Pyrophyte Acquisition (PHYT) - 2023 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Condensed Financial Statements This section presents Pyrophyte Acquisition Corp.'s unaudited condensed financial statements, including balance sheets, statements of operations, and cash flows, with notes on accounting policies and key events Condensed Balance Sheets As of June 30, 2023, total assets decreased to $95.7 million from $210.0 million, primarily due to share redemptions, while liabilities and shareholders' deficit increased Condensed Balance Sheet Summary (as of June 30, 2023 vs. December 31, 2022) | Metric | June 30, 2023 (Unaudited) | December 31, 2022 | | :--- | :--- | :--- | | Total Assets | $95,730,675 | $210,012,487 | | Investments and cash held in Trust Account | $95,563,986 | $209,651,193 | | Total Liabilities | $12,978,452 | $11,504,350 | | Class A ordinary shares subject to possible redemption | $95,463,977 | $209,551,185 | | Total shareholders' deficit | ($12,711,754) | ($11,043,048) | Condensed Statements of Operations For the six months ended June 30, 2023, net income decreased to $1.99 million from $4.03 million in 2022, mainly due to a negative change in derivative warrant liabilities Condensed Statements of Operations Summary (Unaudited) | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | General and administrative expenses | $1,027,500 | $1,779,811 | | Change in fair value of derivative warrant liabilities | ($481,207) | $5,441,268 | | Gain on investments held in Trust Account | $3,497,182 | $367,403 | | Net income | $1,988,475 | $4,028,877 | Condensed Statements of Changes in Ordinary Shares Subject to Possible Redemption and Shareholders' Deficit During the six months ended June 30, 2023, 11.15 million Class A ordinary shares were redeemed for $117.7 million, and all Class B shares converted to Class A, reducing shares subject to redemption - In connection with the business combination deadline extension, holders of 11,151,163 Class A ordinary shares redeemed their shares for approximately $118 million[31] - On April 28, 2023, all 5,031,250 Class B Ordinary Shares were converted into Class A Ordinary Shares on a one-for-one basis[31] Condensed Statements of Cash Flows For the six months ended June 30, 2023, operating activities used $84,426, while investing activities provided $117.6 million and financing activities used $117.5 million, resulting in a cash balance of $1 Condensed Statements of Cash Flows Summary (Six Months Ended June 30, 2023) | Category | Amount | | :--- | :--- | | Net cash used in operating activities | ($84,426) | | Net cash provided by investing activities | $117,584,389 | | Net cash used in financing activities | ($117,513,334) | | Net decrease in cash | ($13,371) | | Cash - end of period | $1 | Notes to Unaudited Condensed Financial Statements These notes detail the company's blank check status, IPO, business combination deadline extension, share redemptions, key accounting policies, related-party transactions, and a going concern uncertainty - The company is a blank check company formed to effect a Business Combination and has not commenced any operations as of June 30, 2023[24][25] - On April 24, 2023, shareholders approved an extension for the company to complete an initial business combination from April 29, 2023, to April 29, 2024[29] - Management has determined that liquidity conditions and the proximity to the liquidation date raise substantial doubt about the Company's ability to continue as a going concern[46] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's blank check status, results of operations, liquidity challenges due to share redemptions, a going concern uncertainty, and key commitments Overview The company is a blank check entity targeting the energy transition sector, which extended its business combination deadline to April 29, 2024, leading to significant Class A share redemptions - The company is a blank check company seeking a business combination with market leaders in the energy transition toward decarbonization and sustainable energy[120] - Shareholders approved extending the business combination deadline to April 29, 2024, which led to the redemption of 11,151,163 Class A ordinary shares for approximately $118 million[125] Results of Operations For the six months ended June 30, 2023, net income was $1,988,475, driven by investment gains but offset by general and administrative expenses and a loss on derivative warrant liabilities Results of Operations Summary (Six Months Ended) | Metric | June 30, 2023 | June 30, 2022 | | :--- | :--- | :--- | | Net Income | $1,988,475 | $4,028,877 | | Key Drivers (2023) | Gain on investments ($3.5M), G&A expenses ($1.0M), Loss on warrant liabilities ($0.5M) | Gain on warrant liabilities ($5.4M), G&A expenses ($1.8M), Gain on investments ($0.4M) | Liquidity and Capital Resources As of June 30, 2023, the company had $1 in cash outside the Trust Account, which held $95.6 million, raising substantial doubt about its going concern ability due to limited cash and liquidation proximity - As of June 30, 2023, the Company had $1 in cash and relies on funds held in the Trust Account and potential loans from its Sponsor for liquidity[138] - Management has concluded that the company's liquidity condition and the proximity to its liquidation date raise substantial doubt about its ability to continue as a going concern[139] Commitments and Contractual Obligations The company's primary commitments include deferred underwriting fees, a $5,000 monthly administrative support agreement with its Sponsor, and convertible promissory notes for extension and working capital loans - The company has a deferred underwriting fee of 4% of gross proceeds from the IPO, payable upon completion of a business combination[92][144] - An administrative support agreement requires a payment of $5,000 per month to the Sponsor (amended from $15,000 on July 1, 2022)[145] - The Sponsor has provided loans for the business combination extension ($160,000 drawn) and working capital ($71,055 outstanding), which may be converted into warrants[146][147][148] Critical Accounting Policies and Estimates This section outlines critical accounting policies, including the classification of Class A ordinary shares subject to redemption, net income per share calculation, and accounting for warrants as derivative liabilities - Class A Ordinary Shares Subject to Possible Redemption: These shares are classified as temporary equity and adjusted to their redemption value at each reporting period[153][154] - Derivative Instruments: All outstanding public and private warrants are recognized as derivative liabilities and re-measured to fair value each period, with changes recognized in the statement of operations[157][158] - Promissory Notes Conversion Option: The conversion feature in the Sponsor's promissory notes is treated as a derivative, but was assigned zero liability as the likelihood of exercise was deemed de minimis[159] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Pyrophyte Acquisition Corp. is not required to provide disclosures about market risk - The company is a smaller reporting company and is not required to provide disclosures about market risk[163] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were not effective as of June 30, 2023, due to material weaknesses in internal control over financial reporting - Management concluded that as of June 30, 2023, the company's disclosure controls and procedures were not effective[165] - The ineffectiveness is attributed to material weaknesses in internal control over financial reporting concerning the recording of accruals and accounting for complex financial instruments[165] PART II–OTHER INFORMATION Item 1. Legal Proceedings The company reports no legal proceedings - There are no legal proceedings to report[169] Item 1A. Risk Factors No material changes have occurred to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022 - No material changes to the risk factors disclosed in the Annual Report on Form 10-K filed on April 12, 2023 have occurred[170] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reports no unregistered sales of equity securities or changes in the use of proceeds - None reported[171] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including corporate governance documents, financial instruments, and executive certifications - Exhibits filed include corporate governance documents, financial instruments like a convertible promissory note, and required executive certifications[176]