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Item 2. Management’s Discussion and Analysis

2023-05-22 compared with 2022-11-10 · 52 added, 22 removed, 69 unchanged (52% of the section changed)

11 unchanged sentences

We intend to effectuate our Business Combination using cash from the proceeds of our initial public offering (“IPO”) and the sale of the placement units that occurred simultaneously with the completion of our IPO, our capital stock, debt or a combination of cash, stock, and debt.

We expect to continue to incur significant costs in the pursuit of our acquisition plans.

We cannot assure you that our plans to complete a Business Combination will be successful.

We have identified an acquisition target and, as described in further detail below, executed a merger agreement with the intention of closing a Business Combination on or before the time allotted to do so.

We expect to continue to incur significant costs in the pursuit of these acquisition plans and cannot assure you that we will be successful.

The information that follows under the heading “ Proposed Business Combination ” and elsewhere in this Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide information relevant to assess the Company from our management’s perspective regarding the Company.

Proposed Business Combination

Business Combination Agreement

On November 21, 2022, the Company., a Delaware corporation (“the Company” or “Registrant”), WAV Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Registrant (“Merger Sub”), which will be formed at, or prior to, closing, Cycurion, Inc., a corporation organized under the laws of Ontario (“Cycurion”), and Emmit McHenry as Cycurion stockholders’ representation (the “Stockholders’ Representative”), entered into an Agreement and Plan of Merger (“Merger Agreement”) pursuant to which, among other things, Cycurion will be merged with the Merger Sub (the “Merger,” and together with the other transactions related thereto, the “Proposed Transactions”), with Cycurion surviving the Merger as a wholly-owned subsidiary of Registrant (the “Surviving Corporation”).

There is no guarantee that a merger will take place.

Sponsor Support Agreement

Contemporaneously with the execution of the Merger Agreement, Western Acquisition Ventures Sponsor LLC (the “Sponsor”), a Delaware limited liability company, delivered the Support Agreement, pursuant to which, among other things, Sponsor agreed to vote in favor of the Merger and the transactions contemplated by the Merger Agreement.

Stockholder Support Agreement

Contemporaneously with the execution of the Merger Agreement, certain officers and directors of the Company delivered Support Agreements, pursuant to which, among other things, the Company stockholders agreed to vote in favor of the Merger and the transactions contemplated by the Merger Agreement.

In addition, the Company agreed to use its best efforts to obtain additional Support Agreements from certain of its stockholders.

Registration Rights Agreement

In connection with the Closing, Cycurion, the Company, and certain of their respective stockholders will enter into a registration rights agreement (the “Registration Rights Agreement”).

Pursuant to the Registration Rights Agreement, the Combined Company will be required to file a registration statement covering the resale of registrable securities held by the stockholder’s party thereto.

The Merger Agreement may be terminated at any time prior to the consummation of the Merger by mutual written consent of Cycurion, as applicable, and Company and in certain other limited circumstances, including if the Merger has not been consummated by May 31, 2023.

Either the Company or Cycurion may also terminate the Merger Agreement if certain Proposals fail to receive the requisite vote for approval and other conditions, as defined in the Merger Agreement are not met.

If the Merger Agreement is terminated, the Merger Agreement, and all above agreements, will become void, and there will be no liability under the Merger Agreement on the part of any party thereto, except as set forth in the Merger Agreement.

Results of Operations

We have neither engaged in any operations nor generated any operating revenues to date.

Our only activities for the nine months ended September 30, 2022 were organizational activities and those necessary to prepare for the IPO, described below, and since the IPO, the search for a prospective Business Combination.

Our only activities for the three months ended March 31, 2023 were organizational activities and those necessary to prepare for the IPO, described below, and since the IPO, the search for a prospective Business Combination.

We do not expect to generate any operating revenues until after the completion of our Business Combination at the earliest.

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We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses in connection with searching for, and completing, a Business Combination.

For the nine months ended September 30, 2022, we had a net loss of $1,075,657.

This consisted of $1,691,594 in professional fees, general and administrative expenses, income tax expense and franchise taxes and $615,937 of net gain on marketable securities in the Trust Account.

For the three months ended March 31, 2023, we had a net loss of $171,611.

This consisted of $403,872 in professional fees, general and administrative expenses, income tax expense and franchise taxes and $189,160 of net gain on marketable securities in the Trust Account and $43,101 of change in fair value of the forward purchase agreement.

For the three months ended March 31, 2022, we had a net loss of $590,409.

This consisted of $530,687 in professional fees, general and administrative expenses, and franchise taxes and $59,722 of loss on marketable securities in the Trust Account.

Liquidity and Capital Resources

As of September 30, 2022, we had $475,809 in cash held outside of the Trust Account.

As of September 30, 2022, we had a working capital surplus of $56,014.

The Company’s liquidity needs will be satisfied through the proceeds from loans or additional investments from its Sponsor, shareholders, officers, directors, or third parties held outside of the Trust Account.

As of March 31, 2023, we had $386,306 in cash held outside of the Trust Account.

As of March 31, 2023, we had a working capital deficit of $2,062,980.

The Company’s liquidity needs may need to be satisfied through the proceeds from loans or additional investments from its Sponsor, shareholders, officers, directors, or third parties held outside of the Trust Account.

The Company’s officers, directors, and Sponsor may, but are not obligated to, loan the Company funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs.

Accordingly, the Company may not be able to obtain additional financing.

For the nine months ended September 30, 2022, net cash used in operating activities was $1,075,657, which is primarily due to a net loss of $1,075,657, changes in working capital of $564,490 and gain on marketable securities of

For the three months ended March 31, 2023, net cash used in operating activities was $393,175, which is primarily due to a net loss of $171,611, change in fair value of derivative liabilities of $43,101, gain on marketable securities of $189,160, and changes in operating assets and liabilities of $10,697.

Net cash provided by investing activities was $109,406,586, which was due to the withdrawal from the Trust Account to pay redeeming shareholders of $109,436,586 offset by $30,000 deposited into the trust account.

Net cash used in financing activities was $109,436,586 which was primarily due to the payment made for the redemption of shares.

For the three months ended March 31, 2022, net cash used in operating activities was $802,186, which is primarily due to a net loss of $590,409 and changes in operating assets and liabilities of $271,499.

Net cash used in investing activities was $116,150,000, which was due to the proceeds of the IPO deposited into the trust account.

Net cash provided by financing activities was $117,749,000 which was primarily due to the IPO proceeds and the proceeds from private placement.

Net cash provided by financing activities was $117,749,000, which was due to the IPO proceeds.

We have incurred, and expect to continue to incur, significant costs in pursuit of our acquisition plans.

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Going Concern

In connection with the Company’s assessment of going concern considerations in accordance with the authoritative guidance in Financial Accounting Standard Board (“FASB”) Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that the mandatory liquidation and subsequent dissolution, described in Note 1, should the Company be unable to complete a Business Combination, raises substantial doubt about the Company’s ability to continue as a going concern.

The Company has until January 13, 2023, 12 months from the closing of the IPO, to consummate a Business Combination.

It is uncertain that the Company will be able to consummate a Business Combination by the specified period.

If a Business Combination is not consummated by January 13, 2023, there will be a mandatory liquidation and subsequent dissolution.

These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

On April 5, 2012, the JOBS Act was signed into law.

The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies.

In connection with the Company’s assessment of going concern considerations in accordance with the authoritative guidance in Financial Accounting Standard Board (“FASB”) Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that the mandatory liquidation and subsequent dissolution described in Note 1 to the unaudited condensed financial statements included in this quarterly report on Form 10-Q, should the Company be unable to complete a Business Combination, raises substantial doubt about the Company’s ability to continue as a going concern.

The Jumpstart Our Business Startup Act (the “JOBS Act”) contains provisions that, among other things, relax certain reporting requirements for qualifying public companies.

We qualify as an “emerging growth company” under the JOBS Act and are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies.

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These exemptions will apply for a period of five years following the completion of our IPO or until we are no longer an “emerging growth company,” whichever is earlier.

Commitments and Contingencies

Contractual Obligations

Registration Rights

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a fee for such marketing services upon the consummation of a Business Combination in an amount equal to 4.5% of the gross proceeds of the IPO, or $5,175,000 in the aggregate (exclusive of any applicable finders’ fees that might become payable).

In connection with the Business Combination contemplated with Cycurion, A.G.P., and the Company amended the fee arrangement whereby rather than the cash fee described above, the Company will distribute 250,000 shares of common stock.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported.

The preparation of unaudited condensed financial statements and related disclosures in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements, and income and expenses during the periods reported.

Actual results could materially differ from those estimates.

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Net loss per share is computed by dividing net income or loss by the weighted average number of shares of common stock outstanding during the period, excluding shares of common stock subject to forfeiture by the Sponsor.

The 11,876,000 potential shares of common stock for outstanding Public Warrants and Private Placement Warrants to purchase the Company’s stock were excluded from diluted earnings per share for the periods ended September 30, 2022 because they are contingently exercisable, and the contingencies have not yet been met.

Therefore, as of September 30, 2022, the Company did not have any dilutive securities or other contracts that could, potentially, be exercised or converted into shares of common stock and then share in the earnings of the Company.

The 11,876,000 potential shares of common stock for outstanding Public Warrants and Private Placement Warrants to purchase the Company’s stock were excluded from diluted earnings per share for the periods ended March 31, 2023 and 2022 because they are contingently exercisable, and the contingencies have not yet been met.

Therefore, as of March 31, 2023 and 2022, the Company did not have any dilutive securities or other contracts that could, potentially, be exercised or converted into shares of common stock and then share in the earnings of the Company.

As a result, diluted income or loss per share is the same as basic loss per share for the periods presented.

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Management has concluded that the Public Warrants and Private Placement Warrants issued pursuant to the warrant agreement qualify for equity accounting treatment.

Derivative liabilities - Forward Purchase Agreement

The Company accounts for its Forward Purchase Agreement (“FPA”) (see Note 6) in accordance with the guidance contained in ASC 815-40, “Derivatives and Hedging”, under which the FPA does not meet the criteria for equity treatment and must be recorded as a liability.

Accordingly, the Company classified the FPA as a liability at its fair value and adjusts the FPA to fair value at each reporting period.

This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the statements of operations.

The FPA is valued using PWERM and certain components of the FPA are valued under the Monte Carlo model.

Common Stock subject to Possible Redemption

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Recent Accounting Pronouncements

The Company’s management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements.

In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13 - Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”).

This update requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected.

The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount.

Since June 2016, the FASB issued clarifying updates to the new standard including changing the effective date for smaller reporting companies.

The guidance is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years, with early adoption permitted.

The Company adopted ASU 2016-13 on January 1, 2023.

The adoption of ASU 2016-13 did not have a material impact on its financial statements.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis