Item 9A. Controls and Procedures
ITEM 9A.
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal period ended December 31, 2023, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial officer concluded that during the period covered by this report, our disclosure controls and procedures were not effective due to the inadequate controls around account reconciliations and controls for the withdrawal of funds from the Trust Account and our internal controls and procedures were not effective regarding the financial reporting and procedures of certain operating expenses. A material weakness, as defined in the SEC regulations, is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. In light of these material weaknesses, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with U.S. generally accepted accounting principles.
Management plans to remediate the material weaknesses by enhancing our control process around the withdrawals of funds from the Trust Account and enhancing our controls around procedures of recording certain operating expenses and their accruals. The elements of our remediation plans can only be accomplished over time, and these initiatives may not ultimately have the intended effects.
Management’s Report on Internal Controls Over Financial Reporting
As required by SEC rules and regulations implementing Section 404 of the Sarbanes-Oxley Act, our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external reporting purposes in accordance with GAAP. Our internal control over financial reporting includes those policies and procedures that:
(1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our company;
(2)
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
(3)
provide reasonable assurance regarding prevention, or timely detection, of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.
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Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with accounting principles generally accepted in the United States. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or because the degree of compliance with policies or procedures may deteriorate.
Management conducted, under the supervision of our CEO and CFO, an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, commonly referred to as the “COSO” criteria. Based on this evaluation, our principal executive officer and principal financial officer concluded that during the period covered by this annual report, our disclosure controls and procedures were not effective due to the inadequate controls around account reconciliations and controls for the withdrawal of funds from the Trust Account and our internal controls and procedures were not effective regarding the financial reporting and procedures of certain operating expenses.
This Annual Report on Form 10-K does not include an attestation report of our registered public accounting firm due to a transition period established by rules of the SEC for an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, or the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the most recent year that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
N o n e .
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following table sets forth information about our directors, and executive officers as of April 25, 2024, each of whom have served in the indicated role since our inception.
Name
Age
Position
James Patrick McCormick
57
Chief Executive Officer, Chief Financial Officer, Treasurer, Secretary, and Director
Ryan Selewicz
32
Director
For more information about our directors and executive officers, please see the information above under the section labeled “ Our Management Team .”
Each of Stephen Christoffersen, William Lischak, Ade Okunabi, Robin Smith and Adam Stern, constituting the entire prior board of directors, resigned effective December 28, 2023, as reported on Current Report on Form 8-K dated January 3, 2024. For more information about our prior directors and officers, please see the information in our Form 10-K filed with the SEC on March 31, 2023 for the year ended December 31, 2022.
Family Relationships
There are no family relationships among the officers and directors, nor are there any arrangements or understanding between any of the directors or officers of our Company or any other person pursuant to which any officer or director was, or is, to be selected as an officer or director.
Involvement in Certain Legal Proceedings
Since our inception, none of our officers, directors, promoters, or control persons have been involved in any legal proceedings as described in Item 401(f) of Regulation S-K.
Board Meetings; Committee Meetings; and Annual Meeting Attendance
The Board met six times and acted by written consent once, and the Audit Committee acted by written consent one time. Neither the Nominating Committee nor the Compensation Committee met in 2023. All meetings were via videoconference. Every director attended more than 75% of the meetings for the Board or committee of which such director was a member.
Officer and Director Qualifications
Our officers and board of directors are composed of a diverse group of leaders with a wide array of professional roles, as described above in the section labeled “Our Management Team.” In these roles, they have gained experience in core management skills, such as strategic and financial planning, financial reporting, compliance, risk management, and leadership development. As detailed above, our officers and directors also have experience serving on boards of directors, and board committees of other companies, and have an understanding of corporate governance practices and trends, which provides an understanding of different business processes, challenges, and strategies. Further, our officers and directors also have other experience that makes them valuable, managing, and investing assets, or facilitating the consummation of business combinations.
Board Committees
The Board has a standing audit committee, nominating committee, and compensation committee. The independent directors oversee director nominations. Each audit committee, nominating committee, and compensation committee has a charter, which was filed with the SEC as exhibits to the Registration Statement on Form S-1 on October 20, 2021, and is available on our website at westernacquisitionventures.com. The information on our website, however, is not, and should not be deemed to be a part of this annual report.
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Audit Committee
The Audit Committee is comprised of Mr. McCormick and Mr. Selewicz as members, and Mr. McCormick is the chair and audit committee financial expert as such term is used in Item 407(d) of Regulation S-K. Mr. Selewicz is an independent director under the Nasdaq listing standards and under Rule 10-A-3(b)(1) of the Exchange Act. The audit committee’s duties, which are specified in the Audit Committee’s Charter, include, but are not limited to:
● reviewing and discussing with management and the independent auditor the annual audited financial statements, and recommending to the board whether the audited financial statements should be included in our Form 10-K;
● discussing with management and the independent auditor significant financial reporting issues and judgments made in connection with the preparation of our financial statements;
● discussing with management major risk assessment and risk management policies;
● monitoring the independence of the independent auditor;
● verifying the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit as required by law;
● reviewing and approving all related-party transactions;
● inquiring and discussing with management our compliance with applicable laws and regulations;
● pre-approving all audit services and permitted non-audit services to be performed by our independent auditor, including the fees and terms of the services to be performed;
● appointing or replacing the independent auditor;
● determining the compensation and oversight of the work of the independent auditor (including resolution of disagreements between management and the independent auditor regarding financial reporting) for the purpose of preparing, or issuing an audit report, or related work;
● establishing procedures for the receipt, retention, and treatment of complaints received by us regarding accounting, internal accounting controls, or reports that raise material issues regarding our financial statements or accounting policies; and
● approving reimbursement of expenses incurred by our management team in identifying potential target businesses.
Nominating Committee
The Nominating Committee is comprised of Mr. Selewicz as its sole member. Each member is an independent director under the Nasdaq listing standards. The nominating committee is responsible for overseeing the selection of persons to be nominated to serve on our board of directors. The nominating committee considers persons identified by its members, management, stockholders, investment bankers, and others.
The guidelines for selecting nominees, which are specified in the Nominating Committee Charter, generally provide that persons to be nominated:
● should have demonstrated notable, or significant, achievements in business, education, or public service;
● should possess the requisite intelligence, education, and experience to make a significant contribution to our board of directors and bring a range of skills, diverse perspectives, and backgrounds to its deliberations; and
● should have the highest ethical standards, a strong sense of professionalism, and intense dedication to serving the interests of the stockholders.
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The nominating committee will consider a number of qualifications relating to management and leadership experience, background, integrity, and professionalism in evaluating a person’s candidacy for membership on our board of directors. The nominating committee may require certain skills or attributes, such as financial or accounting experience, to meet specific board needs that arise from time to time and will also consider the overall experience and makeup of its members to obtain a broad and diverse mix of board members. The nominating committee does not distinguish among nominees recommended by stockholders and other persons.
Compensation Committee
The Compensation Committee is comprised of Mr. McCormick and Mr. Selewicz as chair. Mr. Selewicz is an independent director under the Nasdaq listing standards. The compensation committee’s duties, which are specified in our Compensation Committee Charter, include, but are not limited to:
● reviewing and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officer’s compensation, evaluating our Chief Executive Officer’s performance in light of such goals and objectives and determining and approving the remuneration (if any) of our Chief Executive Officer based on such evaluation;
● reviewing and approving the compensation of all of our other executive officers;
● reviewing our executive compensation policies and plans;
● implementing and administering our incentive compensation equity-based remuneration plans;
● assisting management in complying with our proxy statement and annual report disclosure requirements;
● approving all special perquisites, special cash payments, and other special compensation and benefit arrangements for our executive officers and employees;
● if required, producing a report on executive compensation to be included in our annual proxy statement; and
● reviewing, evaluating, and recommending changes, if appropriate, to the remuneration for directors.
Notwithstanding the foregoing, other than fees payable to A.G.P. as described in “Conflicts of Interest,” no compensation of any kind, including finders, consulting, or other similar fees, will be paid to any of our initial stockholders, our directors, or any of their respective affiliates, prior to or for any services they render in order to effectuate the consummation of an initial business combination. Accordingly, it is likely that prior to the consummation of our initial business combination, the compensation committee will only be responsible for the review and recommendation of any compensation arrangements to be entered into in connection with such initial business combination.
On March 11, 2024, the Company received the Second Letter from the Staff stating that due to the resignations of Stephen Christoffersen, William Lischak, Ade Okunabi, Robin Smith and Adam Stern, constituting the entire board of directors of the Company, effective December 27, 2023, which was previously reported in a current report on Form 8-K filed with the Securities and Exchange Commission on January 3, 2024, the Company no longer complies with Nasdaq's Majority Independent Board rule, its Audit Committee Rule, or its Compensation Committee Rule as set forth in Listing Rule 5605 (b) (1). In accordance with Nasdaq Listing Rule 5605 (b) (1) (A), Nasdaq will provide the Company a cure period in order to regain compliance as follows: (i) until the earlier of the Company's next annual stockholders' meeting or December 28, 2024; or (ii) if the Company's next annual stockholders' meeting is held before June 25, 2024, then the Company must evidence compliance no later than June 25, 2024 (the "Cure Period"). If the Company fails to regain compliance within the Cure Period in connection with the Second Letter, the Nasdaq Listing Rules require the Staff to provide written notification to the Company that its securities will be delisted. The Company is actively engaged in efforts to regain compliance with the requirements set forth in Nasdaq Listing Rule 5605 and plans to regain compliance within the Cure Period provided by Nasdaq.
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Conflicts of Interest
Investors should be aware of the following potential conflicts of interest:
● None of our officers or directors is required to commit their full time to our affairs and, accordingly, they may have conflicts of interest in allocating their time among various business activities.
● In the course of their other business activities, our officers and directors may become aware of investment and business opportunities that may be appropriate for presentation to our company as well as the other entities with which they are affiliated. Our management has pre-existing fiduciary duties and contractual obligations and if there is a conflict of interest in determining whether a particular business opportunity should be presented, any pre-existing fiduciary obligation will be presented the opportunity before we are presented with it.
● Our officers and directors may in the future become affiliated with entities, including other blank check companies, engaged in business activities similar to those intended to be conducted by our company.
● The insider shares owned by our officers and directors will be released from escrow only if an initial business combination is successfully completed and subject to certain other limitations. Additionally, our officers and directors will not receive distributions from the Trust Account with respect to any of their insider shares if we do not complete an initial business combination. In addition, our officers and directors may loan funds to us after the IPO and may be owed reimbursement for expenses incurred in connection with certain activities on our behalf that would only be repaid if we complete our initial business combination. For the foregoing reasons, the personal and financial interests of our directors and executive officers may influence their motivation in identifying and selecting a target business, completing an initial business combination in a timely manner and securing the release of their shares.
In general, officers and directors of a corporation incorporated under the laws of the State of Delaware are required to present business opportunities to a corporation if:
● the corporation could financially undertake the opportunity;
● the opportunity is within the corporation’s line of business; and
● it would not be fair to the corporation and its stockholders for the opportunity not to be brought to the attention of the corporation.
Accordingly, as a result of multiple business affiliations, our officers and directors may have similar legal obligations relating to presenting business opportunities meeting the above-listed criteria to multiple entities. Furthermore, our amended and restated certificate of incorporation provides that the doctrine of corporate opportunity will not apply with respect to any of our officers or directors in circumstances where the application of the doctrine would conflict with any fiduciary duties or contractual obligations they may have. In order to minimize potential conflicts of interest that may arise from multiple affiliations, our officers and directors (other than our independent directors) have agreed to present to us for our consideration, prior to presentation to any other person or entity, any suitable opportunity to acquire a target business until the earlier of: (i) our consummation of our initial business combination, and (ii) July 11, 2024. This agreement is, however, subject to any pre-existing fiduciary and contractual obligations such officer or director may from time to time have to another entity. Accordingly, if any of them becomes aware of an initial business combination opportunity that is suitable for an entity to which he or she has pre-existing fiduciary or contractual obligations, he or she will honor their fiduciary or contractual obligations to present such an initial business combination opportunity to such entity, and only present it to us if such entity rejects the opportunity. We do not believe, however, that the pre-existing fiduciary duties or contractual obligations of our officers and directors will materially undermine our ability to complete our initial business combination because in most cases the affiliated companies are closely held entities controlled by the officer or director or the nature of the affiliated company’s business is such that it is unlikely that a conflict will arise.
There were no other relevant pre-existing fiduciary or contractual obligations of our officers and directors as of the date this annual report was filed.
Each of Stephen Christoffersen, William Lischak, Ade Okunabi, Robin Smith and Adam Stern, constituting the entire prior board of directors, resigned effective December 28, 2023. For information regarding the pre-existing fiduciary duties or contractual
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obligations of our prior officers and directors, please see “Item 10. Directors, Executive Officers and Corporate Governance” in our Form 10-K filed on March 31, 2023 with the SEC for the year ended December 31, 2022.
In connection with the vote required for any initial business combination, all of our existing stockholders, including all of our officers and directors, have agreed to vote their respective insider shares in favor of any proposed initial business combination. In addition, they have agreed to waive their respective rights to participate in any liquidation distribution with respect to those shares of common stock acquired by them prior to the IPO. If they purchased shares of common stock as part of the IPO or in the open market, however, they would be entitled to participate in any liquidation distribution in respect of such shares but have agreed not to convert such shares (or sell their shares in any tender offer) in connection with the consummation of our initial business combination or an amendment to our amended and restated certificate of incorporation relating to pre-initial business combination activity.
All ongoing and future transactions between us, on the one hand, and any of our officers and directors or their respective affiliates, on the other hand, will be on terms believed by us to be no less favorable to us than are available from unaffiliated third parties. Such transactions will require prior approval by our audit committee and a majority of our uninterested “independent” directors, or the members of our board who do not have an interest in the transaction, in either case who had access, at our expense, to our attorneys or independent legal counsel. We will not enter into any such transaction unless our audit committee and a majority of our disinterested “independent” directors determine that the terms of such transaction are no less favorable to us than those that would be available to us with respect to such a transaction from unaffiliated third parties.
To further minimize conflicts of interest, we have agreed not to consummate our initial business combination with an entity that is affiliated with any of our officers, directors or Sponsor, unless we have obtained: (i) an opinion from an independent investment banking firm, or another independent entity that commonly renders valuation opinions, that the initial business combination is fair to our company from a financial point of view; and (ii) the approval of a majority of our disinterested and independent directors (if we have any at that time). Furthermore, other than the initial business combination fee payable to A.G.P. as described in “Conflicts of Interest,” in no event will any of our initial stockholders, officers, directors, special advisors, or their respective affiliates be paid any finder’s fee, consulting fee, or other similar compensation prior to, or for any services they render in order to effectuate, the consummation of our initial business combination.
PRINCIPAL STOCKHOLDERS
The table below sets forth information regarding the beneficial ownership of our shares of common stock as of the date of this Form 10-K by:
● each person known by us to be the beneficial owner of more than 5% of our issued and outstanding shares of common stock;
● each of our officers and directors; and
● all of our officers and directors as a group.
Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially owned by them. The following table does not reflect a record of beneficial ownership of any shares of common stock issuable upon exercise of the warrants, as the warrants are not exercisable within 60 days of the date this annual report was filed on Form 10-K.
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The following table presents the number of shares and percentage of our common stock beneficially owned as of December 31, 2023, unless otherwise noted, by each person, or group of persons, known to us who beneficially owns more than 5% of our capital stock, each named executive officer, each of our directors and all directors and executive officers as a group.
Amount
Approximate
and
Percentage of
Nature of
Outstanding
Beneficial
Shares of
Name and Address of Beneficial Owner (1)
Ownership (3)
Common Stock (2)
Western Acquisition Ventures Sponsor LLC (our sponsor)
2,125,000
60.3
%
A.G.P./Alliance Global Partners (4)
750,000
21.3
%
James P. McCormick (Director)
—
—
Ryan Selewicz (Director)
—
—
William Lischak (Former director) (5)
2,125,000
60.3
%
All directors and executive officers as a group (six individuals)
2,125,000
60.3
%
(1)
Unless otherwise indicated, the business address of each of the individuals is c/o 42 Broadway, 12th Floor, New York, New York 10004.
(2)
Percentages shows are based on 3,525,267 shares of common stock issued and outstanding as of the date this annual report was filed.
(3)
Interests shown include of founders shares, classified as common stock, and shares issued with the private placement units, as well as public shares.
(4)
Interests shown consist solely of representative shares, classified as common stock. The business address of A.G.P. is 590 Madison Avenue, 28th Floor, New York, NY 10022. Interests shown consist of 750,000 shares of common stock beneficially owned by A.G.P. Individuals who have shared voting and investor control over these shares are Raffaele Gambardella, A.G.P.’s Chief Operation Officer and Chief Risk Officer, Craig E. Klein, A.G.P.’s Chief Financial Officer/Principal Financial Officer, Phillip W. Michals, A.G.P.’s Chief Executive Officer, John J. Venezia, A.G.P.’s Chief Compliance Officer, and David A. Bocchi, Trustee of the David Bocchi Family Trust, which is an indirect owner of A.G.P., each of whom disclaims any beneficial ownership of such shares except to the extent of their pecuniary interest.
(5)
With respect to before the offering, our Sponsor is the record holder of such shares. William Lischak, our former Chief Financial Officer, was the sole managing member of our Sponsor. As such, William Lischak has voting and investment discretion with respect to the founder shares held of record by our Sponsor and may be deemed to have shared beneficial ownership of the founder shares held directly by our Sponsor. William Lischak disclaimed beneficial ownership of any shares other than to the extent he may have a pecuniary interest therein, directly or indirectly.
Our initial stockholders beneficially owned 20% of the then issued and outstanding shares of common stock immediately following our IPO. None of our initial stockholders, officers, or directors purchased securities in the IPO. Because of the ownership block held by our initial stockholders, they may be able to effectively exercise control over all matters requiring approval by our stockholders, including the election of directors and approval of significant corporate transactions other than approval of our initial business combination.
All of the insider shares issued and currently outstanding have been placed in escrow with Equiniti Trust Company, LLC, as escrow agent, until the earlier of: (A) one year after the date of the consummation of our initial business combination; or (B) the date on which we complete a liquidation, merger, stock exchange, or other similar transaction after our initial business combination that results in all of our public stockholders having the right to exchange their shares of common stock for cash, securities, or other properties. Notwithstanding the foregoing, all of the founder shares will be released from the escrow account if: (1) the last reported sale price of our common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations) for any 20 trading days within any 30-trading day period commencing at least 150 days after our initial business combination; or (2) if we complete a transaction after our initial business combination that results in all of our stockholders having the right to exchange their shares for cash, securities or other property. During the escrow period, the holders of these shares will not be able to sell or transfer their securities except: (1) to any persons (including their affiliates and stockholders) participating in the private placement of the Private Placement Units, officers, directors, stockholders, employees, and members of our initial stockholders and their affiliates; (2) amongst initial stockholders or their respective affiliates, or to our officers, directors, advisors, and employees; (3) if a holder is an entity, as a
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distribution to its partners, stockholders, or members upon its liquidation; (4) by bona fide gift to a member of the holder’s immediate family or to a trust, the beneficiary of which is a holder or a member of a holder’s immediate family, for estate planning purposes; (5) by virtue of the laws of descent and distribution upon death; (6) pursuant to a qualified domestic relations order; (7) by certain pledges to secure obligations incurred in connection with purchases of our securities; or (8) by private sales at prices no greater than the price at which the shares were originally purchased, in each case where the transferee agrees to the terms of the escrow agreement and the letter agreement. During the escrow period, the holders of these shares will not be able to sell or transfer their securities except: (i) for transfers to our officers, directors or their respective affiliates (including for transfers to an entity’s members upon its liquidation); (ii) to relatives and trusts for estate planning purposes; (iii) by virtue of the laws of descent and distribution upon death; (iv) pursuant to a qualified domestic relations order; (v) by certain pledges to secure obligations incurred in connection with purchases of our securities; (vi) by private sales made at or prior to the consummation of an initial business combination at prices no greater than the price at which the shares were originally purchased; or (vii) to us for no value for cancellation in connection with the consummation of our initial business combination, in each case (except for clause (vii)) where the transferee agrees to the terms of the escrow agreement, but will retain all other rights as our stockholders, including, without limitation, the right to vote their shares of common stock and the right to receive cash dividends, if declared. If dividends are declared and payable in shares of common stock, such dividends will also be placed in escrow. If we are unable to effect an initial business combination and liquidate the Trust Account, none of our initial stockholders will receive any portion of the liquidation proceeds with respect to their insider shares.
Our Sponsor purchased from us an aggregate of 376,000 units at $10.00 per unit for a total purchase price of $3,760,000. These purchases took place on a private placement basis simultaneously with the consummation of the IPO. A portion of the proceeds of the private placement were added to the proceeds of the IPO and placed in a Trust Account in the United States maintained by Equiniti Trust Company, LLC, as trustee, in an amount such that, at the time of the closing of the IPO, $116,150,000 was being held in the Trust Account. The remainder of such proceeds are being held by us outside of the Trust Account and being used for working capital purposes.
Our Sponsor, officers, and directors are deemed to be our “promoter” (as such term is defined under the federal securities laws). In addition, Nick Kovacevich may be deemed to be a “promoter” (as such term is defined under the federal securities laws) of ours due to his involvement in our early founding and organization. Mr. Kovacevich is an investor in our Sponsor, but did not receive, nor is he entitled to receive, any compensation for such activities.
Code of Ethics
We adopted a code of conduct and ethics applicable to our directors, officers, and employees in accordance with applicable federal securities laws. The code of ethics codifies the business and ethical principles that govern all aspects of our business.
Delinquent Section 16(a) Reports
Based on a review of Forms 3, 4, and 5 and amendments thereto filed electronically with the Commission during the fiscal year ended December 31, 2023, we are aware of no reports required by Section 16(a) of the Exchange Act that were not timely filed during such fiscal year. We received no written representation from any reporting person under Section 16(a) indicating that no Form 5 is required.
ITEM 11. EXECUTIVE COMPENSATION
Executive Officers and Director Compensation
For the year ended December 31, 2023, no executive officer has received any cash compensation for services rendered to us. No compensation of any kind, including finders, consulting or other similar fees, will be paid to any of our existing stockholders, including our directors, or any of their respective affiliates, prior to, or for any services they render in order to effectuate, the consummation of a business combination, other than James P. McCormick. However, such individuals will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. There is no limit on the amount of these out-of-pocket expenses and there will be no review of the reasonableness of the expenses by anyone other than our board of directors and audit committee, which includes persons who may seek reimbursement, or a court of competent jurisdiction if such reimbursement is challenged.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
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For information about common stock beneficially owned by our directors and officers individually and as a group, as well as for those persons known to us who hold at least 5% of our common stock, refer to the information above under the heading “ Principal Stockholders .”
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Founder Shares
On June 9, 2021, the Sponsor acquired 4,312,500 Founder Shares for an aggregate purchase price of $25,000. On June 16, 2021, the Sponsor transferred 1,207,500 of the Founder Shares to an affiliate of AGP for $7,000. On November 22, 2021, the Company effected a 2 for 3 reverse stock split of its common stock, and AGP sold back to the Sponsor 55,000 Founder Shares for $478, such that the Sponsor owns an aggregate of 2,125,000 Founder Shares, and AGP owns 750,000 Founder Shares. Up to 375,000 Founder Shares (including the Founder Shares transferred to an affiliate of AGP) were subject to forfeiture by the subscribers in case the underwriters did not fully exercise their over-allotment option. Prior to the initial investment in the Company of $25,000 by our Sponsor, we had no assets, tangible or intangible. Simultaneously with the consummation of the IPO, the Company sold 376,000 Private Placement Units, as described above under the heading “Introduction,” which is part of Item 1 above. Since the underwriters exercised the overallotment option in full on January 14, 2022, none of the Founder Shares are subject to forfeiture any longer.
The Initial Stockholders have agreed, subject to limited exceptions, not to transfer, assign, or sell any of its Founder Shares until the earlier to occur of: (A) one year after the completion of the initial Business Combination or (B) subsequent to the initial Business Combination, (x) if the last sale price of the common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange, or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Promissory Note – Related Party
On June 9, 2021, the Sponsor agreed to loan the Company an aggregate of up to $300,000 to cover expenses related to the IPO pursuant to a promissory note (the “Note”). This Note was amended to become payable on the earlier of the IPO or June 30, 2022. The Note was non-interest bearing and became payable on the consummation of the IPO (January 14, 2022). On December 31, 2021, the balance outstanding on the Note was $80,000 which was subsequently repaid on January 14, 2022, in full.
Related Party Loans
In order to finance transaction costs in connection with a Business Combination, certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined, and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1.5 million of such Working Capital Loans may be convertible into units of the post Business Combination entity at a price of $10.00 per unit. These units would be identical to the Private Placement Units. As of December 31, 2023, there were no Working Capital Loans outstanding.
In order to meet our working capital needs following the consummation of our IPO, our initial stockholders, officers, and directors, and their respective affiliates may, but are not obligated to, loan us funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion. Each loan would be evidenced by a promissory note. The notes would be repaid upon consummation of our initial business combination, without interest.
The holders of our insider shares issued and outstanding on the date this annual report was filed, as well as the holders of the Private Warrants (and all underlying securities), are entitled to registration rights pursuant to the registration rights agreement, dated January 11, 2022. The holders of a majority of these securities are entitled to make up to two demands that we register such securities. The holders of the majority of the insider shares can elect to exercise these registration rights at any time commencing three months prior to the date on which these shares of common stock are to be released from escrow. The holders of a majority of the private warrants
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can elect to exercise these registration rights at any time after we consummate a business combination. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to our consummation of a business combination. We will bear the expenses incurred in connection with the filing of any such registration statements.
We reimburse our officers and directors for any reasonable out-of-pocket business expenses incurred by them in connection with certain activities on our behalf such as identifying and investigating possible target businesses and business combinations. There is no limit on the amount of out-of-pocket expenses reimbursable by us; provided, however, that to the extent such expenses exceed the available proceeds not deposited in the Trust Account and the interest income earned on the amounts held in the Trust Account, such expenses would not be reimbursed by us unless we consummate an initial business combination. Our audit committee reviews and approves all reimbursements and payments made to any initial stockholder or member of our management team, or our or their respective affiliates, and any reimbursements and payments made to members of our audit committee are reviewed and approved by our Board of Directors, with any interested director abstaining from such review and approval.
Loan Payable
On July 27, 2023, the Company entered into a promissory note with Cycurion for $200,000, pursuant to which the Company can borrow up to an aggregate principal amount of $200,000. The Promissory Note, with an interest rate of 5% per annum is payable upon the sooner of the consummation of the Business Combination with Cycurion, or January 11, 2024. If the Company defaults on the loan, or the business combination does not occur, the Company will owe all principal and accrued interest thereto to Cycurion. Cycurion may not seek recourse against any money held in the Trust Account established pursuant the Borrower’s investment management trust agreement, dated as of January 11, 2022, as amended, by and between the Company and Equiniti Trust Company, nor any of the Company’s directors, officers, and any affiliate. As of December 31, 2023, the Company has borrowed $200,000 and accrued approximately $4,222 in interest. No amounts were borrowed as of December 31, 2022. On January 26, 2024, the Company and Cycurion amended the Promissory Note to increase its amount to $300,000 and extend the maturity date to the earlier of the consummation of the Business Combination or April 11, 2024. On April 4, 2024, the Company and Cycurion amended the Promissory Note to extend the maturity date to the earlier of the consummation of the Business Combination or July 11, 2024.
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No compensation or fees of any kind, including finder’s fees, consulting fees or other similar compensation, other than the compensation to James P. McCormick, will be paid to any of our initial stockholders, officers or directors who owned our shares of common stock, or to any of their respective affiliates, prior to or with respect to the business combination (regardless of the type of transaction that it is).
All ongoing and future transactions between us and any of our officers and directors or their respective affiliates will be on terms believed by us to be no less favorable to us than are available from unaffiliated third parties. Such transactions, including the payment of any compensation, will require prior approval by a majority of our uninterested “independent” directors (to the extent we have any) or the members of our board who do not have an interest in the transaction, in either case who had access, at our expense, to our attorneys or independent legal counsel. We will not enter into any such transaction unless our disinterested “independent” directors (or, if there are no “independent” directors, our disinterested directors) determine that the terms of such transaction are no less favorable to us than those that would be available to us with respect to such a transaction from unaffiliated third parties.
Related Party Policy
Our code of ethics, which we have adopted, requires us to avoid, wherever possible, all related party transactions that could result in actual or potential conflicts of interests, except under guidelines approved by our board of directors (or the audit committee). Related-party transactions are defined as transactions in which: (1) the aggregate amount involved will or may be expected to exceed the lesser of $120,000 in any calendar year, or 2% of our total assets averaged across the last two most recently completed fiscal years; (2) we or any of our subsidiaries are a participant; and (3) any: (a) executive officer, director or nominee for election as a director, (b) beneficial owner greater than 5% of our common stock, or any other class, or series of our securities, or (c) immediate family member, of the persons referred to in clauses (a) and (b), has or will have a direct or indirect material interest (other than solely as a result of being a director or a less than 10% beneficial owner of another entity). A conflict of interest situation can arise when a person takes actions or has interests that may make it difficult to perform their work objectively and effectively. Conflicts of interest may also arise if a person, or a member of their family, receives improper personal benefits as a result of their position.
Our audit committee, pursuant to its written charter, will be responsible for reviewing and approving related-party transactions to the extent we enter into such transactions. All ongoing and future transactions between us on the one hand, and any of our officers and directors or their respective affiliates on the other hand, will be on terms believed by us to be no less favorable to us than are available from unaffiliated third parties. Such transactions will require prior approval by our audit committee and a majority of our uninterested “independent” directors, or the members of our board who do not have an interest in the transaction, in either case who had access, at our expense, to our attorneys or independent legal counsel. We will not enter into any such transaction unless our audit committee and a majority of our disinterested “independent” directors determine that the terms of such transaction are no less favorable to us than those that would be available to us with respect to such a transaction from unaffiliated third parties. Additionally, we require each of our directors and executive officers to complete a directors and officers questionnaire that elicits information about related party transactions.
These procedures are intended to determine whether any such related party transaction impairs the independence of a director or presents a conflict of interest on the part of a director, employee, or officer.
To further minimize potential conflicts of interest, we have agreed not to consummate an initial business combination with an entity that is affiliated with any of our initial stockholders unless we obtain an opinion from an independent investment banking firm that the initial business combination is fair to our unaffiliated stockholders from a financial point of view. Furthermore, in no event will any of our existing officers, directors, or initial stockholders, or any entity with which they are affiliated, be paid any finder’s fee, consulting fee or other compensation prior to, or for any services they render in order to effectuate, the consummation of an initial business combination.
Director Independence
The Nasdaq requires that a majority of our board must be composed of “independent directors,” which is defined generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship, which in the opinion of the company’s board of directors would interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director.
Ryan Selewiz is our independent director. We intend to add additional independent directors to the Board of Directors following the initial business combination.
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Our independent directors will have regularly scheduled meetings at which only independent directors are present.
Any affiliated transactions will be on terms that our board believes are no less favorable to us than could be obtained from independent parties. Our board of directors will review and approve all affiliated transactions with any interested director abstaining from such review and approval.
For a further description of director independence, see above Part III, Item 10 – Directors, Executive Officers and Corporate Governance.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following is a summary of fees paid or to be paid to Marcum LLP, or Marcum, for services rendered.
Audit Fees. Audit fees consist of fees for professional services rendered for the audit of our year-end financial statements and services that are normally provided by Marcum LLP in connection with periodic filings. The aggregate fees of Marcum LLP for professional services rendered for the annual audited financial statements and quarterly reviewed financial statements and other required filings with the SEC for the years ended December 31, 2023 and 2022, totaled approximately $183,739 and $146,187, respectively. The amount includes interim procedures and audit fees, as well as attendance at audit committee meetings.
Audit-Related Fees . Audit-related services consist of fees billed for assurance and related services that are reasonably related to performance of the audit or review of our financial statements and are not reported under “Audit Fees.” These services include attest services that are not required by statute or regulation and consultations concerning financial accounting and reporting standards. We did not pay Marcum for consultations concerning financial accounting and reporting standards for the years ended December 31, 2023 or 2022.
Tax Fees . We did not pay Marcum LLP for tax services, planning or advice for the years ended December 31, 2023, and 2022.
All Other Fees . During the years ended December 31, 2023 and 2022, there were no fees billed for products and services provided by Marcum LLP, other than those set forth above.
Pre-Approval Policy
Our audit committee was formed upon the consummation of our Initial Public Offering. As a result, the audit committee did not pre-approve all of the foregoing services, although any services rendered prior to the formation of our audit committee were approved by our board of directors. Since the formation of our audit committee, and on a going-forward basis, the audit committee has and will pre-approve all auditing services and permitted non-audit services to be performed for us by our auditors, including the fees and terms thereof (subject to the de minimis exceptions for non-audit services described in the Exchange Act which are approved by the audit committee prior to the completion of the audit).
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)
The following are filed as part of this Form 10-K:
(1)
Financial statements:
Page
Report of Independent Registered Public Accounting Firm
F-2
Balance Sheets
F-3
Statements of Operations
F-4
Statements of Changes in Shareholders’ Deficit
F-5
Statements of Cash Flows
F-6
Notes to Financial Statements
F-7 to F-24
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(2)
Financial Statement Schedules:
None.
(3)
Exhibits
We hereby file as part of this Report the exhibits listed in the attached Exhibit Index. Exhibits which are incorporated herein by reference can be inspected and copied at the public reference facilities maintained by the SEC, 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Copies of such material can also be obtained from the Public Reference Section of the SEC, 100 F Street, N.E., Washington, D.C. 20549, at prescribed rates or on the SEC website at www.sec.gov.
Exhibit No.
Description
3.1
Amended and Restated Certificate of Incorporation of Western Acquisition Ventures Corp. dated January 11, 2022 ( incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the SEC on January 14, 2022 , as amended by Amendment No. 1, which was filed as Exhibit 3.1 to the January 12, 2023 Current Report on Form 8-K, as amended by Amendment No. 2, which was filed as Exhibit 3.1 to the July 13, 2023 Current Report on Form 8-K, as amended by Amendment No. 3, which was filed as Exhibit 3.1 to the January 11, 2024 Current Report on Form 8-K and as amended by Amendment No. 4, which was filed as Exhibit 3.1 to the April 12, 2024 Current Report on Form 8-K).
3.2
Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to our Registration Statement on Form S-1 filed with the Securities & Exchange Commission on October 20, 2021 , as amended by Amendment No. 1 filed on December 1, 2021 , as amended by Amendment No. 2 filed on January 5, 2022).
3.3
Bylaws of Western Acquisition Ventures Corp. dated May 7, 2021 (incorporated by reference to Exhibit 3.3 to our Registration Statement on Form S-1 filed with the Securities & Exchange Commission on October 20, 2021 , as amended by Amendment No. 1 filed on December 1, 2021 , as amended by Amendment No. 2 filed on January 5, 2022).
4.1
Warrant Agreement between the Company and Equiniti Trust Company LLC dated January 11, 2022 (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed with the SEC on January 14, 2022).
4.2
Form of Warrant Agreement between Equiniti Trust Company, LLC and the Registrant (incorporated by reference to Exhibit 4.4 to our Registration Statement on Form S-1 filed with the Securities & Exchange Commission on October 20, 2021 , as amended by Amendment No. 1 filed on December 1, 2021 , as amended by Amendment No. 2 filed on January 5, 2022).
4.3
Specimen Common Stock Certificate of Western Acquisition Ventures Corp. (incorporated by reference to Exhibit 4.2 to our Registration Statement on Form S-1 filed with the Securities & Exchange Commission on October 20, 2021 , as amended by Amendment No. 1 filed on December 1, 2021 , as amended by Amendment No. 2 filed on January 5, 2022 ).
4.4
Specimen Warrant Certificate of Western Acquisition Ventures Corp. (incorporated by reference to Exhibit 4.3 to our Registration Statement on Form S-1 filed with the Securities & Exchange Commission on October 20, 2021 , as amended by Amendment No. 1 filed on December 1, 2021 , as amended by Amendment No. 2 filed on January 5, 2022) .
4.5
Description of Securities (incorporated by reference to that portion of our Registration Statement on Form S-1/A filed on January 5, 2022 under the heading “Description of Securities.”
10.1+
Letter Agreement between the Company, its officers, its directors, the Sponsor and A.G.P./Alliance Global Partners dated January 11, 2022 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on January 14, 2022).
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10.2+
Form of Letter Agreement from each of the Registrant’s officers, directors, Sponsor, and A.G.P./Alliance Global Partners (incorporated by reference to Exhibit 10.1 to our Registration Statement on Form S-1 filed with the Securities & Exchange Commission on October 20, 2021 , as amended by Amendment No. 1 filed on December 1, 2021 , as amended by Amendment No. 2 filed on January 5, 2022) .
10.3
Investment Management Trust Agreement between the Company and Equiniti Trust Company, LLC dated January 11, 2022 (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed with the SEC on January 14, 2022).
10.4
Form of Investment Management Trust Agreement between Equiniti Trust Company, LLC and the Registrant (incorporated by reference to Exhibit 10.2 to our Registration Statement on Form S-1 filed with the Securities & Exchange Commission on October 20, 2021 , as amended by Amendment No. 1 filed on December 1, 2021 , as amended by Amendment No. 2 filed on January 5, 2022) .
10.5
Registration Rights Agreement between the Company, the Sponsor, A.G.P./Alliance Global Partners and certain other security holders of the Company dated January 11, 2022 (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed with the SEC on January 14, 2022).
10.6
Form of Registration Rights Agreement, (incorporated by reference to Exhibit 10.5 to our Registration Statement on Form S-1 filed with the Securities & Exchange Commission on October 20, 2021 , as amended by Amendment No. 1 filed on December 1, 2021 , as amended by Amendment No. 2 filed on January 5, 2022) .
10.7
Securities Subscription Agreement for Private Placement Units by and between the Company and the Sponsor dated January 11, 2022 (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed with the SEC on January 14, 2022).
10.8
Form of Subscription Agreement for Private Placement Units (incorporated by reference to Exhibit 10.6 to our Registration Statement on Form S-1 filed with the Securities & Exchange Commission on October 20, 2021 , as amended by Amendment No. 1 filed on December 1, 2021 , as amended by Amendment No. 2 filed on January 5, 2022).
10.9
Stock Escrow Agreement between the Company, Equiniti Trust Company, LLC and the initial stockholders dated January 11, 2022 (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K filed with the SEC on January 14, 2022).
10.10
Form of Stock Escrow Agreement (incorporated by reference to Exhibit 10.7 to our Registration Statement on Form S-1 filed with the Securities & Exchange Commission on October 20, 2021 , as amended by Amendment No. 1 filed on December 1, 2021 , as amended by Amendment No. 2 filed on January 5, 2022) .
10.11
Form of Indemnity Agreement by and among the Company and each of the directors and officers of the Company dated January 11, 2022 (incorporated by reference to Exhibit 10.6 to the Current Report on Form 8-K filed with the SEC on January 14, 2022).
10.12
Underwriting Agreement between the Company and A.G.P./Alliance Global Partners dated January 11, 2022 (incorporated by reference to Exhibit 1.1 to the Current Report on Form 8-K filed with the SEC on January 14, 2022).
10.13
Amendment to Underwriting Agreement on Letter Agreement between the Company and A.G.P/Alliance Global Partners, dated November 7, 2022, which is described under the heading Business Combination Marketing Agreement on the Registration Statement on Form S-4 filed on February 13, 2023 (incorporated by reference to Exhibit 10.13 to the Annual Report on Form 10-K filed with the SEC on March 31. 2022).
10.14
Business Combination Agreement between the Company and A.G.P./Alliance Global Partners dated January 11, 2022 (incorporated by reference to Exhibit 1.2 to the Current Report on Form 8-K filed with the SEC on January 14, 2022).
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10.15
Promissory Note dated June 9, 2021, issued to Western Acquisition Ventures Sponsor LLC (incorporated by reference to Exhibit 10.3 to our Registration Statement on Form S-1 filed with the Securities & Exchange Commission on October 20, 2021 , as amended by Amendment No. 1 filed on December 1, 2021 , as amended by Amendment No. 2 filed on January 5, 2022) .
10.16
Securities Subscription Agreement, dated June 9, 2021, between the Registrant and Western Acquisition Ventures Sponsor LLC (incorporated by reference to Exhibit 10.4 to our Registration Statement on Form S-1 filed with the Securities & Exchange Commission on October 20, 2021 , as amended by Amendment No. 1 filed on December 1, 2021 , as amended by Amendment No. 2 filed on January 5, 2022) .
10.17
Agreement and Plan of Merger, dated as of November 21, 2022, by and among Registrant, Merger Sub, Cycurion and the Stockholders’ Representative (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on December 7, 2022).
10.18
Form of Stockholder Support Agreement Representative (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed with the SEC on December 7, 2022).
10.19
Form of Sponsor Support Agreement Representative (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed with the SEC on December 7, 2022).
10.20
Form of Parent Support Agreement Representative (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed with the SEC on December 7, 2022).
10.21
Form of Lock Up Agreement Representative (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K filed with the SEC on December 7, 2022).
10.22
Forward Share Purchase Agreement entered into as of January 10, 2023, by and among the Company, Cycurion, Inc., Alpha Capital Anstalt is incorporated herein by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K, filed with the SEC on January 17, 2023.
10.23
Loan Agreement between Cycurion, Inc. and the Company, made and entered July 2023 in a transaction that closed on August 1, 2023 (incorporated by reference to Exhibit 10.23 of the Company’s Registration Statement on Form S-4 (File No. 333-269724), filed with the SEC on January 30, 2024).
10.24
Amendment No. 1 to Loan Agreement between Cycurion, Inc. and the Registrant, dated January 26, 2024 (incorporated by reference to Exhibit 10.24 of the Company’s Registration Statement on Form S-4 (File No. 333-269724), filed with the SEC on January 30, 2024).
10.25*
Amendment No. 2 to Loan Agreement between Cycurion, Inc. and the Registrant, dated April 4, 2024
10.26+
Employment Agreement between James P. McCormick and the Company dated December 27, 2023 (incorporated by reference to Exhibit 10.26 of the Company’s Registration Statement on Form S-4 (File No. 333-269724), filed with the SEC on January 30, 2024).
14.1
Code of Ethics (incorporated by reference to Exhibit 14.1 to our Registration Statement on Form S-1 filed with the Securities & Exchange Commission on October 20, 2021 , as amended by Amendment No. 1 filed on December 1, 2021 , as amended by Amendment No. 2 filed on January 5, 2022) .
24.1
Power of Attorney, included on the signature page of this Annual Report.
31.1*
Certification of the Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a).
31.2*
Certification of the Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a).
32.1*
Certification of the Principal Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350
32.2*
Certification of the Principal Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350
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97.1*
Policy Regarding Recovery of Erroneously Awarded Compensation
99.1
Audit Committee Charter (incorporated by reference to Exhibit 99.1 to our Registration Statement on Form S-1 filed with the Securities & Exchange Commission on October 20, 2021 , as amended by Amendment No. 1 filed on December 1, 2021 , as amended by Amendment No. 2 filed on January 5, 2022 ).
99.2
Compensation Committee Charter (incorporated by reference to Exhibit 99.2 to our Registration Statement on Form S-1 filed with the Securities & Exchange Commission on October 20, 2021 , as amended by Amendment No. 1 filed on December 1, 2021 , as amended by Amendment No. 2 filed on January 5, 2022 ).
99.3
Nominating Committee Charter (incorporated by reference to Exhibit 99.3 to our Registration Statement on Form S-1 filed with the Securities & Exchange Commission on October 20, 2021 , as amended by Amendment No. 1 filed on December 1, 2021 , as amended by Amendment No. 2 filed on January 5, 2022 ).
99.4
Press Release, dated January 14, 2022 (incorporated by reference to Exhibit 99.2 to the Current Report on Form 8-K filed with the SEC on January 14, 2022).
99.5
Press Release, dated January 11, 2022 (incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K filed with the SEC on January 14, 2022).
99.6
Forward Share Purchase Agreement entered into as of January 10, 2023, by and among the Registrant, Cycurion, Inc., Alpha Capital Anstalt (incorporated herein by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K, filed with the SEC on January 17, 2023).
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema Document
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
104
Inline XBRL for the cover page of this Annual Report on Form 10-K, included in the Exhibit 101 Inline XBRL Document Set.
*
Filed Herewith
+ Employment Agreement
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934, as amended, the registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.
WESTERN ACQUISITION VENTURES ACQUISITION CORP.
Dated: April 25, 2024
By:
/s/ James P. McCormick
Name:
James P. McCormick
Title:
Chief Executive Officer
Power of Attorney
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints James P. McCormick and Ryan Selewicz, jointly and severally, as his or her attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign any amendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Annual Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ James P. McCormick
Chief Executive Officer, President Chief Financial Officer, Treasurer, Secretary and Director
April 25, 2024
(Principal Executive Officer and Principal Financial Officer)
/s/ Ryan Selewicz
Director
April 25, 2024
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WESTERN ACQUISITION VENTURES CORP.
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (PCAOB ID # 688 )
F-2
F inancial Statements:
Balance Sheets
F-3
Statements of Operations
F-4
Statements of Changes in Stockholders’ Deficit
F-5
Statements of Cash Flows
F-6
Notes to Financial Statements
F-7 to F-24
F-1
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of
Western Acquisition Ventures Corp.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Western Acquisition Ventures Corp. (the “Company”) as of December 31, 2023 and 2022, the related statements of operations, changes in stockholders’ deficit and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph – Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 1 to the financial statements, the Company is a Special Purpose Acquisition Company that was formed for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities on or before July 11, 2024. The Company entered into a merger agreement with a business combination target on November 21, 2022; however, the completion of this transaction is subject to the approval of the Company’s stockholders among other conditions. There is no assurance that the Company will obtain the necessary approvals, satisfy the required closing conditions, raise the additional capital it needs to fund its operations, and complete the transaction prior to July 11, 2024, if at all. The Company also has no approved plan in place to extend the business combination deadline and fund operations for any period of time after July 11, 2024, in the event that it is unable to complete a business combination by that date. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans with regard to these matters are also described in Note 1. The financial statements do not include any adjustments that may be necessary should the Company be unable to continue as a going concern.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Marcum LLP
Marcum LLP
We have served as the Company’s auditor since 2021.
Boston, MA
April 25, 2024
F-2
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WESTERN ACQUISITION VENTURES CORP.
BALANCE SHEETS
December 31,
2023
2022
ASSETS
CURRENT ASSETS
Cash
$
—
$
809,481
Restricted Cash
8,651
—
Due from Sponsor
99,961
—
Prepaid expenses and other assets
9,338
268,208
Total current assets
117,950
1,077,689
Prepaid expenses - non current
—
17,868
Investments held in Trust Account
3,293,966
117,191,410
TOTAL ASSETS
$
3,411,916
$
118,286,967
LIABILITIES, REDEEMABLE COMMON STOCK AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses
$
1,099,166
$
829,440
Due to Trust Account
99,961
—
Loan payable
204,222
—
Derivative liability-Forward Purchase Agreement
665,116
—
Excise tax payable
1,143,296
—
Income tax payable
72,824
250,739
Franchise tax payable
21,247
163,200
Total liabilities
3,305,832
1,243,379
COMMITMENTS AND CONTINGENCIES (Note 6)
REDEEMABLE COMMON STOCK
Common stock subject to possible redemption, $ 0.0001 par value, 305,410 shares and 11,500,000 shares at redemption value of approximately $ 10.83 and $ 10.20 per share as of December 31, 2023 and 2022, respectively
3,308,364
117,299,975
STOCKHOLDERS’ DEFICIT
Preferred stock, $ 0.0001 par value; 1,000,000 shares authorized; none issued and outstanding
—
—
Common stock; $ 0.0001 par value; 50,000,000 shares authorized; 3,251,000 shares issued and outstanding (excluding 305,410 shares and 11,500,000 shares, respectively, subject to possible redemption) as of December 31, 2023 and 2022
324
324
Additional paid-in capital
—
1,605,560
Accumulated deficit
( 3,202,604 )
( 1,862,271 )
Total stockholders’ deficit
( 3,202,280 )
( 256,387 )
TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND STOCKHOLDERS’ DEFICIT
$
3,411,916
$
118,286,967
The accompanying notes are an integral part of these financial statements.
F-3
Table of Contents
WESTERN ACQUISITION VENTURES CORP.
STATEMENTS OF OPERATIONS
For the Years Ended December 31,
2023
2022
OPERATING EXPENSES
Professional fees and other expenses
$
1,077,427
$
1,853,300
Franchise tax
21,297
163,296
LOSS FROM OPERATIONS
( 1,098,724 )
( 2,016,596 )
Other (expense) income:
Interest earned on marketable securities held in Trust Account
372,050
1,566,410
Change in fair value of forward purchase agreement
( 235,095 )
—
TOTAL LOSS BEFORE INCOME TAXES
( 961,769 )
( 450,186 )
Income Tax Expense
( 72,824 )
( 250,739 )
NET LOSS
$
( 1,034,593 )
$
( 700,925 )
Weighted average shares outstanding of Common Stock subject to possible redemption
842,606
11,058,904
Basic and diluted net loss per share, Common Stock subject to possible redemption
$
( 0.25 )
$
( 0.05 )
Weighted average shares outstanding of Common Stock not subject to possible redemption
3,251,000
3,236,578
Basic and diluted net loss per share, Common Stock not subject to possible redemption
$
( 0.25 )
$
( 0.05 )
The accompanying notes are an integral part of these financial statements.
F-4
Table of Contents
WESTERN ACQUISITION VENTURES CORP.
STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
Total
Common stock
Additional
Accumulated
stockholders’
Shares
Amount
paid-in capital
deficit
deficit
Balance, December 31, 2021
2,875,000
$
287
$
24,713
$
( 11,371 )
$
13,629
Sale of private placement units including over-allotment
376,000
37
3,759,963
—
3,760,000
Proceeds allocated to public warrants, net of offering costs
—
—
3,533,617
—
3,533,617
Accretion of Common Stock subject to possible redemption value
—
—
( 5,712,733 )
( 1,149,975 )
( 6,862,708 )
Net loss
—
—
—
( 700,925 )
( 700,925 )
Balance, December 31, 2022
3,251,000
324
1,605,560
( 1,862,271 )
( 256,387 )
Forward purchase agreement
—
—
( 430,021 )
—
( 430,021 )
Excise tax liability arising from redemption of shares
—
—
( 1,094,366 )
( 48,930 )
( 1,143,296 )
Accretion of Common Stock subject to possible redemption to redemption value
—
—
( 81,173 )
( 256,810 )
( 337,983 )
Net loss
—
—
—
( 1,034,593 )
( 1,034,593 )
Balance, December 31, 2023
3,251,000
$
324
$
—
$
( 3,202,604 )
$
( 3,202,280 )
The accompanying notes are an integral part of these financial statements.
F-5
Table of Contents
WESTERN ACQUISITION VENTURES CORP.
STATEMENTS OF CASH FLOWS
For the Years Ended
December 31,
2023
2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss
$
( 1,034,593 )
$
( 700,925 )
Adjustments to reconcile net loss to net cash used in operating activities:
Interest earned on marketable securities held in Trust Account
( 372,050 )
( 1,566,410 )
Change in fair value of derivative liability – Forward Purchase Agreement
235,095
—
Changes in operating assets and liabilities:
Prepaid expenses and other assets
276,738
( 286,076 )
Accounts payable, accrued expenses and income tax payable
269,726
1,074,179
Income tax payable
( 177,915 )
—
Franchise tax payable
( 141,953 )
160,800
Interest accrued on loan payable
4,222
—
Net cash used in operating activities
( 940,730 )
( 1,318,432 )
CASH FLOWS FROM INVESTING ACTIVITIES
Cash deposited to Trust Account
( 60,100 )
( 116,150,000 )
Cash withdrawn from Trust Account in connection with redemption
114,329,594
—
Cash withdrawn from Trust Account to pay franchise and income taxes
—
525,000
Net cash provided by (used in) investing activities
114,269,494
( 115,625,000 )
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from initial public offering, net of underwriters’ discount
—
114,500,000
Proceeds from private placement
—
3,760,000
Proceeds from loan payable
200,000
—
Redemption of Common Stock
( 114,329,594 )
—
Payment of Sponsor loan
—
( 80,000 )
Payment of offering costs
—
( 431,000 )
Net cash (used in) provided by financing activities
( 114,129,594 )
117,749,000
NET CHANGE IN CASH AND RESTRICTED CASH
( 800,830 )
805,568
CASH AND RESTRICTED CASH, BEGINNING OF YEAR
809,481
3,913
CASH AND RESTRICTED CASH, END OF YEAR
$
8,651
$
809,481
Supplemental disclosure of cash flow information:
Cash paid for income taxes
$
250,739
$
—
Supplemental disclosure of noncash activities:
Accrual of amount to be funded by Sponsor for overwithdrawal of Trust Account
$
99,961
$
—
Issuance of Forward Purchase Agreement
$
430,021
$
—
Excise tax liability arising from redemption of shares
$
1,143,296
$
—
Accretion of common stock subject to redemption value
$
337,983
$
6,862,708
Reconciliation of Cash and Restricted Cash:
Cash – Beginning of Year
$
809,481
$
3,913
Restricted Cash – Beginning of Year
$
—
$
—
Cash and Restricted Cash – Beginning of Year
$
809,481
$
3,913
Cash – End of Year
$
—
$
809,481
Restricted Cash – End of Year
$
8,651
$
—
Cash and Restricted Cash – End of Year
$
8,651
$
809,481
The accompanying notes are an integral part of these financial statements.
F-6
Table of Contents
WESTERN ACQUISITION VENTURES CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 – DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS AND LIQUIDITY
Western Acquisition Ventures Corp. (the “Company”) was incorporated in Delaware on April 28, 2021. The Company is a blank check company formed for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization, or other similar business combination with one or more businesses or entities (a “Business Combination”).
The Company is not limited to a particular industry or geographic region for purposes of consummating a Business Combination. The Company is an early stage and emerging growth company, and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of December 31, 2023, the Company had not commenced any operations. All activity from April 28, 2021 (inception) through December 31, 2023, relates to the Company’s formation and Initial Public Offering (“IPO”), which is described below, and, since the IPO, the search for a prospective Business Combination. The Company will not generate any operating revenues until after the completion of its Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income earned on investments from the proceeds derived from the IPO. The registration statement for the Company’s IPO was declared effective on January 11, 2022. On January 14, 2022, the Company consummated the IPO of 10,000,000 units (“Units”) with respect to the common stock included in the Units being offered (the “Public Shares”) at $ 10.00 per Unit, generating gross proceeds of $ 100,000,000 . Each Unit consists of one share of common stock and one redeemable warrant (the “Public Warrants”). Each Public Warrant entitles the holder to purchase one share of common stock at a price of $ 11.50 per share, subject to adjustment (see Note 7). The Company has selected December 31 as its fiscal year end.
Simultaneously with the closing of the IPO the Company consummated the sale of 361,000 private placement units (“Private Placement Units”) at a price of $ 10.00 per Private Placement Unit in a private placement to the Company’s sponsor, Western Acquisition Ventures Sponsor LLC (the “Sponsor”), generating gross proceeds of $ 3,610,000 which is described in Note 4.
Simultaneously with the closing of the IPO, and the sale of the Private Placement Units, the Company consummated the closing of the sale of 1,500,000 additional Units upon receiving notice of the underwriter’s election to fully exercise its overallotment option (“Overallotment Units”), generating additional gross proceeds of $ 15,000,000 . Simultaneously with the exercise of the overallotment option, the Company consummated the private placement of an additional 15,000 Private Placement Units to the Sponsor, generating gross proceeds of $ 150,000 .
As of December 31, 2023, offering costs for the IPO amounted to $ 1,029,116 , consisting of $ 500,000 of underwriting fees and $ 529,116 of other costs. The Company was to pay Alliance Global Partners (“A.G.P.”) a business combination marketing agreement fee in an amount equal to 4.5 % of the gross proceeds of the IPO (an aggregate amount due to A.G.P of $ 5,175,000 ) if the Company is successful in completing a Business Combination from the amounts being held in the Trust Account (as defined below). If the Company is not successful in completing a Business Combination, A.G.P. will not be entitled to any of this fee (see Note 6). 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.
Following the closing of the IPO and Overallotment Units, $ 116,150,000 ($ 10.10 per Unit) from the net proceeds of the sale of the Units in the IPO and the Private Placement Units was placed in a trust account (“Trust Account”). The amounts placed in the Trust Account will be invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 180 days or less, or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting the conditions of paragraphs (d)(2), (d)(3), and (d)(4) of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination, and (ii) the distribution of the Trust Account, as described below.
Substantially, all of the net proceeds of the IPO and the sale of the Private Placement Units are intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete one or more Business Combinations having an aggregate fair market value of at least 80 % of the assets held in the Trust Account (excluding the amounts due under the business combination marketing agreement and taxes payable on income earned on the Trust Account) at the time of the agreement to enter into the Business Combination. However, the Company will only complete a Business Combination if the post-transaction company owns or acquires 50 % or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. There is no assurance the Company will be able to successfully effect such a Business Combination.
F-7
Table of Contents
WESTERN ACQUISITION VENTURES CORP.
NOTES TO FINANCIAL STATEMENTS
The Company will provide the holders of the outstanding Public Shares (the “Public Stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either: (i) in connection with a stockholder meeting called to approve the Business Combination; or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company. The Public Stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (to be approximately $ 10.83 per Public Share, plus any pro rata interest then in the Trust Account, net of taxes payable).
All of the Public Shares contain a redemption feature which allows for the redemption of such Public Shares in connection with the Company’s liquidation, if there is a stockholder vote or tender offer in connection with the Company’s Business Combination and in connection with certain amendments to the Company’s amended and restated certificate of incorporation. In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity” (“ASC 480”) Subtopic 10-S99, redemption provisions not solely within the control of a company require common stock subject to redemption to be classified outside of permanent equity. Given that the Public Shares will be issued with other freestanding instruments (i.e., Public Warrants), the initial carrying value of the Public Shares classified as temporary equity will be the allocated proceeds determined in accordance with ASC 470-20 “Debt with Conversion and other Options.” The Public Shares are subject to ASC 480-10-S99. If it is probable that the equity instrument will become redeemable, the Company has the option to either: (i) accrete changes in the redemption value over the period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument; or (ii) recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period. The Company has elected to recognize the changes immediately. While redemptions cannot cause the Company’s net tangible assets to fall below $ 5,000,001 , the Public Shares are redeemable and are classified as such on the balance sheet until such date that a redemption event takes place.
Redemptions of the Company’s Public Shares may be subject to the satisfaction of conditions, including minimum cash conditions, pursuant to an agreement relating to the Company’s Business Combination. If the Company seeks stockholder approval of the Business Combination, the Company will proceed with a Business Combination if a majority of the shares voted are voted in favor of the Business Combination, or such other vote as required by law or stock exchange rule. If a stockholder vote is not required by applicable law or stock exchange listing requirements and the Company does not decide to hold a stockholder vote for business or other reasons, the Company will, pursuant to its Certificate of Incorporation, conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction is required by applicable law or stock exchange listing requirements, or the Company decides to obtain stockholder approval for business or other reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the Sponsor has agreed to vote its Founder Shares (as defined in Note 5) and any Public Shares purchased during or after the IPO in favor of approving a Business Combination. Additionally, each Public Stockholder may elect to redeem their Public Shares without voting, and if they do vote, irrespective of whether they vote for or against the proposed transaction.
Notwithstanding the foregoing, the Certificate of Incorporation provides that a Public Stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15 % or more of the Public Shares sold in the IPO, without the prior consent of the Company.
The Company’s Sponsor, officers, and directors (the “Initial Stockholders”) have agreed not to propose an amendment to the Certificate of Incorporation that would affect the substance or timing of the Company’s obligation to redeem 100 % of its Public Shares if the Company does not complete a Business Combination, unless the Company provides the Public Stockholders with the opportunity to redeem their shares of common stock in conjunction with any such amendment.
F-8
Table of Contents
WESTERN ACQUISITION VENTURES CORP.
NOTES TO FINANCIAL STATEMENTS
On January 6, 2023, the Company voted upon and approved a Charter Amendment to be filed with the Delaware Secretary of State and on the Trust Agreement Amendment (collectively known as the “Amendment Agreements”). The Amendment Agreements permit an extension of the date by which the Company has to consummate a business combination up to six times, each such extension for an additional one month period, from January 11, 2023 to July 11, 2023, upon payments to the Trust Account of $ 10,000 for each one-month extension. On July 9, 2023, the Company voted upon and approved a Second Charter Amendment to be filed with the Delaware Secretary of State and on the Trust Agreement Amendment (collectively known as the "Second Amendment Agreements"). The Second Amendment Agreements permit an extension of the date by which the Company has to consummate a business combination to January 11, 2024 upon the payment of a nominal fee of $ 100 .
On January 9, 2024, the Company held a virtual special meeting of stockholders to vote on the proposals identified in the Proxy Statement for the Special Meeting. At the Special Meeting, the Company’s stockholders voted on a proposal to amend the Company’s Certificate of Incorporation, to extend the date by which the Company has to consummate a business combination, such extension for an additional three (3)-month period, from January 11, 2024 through and including April 11, 2024, a proposal to amend the Company’s investment management trust agreement, dated as of January 11, 2022, as amended, by and between the Company and Equiniti Trust Company, LLC allowing the Company to extend the extended termination date by depositing into the Trust Account $ 100 and a proposal to direct the chairman of the Special Meeting to adjourn the Special Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if necessary, based upon the tabulated vote at the time of the Special Meeting. As a result of the virtual special meeting the Company’s stockholders elected to redeem an aggregate of 31,143 shares, each share valued at approximately $ 10.51 per share and totaling $ 327,375 , which was removed from the Trust Account.
On April 10, 2024, the Company held a virtual special meeting of stockholders to vote on the proposals identified in the Proxy Statement for the Special Meeting. At the Special Meeting, the Company’s stockholders voted on a proposal to amend the Company’s Certificate of Incorporation, to extend the date by which the Company has to consummate a business combination, such extension for an additional three (3)-month period, from April 11, 2024 through and including July 11, 2024, a proposal to amend the Company’s investment management trust agreement, dated as of January 11, 2022, as amended, by and between the Company and Equiniti Trust Company, LLC allowing the Company to extend the extended termination date by depositing into the Trust Account $ 100 and a proposal to direct the chairman of the Special Meeting to adjourn the Special Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the Special Meeting.
If the Company is unable to complete a Business Combination by July 11, 2024, the Company intends to: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account and not previously released to the Company to pay: (a) its income and franchise taxes and (b) up to $ 100,000 of dissolution expenses, if any, divided by the number of then outstanding Public Shares, which redemption will completely extinguish Public Stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve, and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
On January 6, 2023, at a special meeting of stockholders, the Company’s stockholders elected to redeem an aggregate of 10,729,779 shares, each share valued at approximately $ 10.20 per share and totaling $ 109,436,586 . On July 9, 2023, the Company’s stockholders elected to redeem an aggregate of 464,811 shares requiring payment out of the Trust Account of approximately $ 4,893,008 ($ 10.53 per share).
On April 3, 2023, the Company received a notice in the form of a letter (the “Notice”) from the listing qualifications department staff of The Nasdaq Stock Market notifying the Company that for the last 30 consecutive business days, the Company’s Minimum Value of Listed Securities (“MVLS”) was below the minimum of $ 50 million required for continued listing on the Nasdaq Global Market pursuant to Nasdaq listing rule 5450(b)(2)(A). The Company had until October 2, 2023, to regain compliance by reaching $ 50 million for at least ten consecutive days.
As a consequence, on September 1, 2023 the Company applied for a listing with Nasdaq to be moved to the Nasdaq Capital Market, which requires MVLS of $35 million. On October 6, 2023, the Company was approved by Nasdaq to list its securities on the Nasdaq Capital Market and on October 11, 2023 Nasdaq confirmed that the Company is in compliance with listing requirements and has closed the matter.
F-9
Table of Contents
WESTERN ACQUISITION VENTURES CORP.
NOTES TO FINANCIAL STATEMENTS
The Initial Stockholders have agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the time to consummate a business combination (the “Combination Period”). However, since the Initial Stockholders acquired Public Shares in the IPO, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the Company fails to complete a Business Combination within the Combination Period. A.G.P. has agreed to waive its rights to its business combination marketing agreement fee (see Note 6) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period, and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be only $ 10.10 per share held in the Trust Account. In order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a vendor for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account. This liability will not apply with respect to any claims by a third party who has executed a waiver of any right, title, interest or claim of any kind in or to any monies held in the Trust Account or to any claims under the Company’s indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (except the Company’s independent registered public accounting firm), prospective target businesses or other entities with which the Company does business, execute agreements waiving any right, title, interest, or claim of any kind in or to monies held in the Trust Account.
Risks and Uncertainties
We continue to evaluate the impact of increases in inflation and rising interest rates, financial market instability, including the recent bank failures, the potential government shutdown, the lingering effects of the COVID-19 pandemic and certain geopolitical events, including the wars in Ukraine and the surrounding region and between Israel and Hamas. We have concluded that while it is reasonably possible that the risks and uncertainties related to or resulting from these events could have a negative effect on our financial position, results of operations and/or ability to complete an initial Business Combination, we cannot at this time fully predict the likelihood of one or more of the above events, their duration or magnitude or the extent to which they may negatively impact our business and our ability to complete an initial Business Combination.
Business Combination Agreement
On November 21, 2022, the Company, WAV Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of the Company (“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. There is no guarantee that a merger will take place.
Sponsor Support Agreement
Contemporaneously with the execution of the Merger Agreement, 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’s 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 Stockholder Support Agreements from certain of its stockholders.
F-10
Table of Contents
WESTERN ACQUISITION VENTURES CORP.
NOTES TO FINANCIAL STATEMENTS
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.
Termination
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 July 11, 2024. 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. 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.
Liquidity and Capital Resources
As of December 31, 2023, we had $ 8,651 in restricted cash available exclusively for payment of current tax liabilities. As of December 31, 2023, we had a working capital deficit of $ 3,187,882 . The Company’s liquidity is 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.
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 for a period of twelve months from the issuance of these financial statements.
Restricted Cash, Due from Sponsor and Due to Trust Account
In accordance with the Trust agreement, the Company is permitted to withdraw interest from the Trust Account to pay its tax obligations, including federal income taxes and state franchise taxes. During the year ended December 31, 2022, the Company withdrew $ 525,000 in interest from the Trust Account to settle its current tax obligations. However, during the year ended December 31, 2023, the Company identified that a $ 108,611 excess of interest was erroneously withdrawn from the Trust Account and was used for operating expenses during 2023, which is not a permitted use of the Trust funds per the trust agreement. As a result, the Company recorded a receivable due from the Sponsor and a related payable to the Trust for an amount of $ 99,961 as of December 31, 2023 . The receivable reflects the amount due to be reimbursed to the Trust Account from the Sponsor for the funds used for operating expenses. The balance of this withdrawal is included in restricted cash in the amount of $ 8,651 on the accompanying balance sheet, representing the amounts available exclusively for payment of current tax liabilities. The Sponsor has committed to funding the Company in a manner sufficient to fund the Company’s tax obligations and return any over withdrawal from the Trust Account, if any.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements are presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the SEC.
F-11
Table of Contents
WESTERN ACQUISITION VENTURES CORP.
NOTES TO FINANCIAL STATEMENTS
Emerging Growth Company
The Company is an emerging growth company as defined in Section 102(b)(1) of the Jumpstart Our Business Start-ups Act of 2012 (the “JOBS Act”) which exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies, but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised, and it has different application dates for public or private companies. The Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
This may make comparison of the Company’s financial statements with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of the financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Cash and Cash Equivalents and Restricted Cash
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company had $ 0 and $ 809,481 in cash and did not have any cash equivalents as of December 31, 2023 and 2022, respectively. At December 31, 2023 and 2022, the Company also had $8,651 and $ 0 of restricted cash, respectively, related to funds withdrawn from the Trust Account reserved for the payment of income and state franchise taxes.
Investments Held in Trust Account
At December 31, 2023 and 2022, substantially all of the assets held in the Trust Account were held in mutual funds that invest in U.S Treasury Securities. The Company’s investments held in the Trust Account are classified as trading securities. Trading securities are presented on the balance sheet at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of investments held in Trust Account are included in in the accompanying statements of operations. The estimated fair values of investments held in Trust Account are determined using available market information.
Common Stock subject to Possible Redemption
The Company accounts for its common stock subject to possible redemption in accordance with the guidance in ASC 480. Shares of common stock subject to mandatory redemption (if any) are classified as a liability instrument and are measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s Public Shares sold in the IPO feature certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, on January 14, 2022, 11,500,000 shares of common stock subject to possible redemption are presented as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheet.
Immediately upon the closing of the IPO, the Company recognized the accretion from the initial book value to redemption amount value. This method would view the end of the reporting period as if it were also the redemption date for the security. The change in the carrying value of redeemable shares of common stock resulted in charges against additional paid-in capital.
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Table of Contents
WESTERN ACQUISITION VENTURES CORP.
NOTES TO FINANCIAL STATEMENTS
As of December 31, 2023 and 2022, the value of common stock subject to possible redemption reflected on the balance sheet is reconciled on the following table:
Gross proceeds
$
115,000,000
Less:
Proceeds allocated to Public Warrants
( 3,565,000 )
Issuance costs allocated to Public Shares
( 997,733 )
Plus:
Accretion of carrying value to redemption value
6,862,708
Common stock subject to possible redemption as of December 31, 2022
117,299,975
Less:
Redemption
( 114,329,594 )
Add:
Accretion of carrying value to redemption value
337,983
Common stock subject to possible redemption as of December 31, 2023
$
3,308,364
As disclosed in Note 1, the Company identified during the year ended December 31, 2023 that an excess of $ 108,611 was erroneously withdrawn from the interest earned in the Trust Account for operating expenses. As of December 31, 2023, the Company recorded a receivable due from the Sponsor to reimburse the Trust Account for these funds used for operating expenses.
Deferred Offering Costs Associated with the Initial Public Offering
Deferred offering costs consist of direct costs incurred through the balance sheet date that were directly related to the IPO and that were charged to stockholders’ equity upon the completion of the IPO. As of December 31, 2023 and 2022, the Company has zero deferred offering costs on the balance sheet, due to the IPO taking place in the first calendar quarter of the year ending December 31, 2022.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal Depository Insurance Corporation limit of $ 250,000 . As of December 31, 2023 and 2022, the Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such account.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under the FASB ASC 820, “Fair Value Measurements and Disclosures,” equals or approximates the carrying amounts represented in the accompanying balance sheets, primarily due to their short-term nature, except for the Investments held in Trust Account and the Derivative Liability - Forward Purchase Agreement.
Fair Value of 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 a Probability Weighted Expected Return Method (“PWERM”) and certain components of the FPA are valued under the Monte Carlo model (see note 9).
Income Taxes
The Company complies with the accounting and reporting requirements of ASC 740, “Income Taxes,” (“ASC 740”) which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or
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WESTERN ACQUISITION VENTURES CORP.
NOTES TO FINANCIAL STATEMENTS
deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of December 31, 2023 and 2022. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest and immaterial amounts were accrued for the payment of penalties for the years ended December 31, 2023 and 2022. The Company is currently not aware of any issues under review that could result in significant payments, accruals, or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
Net Loss per Common Share
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” Net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. The weighted average number of shares outstanding were reduced for the effect of an aggregate of 375,000 Founders Shares that were subject to forfeiture if the over-allotment option was not exercised by the underwriters. Since the over-allotment was exercised, no forfeiture happened. The 11,876,000 potential shares of common stock for outstanding Public Warrants and Private Placement Warrants (as defined in Note 4) to purchase the Company’s stock were excluded from diluted earnings per share for the years ended December 31, 2023 and 2022 because they are contingently exercisable, and the contingencies have not yet been met. As a result, diluted loss per share is the same as basic loss per share for the years presented.
The following table reflects the calculation of basic and diluted net loss per ordinary share (in dollars, except per share amounts):
For the Year Ended December 31, 2023
Common stock
Common stock not
subject to
subject to possible
Basic and diluted net loss per share:
possible redemption
redemption
Numerator:
Allocation of net loss
$
( 212,955 )
$
( 821,638 )
Denominator:
Basic and diluted weighted average shares outstanding
842,606
3,251,000
Basic and diluted net loss per ordinary share
$
( 0.25 )
$
( 0.25 )
For the Year Ended December 31, 2022
Common stock
Common stock not
subject to
subject to possible
Basic and diluted net loss per share:
possible redemption
redemption
Numerator:
Allocation of net loss
$
( 542,232 )
$
( 158,693 )
Denominator:
Basic and diluted weighted average shares outstanding
11,058,904
3,236,578
Basic and diluted net loss per ordinary share
$
( 0.05 )
$
( 0.05 )
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Table of Contents
WESTERN ACQUISITION VENTURES CORP.
NOTES TO FINANCIAL STATEMENTS
Accounting for Warrants
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the instruments’ specific terms and applicable authoritative guidance in ASC 480 and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the instruments are free standing financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the instruments meet all of the requirements for equity classification under ASC 815, including whether the instruments are indexed to the Company’s own common shares and whether the instrument holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, was conducted at the time of warrant issuance and as of each subsequent period end date while the instruments are outstanding. Management has concluded that the Public Warrants and Private Placement Warrants issued pursuant to the warrant agreement qualify for equity accounting treatment.
Recent Accounting Pronouncements
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.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which will require the Company to disclose specified additional information in its income tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. ASU 2023-09 will also require the Company to disaggregate its income taxes paid disclosure by federal, state and foreign taxes, with further disaggregation required for significant individual jurisdictions. ASU 2023-09 will become effective for annual periods beginning after December 15, 2024. The Company is still reviewing the impact of ASU 2023-09.
The Company’s management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements.
NOTE 3 — INITIAL PUBLIC OFFERING AND OVER-ALLOTMENT
Pursuant to the IPO, the Company sold 11,500,000 Units (including 1,500,000 Overallotment Units) at a price of $ 10.00 per Unit. Each Unit consists of one share of common stock and one Public Warrant. Each Public Warrant entitles the holder to purchase one share of common stock at a price of $ 11.50 per share, subject to adjustment (see Note 7).
NOTE 4 — PRIVATE PLACEMENT UNITS
On January 14, 2022, simultaneously with the consummation of the IPO and sale of the Overallotment Units, the Company consummated the issuance and sale of 376,000 Private Placement Units in a private placement transaction at a price of $ 10.00 per Private Placement Unit, generating gross proceeds of $ 3,760,000 . Each Private Placement Unit consists of one share of common stock and one warrant (the “Private Placement Warrants”). Each Private Placement Warrant entitles the holder to purchase one share of common stock at a price of $ 11.50 per share, subject to adjustment (see Note 7).
A portion of the proceeds from the Private Placement Units were added to the proceeds from the IPO to be held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Placement Units will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law), and the Private Placement Units and any underlying securities will become worthless.
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WESTERN ACQUISITION VENTURES CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 5 — RELATED PARTY TRANSACTIONS
Founder Shares
On June 9, 2021, the Sponsor acquired 4,312,500 shares of common stock of the Company (the “Founder Shares”) for an aggregate purchase price of $ 25,000 . On June 16, 2021, the Sponsor transferred 1,207,500 of the Founder Shares to an affiliate of A.G.P. for $ 7,000 . On November 22, 2021, the Company effected a 2 for 3 reverse stock split of its common stock, and A.G.P. sold back to the Sponsor 55,000 Founder Shares for $ 478 , such that the Sponsor owns an aggregate of 2,125,000 Founder Shares, and A.G.P. owns 750,000 Founder Shares. Up to 375,000 Founder Shares (including the Founder Shares transferred to an affiliate of A.G.P.) were subject to forfeiture by the subscribers in case the underwriters did not fully exercise their over-allotment option. Since the underwriters exercised the overallotment option in full on January 14, 2022, none of the Founder Shares are subject to forfeiture any longer.
The Initial Stockholders have agreed, subject to limited exceptions, not to transfer, assign, or sell any of their Founder Shares until the earlier to occur of: (A) one year after the completion of the Business Combination or (B) subsequent to the Business Combination, (x) if the last sale price of the common stock equals or exceeds $ 12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30 -trading day period commencing at least 150 days after the Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange, or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities, or other property.
Promissory Note – Related Party
On June 9, 2021, the Sponsor agreed to loan the Company an aggregate of up to $ 300,000 to cover expenses related to the IPO pursuant to a promissory note (the “Note”). This Note was amended to become payable on the earlier of the IPO or December 31, 2022. The Note was non-interest bearing and became payable on the consummation of the IPO (January 14, 2022). On December 31, 2021, the balance outstanding on the Note was $ 80,000 which was subsequently repaid on January 14, 2022 in full.
Loan Payable
On July 27, 2023, the Company entered into a promissory note with Cycurion for $ 200,000 , pursuant to which the Company can borrow up to an aggregate principal amount of $ 200,000 . The Promissory Note, with an interest rate of 5 % per annum is payable upon the sooner of the consummation of the Business Combination with Cycurion, or January 11, 2024. If the Company defaults on the loan, or the business combination does not occur, the Company will owe all principal and accrued interest thereto to Cycurion. Cycurion may not seek recourse against any money held in the Trust Account established pursuant the Borrower’s investment management trust agreement, dated as of January 11, 2022, as amended, by and between the Company and Equiniti Trust Company, nor any of the Company’s directors, officers, and any affiliate. As of December 31, 2023, the Company has borrowed $ 200,000 and accrued approximately $ 4,222 in interest. No amounts were borrowed as of December 31, 2022. On January 26, 2024, the Company and Cycurion amended the Promissory Note to increase its amount to $ 300,000 and extend the maturity date to the earlier of the consummation of the Business Combination or April 11, 2024. On April 4, 2024, the Company and Cycurion amended the Promissory Note to extend the maturity date to the earlier of the consummation of the Business Combination or July 11, 2024.
Related Party Loans
In order to finance transaction costs in connection with a Business Combination, certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company will repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company.
Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $ 1.5 million of such Working Capital Loans may be convertible into units of the post Business Combination entity at a price of $ 10.00 per unit. These units would be identical to the Private Placement Units. As of December 31, 2023 and 2022, there were no Working Capital Loans outstanding.
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WESTERN ACQUISITION VENTURES CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 6 — COMMITMENTS AND CONTINGENCIES
Registration Rights
The holders of Founder Shares, Private Placement Units, and units that may be issued upon conversion of Working Capital Loans, if any, are entitled to registration rights pursuant to a registration rights agreement that was signed on the date of the IPO. These holders will be entitled to certain demand and “piggyback” registration rights. However, the registration rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until the termination of the applicable lock-up period for the securities to be registered. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The Company granted the underwriters a 45 -day option from the final prospectus relating to the IPO to purchase up to 1,500,000 additional Units to cover over-allotments, if any, at the IPO price less the underwriting discounts and commissions. On January 14, 2022, the underwriters fully exercised their over-allotment option and purchased 1,500,000 Units at $ 10.00 per Unit.
The underwriters were paid an underwriting fee of $ 500,000 at the closing of the IPO. As an additional underwriting fee, on June 16, 2021, the Sponsor transferred 1,207,500 of the Founder Shares to an affiliate of A.G.P. for $ 7,000 . On November 22, 2021, the Company effected a 2 for 3 reverse stock split of its common stock, and A.G.P. sold back to the Sponsor 55,000 Founder Shares for $ 478 , such that A.G.P. owns 750,000 Founder Shares.
Business Combination Marketing Agreement
The Company has engaged A.G.P. as an advisor in connection with a Business Combination to assist the Company in holding meetings with its stockholders to discuss the potential Business Combination and the target business’ attributes, introduce the Company to potential investors that are interested in purchasing the Company’s securities in connection with a Business Combination, assist the Company in obtaining stockholders’ approval for a Business Combination, and assist the Company with its press releases and public filings in connection with a Business Combination. The Company was to pay A.G.P. 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.
Forward Purchase Agreement
On January 10, 2023, the Company, Cycurion, and Alpha Capital Anstalt (“Alpha”), entered into a Forward Share Purchase Agreement (the “FPA”). Prior to effecting the FPA, Alpha had purchased shares from an unaffiliated party which had elected to redeem 300,000 shares of Common Stock, par value $ 0.0001 per share (such purchased Shares, the “Recycled Shares”.) Under the terms of the FPA, once the proposed Business Combination is effective, and twelve months (or six to nine months if submitted in writing to the Company) have elapsed, Alpha may elect to sell and transfer to the Company up to that number of shares that are then held by Alpha, and the Company shall purchase from Alpha, up to that number of shares that are then held by Alpha, but not to exceed 300,000 shares in the aggregate unless otherwise agreed to in writing by all parties, at a price per share equal to the Redemption Price (as defined in the charter.)
On January 22, 2024, the Company terminated this Forward Purchase Agreement.
Employment Agreements
On December 27, 2023, we entered into an employment agreement with James P. McCormick whereby the Company agreed to pay a total of $ 125,000 of total compensation annually, including $ 40,000 in cash and $ 85,000 in stock payment.
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WESTERN ACQUISITION VENTURES CORP.
NOTES TO FINANCIAL STATEMENTS
The FPA provides that subject to conditions under the FPA on the date that is 12 months after the closing of the Business Combination (the “BC Closing”); provided that, Alpha, at Alpha’s sole discretion, may accelerate such date to any of six (6) months after the BC Closing and nine (9) months after the BC Closing by providing notice to WAVS of its election to so accelerate at least two (2) calendar days prior to such date (any such date, the “Put Date”), Alpha may elect to sell and transfer to WAVS up to that number of Shares that are then held by Alpha, but not to exceed 300,000 Shares in the aggregate at a price per Recycled Share equal to the Redemption Price (as defined in Section 9.2(a) of the Current Charter) (the “Shares Purchase Price”). The Put Date may be accelerated by Alpha if (i) the Shares are delisted from the New York Stock Exchange of NASDAQ, (ii) the Agreement is terminated for any reason after the date redemption requests are due in connection with the stockholder vote to approve the Business Combination, or (iii) during any 30 consecutive trading day period following the closing of the Business Combination, the VWAP Price (as defined below) for 20 trading days during such period shall be less than $ 3.00 per Share. For purposes of this Agreement, the “VWAP Price” per Share shall be determined for any trading day or any specified trading period using the Rule 10b-18 volume weighted average price per share of Common Stock as reported via a Bloomberg Terminal. The FPA also provides that WAV shall reimburse Alpha for all reasonable and necessary brokerage commissions incurred in connection with the Alpha’s acquisition of Shares, in an amount not to exceed $ 0.05 per Share and $ 0.02 per disposition of each Share.
Simultaneously with the BC Closing, WAVS shall transfer into an escrow account for the benefit of Alpha (the “Escrow Account”) with Equiniti Trust Company (the “Escrow Agent”), subject to the terms of a customary written escrow agreement (the “Escrow Agreement”) to be entered into on or prior to the BC Closing, an amount equal to the Shares Purchase Price multiplied by the number of Shares held by Alpha as of the closing of the Business Combination (the “Escrowed Funds”). The Escrow Agreement shall irrevocably cause the Escrow Agent to release from the Escrow Account the aggregate Shares Purchase Price on the Put Date, and the additional payments to be made to Alpha described below, if applicable.
Within three business days of receipt by the Escrow Agent and WAVS of written notice that Alpha has sold Recycled Shares the Escrow Agent will release to WAVS an aggregate cash amount equal to (x) the number of Shares sold multiplied by the Reset Price (as defined below) at the time of such sale, and shall release to Alpha an amount in cash equal to the product of (I) the number of Shares sold in the open market multiplied by (II) the difference of (A) the Shares Purchase Price minus (B) the Reset Price. The Reset Price shall initially equal $ 8.00 . The Reset Price shall be adjusted first on the one month anniversary of the BC Closing, and then every three month anniversary of the most recent reset date (each such date, a “Reset Date”) to be the lowest of (a) the then-current Reset Price, (b) $ 8.00 and (c) an amount equal to the product of (i) 1.05 multiplied by (ii) the VWAP Price of the last five (5) trading days immediately preceding the applicable Reset Date, but not lower than $ 2.00 ; provided, however, that if WAVS offers and sells or issues any shares or debt or securities that are convertible into or exchangeable or exercisable for shares (including, but not limited to, any equity line of credit or similar facility determined based on the per share price of any draw by WAVS on such facility (with notice of any such draw to be provided to Investor within one (1) business day of such draw), and excluding securities issued or issuable as merger consideration in connection with the Business Combination Agreement, with such exclusion applicable only to the extent the terms and related agreements are not amended with respect to such securities), at a price lower than, or upon any conversion or exchange or exercise price of currently outstanding or future issuances of any securities convertible or exchangeable or exercisable for shares (other than any incentive equity outstanding immediately following the closing of the Business Combination, with such exclusion applicable only to the extent the terms and related agreements are not amended with respect to such securities) being equal to a price lower than, the then-current Reset Price (the “Offering Price”), then immediately after such event, the Reset Price shall be further reduced to equal the Offering Price.
The Company accounts for its Forward Purchase Agreement in accordance with the guidance contained in ASC 815-40, under which the FPA does not meet the criteria for equity treatment and must be recorded as a liability. Accordingly, the Company classifies the FPA as a liability at its fair value and adjusts the FPA to fair value at each reporting period. These liabilities are 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 Recycled Shares of the FPA are valued under the Monte Carlo model. The initial fair value of the Forward Purchase Agreement as of January 10, 2023, was $ 430,021 . The fair value of the Forward Purchase Agreement as of December 31, 2023 was $ 665,116 , which resulted in a change in fair value of the Forward Purchase Agreement of $ 235,095 , which is recorded in the statements of operations for the year ended December 31, 2023 (See Note 9).
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WESTERN ACQUISITION VENTURES CORP.
NOTES TO FINANCIAL STATEMENTS
Inflation Reduction Act of 2022 (the “IR Act”)
On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal 1% excise tax on certain repurchases of stock by publicly traded U.S. domestic corporations and certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax.
Any redemption or other repurchase that occurs after December 31, 2022, in connection with a business combination, extension vote or otherwise, may be subject to the excise tax. Whether and to what extent the Company would be subject to the excise tax in connection with a business combination, extension vote or otherwise would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection with the business combination, extension or otherwise, (ii) the structure of a business combination, (iii) the nature and amount of any “PIPE” or other equity issuances in connection with a business combination (or otherwise issued not in connection with a business combination but issued within the same taxable year of a business combination) and (iv) the content of regulations and other guidance from the Treasury. In addition, because the excise tax would be payable by the Company and not by the redeeming holder, the mechanics of any required payment of the excise tax have not been determined. The foregoing could cause a reduction in the cash available on hand to complete a business combination and in the Company’s ability to complete a business combination.
As of December 31, 2023, the Company’s stockholders have redeemed a total of 11,194,590 shares of Common Stock resulting in $ 1,143,296 of excise tax liability, calculated as 1 % of the value of the shares redeemed.
NOTE 7 — STOCKHOLDERS’ DEFICIT
Common Stock —The Company is authorized to issue 50,000,000 shares of common stock with a par value of $ 0.0001 per share. As of December 31, 2023 and 2022, there were 3,251,000 shares of common stock outstanding (comprised of 2,875,000 Founder Shares and 376,000 shares of common stock included in the sale of the Private Placement Units and excluding 305,410 shares and 11,500,000 shares of common stock subject to possible redemption, respectively, at December 31, 2023 and 2022.)
Preferred Stock —The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $ 0.0001 per share with such designations, voting, and other rights and preferences as may be determined from time to time by the Company’s board of directors. As of December 31, 2023 and 2022, there were no shares of preferred stock issued or outstanding.
Public Warrants — As of December 31, 2023 and, 2022, there were 11,500,000 Public Warrants outstanding. The Company accounts for the Public Warrants as equity instruments. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination or (b) 12 months from the closing of the IPO. No warrants will be exercisable for cash unless the Company has an effective and current registration statement covering the shares of common stock issuable upon exercise of the warrants and a current prospectus relating to such shares of common stock. Notwithstanding the foregoing, if a registration statement covering the shares of common stock issuable upon exercise of the Public Warrants is not effective within a specified period following the consummation of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is available. If neither that exemption nor another exemption is available, holders will not be able to exercise their warrants on a cashless basis.
The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.
Once the Public Warrants become exercisable, the Company may redeem the Public Warrants:
● in whole and not in part;
● at a price of $ 0.01 per Public Warrant;
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Table of Contents
WESTERN ACQUISITION VENTURES CORP.
NOTES TO FINANCIAL STATEMENTS
● upon not less than 30 days ’ prior written notice of redemption;
● if, and only if, the reported last sale price of the shares of common stock equals or exceeds $ 18.00 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations), for any 20 trading days within a 30 trading day period commencing at any time after the Public Warrants become exercisable and ending on the third business day prior to the notice of redemption to warrant holders; and
● if, and only if, there is a current registration statement in effect with respect to the shares of common stock underlying the Public Warrants.
If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement.
The exercise price and number of shares of common stock issuable on exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary dividend or recapitalization, reorganization, merger, or consolidation. However, the warrants will not be adjusted for issuances of shares of common stock at a price below their respective exercise prices. Additionally, in no event will the Company be required to net cash settle the Public Warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of Public Warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such Public Warrants. Accordingly, the Public Warrants may expire and become worthless.
In addition, if (a) the Company issues additional shares of common stock or equity-linked securities for capital raising purposes in connection with the closing of a Business Combination at an issue price or effective issue price of less than $ 9.20 per share of common stock (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors, and in the case of any such issuance to the initial stockholders or their affiliates, without taking into account any Founder Shares held by them prior to such issuance), (b) the aggregate gross proceeds from such issuances represent more than 60 % of the total equity proceeds, and interest thereon, available for the funding of a Business Combination on the date of the consummation of a Business Combination (net of redemptions), and (c) the volume weighted average trading price of the Company’s common stock during the 20 trading day period starting on the trading day prior to the day on which the Company consummates Business Combination (such price, the “Market Value”) is below $ 9.20 per share, the exercise price of the Public Warrants will be adjusted (to the nearest cent) to be equal to 115 % of the greater of (i) the Market Value or (ii) the price at which the Company issues the additional shares of common stock or equity-linked securities.
Private Placement Warrants — As of December 31, 2023 and 2022, there were 376,000 Private Placement Warrants outstanding. The Company accounts for the Private Placement Warrants as equity instruments. The Private Placement Warrants sold in the private placement are identical to the Public Warrants underlying the Units sold in the IPO, except that such warrants, and the shares of common stock issuable upon the exercise of such warrants, will not be transferable, assignable, or salable until after the completion of a Business Combination, subject to certain limited exceptions.
On May 2, 2022, the Company issued a press release, announcing that separate trading of shares of the Common Stock and Warrants comprising the Units has commenced. Any Units not separated will continue to trade on the Nasdaq Global Market (“Nasdaq”) under the symbol “WAVSU.” The Common Stock and Warrants will separately trade on Nasdaq under the symbols “WAVS” and “WAVSW,” respectively.
F-20
Table of Contents
WESTERN ACQUISITION VENTURES CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 8 — INCOME TAX
The Company’s net deferred tax assets (liability) at December 31, 2023 and 2022 are as follows:
December 31,
December 31,
2023
2022
Deferred tax assets (liability)
Startup/Organization Expenses
$
549,352
$
347,666
Total deferred tax assets (liability)
549,352
347,666
Valuation Allowance
( 549,352 )
( 347,666 )
Deferred tax assets (liability)
$
—
$
—
The income tax provision for the years ended December 31, 2023 and 2022 consists of the following:
December 31,
December 31,
2023
2022
Federal
Current
$
72,824
$
250,739
Deferred
( 201,686 )
( 345,278 )
State and Local
Current
—
—
Deferred
—
—
Change in valuation allowance
201,686
345,278
Income tax provision
$
72,824
$
250,739
As of December 31, 2023 and 2022, the Company had $ 0 of U.S. federal net operating loss carryovers available to offset future taxable income. The federal net operating loss can be carried forward indefinitely.
In assessing the realization of the deferred tax assets (liability), management considers whether it is more likely than not that some portion of all of the deferred tax assets (liability) will not be realized. The ultimate realization of deferred tax assets (liability) is dependent upon the generation of future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax assets (liability), projected future taxable income, and tax planning strategies in making this assessment. After consideration of all of the information available, management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance. For the year ended December 31, 2023, the change in the valuation allowance was $ 201,686 . For the year ended December 31, 2022, the change in the valuation allowance was $ 345,278 . During the years ended December 31, 2023 and 2022, the Company had tax penalties regarding Delaware Franchise Tax for $ 250 and $ 0 , respectively.
A reconciliation of the federal income tax rate to the Company’s effective tax rate at December 31, 2023 and 2022 is as follows:
December 31,
December 31,
2023
2022
Statutory federal income tax rate
21.0
%
21.0
%
State taxes, net of federal tax benefit
0.0
%
0.0
%
Change in fair value of forward purchase agreement
( 5.13 )
%
0.0
%
Transaction costs allocated to warrants
( 2.46 )
%
0.0
%
Change in fair value of over-allotment option liability
0.0
%
0.0
%
Fines and penalties
( 0.01 )
%
0.0
%
Valuation allowance
( 20.97 )
%
( 76.5 )
%
Income tax provision
( 7.57 )
%
( 55.5 )
%
F-21
Table of Contents
WESTERN ACQUISITION VENTURES CORP.
NOTES TO FINANCIAL STATEMENTS
The Company files income tax returns in the U.S. (including California and Oklahoma) and is subject to examination by the various taxing authorities since inception.
NOTE 9 — FAIR VALUE MEASUREMENTS
The Company follows the guidance in ASC 820, “Fair Value Measurement,” for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and nonfinancial assets and liabilities that are re-measured and reported at fair value at least annually.
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
Level 1 — Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not being applied. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment.
Level 2 — Valuations based on (i) quoted prices in active markets for similar assets and liabilities, (ii) quoted prices in markets that are not active for identical or similar assets, (iii) inputs other than quoted prices for the assets or liabilities, or (iv) inputs that are derived principally from or corroborated by market through correlation or other means.
Level 3 — Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at December 31, 2023 and 2022, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
Quoted
Significant
Significant
Prices In
Other
Other
Active
Observable
Unobservable
December 31,
Markets
Inputs
Inputs
2023
(Level 1)
(Level 2)
(Level 3)
Assets:
U.S. Money Market held in Trust Account
$
3,293,966
$
3,293,966
$
—
$
—
Liabilities:
Derivative Liability - Forward Purchase Agreement
$
665,116
$
—
$
—
$
665,116
Quoted
Significant
Significant
Prices In
Other
Other
Active
Observable
Unobservable
December 31,
Markets
Inputs
Inputs
2022
(Level 1)
(Level 2)
(Level 3)
Assets:
U.S. Money Market held in Trust Account
$
117,191,410
$
117,191,410
$
—
$
—
F-22
Table of Contents
WESTERN ACQUISITION VENTURES CORP.
NOTES TO FINANCIAL STATEMENTS
The FPA is valued using PWERM and Reset Pricing and counterparty sales of Recycled Shares was modeled using a Monte Carlo simulation based on the stock price, settlement timing and market implied volatility. The PWERM is a multistep process in which value is estimated based on the probability-weighted present value of various future outcomes. The estimated fair value of the FPA liability is determined using Level 3 inputs. Inherent in the pricing models are assumptions related to expected share-price volatility, expected life and risk-free interest rate. The Company estimates the volatility of its ordinary shares based on historical volatility that matches the expected remaining life of the FPA. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the FPA. The expected life of the FPA is assumed to be equivalent to its remaining contractual term. The initial fair value of the Forward Purchase Agreement as of January 10, 2023, was $ 430,021 . The fair value of the Forward Purchase Agreement as of December 31, 2023 was $ 665,116 , which resulted in a change in fair value of the Forward Purchase Agreement of $ 235,095 for the year ended December 31, 2023.
The key inputs of the models used to value the Company’s FPA were as follows:
Initial Measurement Date of
Input
January 10, 2023
December 31, 2023
Risk-free interest rate
4.63
%
4.94
%
Remaining life (Yrs.)
1.72
1.34
Expected volatility
3.73
%
—
%
Redemption Price
$
—
$
10.83
Stock Price
$
10.48
$
10.86
The following table provides a summary of the changes in the fair value of the Company’s Level 3 financial instruments that are measured at fair value on a recurring basis for the year ended December 31, 2023:
Forward Purchase
Agreement
Fair value as of January 1, 2023
$
—
Initial measurement on January 10, 2023 – Issuance
430,021
Change in Fair Value
235,095
Fair value as of December 31, 2023
$
665,116
NOTE 10 — SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. Based upon this review, other than stated below and earlier, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.
On January 22, 2024, the Company and Alpha terminated the Forward Purchase Agreement without payment or other liability on the part of any party.
On February 6, 2024, the Company received a notification letter from the Nasdaq Listing Qualifications Staff (the “Staff”) notifying the Company that the Company no longer meets the minimum 500,000 publicly held shares requirement for continued listing on The Nasdaq Capital Market set forth in Nasdaq Listing Rule 5550(a)(4) (the “First Letter”). The notification received has no immediate effect on the listing of the Company’s common stock on Nasdaq. Under Nasdaq Listing Rules, the Company had 45 calendar days, or until March 22, 2024, to provide Nasdaq with a specific plan to achieve and sustain compliance with all Nasdaq listing requirements, including the time frame for completion of the plan. On March 22, 2024, the Company submitted its compliance plan with Nasdaq in connection with the First Letter. If Nasdaq does not accept the Company’s plan to achieve compliance, the Company will have the opportunity to appeal the decision to a Nasdaq Hearings Panel. The Company is evaluating various courses of action to achieve compliance with the minimum publicly held shares continued listing standard.
On March 11, 2024, the Company received a letter from the Staff stating that due to the resignations of Stephen Christoffersen, William Lischak, Ade Okunabi, Robin Smith and Adam Stern, constituting the entire board of directors of the Company, effective December 27, 2023, which was previously reported in a current report on Form 8-K filed with the Securities and Exchange Commission on January 3, 2024, the Company no longer complies with Nasdaq’s Majority Independent Board rule, its Audit Committee Rule, or its Compensation Committee Rule as set forth in Listing Rule 5605(b)(1) (the “Second Letter”). In accordance with Nasdaq Listing Rule 5605(b)(1)(A),
F-23
Table of Contents
WESTERN ACQUISITION VENTURES CORP.
NOTES TO FINANCIAL STATEMENTS
Nasdaq will provide the Company a cure period in order to regain compliance as follows: (i) until the earlier of the Company’s next annual stockholders’ meeting or December 28, 2024; or (ii) if the Company’s next annual stockholders’ meeting is held before June 25, 2024, then the Company must evidence compliance no later than June 25, 2024 (the “Cure Period”). If the Company fails to regain compliance within the Cure Period in connection with the Second Letter, the Nasdaq Listing Rules require the Staff to provide written notification to the Company that its securities will be delisted. The Company is actively engaged in efforts to regain compliance with the requirements set forth in Nasdaq Listing Rule 5605 and plans to regain compliance within the Cure Period provided by Nasdaq.
On April 11, 2024, Cycurion and certain private investors entered into agreements to acquire (i) shares of Series B Preferred Stock of Cycurion and (ii) Series B Warrants to purchase Cycurion common stock, which, in accordance with a securities purchase agreement and an exchange agreement among Cycurion and other parties thereto to be dated prior to the effective date of the Company’s registration statement on Form S-4, will be exchanged as of the effective time of the merger between the Company and Cycurion pursuant to the Merger Agreement for securities of the Company following the merger in the same form and on the same terms as the Cycurion Series B Preferred Stock and Series B Warrants (the “Series B Capital Raise”).
As a result of the Series B Capital Raise mentioned above, the Company received $ 254,269 into its operating bank account to be used for working capital expenses and tax obligations. As discussed in Note 1, the Company identified that a $ 108,611 excess of interest was erroneously withdrawn from the Trust Account and a portion was used for operating expenses during the year ended December 31, 2023, which is not a permitted use of the Trust funds per the trust agreement. As of December 31, 2023, the Company has restricted cash of $ 8,651 and a receivable from the Sponsor of $ 99,961 . The Company intends to deposit $ 99,961 back into the Trust Account, or use the $ 99,961 (or a portion thereof) for tax obligations until a deposit is made into the trust on a future date.
F-24
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.