Western Acquisition Ventures Corp. (NASDAQ:WAVS) 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. The company has been actively pursuing a potential business combination, having identified an acquisition target and executed a merger agreement. However, the successful completion of this transaction remains uncertain.
Financials
For the fiscal year ended December 31, 2023, WAVS reported an annual net loss of $1,034,593, with no revenue generated during the period. The company's annual operating cash flow and free cash flow both stood at -$940,730. These financial results reflect the company's status as a blank check firm, focused on identifying and executing a transformative business combination rather than generating operational income.
In the first quarter of 2024, WAVS reported a net income of $408,380, a significant improvement from the net loss of $171,611 recorded in the same period of the prior year. This positive quarterly performance was primarily driven by a $665,116 change in the fair value of the company's forward purchase agreement, which offset the $256,736 in professional fees, general and administrative expenses, and franchise taxes incurred during the quarter.
Liquidity
WAVS' liquidity position remains a concern, as the company had a working capital deficit of $2,782,776 as of March 31, 2024. The company's ability to fund its operations and pursue a successful business combination is largely dependent on the continued support of its Sponsor, shareholders, officers, directors, or third-party investors. The company's management has indicated that they may need to obtain additional financing to complete a business combination, as the funds currently available may be insufficient.
Recent Developments
The company's proposed business combination with Cycurion, Inc., a corporation organized under the laws of Ontario, represents a significant milestone in WAVS' journey. In November 2022, the companies entered into a merger agreement, under which Cycurion will be merged with a wholly-owned subsidiary of WAVS, with Cycurion surviving as a wholly-owned subsidiary of the combined entity.
On April 26, 2024, the parties amended and restated the business combination agreement, extending the termination date to complete the transaction from December 31, 2023 to December 31, 2024. This extension provides additional time for the companies to navigate the complexities of the proposed merger and address any regulatory or shareholder approval requirements.
WAVS' Sponsor, Western Acquisition Ventures Sponsor LLC, has agreed to vote in favor of the merger and the related transactions, while certain officers and directors of the company have also delivered support agreements, committing to vote in favor of the proposed combination.
In connection with the closing of the business combination, Cycurion, WAVS, and certain of their respective stockholders will enter into a registration rights agreement. This agreement will require the combined company to file a registration statement covering the resale of registrable securities held by the stockholder parties.
The merger agreement can be terminated under certain circumstances, including if the transaction has not been consummated by December 31, 2024. Either WAVS or Cycurion may also terminate the agreement if certain proposals fail to receive the requisite shareholder approval or if other specified conditions are not met.
Risks and Challenges
WAVS' financial performance and liquidity position remain areas of concern, as the company continues to incur significant costs in pursuit of its acquisition plans. The successful completion of the proposed business combination with Cycurion could provide a much-needed boost to the company's financial resources and strategic direction. However, the outcome of this transaction remains uncertain, and investors should carefully consider the risks and uncertainties associated with WAVS' operations and future prospects.
In the event that WAVS is unable to complete a business combination by the extended deadline of December 31, 2024, the company intends to cease operations, redeem the public shares, and dissolve, subject to the approval of its remaining stockholders and board of directors.
WAVS' status as an emerging growth company under the JOBS Act allows the company to take advantage of certain reporting and compliance exemptions, which may impact the comparability of its financial statements to those of non-emerging growth companies. Investors should be aware of these potential differences when evaluating the company's performance and prospects.
The company's liquidity and capital resources remain a significant concern, as WAVS had a working capital deficit of $2,782,776 as of March 31, 2024. The company's ability to fund its operations and pursue a successful business combination is largely dependent on the continued support of its Sponsor, shareholders, officers, directors, or third-party investors. WAVS' management has indicated that additional financing may be necessary to complete a business combination, as the funds currently available may be insufficient.
Outlook
WAVS' proposed business combination with Cycurion represents a critical juncture in the company's development. The successful completion of this transaction could provide a much-needed infusion of resources and strategic direction for the blank check company. However, the outcome of the merger remains uncertain, and investors should carefully consider the risks and uncertainties associated with WAVS' operations and future prospects.
Conclusion
In summary, WAVS is a blank check company that has been actively pursuing a potential business combination, having identified an acquisition target and executed a merger agreement. The company's financial performance and liquidity position remain areas of concern, as it continues to incur significant costs in pursuit of its acquisition plans. The successful completion of the proposed business combination with Cycurion could provide a much-needed boost to WAVS' financial resources and strategic direction, but the outcome of this transaction remains uncertain.