10-Q: Coliseum Acquisition Corp. Reports Net Loss in Q3 2024 Amidst Business Combination Efforts
Sentiment:
Quarterly Report
Coliseum Acquisition Corp. reported a net loss of $694,939 for the third quarter of 2024, as it continues to pursue a business combination with Rain Enhancement Technologies, Inc.
Delay expectedThe company has extended its combination period multiple times, most recently to November 25, 2024.
Capital raiseThe company has issued a convertible note to the New Sponsor with a principal amount up to $1.5 million to fund contributions and transaction costs.The company may need to raise additional capital to meet the minimum cash condition for the business combination with RET.
Worse than expectedThe company reported a net loss for the quarter and year-to-date, which is worse than the net income reported in the same periods of the previous year.The company's working capital deficit and going concern issues indicate a worsening financial position.
Summary
- Coliseum Acquisition Corp., a blank check company, reported a net loss of $694,939 for the three months ended September 30, 2024, and a net loss of $1,371,799 for the nine months ended September 30, 2024.
- The company's operating expenses were $1,059,346 for the quarter and $2,478,245 for the nine-month period, with a significant portion of the nine-month expenses, $1,780,733, related to the proposed business combination with Rain Enhancement Technologies, Inc. (RET).
- Interest income from the trust account partially offset the losses, amounting to $405,268 for the quarter and $1,216,967 for the nine-month period.
- The company has extended its combination period to November 25, 2024, and has a working capital deficit of $4,797,417 as of September 30, 2024.
- Coliseum has a minimum cash condition of $10 million to close the business combination with RET.
- The company's management has expressed substantial doubt about its ability to continue as a going concern if a business combination is not completed by the deadline.
Sentiment
Score: 3
Explanation: The document presents a concerning financial situation with net losses, a working capital deficit, and a going concern warning. While the company is actively pursuing a business combination, the risks and challenges are significant, leading to a low sentiment score.
Positives
- The company generated interest income from its trust account, which partially offset operating losses.
- The company has secured an extension to complete its business combination until November 25, 2024.
- The company is actively pursuing a business combination with Rain Enhancement Technologies, Inc.
Negatives
- The company reported a net loss of $694,939 for the quarter and $1,371,799 for the nine months ended September 30, 2024.
- The company has a significant working capital deficit of $4,797,417.
- The company's management has expressed substantial doubt about its ability to continue as a going concern if a business combination is not completed by the deadline.
- The company has incurred significant expenses related to the proposed business combination with RET.
Risks
- The company's ability to continue as a going concern is dependent on completing a business combination by November 25, 2024.
- The company has a working capital deficit and may require additional funding.
- The company's proposed business combination with RET is subject to a $10 million minimum cash condition and other material conditions to closing.
- The company's securities could be delisted from Nasdaq if the business combination is not completed by December 23, 2024.
- Geopolitical instability, including the Russia-Ukraine and Israel-Hamas conflicts, could adversely affect the company's search for a business combination.
Future Outlook
The company's future is dependent on completing a business combination by November 25, 2024, and management has expressed substantial doubt about its ability to continue as a going concern if this does not occur. The company is actively pursuing a business combination with Rain Enhancement Technologies, Inc., but there is no assurance that this will be successful.
Management Comments
- Management has determined that the liquidity condition and mandatory liquidation, should a Business Combination not occur, and potential subsequent dissolution raise substantial doubt about the Company's ability to continue as a going concern.
- Management plans to address this uncertainty through a Business Combination.
Industry Context
The document reflects the challenges faced by SPACs in the current market, including the need to secure extensions and the risk of liquidation if a business combination is not completed within the allotted time. The company's efforts to secure a business combination and maintain its Nasdaq listing are consistent with the broader trends in the SPAC market.
Comparison to Industry Standards
- The financial results of Coliseum Acquisition Corp. are not directly comparable to traditional operating companies due to its status as a blank check company.
- The company's performance is more appropriately compared to other SPACs, particularly those that have faced similar challenges in securing a business combination.
- The high redemption rates experienced by Coliseum are consistent with industry trends, where investors often choose to redeem their shares rather than participate in a business combination.
- The company's reliance on extensions and related contributions is also a common practice among SPACs facing deadlines.
- The company's working capital deficit and going concern issues are not uncommon for SPACs nearing their expiration dates.
Management Changes
| Role | Previous Person | New Person | Effective Date | Reason |
|---|---|---|---|---|
| Chief Executive Officer | na | Charles Wert | June 26, 2023 | In connection with the Transfer Transaction |
| Chief Financial Officer | na | Oanh Truong | June 26, 2023 | In connection with the Transfer Transaction |
| Chairman | na | Harry You | June 26, 2023 | In connection with the Transfer Transaction |
| Director | na | Roland Rapp | June 26, 2023 | In connection with the Transfer Transaction |
| Director | na | Kenneth Rivers | June 26, 2023 | In connection with the Transfer Transaction |
| Director | na | Walter Skowronski | June 26, 2023 | In connection with the Transfer Transaction |
Corporate Governance
| Change Type | Description | Effective Date | Impact Assessment |
|---|---|---|---|
| Amendment to Articles | Extended the Combination Period up to twelve (12) times for an additional one (1) month each time, only if the Previous Sponsor or its designee would make Contributions into the Trust Account. | June 22, 2023 | Allowed the company to extend its deadline for completing a business combination. |
| Amendment to Articles | Removed the net tangible asset requirement from the Articles. | June 22, 2023 | Expanded the methods that the Company may employ so as not to become subject to the penny stock rules of the SEC. |
| Amendment to Articles | Provided for the right of a holder of the Class B ordinary shares to convert into non-redeemable Class A ordinary shares on a one-for-one basis. | June 22, 2023 | Allowed holders of Class B shares to convert to Class A shares. |
| Amendment to Articles | Extended the Combination Period to June 25, 2024, and allowed the Company to further extend the Combination Period for an additional three months, until up to September 25, 2024. | November 27, 2023 | Allowed the company to extend its deadline for completing a business combination. |
| Amendment to Articles | Permitted the board of directors to elect to wind up the Company's operations prior to the end of the Combination Period. | November 27, 2023 | Gave the board the option to liquidate the company before the deadline. |
| Amendment to Articles | Extended the Combination Period to October 25, 2024, and allowed the Company to further extend such date up to two times for an additional one month each time, until up to December 25, 2024. | September 24, 2024 | Allowed the company to extend its deadline for completing a business combination. |
Related Party Transactions
- The company has entered into an administrative services agreement with the New Sponsor, paying $10,000 per month for services.
- The New Sponsor has advanced funds to the company for working capital needs.
- The company issued a convertible note to the New Sponsor with a principal amount up to $1.5 million.
- The Previous Sponsor forgave debt owed by the company upon consummation of the Transfer Transaction.
Stakeholder Impact
- Shareholders face the risk of liquidation if a business combination is not completed by the deadline.
- Shareholders who did not redeem their shares may benefit from a successful business combination.
- Employees of the company and any target business are affected by the uncertainty surrounding the company's future.
- Creditors of the company face the risk of not being repaid if the company is liquidated.
- The company's suppliers and service providers are affected by the company's financial condition and ability to continue operations.
Next Steps
- The company needs to complete its business combination with Rain Enhancement Technologies, Inc. or another target by November 25, 2024.
- The company needs to meet the $10 million minimum cash condition for the business combination with RET.
- The company needs to provide progress updates to the Nasdaq Hearings Panel regarding the status of the business combination.
- The company needs to address its working capital deficit and going concern issues.
Key Dates
| Date | Description |
|---|---|
| February 5, 2021 | Coliseum Acquisition Corp. was incorporated in the Cayman Islands. |
| June 22, 2021 | The registration statement for the Initial Public Offering was declared effective. |
| June 25, 2021 | The Company consummated its Initial Public Offering. |
| August 6, 2021 | The underwriter's option to purchase additional units expired unexercised. |
| June 12, 2023 | The underwriter waived its deferred underwriting fees. |
| June 15, 2023 | The Company, Previous Sponsor, and New Sponsor entered into a Purchase Agreement. |
| June 22, 2023 | The Company issued a Convertible Note to the New Sponsor and held an extraordinary general meeting to approve the First Extension. |
| June 25, 2023 | The initial 24-month period to complete a business combination expired. |
| June 26, 2023 | The Transfer Transaction was consummated. |
| November 27, 2023 | The Company held an extraordinary general meeting to approve the Second Extension. |
| June 25, 2024 | The Company entered into a Business Combination Agreement with Rain Enhancement Technologies, Inc. and received a delisting notice from Nasdaq. |
| August 8, 2024 | The Company had a hearing with the Nasdaq Hearings Panel. |
| August 14, 2024 | The Nasdaq Hearings Panel granted the Company's request for continued listing. |
| August 22, 2024 | The Business Combination Agreement was amended. |
| September 20, 2024 | The Company held an extraordinary general meeting, later adjourned to September 24, 2024, to approve the Third Extension. |
| September 24, 2024 | Shareholders voted to amend the Company's Articles to extend the Combination Period to October 25, 2024. |
| September 25, 2024 | The Company deposited $50,000 of New Contributions to extend the Combination Period. |
| September 30, 2024 | End of the reporting period for the quarterly report. |
| October 25, 2024 | The Company deposited $50,000 of New Contributions to extend the Combination Period to November 25, 2024 and borrowed an additional $50,000 under the Convertible Note. |
| November 14, 2024 | Date of the quarterly report filing. |
| November 25, 2024 | Current deadline for completing a business combination. |
| December 23, 2024 | Deadline to complete the business combination to maintain Nasdaq listing. |
| December 25, 2024 | Latest possible date for completing a business combination. |
Keywords
Business Combination, SPAC, Merger, Acquisition, Rain Enhancement Technologies, Special Purpose Acquisition Company, Trust Account, Redemption, Warrants, Nasdaq, Going Concern
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