Pyrophyte Acquisition (PHYT) - 2023 Q3 - Quarterly Report

PART I – FINANCIAL INFORMATION This section presents the company's unaudited financial statements, management's analysis of financial condition, market risk disclosures, and controls and procedures Condensed Financial Statements The unaudited condensed financial statements for Pyrophyte Acquisition Corp. as of September 30, 2023, reflect its status as a blank check company with no operations and significant share redemptions Condensed Balance Sheets The balance sheets highlight a substantial decrease in trust account assets and Class A shares subject to redemption due to shareholder redemptions Condensed Balance Sheet Highlights (Unaudited) | Financial Item | Sep 30, 2023 (USD) | Dec 31, 2022 (USD) | | :--- | :--- | :--- | | Assets | | | | Cash | $1,933 | $13,372 | | Investments and cash held in Trust Account | $97,110,088 | $209,651,193 | | Total Assets | $97,648,201 | $210,012,487 | | Liabilities & Equity | | | | Total Liabilities | $13,033,873 | $11,504,350 | | Class A ordinary shares subject to possible redemption | $97,490,079 | $209,551,185 | | Total shareholders' deficit | ($12,895,751) | ($11,043,048) | - The significant decrease in 'Investments and cash held in Trust Account' and 'Class A ordinary shares subject to possible redemption' from December 2022 to September 2023 is primarily due to shareholder redemptions in connection with the business combination deadline extension[11][33] Condensed Statements of Operations The statements of operations show net income primarily driven by gains on trust investments and changes in derivative warrant liabilities Condensed Statements of Operations (Unaudited) | Metric | Three Months Ended Sep 30, 2023 (USD) | Three Months Ended Sep 30, 2022 (USD) | Nine Months Ended Sep 30, 2023 (USD) | Nine Months Ended Sep 30, 2022 (USD) | | :--- | :--- | :--- | :--- | :--- | | General and administrative expenses | $547,392 | $254,584 | $1,574,892 | $2,034,395 | | Change in fair value of derivative warrant liabilities | $683,395 | $2,830,625 | $202,188 | $8,271,893 | | Gain on investments held in Trust Account | $1,226,102 | $1,023,730 | $4,723,284 | $1,391,133 | | Net income | $1,362,105 | $3,599,837 | $3,350,580 | $7,628,714 | - Net income for the three and nine months ended September 30, 2023, was primarily driven by gains on investments held in the Trust Account, partially offset by general and administrative expenses, with the change in fair value of derivative warrant liabilities also significantly impacting net income[14] Condensed Statements of Changes in Ordinary Shares Subject to Possible Redemption and Shareholders' Deficit This statement details significant Class A share redemptions and Class B share conversions during the nine months ended September 30, 2023 - During the nine months ended September 30, 2023, 11,151,163 Class A ordinary shares were redeemed for approximately $117.7 million in connection with the vote to approve the business combination extension[17][33] - All 5,031,250 Class B ordinary shares were converted into Class A ordinary shares during the nine months ended September 30, 2023[17][115] - The carrying value of Class A ordinary shares subject to redemption increased by $5.2 million during the nine months ended September 30, 2023, due to remeasurement to redemption value[63] Condensed Statements of Cash Flows Cash flows for the period were primarily impacted by the redemption of Class A ordinary shares Cash Flow Summary (Unaudited) | Cash Flow Activity | Nine Months Ended Sep 30, 2023 (USD) | Nine Months Ended Sep 30, 2022 (USD) | | :--- | :--- | :--- | | Net cash used in operating activities | ($203,494) | ($701,620) | | Net cash provided by investing activities | $117,264,389 | $0 | | Net cash used in financing activities | ($117,072,334) | $0 | | Net decrease in cash | ($11,439) | ($701,620) | - For the nine months ended September 30, 2023, cash flows were dominated by the redemption of Class A ordinary shares, reflected as a cash inflow from investing activities (release from Trust Account) and a nearly equal cash outflow from financing activities (payment to shareholders)[22] Notes to Unaudited Condensed Financial Statements The notes detail the company's SPAC status, the Sio Silica business combination agreement, and a going concern uncertainty due to the approaching liquidation deadline - The Company is a blank check company that has not commenced operations and will not generate operating revenue until a business combination is complete[25][26] - On November 13, 2023, the Company entered into a Business Combination Agreement with Sio Silica Corporation[27][123] - The deadline to complete a business combination was extended from April 29, 2023, to April 29, 2024, leading to holders of 11,151,163 Class A shares redeeming their shares for approximately $118 million[31][33] - 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[47][144] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's blank check status, non-operating income drivers, liquidity concerns, and the proposed business combination with Sio Silica Corporation Overview and Business Combination Extension This section outlines the company's search for a business combination and the shareholder-approved extension of the deadline, leading to significant share redemptions - The company is a blank check company seeking a business combination with a target in the energy transition and decarbonization sector[127] - On April 24, 2023, shareholders approved extending the business combination deadline from April 29, 2023, to April 29, 2024[131] - In connection with the extension, holders of 11,151,163 Class A shares redeemed their shares for an aggregate of approximately $118 million[131] Results of Operations The results of operations primarily reflect net income derived from non-operating activities, such as investment gains and changes in warrant liability fair value Net Income Summary | Period | Net Income (USD) | Key Drivers | | :--- | :--- | :--- | | Q3 2023 | $1,362,105 | Gain on investments ($1.23M), Gain on warrant value ($0.68M), offset by G&A expenses ($0.55M) | | 9 Months 2023 | $3,350,580 | Gain on investments ($4.72M), Gain on warrant value ($0.20M), offset by G&A expenses ($1.57M) | | Q3 2022 | $3,599,837 | Gain on warrant value ($2.83M), Gain on investments ($1.02M), offset by G&A expenses ($0.25M) | | 9 Months 2022 | $7,628,714 | Gain on warrant value ($8.27M), Gain on investments ($1.39M), offset by G&A expenses ($2.03M) | Liquidity, Capital Resources, and Going Concern The company faces substantial doubt about its ability to continue as a going concern due to limited liquidity and the impending business combination deadline - As of September 30, 2023, the Company had only $1,933 in cash available outside the Trust Account[143] - Management has determined that the limited liquidity and the proximity to the April 29, 2024 liquidation deadline raise substantial doubt about the Company's ability to continue as a going concern[144] Commitments and Contractual Obligations This section details outstanding loans from the Sponsor for extensions and working capital, administrative service fees, and a significant success fee for the capital markets advisor - The Sponsor provides loans for extensions and working capital, with $480,000 outstanding under the extension loan and $171,055 under the working capital loan as of September 30, 2023, which may be converted into warrants[152][154] - The Company pays its Sponsor $5,000 per month for administrative support services, reduced from $15,000 per month effective July 1, 2022[150] - The Company has re-engaged UBS as its exclusive capital markets advisor for the potential business combination, with a success fee of $5,000,000 payable upon consummation[159] Recent Developments - Proposed Business Combination The company entered into a definitive Business Combination Agreement with Sio Silica Corporation, involving re-domiciliation, amalgamations, and concurrent PIPE investment - On November 13, 2023, Pyrophyte entered into a Business Combination Agreement with Sio Silica Corporation[169] - The transaction structure includes Pyrophyte's domestication from the Cayman Islands to Alberta, Canada, followed by amalgamations resulting in Sio becoming a wholly-owned subsidiary of the new public entity, Pubco[169][170] - Concurrent with the agreement, the company secured a PIPE investment of $20.1 million and entered into a Non-Redemption Agreement for 100,000 shares[181][183] Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Pyrophyte Acquisition Corp. is not required to provide market risk disclosures - As a smaller reporting company, Pyrophyte Acquisition Corp. is not required to provide quantitative and qualitative disclosures about market risk[194] Controls and Procedures Management concluded that disclosure controls and procedures were ineffective as of September 30, 2023, due to material weaknesses in internal control over financial reporting - Management concluded that disclosure controls and procedures were not effective as of September 30, 2023[196] - The ineffectiveness is due to material weaknesses in internal control over financial reporting related to recording accruals and accounting for complex financial instruments[196] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control[197] PART II – OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, senior security defaults, mine safety disclosures, other information, and exhibits Legal Proceedings The company reports no legal proceedings - There are no legal proceedings to report[199] Risk Factors No material changes have occurred to the risk factors previously disclosed in the company's Annual Report on Form 10-K - No material changes have occurred to the risk factors disclosed in the Annual Report on Form 10-K filed on April 12, 2023[200] Unregistered Sales of Equity Securities and Use of Proceeds The company reports no unregistered sales of equity securities during the period - There were no unregistered sales of equity securities during the period[201] Defaults Upon Senior Securities The company reports no defaults upon senior securities - There were no defaults upon senior securities[202] Mine Safety Disclosures This item is not applicable to the company - Not applicable[203] Other Information There is no other information to report - There is no other information to report[204] Exhibits Key exhibits filed include the Business Combination Agreement and associated agreements for the PIPE investment, non-redemption, and sponsor support - Key exhibits filed include the Business Combination Agreement dated November 13, 2023, and associated agreements for the PIPE investment, non-redemption, and sponsor support[206]