Board of Directors and Management Changes - The entire prior board of directors resigned effective December 28, 2023, due to potential excise tax liabilities under the Inflation Reduction Act[23]. - James P. McCormick was appointed as the new CEO and CFO effective December 27, 2023, bringing extensive experience from British American Tobacco and KushCo Holdings[25]. Merger and Acquisition Strategy - The company entered into a Merger Agreement with Cycurion, a cybersecurity firm, on November 21, 2022, with the merger expected to enhance the company's market position[28]. - The company aims to target merger candidates in sectors such as health, wellness, financial technology, and environmental services, focusing on those with strong growth prospects[32]. - The acquisition strategy emphasizes generating attractive returns for stockholders by completing high-quality mergers at favorable valuations[34]. - The company seeks to acquire businesses with stable free cash flow or annual recurring revenue, particularly in SaaS and financial technology sectors[43]. - The management team has extensive experience in sourcing, structuring, and executing business combinations across various industries[35]. - The company plans to enhance the performance of acquired businesses through its operational expertise and industry relationships[34]. - The merger with Cycurion is part of a broader strategy to expand the company's capabilities in the cybersecurity market[36]. Financial Position and Trust Account - The Trust Account held approximately 117.3 million[74]. - As of the report date, approximately 3.0 million as of the date the annual report was filed[113]. - The company must ensure that it does not exceed 40% of total assets in investment securities to avoid being classified as an investment company[116]. - The Trust Account is intended to hold funds until the completion of the initial business combination or the redemption of public shares[118]. Compliance and Regulatory Issues - The company received a notification from Nasdaq on February 6, 2024, indicating it no longer meets the minimum requirement of 500,000 publicly held shares for continued listing[59]. - The company is actively working to regain compliance with Nasdaq's Majority Independent Board rule and plans to do so within the provided Cure Period[60]. - The company is classified as an "emerging growth company," allowing it to take advantage of certain exemptions from reporting requirements[55]. - The company has identified material weaknesses in internal control over financial reporting, which could adversely affect investor confidence and business results[220]. - The company is actively engaged in efforts to regain compliance with Nasdaq's listing requirements following the resignation of its entire board of directors[219]. - The company may face significant adverse consequences if its securities are delisted from Nasdaq, including reduced liquidity and increased regulatory scrutiny[214]. Risks Related to Business Combination - The company must complete its initial business combination by July 11, 2024, or it will cease operations and redeem public shares at approximately 10.10 per share[66]. - The company may face intense competition from other entities with similar business objectives, which may limit its ability to acquire target businesses[93]. - The company may face difficulties in completing its initial business combination due to the grant of registration rights to initial stockholders, which could adversely affect the market price of its common stock[124]. - If stockholders exercise their redemption rights, it may hinder the ability to meet closing conditions with a target business requiring a minimum net worth or cash[130]. - The company may incur substantial costs in investigating target businesses, which would not be recoverable if a specific business combination is not completed[137]. - The company may face complex tax obligations following its initial business combination, which could adversely affect after-tax profitability[140]. Shareholder and Stockholder Considerations - The company may issue additional common or preferred stock to complete the initial business combination, which could significantly dilute existing shareholders' equity[162]. - The company has authorized the issuance of up to 50,000,000 shares of common stock and 1,000,000 shares of preferred stock, with 11,225,733 shares of common stock available for issuance as of the report date[163]. - Public stockholders wishing to redeem shares must comply with specific requirements, potentially complicating the redemption process[199]. - The financial interests of the Sponsor and management may influence their motivation in selecting a target for the initial business combination, potentially creating conflicts of interest[157]. - The existence of registration rights for initial stockholders may complicate the completion of the initial business combination and adversely affect the market price of common stock[198]. Warrant and Share Issuance Risks - The company issued warrants to purchase 11,500,000 shares of common stock at an exercise price of 0.01 per warrant if the common stock price exceeds $18.00 for 20 trading days within a 30-day period[187]. - The company may require holders to exercise their warrants on a cashless basis, resulting in fewer shares received compared to cash exercise[179]. - If the initial business combination does not close, warrant holders will not participate in liquidating distributions[171]. - The market for the warrants may be limited, and they may become worthless if the common shares are not qualified or exempt from qualification[179]. Economic and Market Conditions - The current economic environment has made it particularly challenging for companies to obtain acquisition financing, which could impact the company's ability to complete business combinations[209]. - The company expects intense competition from established entities such as venture capital funds and leveraged buyout funds, which may limit its ability to acquire sizable target businesses due to relatively limited financial resources[204].
Western Acquisition Ventures Corp.(WAVSU) - 2023 Q4 - Annual Report