |
| Net loss, 2023 | $332,537 | $504,148 |
| Net loss, 2022 | $722,400 | $1,312,809 |
| Basic and diluted loss per share, 2023 | $0.08 | $0.11 |
| Trust-account interest income, 2023 | $93,954 | $283,114 |
- Second-quarter 2023 expenses included $198,706 of operating costs and a $210,365 loss from the change in fair value of the forward purchase agreement (FPA); income tax expense was $17,420.
- At June 30, cash outside the trust was $258,551; trust investments were $8,097,937; total assets were $8,544,563. Working capital deficit was $2,191,908. Total liabilities were $2,966,096, including a $597,285 FPA derivative liability and $1,094,366 excise-tax payable.
- For the first half, operating cash use was $490,930. Investing cash inflow of $109,376,586 and financing cash outflow of $109,436,586 principally reflected trust withdrawals and redemptions. Cash fell by $550,930 to $258,551.
- No conventional operating margins are applicable because the SPAC had no revenue-generating operations. The filing reports no outstanding working-capital loans at June 30.
Material changes versus prior period
- First-half net loss narrowed to $504,148 from $1,312,809 in 2022, mainly alongside lower professional and other expenses; trust-account interest increased to $283,114 from $99,639.
- In January 2023, shareholders redeemed 10,729,779 public shares for $109,436,586. Redeemable shares fell from 11.5 million at December 31, 2022 to 770,221 at June 30, 2023, and trust assets declined from $117,191,410 to $8,097,937.
- The company recorded a $1,094,366 excise-tax liability associated with the January redemptions. A new FPA liability was recorded at $597,285 at June 30.
Outlook, risks, and unusual items
- The company extended its business-combination deadline to January 11, 2024. If it fails to complete a combination by then, it must cease operations, redeem public shares, and liquidate.
- Management stated that the liquidation requirement raises substantial doubt about the company’s ability to continue as a going concern for twelve months from issuance. The company may need additional financing to fund operations and pursue the transaction; potential sponsor or other insider funding was not committed.
- After quarter-end, shareholders redeemed a further 464,811 shares, requiring approximately $4,893,007 from the trust. On July 27, Cycurion provided a $200,000 interest-bearing promissory note, and the company had borrowed the full amount by the filing date.
- Nasdaq had notified the company that its market value of listed securities was below the required $50 million level, with an October 2, 2023 compliance deadline. Nasdaq also sought evidence that the company had at least 300 beneficial owners. The company said it expected to apply for Nasdaq Capital Market listing; continued listing was not assured.
- The FPA may require the combined company to buy up to 300,000 shares from Alpha after closing, with price-reset provisions and potential earlier exercise under specified conditions. Its valuation uses significant unobservable inputs.
- No material litigation was reported. Management reported disclosure controls effective as of June 30 and no material second-quarter changes to internal control over financial reporting.
Important facts for investors to verify
- Confirm the status, closing conditions, financing and required shareholder approvals for the proposed Cycurion merger; the filing states there was no guarantee it would close.
- Review post-quarter redemptions and the remaining trust balance, including the effect on cash available to the transaction and any minimum-cash conditions.
- Check the terms, interest rate and repayment obligations of the $200,000 Cycurion note, as well as any further financing needs.
- Track Nasdaq listing compliance and the company’s beneficial-owner count before relevant deadlines.
- Assess the FPA’s potential cash requirements and dilution or pricing effects, along with the excise-tax liability and other transaction costs.