Business context and reporting period
This Form 10-Q covers the quarter and nine months ended September 30, 2023; it was filed by Western Acquisition Ventures Corp. (WAVS), a Nasdaq-listed special purpose acquisition company, not by Cycurion, Inc. Cycurion is the proposed merger target. WAVS reported no operating business or revenue and was pursuing a business combination with Cycurion.
The proposed merger was subject to closing conditions and was not assured. In October 2023, the parties amended the merger agreement, including extending its termination date to December 31, 2023. The filing does not establish that the merger closed.
Financial results and liquidity
| Metric | Three months ended September 30, 2023 | Nine months ended September 30, 2023 |
|---|---|---|
| Operating revenue | None | None |
| Operating loss | $246,957 | $812,132 |
| Net loss | $253,633 | $757,781 |
| Basic and diluted loss per share | $0.07 | $0.18 |
| Net cash used in operating activities | Not presented for the quarter | $646,799 |
- Interest earned on trust investments was $48,576 for the quarter and $331,690 for the nine-month period. The change in fair value of the forward purchase agreement was a $45,239 quarterly expense and a $212,503 nine-month expense.
- At September 30, cash outside the trust was $302,582; trust investments were $3,253,605. Current assets were $406,288 and current liabilities were $3,276,997, resulting in a reported working capital deficit of $2,870,709.
- Total liabilities were $3,276,997, including a $200,000 loan from Cycurion plus accrued interest, a $642,524 forward-purchase derivative liability, and $1,143,296 of excise tax payable. Stockholders’ deficit was $2,893,142.
- Nine-month cash flow included $114,269,494 provided by investing activities and $114,129,594 used in financing activities, primarily reflecting trust withdrawals and redemptions. Ending cash was $302,582, down from $809,481 at December 31, 2022.
Material changes versus the prior comparable period
- WAVS reported a $253,633 net loss for Q3 2023 versus $237,150 net income in Q3 2022. For the first nine months, its net loss narrowed to $757,781 from $1,075,657.
- Trust investments fell from $117,191,410 at December 31, 2022 to $3,253,605 at September 30, 2023, principally following shareholder redemptions. WAVS said shareholders redeemed 11,194,590 shares in total during 2023 through September 30.
- Redeemable common stock declined from $117,299,975 to $3,276,038. The company recorded $1,143,296 in excise tax liability arising from redemptions.
- WAVS drew the full $200,000 available under its 5% Cycurion promissory note in July 2023. The balance is due upon the earlier of the merger closing or January 11, 2024.
Outlook, risks, and unusual items
- Management concluded that the prospect of mandatory liquidation if a business combination is not completed raises substantial doubt about WAVS’s ability to continue as a going concern for twelve months from issuance of the financial statements.
- WAVS disclosed limited operating cash, a working capital deficit, expected continuing transaction costs, and possible need for additional financing. Sponsor and insider loans were discretionary, not committed.
- The company had obtained extensions of its business-combination deadline, but the filing states it intended to begin winding up if no combination was completed by December 31, 2023, despite the approved extension to January 11, 2024. The merger agreement also could be terminated if not completed by December 31, 2023.
- The forward purchase agreement with Alpha covers up to 300,000 shares and can require WAVS to purchase shares after the merger, subject to specified terms and timing. Its valuation is a Level 3 estimate using significant unobservable inputs.
- WAVS reported a Nasdaq minimum-value listing notice in April 2023. After the quarter, Nasdaq approved its move to the Capital Market and confirmed compliance on October 11, 2023; the company said it would continue monitoring compliance.
- Management cited uncertainty from inflation, higher interest rates, financial-market instability, geopolitical events, and other risks to its ability to complete a business combination. It provided no operating forecast or financial guidance.
- Management said disclosure controls were effective as of September 30, 2023, and reported no material changes to internal control over financial reporting during the quarter. No material litigation was reported.
Important facts for investors to verify
- Confirm the merger’s subsequent status, any amended terms, closing conditions, and the amount of cash available after redemptions; this 10-Q does not report a completed merger.
- Reconcile the filing’s December 31, 2023 winding-up intention with the extension to January 11, 2024, and verify any later deadline changes or liquidation actions.
- Review Cycurion’s separate financial statements and the merger materials: WAVS’s results are those of a pre-combination SPAC and do not describe Cycurion’s operating performance.
- Assess WAVS’s near-term funding needs, repayment obligations on the Cycurion loan, excise tax liability, and potential cash commitments under the forward purchase agreement.
- Verify post-quarter Nasdaq compliance and the final share count, redemption amounts, and transaction capitalization.