The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the financial
statements and the notes thereto contained elsewhere in this report. References
to the "Company," "us" or "we" refer to Coliseum Acquisition Corp.
Special Note Regarding Forward-Looking Statements
This Report includes "forward-looking statements" 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 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 "expect,"
"believe," "anticipate," "intend," "estimate," "seek" and variations 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 "Item 1A. Risk Factors". 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 incorporated on February 5, 2021, as a Cayman
Islands exempted company and formed for the purpose of effectuating a merger,
share exchange, asset acquisition, share purchase, reorganization or other
similar business combination, involving one or more businesses, which we refer
to throughout this Annual Report as our "initial business combination". We
intend to effectuate our initial business combination using cash from the
proceeds of our initial public offering and the private placement of the Private
Placement Warrants (as defined below), the proceeds of the sale of our shares in
connection with our initial business combination (pursuant to forward purchase
agreements or backstop agreements we may enter into following the consummation
of the initial public offering or otherwise), shares issued to the owners of the
target, debt issued to bank or other lenders or the owners of the target, or a
combination of the foregoing.
Recent Developments
On March 21, 2023, we received a written notice (the "Nasdaq Notice") from
Nasdaq's Listing Qualifications Department indicating that we were not in
compliance with Listing Rule 5550(a)(3), which requires us to have at least 300
public holders for continued listing on Nasdaq (the "Minimum Public Holders
Rule"). The Nasdaq Notice is only a notification of deficiency, not of imminent
delisting, and has no current effect on the listing or trading of our securities
on Nasdaq.
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The Nasdaq Notice states that we have 45 calendar days to submit a plan to
regain compliance with the Minimum Public Holders Rule. If we are unable to
regain compliance by that date, we intend to submit a plan to regain compliance
with the Minimum Public Holders Rule within the required timeframe. If Nasdaq
accepts our plan, Nasdaq may grant us an extension of up to 180 calendar days
from the date of the Nasdaq Notice to evidence compliance with the Minimum
Public Holders Rule. If Nasdaq does not accept our plan, we will have the
opportunity to appeal the decision in front of a Nasdaq Hearings Panel.
We are monitoring the number of holders of our Class A ordinary shares and will
consider the options available to us to potentially achieve compliance.
Results of Operations
We have neither engaged in any operations nor generated any operating revenues
to date. Our only activities for the period from February 5, 2021 (inception)
through December 31, 2022 were organizational activities, those necessary to
prepare for the initial public offering described below and, after the initial
public offering, identifying a target company for a business combination. We do
not expect to generate any operating revenues until after the completion of our
initial business combination. We will generate non-operating income in the form
of investment income on cash and cash equivalents held after the initial public
offering and will recognize other income and expense related to the change in
fair value of warrant liabilities. We incur expenses as a result of being a
public company (for legal, financial reporting, accounting and auditing
compliance), as well as for due diligence expenses.
For the year ended December 31, 2022, we had net income of $7,596,243, which
resulted from a gain on the change in fair value of warrant liabilities of
$6,530,000 and a gain on investments held in the Trust Account in the amount of
$2,317,796, partially offset by operating and formation costs of $1,251,553.
For the period from February 5, 2021 (inception) through December 31, 2021, we
had net income of $4,386,819, which resulted from a gain on the change in fair
value of warrant liabilities of $5,296,250 and a gain on investments held in the
Trust Account in the amount of $30,739, partially offset by operating and
formation costs of $533,130 and expensed offering costs of $407,040.
Liquidity and Capital Resources
On June 25, 2021, we consummated an initial public offering (the "Initial Public
Offering") of 15,000,000 Units (the "Units") generating gross proceeds to the
Company of $150,000,000. Simultaneously with the closing of the Initial Public
Offering, we completed the private sale of 3,225,000 warrants to Coliseum
Acquisition Sponsor LLC at a purchase price of $1.50 per warrant (the "Private
Placement Warrants"), generating gross proceeds of $4,837,500.
For the year ended December 31, 2022, net cash used in operating activities was
$568,909, which was due to non-cash adjustments to net income related to the
change in fair value of warrant liabilities of $6,530,000 and a gain on
investments held in the Trust Account of $2,317,796, partially offset by net
income of $7,596,243 and changes in operating assets and liabilities of
$682,644.
For the period from February 5, 2021 (inception) through December 31, 2021, net
cash used in operating activities was $1,259,092, which was due to non-cash
adjustments to net income related to the change in fair value of warrant
liabilities of $5,296,250 and a gain on investments held in the Trust Account of
$30,739, and changes in operating assets and liabilities of $725,962, partially
offset by net income of $4,386,819 and non-cash adjustments to net income
related to expensed offering costs of $407,040.
There were no cash flows from investing activities for the year ended December
31, 2022.
For the period from February 5, 2021 (inception) through December 31, 2021, net
cash used in investing activities was $150,000,000, which was the result of the
amount of net proceeds from the Initial Public Offering and the private
placement sale of warrants being deposited to the Trust Account.
There were no cash flows from financing activities for the year ended December
31, 2022.
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Net cash provided by financing activities for the period from February 5, 2021
(inception) through December 31, 2021 of $152,061,037 was comprised of
$147,750,000 from the issuance of Units in the Initial Public Offering net of
underwriter's discount paid, $4,837,500 in proceeds from the issuance of
warrants in a private placement to our Sponsor and proceeds from the issuance of
a promissory note to our Sponsor of $187,401, partially offset by the payment of
$526,463 for other offering costs associated with the Initial Public Offering
and repayment of the outstanding balance on the promissory note to our Sponsor
of $187,401.
As of December 31, 2022, we had $233,036 in cash held outside of the Trust
Account, working capital surplus of $276,354 and accumulated deficit of
$5,681,396. We have incurred and expect to continue to incur significant costs
in pursuit of our acquisition plans. For the year ended December 31, 2022 and
for the period from February 5, 2021 (inception) through December 31, 2021, we
had loss from operations of $1,251,553 and $533,130 respectively and net cash
used in operating activities was $568,909 and $1,259,092, respectively. We
anticipate that the cash held outside of the Trust Account as of December 31,
2022, will not be sufficient to allow the Company to operate until June 25,
2023, the date at which we must complete our initial business combination. While
we expect to have sufficient access to additional sources of capital under
Working Capital Loans (as defined in Note 5 of the financial statements provided
herewith), there is no current commitment on the part of any financing source to
provide additional capital and no assurances can be provided that such
additional capital will ultimately be available if necessary. Further, if our
initial business combination is not consummated by June 25, 2023, there will be
a mandatory liquidation and subsequent dissolution of the Company. These
conditions raise substantial doubt about our ability to continue as a going
concern for a period of time within one year after the date that the
accompanying financial statements are issued.
We plan to address this uncertainty through our initial business combination.
There is no assurance that our plans to consummate our initial business
combination will be successful or successful by June 25, 2023. The accompanying
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Contractual Obligations
Registration Rights
The holders of the Class B ordinary shares, Private Placement Warrants and
warrants that may be issued upon conversion of Working Capital Loans (as defined
in Note 5 of the financial statements provided herewith) (and any Class A
ordinary shares issuable upon the exercise of the Private Placement Warrants)
will have registration rights to require the Company to register a sale of any
of its securities held by them pursuant to a registration rights agreement. The
holders of these securities are entitled to make up to three demands, excluding
short form demands, that the Company register such securities. In addition, the
holders have certain "piggy-back" registration rights with respect to
registration statements filed subsequent to the completion of a business
combination. The Company will bear the expenses incurred in connection with the
filing of any such registration statements.
Underwriting Agreement
The Company granted the underwriter a 45-day option to purchase up to 2,250,000
additional Units to cover over-allotments at the initial public offering price,
less the underwriting discounts and commissions, which the underwriter did not
exercise and expired on August 6, 2021.
The underwriter was paid a cash underwriting fee of $0.20 per Unit, or
$3,000,000 in the aggregate. In addition, $0.375 per Unit, or $5,625,000 in the
aggregate will be payable to the underwriter for deferred underwriting
commissions. The deferred fee will become payable to the underwriter from the
amounts held in the Trust Account solely in the event that the Company completes
a business combination, subject to the terms of the underwriting agreement.
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Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies:
Warrant Liabilities
We account for warrants as either equity-classified or liability-classified
instruments based on an assessment of the warrant's specific terms and
applicable authoritative guidance in ASC 480, Distinguishing Liabilities from
Equity ("ASC 480") and ASC 815, Derivatives and Hedging ("ASC 815"). The
assessment considers whether the warrants are freestanding financial instruments
pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and
whether the warrants meet all of the requirements for equity classification
under ASC 815, including whether the warrants are indexed to our ordinary
shares, among other conditions for equity classification. This assessment, which
requires the use of professional judgment, is conducted at the time of warrant
issuance and as of each subsequent quarterly period end date while the warrants
are outstanding.
For issued or modified warrants that meet all of the criteria for equity
classification, the warrants are required to be recorded as a component of
additional paid-in capital at the time of issuance. For issued or modified
warrants that do not meet all the criteria for equity classification, the
warrants are required to be recorded at their initial fair value on the date of
issuance, and at each balance sheet date thereafter. Changes in the estimated
fair value of the warrants are recognized as a non-cash gain or loss on the
statements of operations. The initial estimated fair value of the Public
Warrants was measured using a Monte Carlo simulation approach. The initial and
subsequent fair value estimates of the Private Placement Warrants is measured
using a Modified Black-Scholes option pricing model (see Note 9).
Class A Ordinary Shares Subject to Possible Redemption
All of the 15,000,000 shares of Class A ordinary shares sold as part of the
Units in the Initial Public Offering 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 second amended and restated certificate of incorporation. 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 has 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
We comply with accounting and disclosure requirements of ASC 260, Earnings Per
Share. Net income per ordinary share is computed by dividing net income by the
weighted average number of ordinary shares outstanding during the period.
Remeasurement associated with the redeemable Class A ordinary shares is excluded
from net income per share as the redemption value approximates fair value.
Therefore, the net income per share calculation allocates income shared pro rata
between Class A and Class B ordinary shares. As a result, the calculated net
income per ordinary share is the same for Class A and Class B ordinary shares.
We have not considered the effect of the Public Warrants and Private Placement
Warrants to purchase an aggregate of 8,225,000 shares in the calculation of
diluted net income per share, since the exercise of the warrants are contingent
upon the occurrence of future events. As a result, diluted income per share is
the same as basic income per share for the periods presented.
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Recent Accounting Standards
In August 2020, the Financial Accounting Standards Board issued Accounting
Standards Update ("ASU") 2020-06, Debt - Debt with Conversion and Other Options
(Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity
(Subtopic 815-40) ("ASU 2020-06") to simplify accounting for certain financial
instruments. ASU 2020-06 eliminates the current models that require separation
of beneficial conversion and cash conversion features from convertible
instruments and simplifies the derivative scope exception guidance pertaining to
equity classification of contracts in an entity's own equity. The new standard
also introduces additional disclosures for convertible debt and freestanding
instruments that are indexed to and settled in an entity's own equity. ASU
2020-06 amends the diluted earnings per share guidance, including the
requirement to use the if-converted method for all convertible instruments. ASU
2020-06 is effective January 1, 2024 and should be applied on a full or modified
retrospective basis, with early adoption permitted beginning on January 1, 2021.
The Company adopted ASU 2020-06 effective February 5, 2021 (inception) using the
modified retrospective method of transition. The adoption of ASU 2020-06 did not
have a material impact on the accompanying financial statements.
Management does not believe that any other recently issued, but not yet
effective, accounting standards, if currently adopted, would have a material
effect on our financial statements.
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