PHYT Pyrophyte Acquisition Corp

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                  to                  

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒ No ☐

As of November 20, 2023 the Registrant had 14,005,087 Class A ordinary shares, $0.0001 par value per share, issued and outstanding.

PYROPHYTE ACQUISITION CORP.

FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2023

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Item 1. Condensed Financial Statements.

PYROPHYTE ACQUISITION CORP.

CONDENSED BALANCE SHEETS

The accompanying notes are an integral part of these unaudited condensed financial statements.

PYROPHYTE ACQUISITION CORP.

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

The accompanying notes are an integral part of these unaudited condensed financial statements.

PYROPHYTE ACQUISITION CORP.

CONDENSED STATEMENTS OF ORDINARY SHARES SUBJECT TO POSSIBLE REDEMPTION AND
SHAREHOLDERS’ DEFICIT

For the three and nine months ended September 30, 2023

(Unaudited)

For the three and nine months ended September 30, 2022

(Unaudited)

The accompanying notes are an integral part of these unaudited condensed financial statements.

PYROPHYTE ACQUISITION CORP.

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

The accompanying notes are an integral part of these unaudited condensed financial statements.

PYROPHYTE ACQUISITION CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

References in this Quarterly Report on Form 10-Q (the “Quarterly Report”) to “we,” “us,” the “Company” or “Pyrophyte” refer to Pyrophyte Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to Pyrophyte Acquisition LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Quarterly Report including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and variations thereof and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company annual report for December 31, 2022 on Form 10-K filed with the SEC on April 12, 2023. The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

Overview

We are a blank check company formed under the laws of Cayman Islands on February 12, 2021 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses. While we may pursue an initial business combination opportunity in any industry or sector, we will seek targets around the world that we believe are market leaders in facilitating energy transition toward decarbonization and sustainable use of energy and natural resources, and are positioned to generate long-term value and growing cash flows. In particular, we will seek to identify companies provide the necessary products, equipment, services and technologies to support the energy transition, without the need to have their business rely solely on a single type of technology. We believe our leadership team’s broad and diverse global network of transaction sources and relationships across a wide spectrum of renewable energy sectors will allow us to effectively and efficiently identify and evaluate potential opportunities for our initial business combination.

We intend to effectuate our business combination using cash from the proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, and our capital stock, debt or a combination of cash, stock and debt. Our registration statement for the Initial Public Offering became effective on October 26, 2021. We consummated the Initial Public Offering of 20,125,000 Units on October 29, 2021. Each Unit consisted of one Class A ordinary share and one-half of one redeemable warrant, including the issuance of 2,625,000 Units as a result of the underwriter’s exercise of its over-allotment option in full. Each Unit consists of one Class A ordinary share and one-half of one redeemable warrant, with each public warrant entitling the holder thereof to purchase one Class A ordinary share for $11.50 per share, subject to adjustment. The Units were sold at a price of $10.00 per Unit, generating gross proceeds to the Company of $201,250,000, and incurred $11,068,750 in underwriting fees (inclusive of $8,443,750 in deferred underwriting fees).

Simultaneously with the closing of the Initial Public Offering on October 29, 2021, we completed the closing of the Private Placement of an aggregate 10,156,250 Private Placement Warrants at a price of $1.00 per Private Placement Warrant to the Sponsor, generating proceeds of $10,156,250.

Upon the closing of the Initial Public Offering, the over-allotment and the Private Placement, $206,281,250 ($10.25 per unit) of the net proceeds of the sale of the Units in the Initial Public Offering, the over-allotment and the Private Placement were placed in the Trust Account with Continental Stock Transfer & Trust Company acting as trustee and invested in United States government treasury bills with a maturity of 185 days or less or in money market funds investing solely in U.S. Treasuries and meeting certain conditions under Rule 2a-7 under the Investment Company Act, as determined by us, until the earlier of: (i) the completion of a business combination and (ii) the distribution of the Trust Account as described below.

On April 24, 2023 we held an extraordinary general meeting (the “EGM”), pursuant to which its shareholders approved an amendment to our amended and restated memorandum and articles of association (the “Charter”) to, among other things, extend the date in which we have to consummate a business combination from April 29, 2023 to April 29, 2024 (the “Extension”) and provide for the conversion of Class B ordinary shares of the Company, par value $0.0001 per share (the “Class B Ordinary Shares”) into Class A ordinary shares, par value $0.0001 per share (the “Class A Ordinary Shares”) (the “Founder Share Amendment”). In connection with the vote to approve the Extension, the holders of 11,151,163 Class A ordinary shares exercised their right to redeem their shares for cash at a redemption price of approximately $10.56 per share, for an aggregate redemption amount of approximately $118 million.

Our management and our board of directors have broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering, the over-allotment and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a business combination.

If we have not completed our initial business combination within the Combination Period, we will (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest or dividend earned on the funds held in the Trust Account and not previously released to us to pay our income taxes, if any (less up to $100,000 of interest to pay dissolution expenses) divided by the number of the then-outstanding public shares, which redemption will completely extinguish public shareholders’ rights as shareholders (including the right to receive further liquidation distributions, if any); and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining shareholders and the board of directors, liquidate and dissolve, subject in the case of clauses (ii) and (iii), to our obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law.

On April 28, 2023, in connection with the Founder Share Amendment and pursuant to the Charter, the Sponsor elected to convert 5,031,250 Class B Ordinary Shares held by it into Class A Ordinary Shares on a one-for-one basis for no consideration. 

Results of Operations

We have neither engaged in any operations nor generated any revenues to date. Our only activities since February 12, 2021 (inception) have been organizational activities and those necessary to prepare for the IPO. Following the IPO, we will not generate any operating revenues until after completion of our initial Business Combination. We will generate non-operating income in the form of interest or dividend income on the investments held in the Trust Account. There has been no significant change in our financial or trading position and no material adverse change has occurred since the date of our audited financial statements. After the IPO, we expect to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses. We expect our expenses to increase substantially after the closing of the IPO.

For the three months ended September 30, 2023, we had a net income of $1,362,105, which consists of general and administrative expenses of $547,392 and a loss in fair value of derivative warrant liabilities of $683,395, offset by a gain on investments held in Trust Account of $1,226,102.

For the nine months ended September 30, 2023, we had a net income of $3,350,580, which consists of general and administrative expenses of $1,574,892 and a loss in fair value of derivative warrant liabilities of $202,188, offset by a gain on investments held in Trust Account of $4,723,284.

For the three months ended September 30, 2022, we had a net income of $3,599,837, which consists of general and administrative expenses of $254,584, offset by a loss in fair value of derivative warrant liabilities of $2,830,625 and a gain on investments held in Trust Account of $1,023,730 and other income of $66.

For the nine months ended September 30, 2022, we had a net income of $7,628,714, which consists of general and administrative expenses of $2,034,395, offset by a gain in fair value of derivative warrant liabilities of $8,271,893 and a gain on investments held in Trust Account of $1,391,133 and other income of $83.

Liquidity and Capital Resources

For the nine months ended September 30, 2023, cash used in operating activities was $203,494. This was made up of a net income of $3,350,580, changes in operating assets and liabilities of $1,371,398, offset by a change in fair value of derivative warrant liabilities of $202,188 and a $4,723,284 gain on investments held in Trust Account.

We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest or dividend earned on the Trust Account, excluding deferred underwriting commissions, to complete our initial business combination. We may withdraw interest or dividend from the Trust Account to pay taxes, if any. To the extent that our share capital or debt is used, in whole or in part, as consideration to complete a business combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.

We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, structure, negotiate and complete a business combination.

Going Concern Considerations

As of September 30, 2023, the Company had $1,933 in cash and no cash equivalents. Further, the Company has incurred and expects to continue to incur significant costs in pursuit of its financing and acquisition plans. Management’s plans to address this need for capital through the Proposed Public Offering. The Company cannot assure that its plans to consummate an initial Business Combination will be successful. If the Company’s estimates of the costs of identifying a target business, undertaking in-depth due diligence, and negotiating a Business Combination are less than the actual amount necessary to do so, the Company may have insufficient funds available to operate its business prior to an initial business combination. The liquidation deadline for the Company is also within the next twelve months if an initial Business Combination is not consummated.

As a result of the above, in connection with the Company’s assessment of going concern considerations in accordance with ASC Subtopic 205-40, “Presentation of Financial Statements – Going Concern,” management has determined that the liquidity conditions and the proximity to liquidation date raises substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after April 29, 2024. These unaudited condensed financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

Off-Balance Sheet Arrangements

We have no obligations, assets or liabilities that would be considered off-balance sheet arrangements as of September 30, 2023 and December 31, 2022. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.

Commitments and Contractual Obligations

For the nine months ended September 30, 2023 and 2022, we did not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities.

Registration Rights

The holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of working capital loans (and any Class A ordinary shares issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of working capital loans) are entitled to registration rights pursuant to a registration rights agreement. The holders of these securities are entitled to make up to three demands, excluding short form demands, that we register such securities. These holders will be entitled to certain demand and “piggyback” registration rights. We will bear the expenses incurred in connection with the filing of any such registration statements.

Underwriting Agreement

We granted the underwriter a 45-day option from the final prospectus relating to the Initial Public Offering to purchase up to 2,625,000 additional Units to cover over-allotments, if any, at the Initial Public Offering price less the underwriting discounts and commissions. On October 29, 2021, the underwriter fully exercised its over-allotment option.

Additionally, the underwriter was entitled to a deferred underwriting discount of 4% of the gross proceeds of the base portion of the Public Offering and a deferred underwriting discount of 5.5% of the gross proceeds per over-allotment unit upon the completion of the Company’s initial business combination.

Administrative Support Agreement

The Company agreed to pay the Sponsor a total of $15,000 per month, commencing on the effective date of the Initial Public Offering, for office space, utilities, secretarial and administrative support services provided to members of the management team, which included payment of $10,000 per month to our former Chief Financial Officer and Executive Vice President of Business Development. Upon completion of the initial business combination or the liquidation, we will cease paying these monthly fees. On July 1, 2022 the Company amended the administrative support agreement with the Sponsor from $15,000 a month to $5,000 a month. The Company incurred $45,000 and $105,000 for the nine months ended September 30, 2023 and September 30, 2022, respectively, in Sponsor administrative fees. For the three months ended September 30, 2023 and 2022, the Company incurred $15,000 and $30,000, respectively.

Due to Related Party

As of September 30, 2023 and December 31, 2022, the Company has an outstanding of $15,000 and $0 respectively due to the Sponsor for administrative support services.

Promissory Note – Extension Loan

In connection with the Extension, The Sponsor agreed to loan the Company an amount equal to the lesser of (i) $0.04 per public share multiplied by the number of public shares then outstanding and (ii) $160,000, for each calendar month beginning on April 30, 2023 until the earlier of (i) the completion of a business combination and (ii) the Company’s liquidation. As of September 30, 2023, there were Trust Account deposits in connection with the extension loan, totaling $480,000.

In connection with the first Contribution, on May 4, 2023, the Company issued the Note for working capital expenses (as discussed in Note 1). The Note bears no interest and is repayable in full upon the earlier of the consummation of the Company’s initial business combination, or the liquidation of the Company. If the Company does not consummate an initial business combination within the Combination Period, the Note will be repaid only from funds held outside of the Trust Account or will be forfeited, eliminated or otherwise forgiven. Upon maturity, the outstanding principal of the Note may be converted into warrants identical to the Private Placement warrants, at a price of $1.00 per warrant, at the option of the Sponsor. As of September 30, 2023, $480,000 has been drawn on the Note.

Promissory Note – Working Capital Loan

In order to finance transaction costs in connection with an initial business combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required. If the Company completes an initial business combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. In the event that an initial business combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. The Working Capital Loans would either be repaid upon consummation of an initial business combination or, at the lender’s discretion, up to $1,500,000 of such Working Capital Loans may be convertible into Private Placement Warrants of the post-initial business combination entity at a price of $1.00 per warrant. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. As of September 30, 2023 and December 31, 2022, the Company had $171,055 and $0 outstanding under the Working Capital Loans.

Other Commitments

On November 5, 2021 the Company entered into an investment advisory agreement with Clean Energy Associates, LLC (“Clean Energy”), pursuant to which Clean Energy will serve as an investment advisor in connection with the Company’s initial Business Combination. If the Company enters into a letter of intent with a potential target that has been introduced to it by Clean Energy, it shall pay Clean Energy a cash success fee of $40,000. Clean Energy shall also be paid a retainer of up to $40,000. This agreement was subsequently terminated. For the period ended September 30, 2023 and 2022 there were no amounts incurred and accrued for Clean Energy.

On March 28, 2022 the Company engaged UBS, the underwriter in the Initial Public Offering, as a financial advisor and capital markets advisor in connection with a specified de-SPAC transaction. The Company will pay UBS a cash fee for such services upon the consummation of such transaction in an amount equal to $3,000,000. The letter of intent related to this agreement expired on July 1, 2022 and as such rendered this agreement void and no future accrual or expense will be booked. The agreement provided for up to $25,000 in reimbursable fees to UBS and as of the expiration date of the agreement, there are no reimbursable fees incurred by the Company.

On November 8, 2021 the Company engaged Atrium as a financial advisor in relation to the potential acquisition of one or more companies in a specific industry. The Company will pay Atrium a cash fee for such services upon the consummation of such transaction in an amount equal to 1% of the enterprise value of the target company at the time of closing. This agreement was terminated in February 2022. For the nine months ended September 30, 2023 and 2022 the Company had incurred and paid $0 and $30,225, respectively, related to the Atrium agreement.

On September 26, 2022 the Company reengaged Atrium as a financial advisor in relation to the potential acquisition of one or more companies in a specific industry under the term of the new agreement the Company will pay Atrium a weekly retainer for all weeks they are engaged in the acquisition efforts as well as a cash fee for such services upon the consummation of such transaction in an amount equal to 1% of the enterprise value of the target company at the time of closing. On November 6, 2022, the agreement was terminated and the Company has no further obligation under such agreement. For the nine months ended September 30, 2023 and 2022 there were $0 and $15,000, respectively, of amounts, as well as 0.75% of any additionally raised capital to fund such transaction, incurred for Atrium under the terms of the new agreement. No expenses were incurred in the three months ended September 30, 2023 and 2022.

In June 2023, the Company re-engaged UBS as its exclusive capital markets advisor for potential business combination. In October 2023, an amended agreement was executed between the Company and UBS such that The Company will pay UBS a cash fee for such services upon the consummation of such transaction in an amount equal to $5,000,000. The exclusivity agreement will lapse six months from the effective date of the agreement unless terminated earlier pursuant to the agreement.

Critical Accounting Policies and Estimates

Class A Ordinary Shares Subject to Possible Redemption

All of the Class A ordinary shares sold as part of the Units in the IPO contain a redemption feature which allows for the redemption of such Public Shares in connection with the Company’s liquidation if there is a shareholder vote or tender offer in connection with the Business Combination and in connection with certain amendments to the Company’s amended and restated memorandum and articles of association. In accordance with SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within the control of the Company require ordinary shares subject to redemption to be classified outside of permanent equity. Therefore, all Class A ordinary shares have been classified outside of permanent equity.

The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable ordinary shares to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable ordinary shares are affected by charges against additional paid in capital and accumulated deficit.

Net Income Per Ordinary Share

The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” Net income per ordinary share is computed by dividing net income by the weighted average number of ordinary share outstanding during the period. The Company has not considered the effect of the warrants sold in the Initial Public Offering and Private Placements to purchase Class A ordinary shares in the calculation of diluted income per share, since their inclusion would be anti-dilutive under the treasury stock method. As a result, diluted income per share is the same as basic income per share for the period presented.

The Company historically has two classes of ordinary shares, which are referred to as Class A ordinary shares and Class B ordinary shares. Upon the conversion event in April 2023 to convert Class B Ordinary shares into Class A Ordinary Shares, the Company now have Class A redeemable and non-redeemable Ordinary Shares. Income and losses are shared pro rata between the redeemable and non-redeemable ordinary shares. Net income per share, basic and diluted for redeemable Class A ordinary shares is calculated by dividing the pro rata allocation of net income to redeemable Class A ordinary shares for the three and nine months ended September 30, 2023 and for the three and nine months ended September 30, 2022 by the weighted average number of redeemable Class A ordinary shares outstanding for the periods. Net income per share basic and diluted for non-redeemable ordinary shares is calculated by dividing the pro rata allocation of net income to non-redeemable ordinary shares or the three and nine months ended September 30, 2023 and for the three and nine months ended September 30, 2022 by the weighted average number of non-redeemable Class A ordinary shares outstanding for the periods. Remeasurement associated with the redeemable shares of Class A ordinary shares is excluded from earnings per share as the redemption value approximates fair value.

Derivative Instruments

The Company does not use derivative instruments to hedge its exposures to cash flow, market, or foreign currency risks. Management evaluates all of the Company’s financial instruments, including issued warrants to purchase its Class A ordinary shares, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC 815-15. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.

The Company issued 10,062,500 Public Warrants to purchase Class A ordinary shares to investors in the Company’s Initial Public Offering and simultaneously issued 10,156,250 Private Placement Warrants. All of the Company’s outstanding warrants are recognized as derivative liabilities in accordance with ASC 815-40. Accordingly, we recognize the warrant instruments as liabilities at fair value and adjust the instruments to fair value at each reporting period. The liabilities are subject to re- measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statement of operations. The Company initially utilized a Monte Carlo simulation model to value the Public Warrants and Private Placement Warrants at each balance sheet date, with changes in fair value recognized in the statement of operations. Inherent in pricing models are assumptions and inputs used to arrive the fair value of the Public and Private Placement warrants. The subsequent measurements of the Public Warrants after the detachment of the Public Warrants from the Units on December 17, 2021 were classified as Level 1 due to the use of an observable market quote in an active market under the ticker PHYT.WS. There was zero trading volume of the Company’s public warrants on September 30, 2023, a level 2 measurement. The close price of the Public Warrant was used as the fair value of the Public Warrants as of September 30, 2023. The Private Placement Warrants have a make-whole provision in place, which will enable them to have a fair value similar to Public Warrants as of September 30, 2023.

Both the Promissory Note- Extension Loan and Promissory Note- Working Capital (“Promissory Notes”), contain a conversion feature, for which upon maturity, the outstanding principal of the Promissory Notes, at the option of the Sponsor, may be converted into warrants identical to the Private Placement capital warrants. The Company determined that the conversion option should be bifurcated and accounted for as a derivative in accordance with ASC 815. However, the exercise price of the underlying warrants was greater than the closing price of the Company’s Class A ordinary shares as of September 30, 2023, and when the Promissory Notes were drawn on. The Company believes that the likelihood of the Sponsor’s exercise of the option to convert the Promissory Notes to warrants is de minimis. As a result, the Company recorded zero liability related to the conversion option on the Promissory Notes.

Investments and cash held in the Trust Account

Our portfolio of investments held in the Trust Account is money market funds solely comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities, or a combination thereof. The investments held in the Trust Account are classified as trading securities. Trading securities are presented on the balance sheet at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities are included in gain on investments held in Trust Account on the unaudited condensed statements of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.

Recent Accounting Standards

Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s unaudited condensed financial statements.

Recent Developments

Proposed Business Combination

On November 13, 2023, Pyrophyte entered into a business combination agreement (the “Business Combination Agreement” and the transactions contemplated thereby, the “Sio Business Combination”) with Pyrophyte (“Pyrophyte Newco”), pursuant to which, among other things and subject to the terms and conditions contained therein, (i) the Company will transfer by way of continuation from the Cayman Islands to Alberta in accordance with the Cayman Islands Companies Act (as revised) (the “Companies Act”) and continue as an Alberta corporation in accordance with the applicable provisions of the Business Corporations Act (Alberta) (the “ABCA”) (such continuation, the “Domestication”), (ii) following the Domestication, Pyrophyte will amalgamate with Sio Newco (the “SPAC Amalgamation”), with Sio Newco surviving the SPAC Amalgamation (“Pubco”) in accordance with the terms of a Plan of Arrangement (the “Plan of Arrangement”), and (iii) Sio and Pyrophyte Newco will amalgamate (the “Sio Amalgamation” and together with the SPAC Amalgamation, the “Amalgamations”), with Sio surviving the Sio Amalgamation as a wholly-owned subsidiary of Pubco and such entity will continue the business operations currently undertaken by Sio. Pyrophyte’s board of directors has unanimously approved and declared advisable the Business Combination and all the transaction documents therein and resolved to recommend approval of the Sio Business Combination Agreement and related matters by Pyrophyte’s shareholders.

Conversion of Securities

Domestication

Pursuant to the Domestication, Pyrophyte will transfer by way of continuation from the Cayman Islands to Alberta in accordance with the Companies Act and continue as an Alberta corporation in accordance with the applicable provisions of the ABCA. In connection with the Domestication, each then-issued and outstanding Class A Ordinary Share will convert automatically, on a one-for-one basis, into one Class A common share of Pyrophyte (after the Domestication) (the “SPAC Class A Common Shares”) and each of the then-issued and outstanding warrant of Pyrophyte will automatically become a warrant to acquire one SPAC Class A Common Share.

SPAC Amalgamation

Pursuant to the SPAC Amalgamation, which will take place not later than one business day prior to the closing (the “Closing”) of the Sio Business Combination (the “Closing Date”), but after the Domestication, (i) each then-issued and outstanding SPAC Class A Common Share will be exchanged, on a one-for-one basis, for a Class A common share in the authorized share capital of Pubco (the “Pubco Class A Common Shares”), (ii) each then-issued and outstanding warrant of Pyrophyte will become a warrant to acquire one Pubco Class A Common Share (the “Pubco Warrants”), (iii) each then-issued and outstanding unit of Pyrophyte will be exchanged for a unit of Pubco representing one Pubco Class A Common Share and one-half of one Pubco Warrant (the “Pubco Units”) (each of which will be separated into its component parts in connection with the Closing), (iv) each common share of Sio Newco will be exchanged for one Pubco Class A Common Share, and (v) immediately thereafter, the Pubco Class A Common Share will be purchased by Sio Newco for cash at the price initially paid by such shareholder and immediately cancelled, in each case upon and subject to the terms and conditions set forth in the Business Combination Agreement, the Plan of Arrangement and in accordance with the provisions of applicable law.

As a result of the SPAC Amalgamation, all holders of then-issued and outstanding SPAC Class A Common Shares will become holders of Pubco Class A Common Shares.

Sio Amalgamation

Pursuant to the Sio Amalgamation, on the Closing Date and following the exercise on a cashless basis of all then-issued and outstanding warrants (the “Sio Warrants”) and options of Sio for common shares in the authorized share capital of Sio (the “Sio Common Shares”) in accordance with the Plan of Arrangement (the “Sio Warrant and Option Settlement”), (i) each then-issued and outstanding Sio Common Share (other than any Sio Common Shares issued by Sio to certain investors during the interim period (the “Sio Interim Common Shares”)) will be exchanged for (x) a number of Pubco Class A Common Shares equal to the Sio Common Share Exchange Ratio (as defined below) and (y) a number of Sio Earnout Shares (as defined below) equal to the Sio Earnout Exchange Ratio (as defined below), (ii) each then-issued and outstanding share award to purchase Sio Common Shares (each, a “Sio RSU”) will become exercisable for a number of Pubco Class A Common Shares (rounded down to the nearest whole share) equal to (a) the number of Sio Common Shares subject to the applicable Sio RSU multiplied by (b) the Sio Common Share Exchange Ratio, (iii) any Sio Warrant that is not exercised pursuant to the Sio Warrant and Option Settlement will remain outstanding and will automatically in accordance with its terms become a warrant to acquire Pubco Class A Common Shares, and (iv) each then-issued and outstanding Sio Interim Common Share will be exchanged for a number of Pubco Class A Common Shares equal to (a) the number of then-issued and outstanding Sio Interim Common Shares multiplied by (b) the Sio Common Share Exchange Ratio, in each case upon and subject to the other terms and conditions set forth in the Business Combination Agreement, the Plan of Arrangement and in accordance with the provisions of applicable law.

As a result of the Amalgamations, Sio will become a wholly-owned subsidiary of Pubco and will continue the business operations currently undertaken by it. Upon the Closing, the Pubco Class A Common Shares and the Pubco Warrants are expected to trade on the New York Stock Exchange under the symbols “SIOS” and “SIOS WS,” respectively.

“Sio Common Share Exchange Ratio” means the quotient obtained by (A) dividing (i) Sio’s valuation of $675,000,000 by (ii) $10.25, and then (B) by further dividing the resulting number of Pubco Class A Common Shares established in (A) above by the sum of (x) the number of Sio Common Shares that are issuable upon the exercise of Sio RSUs that are unexpired, issued and outstanding as of immediately prior to the effective of the Sio Amalgamation (the “Sio Amalgamation Effective Time”), (y) the number of Sio Common Shares issued and outstanding immediately prior to the Sio Amalgamation Effective Time, which shall (1) include any Sio Common Shares issued in connection with the Sio Warrant and Option Settlement and (2) exclude any Sio Interim Common Shares, and (z) the number of Sio Common Shares that are issuable upon the exercise of any issued and outstanding warrants to purchase Sio Common Shares that is not exercised pursuant to the Company Warrant and Option Settlement (“Unexercised Company Warrants”) issued and outstanding as of immediately prior to the Sio Amalgamation Effective Time minus a number of Sio Common Shares with a fair market value equal to the aggregate exercise price (determined with reference to the US dollar to the Canadian dollar exchange rate reported by the Bank of Canada at the close of business on the date that is two (2) business days prior to the Closing) of all such Unexercised Company Warrants if they were so exercised (such sum, the “Fully-Diluted Sio Common Shares”).

“Sio Earnout Exchange Ratio” means the quotient obtained by dividing (i) 6,585,366 by (ii) the Fully-Diluted Sio Common Shares.

“Sio Earnout Shares” means the pro rata portion of an aggregate of 6,585,366 Pubco Class A Common Shares (without duplication) issued to each shareholder of Sio (other than holders of any Sio Interim Common Shares) pursuant to the Sio Amalgamation and the Business Combination Agreement (the “Earnout”), valued at the deemed issue price of the Pubco Class A Common Shares in connection with the Earnout, which is $10.25 per Pubco Class A Common Share, which Sio Earnout shares are subject to forfeiture in accordance with the terms of the Business Combination Agreement.

A copy of the Business Combination Agreement is filed with this Quarterly Report on Form 10-Q as Exhibit 2.1 and is incorporated herein by reference. The foregoing description of the Business Combination Agreement and the Sio Business Combination does not purport to be complete and is qualified in its entirety by reference to the full text of the Business Combination Agreement filed with this Quarterly Report on Form 10-Q. The Business Combination Agreement is included to provide security holders with information regarding its terms. It is not intended to provide any other factual information about Sio, Pyrophyte Newco, Pyrophyte or Sio Newco. In particular, the assertions embodied in representations and warranties by Sio, Pyrophyte Newco, Pyrophyte and Sio Newco contained in the Business Combination Agreement are subject to important qualifications and limitations agreed to by the parties in connection with negotiating such agreement, including being qualified by confidential information in the disclosure schedules provided by the parties in connection with the execution of the Business Combination Agreement, and are subject to standards of materiality applicable to the contracting parties that may differ from those applicable to security holders. The confidential disclosures contain information that modifies, qualifies and creates exceptions to the representations and warranties set forth in the Business Combination Agreement. Moreover, certain representations and warranties in the Business Combination Agreement were used for the purpose of allocating risk between the parties, rather than establishing matters as facts. Accordingly, security holders should not rely on the representations and warranties in the Business Combination Agreement as characterizations of the actual state of facts about Sio, Pyrophyte Newco, Pyrophyte or Sio Newco. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Business Combination Agreement, which subsequent information may or may not be fully reflected in Pyrophyte’s public disclosures.

Subscription Agreements

Concurrently with the execution of the Business Combination Agreement, Pyrophyte, Sio and Sio Newco entered into subscription agreements with (i) a certain accredited investor (the “Non-Insider PIPE Investor”) and (ii) certain other accredited investors who are existing shareholders of Sio or Pyrophyte (the “Insider PIPE Investors” and, together with the Non-Insider PIPE Investor, the “PIPE Investors”), pursuant to which, among other things, Sio Newco agreed to issue and sell, in a private placement to close concurrently with and conditioned upon the effectiveness of the consummation of the Business Combination, an aggregate of 3,114,258 Pubco Class A Common Shares (the “PIPE Investment”) to the PIPE Investors for an aggregate purchase price equal to $20,122,474.

The foregoing description of the PIPE Investment does not purport to be complete and is qualified in its entirety by the terms and conditions of (i) the form of subscription agreement entered into with the Non-Insider PIPE Investors (the “Non-Insider Subscription Agreement”) and (ii) the form of subscription agreement entered into with the Insider PIPE Investors (the “Insider Subscription Agreement” and, together with the Non-Insider Subscription Agreement, the “Subscription Agreements”), as applicable, copies of which are filed as Exhibits 10.1 and 10.2, respectively, hereto and are incorporated by reference herein.

Non-Redemption Agreement

Concurrently with the execution of the Business Combination Agreement, Pyrophyte and Sio Newco entered into a non-redemption agreement (the “Non-Redemption Agreement”) with a Pyrophyte shareholder with respect to 100,000 SPAC Class A Ordinary Shares held by such shareholder (the “Non-Redemption SPAC Shares”), pursuant to which, among other things, Pyrophyte agreed to issue 58,570 Class A Ordinary Shares to such shareholder in consideration of such shareholder’s commitment not to redeem the Non-Redemption SPAC Shares held by it in connection with the approval of the Business Combination by Pyrophyte’s shareholders (the “Non-Redemption Transaction”).

The foregoing description of the Non-Redemption Transaction and the Non-Redemption Agreement does not purport to be complete and is qualified in its entirety by the full text of the Non-Redemption Agreement, a copy of which is filed as Exhibit 10.3 hereto and is incorporated by reference herein.

Sponsor Support Agreement

Concurrently with the execution of the Business Combination Agreement, the Sponsor, entered into a letter agreement (the “Sponsor Support Agreement”) with Sio, Sio Newco, Pyrophyte and the directors and officers (or otherwise a part of the management team) of Pyrophyte, solely for purposes of amending certain of the terms of the letter agreement signed by them in connection with Pyrophyte’s initial public offering, pursuant to which, among other things, the Sponsor agreed to (i) appear at the extraordinary general meeting of Pyrophyte’s shareholders called to approve the Business Combination (the “Pyrophyte Shareholders Meeting”) or otherwise cause the Covered Shares (as defined below) to be counted as present thereat for the purposes of establishing a quorum, (ii) vote all Class A Ordinary Shares, or any securities convertible into, exercisable or exchangeable for Class A Ordinary Shares, held by it or acquired after the date of the Sponsor Support Agreement (the “Covered Shares”) at the Pyrophyte Shareholders Meeting (or execute and deliver a written consent, if applicable, causing to be voted) (v) in favor of any circumstances upon which a consent or other approval is required under the organizational documents of Pyrophyte or otherwise sought in furtherance of the Business Combination, (w) in favor of the adoption and approval of the Business Combination and each other proposal related to the Business Combination necessary or reasonably requested by Pyrophyte for the consummation of the Business Combination, (x) against any alternative transactions or actions reasonably expected to impede, interfere with, delay, postpone or adversely impact the Business Combination or result in a breach of any covenant, representation or warranty of Pyrophyte under the Business Combination Agreement or result in any of the closing conditions of the Business Combination Agreement not being fulfilled, (y) against any change in the dividend policy or capitalization of, including the voting rights of, any class of shares of Pyrophyte, and (z) against any change in business, management or the board of directors of the Pyrophyte, in each of clause (y) and (z) other than in connection with the Business Combination, (iii) not transfer the Class A Ordinary Shares until the earlier of (a) termination of the Business Combination Agreement and (b) termination of the Sponsor Support Agreement upon mutual written agreement of the parties thereto, (iv) not redeem any Covered Shares owned by it in connection with approval of the Business Combination by Pyrophyte’s shareholders, (v) not transfer any Covered Shares (other than Pubco Class A Common Shares issued upon exercise of any private placement warrants held by the Sponsor) until the earlier of (A) one year after the Closing, (B) the first day the last sale price of Pubco Class A Common Shares equals or exceeds $12.00 per share for any 20 trading days within a 30-day trading period commencing at least 150 days after the Closing or (C) after the Closing, the date on which Pubco completes a liquidation, amalgamation, share exchange or similar transaction resulting in the shareholders of Pubco having the right to exchange their shares for consideration, and (vi) not transfer any private placement warrants (or Pubco Class A Common Shares issued or issuable upon exercise of such warrants) held by it until 30 days after the Closing.

In addition, the Sponsor has agreed to subject a number of Class A Ordinary Shares held by it on the date of execution of the Sponsor Support Agreement (“Restricted Owned Shares”) to certain restrictions, to the extent such shares are used to obtain any additional PIPE Financing or other financing arrangements in connection with consummation of the Business Combination; provided that in no event shall the aggregate number of Restricted Owned Shares equal more than 4,025,000 Class A Ordinary Shares (the “Maximum Restricted Owned Shares”). If, prior to the Closing, the sum of all Available Closing Cash raised from the PIPE Investment, any non-redemption agreements (including the Non-Redemption Agreement) and any other cash and cash equivalents of Pyrophyte (including the proceeds of any securities funded in connection with the Closing but excluding, for the avoidance of doubt, (I) the Royalty Agreement Proceeds (as defined in the Business Combination Agreement), (II) proceeds received from any flow-through common shares (other than to the extent that any incentive equity interests are issued in connection with such issuance) and (III) any Indebtedness (as defined in the Business Combination Agreement) funded in connection with the Closing) (collectively, the “SPAC Proceeds”) is less than $70,000,000, then (i) the number of Restricted Owned Shares shall be equal to the actual number of SPAC Class A Ordinary Shares that were used to secure such SPAC Proceeds, up to (but not exceeding) an amount equal to the Maximum Restricted Owned Shares (the “Incentive Owned Shares”), and (ii) a number of SPAC Class A Ordinary Shares owned by Sponsor equal to (x) 4,025,000 minus (y) the number of Incentive Owned Shares shall be automatically forfeited and deemed transferred to Pyrophyte for cancellation for no consideration. If, prior to Closing, the sum of the Available Closing Cash raised from the SPAC Proceeds is equal to or greater than $70,000,000, then the number of Restricted Owned Shares shall be equal to the Incentive Owned Shares.

In connection with the Closing, each Restricted Owned Share will be exchanged on a one-for-one basis for Pubco Class A Common Shares pursuant to the Business Combination and the Plan of Arrangement and such shares will be subject to forfeiture or release as follows: (i) half of the Restricted Owned Shares will be released to the Sponsor on the first day that the Trading Price (as defined in the Business Combination Agreement) is at least $12.50, (ii) the other half of the Restricted Owned Shares will be released from forfeiture on the first day that the Trading Price is at least $15.00, in each case during the period commencing on the Closing Date and ending on the date that is three (3) years after the Closing Date (the “End Date”), and (iii) after the End Date, any Restricted Owned Shares that have not been released to the Sponsor pursuant to clauses (i) or (ii) above will be automatically forfeited for no consideration.

The foregoing description of the Sponsor Support Agreement is qualified in its entirety by reference to the full text of the Sponsor Support Agreement, a copy of which is included as Exhibit 10.4 to this Quarterly Report on Form 10-Q and is incorporated herein by reference.

Sio Securityholder Support Agreements

In connection with the execution of the Business Combination Agreement, on November 13, 2023, Pyrophyte, Sio, and certain securityholders of Sio entered into support agreements (the “Sio Securityholder Support Agreements”), pursuant to which, among other things, such shareholders agreed to vote (or cause to be voted) all of their Sio shares and other voting securities of Sio (“Subject Securities”) in favor of the special resolution of Sio shareholders in respect of the Plan of Arrangement, to be considered at Sio’s shareholders meeting to approve the Business Combination. Additionally, such shareholders have agreed, among other things, not to, prior to the Closing, (a) transfer any of their Subject Securities (or enter into any agreement, arrangement or understanding in connection therewith other than pursuant to the Plan of Arrangement), subject to certain customary exceptions, or (b) enter into any voting arrangement that is inconsistent with the Sio Securityholder Support Agreements. Sio covenants in the Business Combination Agreement that it will use commercially reasonable efforts to obtain Sio Securityholder Support Agreements from at least 66 ⅔% of its shareholders as promptly as possible, but in any event, within five days of the execution date of the Business Combination Agreement.

The foregoing description of the Sio Securityholder Support Agreements is qualified in its entirety by reference to the full text of the form of Sio Securityholder Support Agreements Support Agreement, a copy of which is included as Exhibit 10.5 to this Quarterly Report on Form 10-Q and is incorporated herein by reference.

Trust Account Deposit

On November 20, 2023, in connection with the Company extension arrangement, the Sponsor deposited $160,000 into the Trust Account, representing a contribution for the fourth month of extension. The Sponsor intends to make contributions into the Trust Account for the subsequent months of extension by the end of the month of November.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this Item.

Item 4. Controls and Procedures.

Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Evaluation of Disclosure Controls and Procedures

In connection with the preparation of this Quarterly Report, as of September 30, 2023, an evaluation was performed under the supervision and with the participation of our management, including the CEO and CFO, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based on such evaluation, our CEO and CFO concluded that, as of September 30, 2023, our disclosure controls and procedures were not effective, due to the material weaknesses in our internal control over financial reporting related to the recording of accruals and the accounting for complex financial instruments, as previously disclosed in our quarterly reports and our Form 10-K. As a result, we performed additional analysis as deemed necessary to ensure that our condensed financial statements were prepared in accordance with GAAP. Accordingly, management believes that the condensed financial statements included in this Quarterly Report present fairly in all material respects our financial position, results of operations and cash flows for the periods presented.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended September 30, 2023 covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K filed with the SEC on April 12, 2023. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None. 

Item 6. Exhibits.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

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