Pyrophyte Acquisition (PHYT) - 2021 Q4 - Annual Report

Part I Business Pyrophyte Acquisition Corp. is a SPAC focused on energy transition, with $206.3 million in trust, seeking a business combination by April 2023 - The company is a Special Purpose Acquisition Company (SPAC) or blank check company, with no current operations, formed for the purpose of a business combination[16] Initial Public Offering (IPO) and Trust Account Details | Metric | Value | Date | | :--- | :--- | :--- | | IPO Units | 20,125,000 | October 29, 2021 | | Price per Unit | $10.00 | October 29, 2021 | | Gross Proceeds from IPO | $201,250,000 | October 29, 2021 | | Private Placement Warrants Proceeds | $10,156,250 | October 29, 2021 | | Amount Placed in Trust Account | $206,281,250 | October 29, 2021 | | Cash Held Outside Trust (Working Capital) | ~$1,000,000 | As of IPO Close | - The company intends to focus its search for a target business within the energy transition ecosystem, including renewable power, energy storage, and carbon capture technologies[25] - The initial business combination must have a fair market value equal to at least 80% of the net assets held in the Trust Account at the time of the agreement[26] - If a business combination is not completed by April 29, 2023, the company will cease operations and redeem public shares, returning the funds from the Trust Account to shareholders[39] Risk Factors As a blank check company, Pyrophyte faces significant risks including failure to complete a business combination, market competition, and post-acquisition challenges Risks Relating to the Search for and Consummation of a Business Combination Risks include the 18-month deadline, intense competition, and potential liquidation if a suitable business combination is not secured - The company is a recently incorporated entity with no operating history or revenues, providing no basis for investors to evaluate its ability to achieve its business objective[11][44] - The requirement to consummate a business combination within 18 months may give potential targets leverage in negotiations and limit due diligence time[52][53] - The COVID-19 pandemic and other market factors could adversely affect the search for a target and the ability to consummate a transaction[54][56] - Significant competition for business combination opportunities from other SPACs, private equity, and other entities may make it more difficult and costly to complete a transaction[67][68] - If the company fails to complete an initial business combination, it will be forced to liquidate, and public shareholders may only receive approximately $10.25 per share, while warrants will expire worthless[58][67] Risks Relating to the Post-Business Combination Company Post-combination risks involve potential asset write-downs, reliance on key personnel, increased debt, and lack of business diversification - The company may be forced to write-down or write-off assets or incur impairment charges post-combination, which could negatively affect financial results and share price[120] - The company's future success is dependent on key personnel, some of whom may join after the business combination, and the loss of such personnel could negatively impact operations[125][126] - The company may incur substantial debt to complete a business combination, which could increase financial risk and negatively impact shareholder value[135] - Completing a business combination with a single target will result in a lack of diversification, making the company's prospects solely dependent on the performance of that one business[138][139] Risks Relating to Acquiring and Operating a Business in Foreign Countries Acquiring a non-U.S. business introduces risks from currency fluctuations, trade barriers, and diverse regulatory environments - A business combination with a non-U.S. company would subject the company to additional risks, including currency fluctuations, tariffs, trade barriers, and unexpected changes in regulatory requirements[151][153] - Post-combination, the company's results would be subject to the economic, political, and legal conditions of the country in which the target operates[156] Risks Relating to our Management Team Management risks include lack of SPAC experience, time allocation conflicts, and financial incentives potentially misaligned with public shareholders - None of the Sponsor, officers, or directors have past experience with a blank check company or special purpose acquisition company, which could affect their ability to consummate a business combination[159] - The company's independent registered public accounting firm has expressed substantial doubt about its ability to continue as a "going concern"[161] - Officers and directors have other business commitments, which creates conflicts of interest regarding the allocation of their time to the company's affairs[165] - The Sponsor, officers, and directors will lose their entire investment if a business combination is not completed, creating a conflict of interest that may influence their selection of a target[173][175] Risks Relating to our Securities Securities risks include potential delisting, dilution from warrants and new shares, and volatility from warrant liability accounting - Shareholders have no rights to the funds in the Trust Account except in limited circumstances (redemption or liquidation), forcing them to sell securities on the open market to liquidate their investment, potentially at a loss[179][180] - The NYSE may delist the company's securities if it fails to meet continued listing standards, which would reduce liquidity and limit trading[182][183] - The company may issue additional Class A ordinary shares or preferred shares to complete its business combination, which would dilute the interest of shareholders[186][187] - The company has the ability to redeem outstanding warrants prior to their expiration, potentially at a time that is disadvantageous to holders, which could make the warrants worthless[198][199] - The company's warrants are accounted for as a warrant liability and are re-measured to fair value each period, with changes reported in earnings, which may cause stock price volatility[203] Unresolved Staff Comments The company has no unresolved staff comments from the U.S. Securities and Exchange Commission - None[223] Properties The company's executive offices are provided by the Sponsor for a monthly fee of $15,000 covering space and administrative support - The company pays its Sponsor $15,000 per month for office space and administrative support services[224] Legal Proceedings As of December 31, 2021, there were no material legal proceedings pending against the company - As of December 31, 2021, there were no material legal proceedings against the company[225] Mine Safety Disclosures This item is not applicable to the company's operations - Not applicable[226] Part II Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities The company's securities are listed on the NYSE, no dividends have been paid, and IPO proceeds are held in a Trust Account - The company's securities are listed on the NYSE under the symbols PHYT.U (Units), PHYT (Class A ordinary shares), and PHYT WS (warrants)[228] - No cash dividends have been paid to date, and none are intended to be paid prior to the completion of a business combination[230] - Net proceeds of $206,281,250 from the IPO and private placement are held in the Trust Account as of December 31, 2021[234] Reserved This item is intentionally left blank Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) MD&A covers the company's limited operations as a blank check company, reporting net income driven by warrant fair value changes, and noting going concern doubts - The company is a blank check company with its efforts to date devoted to organizational activities and searching for a business combination target, with a focus on the energy transition sector[237] Financial Position as of December 31, 2021 | Metric | Value | | :--- | :--- | | Cash held outside Trust Account | $966,695 | | Working Capital | $1,226,278 | | Securities held in Trust Account | $206,299,296 | - Management has concluded that there is substantial doubt about the Company's ability to continue as a going concern due to its limited working capital and dependence on completing a business combination[250][367] Results of Operations for the period ended December 31, 2021 | Line Item | Amount | | :--- | :--- | | Loss from operations | ($369,593) | | Change in fair value of derivative warrant liabilities | $3,293,420 | | Net Income | $2,484,049 | Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the company is not required to provide quantitative and qualitative disclosures about market risk - As a smaller reporting company, the company is not required to provide this information[275] Financial Statements and Supplementary Data This section refers to the company's audited financial statements and related notes, included from page F-1 to F-21 - This item references the financial statements included on pages F-1 through F-21 of the annual report[276] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[277] Controls and Procedures Management assessed disclosure controls as effective, with no material changes to internal controls, and a full internal control report not yet required - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2021[278] - A report on internal control over financial reporting is not yet required due to the transition period for newly public companies[281] - No material changes were made to the company's internal control over financial reporting during the most recent fiscal quarter[282] Other Information The company reports no other information - None[283] Disclosure Regarding Foreign Jurisdictions That Prevent Inspections This item is not applicable to the company - Not applicable[284] Part III Directors, Executive Officers and Corporate Governance This section details the company's leadership, board structure, and the establishment of key corporate governance committees Executive Officers and Directors | Name | Position | | :--- | :--- | | Sten L. Gustafson | Chief Executive Officer and Director | | Thomas W. Major | Chief Financial Officer and EVP of Business Development | | Bernard J. Duroc-Danner | Chairman | | Bryan Guido Hassin | Director | | Per Hornung Pedersen | Director | | Adam Pierce | Director | - The board of directors is divided into three classes, with directors serving staggered three-year terms[293] - The board has determined that Messrs. Hassin, Pedersen, and Pierce are independent directors[295] - The company has established three standing board committees: Audit, Compensation, and Nominating and Corporate Governance[296] Executive Compensation No cash compensation is paid to officers or directors, with the Sponsor receiving a monthly fee for administrative support - No cash compensation has been paid to any officers or directors for services rendered[309] - The company pays its Sponsor $15,000 per month for office space and administrative support, from which the CFO receives $10,000 per month. This arrangement will cease upon a business combination or liquidation[309] - After a business combination, members of the management team who remain with the company may be paid consulting or management fees, but no arrangements are currently in place[310] Security Ownership of Certain Beneficial Owners and Management This section details the beneficial ownership of the company's ordinary shares, with the Sponsor holding 20.0% Beneficial Ownership as of March 31, 2022 | Beneficial Owner | Number of Shares | Percentage of Outstanding | | :--- | :--- | :--- | | Pyrophyte Acquisition LLC (Sponsor) | 5,031,250 | 20.0% | | All officers and directors as a group | 5,031,250 | 20.0% | | Adage Capital Partners, L.P. | 1,575,000 | 6.3% | | Atlas Diversified Fund, Ltd. | 1,442,387 | 5.7% | | Atlas Enhanced Master fund, Ltd. | 1,339,135 | 5.3% | Certain Relationships and Related Transactions, and Director Independence This section outlines related party transactions, including the Sponsor's purchase of founder shares and warrants, and ongoing administrative support agreements - The Sponsor holds 5,031,250 Founder (Class B) shares, which are subject to transfer restrictions and will convert to Class A shares upon a business combination[317][319] - The Sponsor purchased 10,156,250 Private Placement Warrants at $1.00 per warrant in a private placement that occurred simultaneously with the IPO[321] - The Sponsor provided a $300,000 non-interest-bearing loan to cover IPO expenses, which was fully repaid on October 29, 2021[323] - The Sponsor may provide up to $1,500,000 in working capital loans, which may be convertible into warrants at the lender's option[324] Principal Accounting Fees and Services This section summarizes the $86,597 in audit fees paid to Marcum LLP for the period from inception through December 31, 2021 Fees Paid to Marcum LLP (Feb 12, 2021 - Dec 31, 2021) | Fee Category | Amount | | :--- | :--- | | Audit Fees | $86,597 | | Audit-Related Fees | $0 | | Tax Fees | $0 | | All Other Fees | $0 | Part IV Exhibits, Financial Statement Schedules This section lists all exhibits filed with the Form 10-K and provides an index to the financial statements - Provides a list of all exhibits filed with the annual report, such as the Amended and Restated Memorandum and Articles of Association, Warrant Agreement, and Registration Rights Agreement[429] - Includes an index to the financial statements, which are located on pages F-2 through F-21[333] Financial Statements This section presents the company's audited financial statements, including the auditor's report with a going concern emphasis, and detailed financial statements Report of Independent Registered Public Accounting Firm The auditor's report includes an unqualified opinion but highlights substantial doubt about the company's ability to continue as a going concern - The auditor's report contains an explanatory paragraph expressing substantial doubt about the Company's ability to continue as a going concern[337] Balance Sheet The balance sheet shows total assets of $207.9 million, primarily trust investments, and a shareholders' deficit of $18.4 million Balance Sheet Summary as of December 31, 2021 | Category | Amount (USD) | | :--- | :--- | | Total Assets | $207,945,686 | | Investments and cash held in Trust Account | $206,299,296 | | Total Liabilities | $20,080,666 | | Derivative warrant liabilities | $11,506,893 | | Deferred underwriting fees payable | $8,443,750 | | Class A ordinary shares subject to possible redemption | $206,281,250 | | Total shareholders' deficit | ($18,416,230) | Statement of Operations The statement of operations reports a net income of $2,484,049, primarily due to a non-cash gain from derivative warrant liabilities Statement of Operations Summary (Feb 12, 2021 - Dec 31, 2021) | Line Item | Amount | | :--- | :--- | | Loss from operations | ($369,593) | | Change in fair value of derivative warrant liabilities | $3,293,420 | | Net income | $2,484,049 | Notes to Financial Statements The notes provide detailed disclosures on company formation, IPO terms, related party transactions, and accounting policies for derivative warrant liabilities and redeemable shares - The company's outstanding warrants are treated as derivative liabilities and are re-measured to fair value at each reporting period, with changes recognized in the statement of operations[385][407] - Class A ordinary shares subject to redemption are classified as temporary equity outside of the shareholders' deficit section[378] - The Sponsor purchased 5,031,250 Founder Shares for $25,000 and 10,156,250 Private Placement Warrants for approximately $10.2 million[394][395]