References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to Coliseum Acquisition Corp. References to our "management" or
our "management team" refer to our officers and directors, and references to the
"Sponsor" refer to Coliseum Acquisition Sponsor 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.
Special Note Regarding Forward-Looking Statements
This Quarterly 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 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
"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 the Risk
Factors section of the Company's Annual Report on Form 10-K for the year ended
December 31, 2021 (the "Annual Report"), filed with the U.S. Securities and
Exchange Commission (the "SEC") on April 18, 2022. 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 Quarterly 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.
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 June 30, 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 interest 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 three months ended June 30, 2022, we had net income of $1,976,966, which
resulted from a gain on the change in fair value of warrant liabilities of
$2,056,250 and unrealized gain on investments held in the trust account (the
"Trust Account") in the amount of $204,399, partially offset by operating and
formation costs of $283,683.
For the three months ended June 30, 2021, we had net income of $410,876, which
resulted from a gain on the change in fair value of warrant liabilities of
$854,750 and unrealized gain on investments held in the Trust Account in the
amount of $14, partially offset by expensed offering costs of $407,040 and
operating and formation costs of $36,848.
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For the six months ended June 30, 2022, we had net income of $5,683,707, which
resulted from a gain on the change in fair value of warrant liabilities of
$6,036,500 and unrealized gain on investments held in the Trust Account in the
amount of $247,367, partially offset by operating and formation costs of
$600,160.
For the period from February 5, 2021 (inception) through June 30, 2021, we had
net income of $387,898, which resulted from a gain on the change in fair value
of warrant liabilities of $854,750 and unrealized gain on investments held in
the Trust Account in the amount of $14, partially offset by expensed offering
costs of $407,040 and operating and formation costs of $59,826.
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 six months ended June 30, 2022, net cash used in operating activities
was $322,935, which was due to non-cash adjustments to net income related to the
change in fair value of warrant liabilities of $6,036,500 and unrealized gain on
investments held in the Trust Account of $247,367, partially offset by net
income of $5,683,707 and changes in operating assets and liabilities of
$277,225.
For the period from February 5, 2021 (inception) through June 30, 2021, net cash
used in operating activities was $1,060,826, which was due to changes in working
capital of $1,001,000, changes in the fair value of warrant liabilities of
$854,750, and unrealized gain on investments held in the Trust Account of $14,
partially offset by expensed offering costs of $407,040 and net income of
$387,898.
There were no cash flows from investing activities for the six months ended June
30, 2022.
For the period from February 5, 2021 (inception) through June 30, 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 six months ended June
30, 2022.
Net cash provided by financing activities for the period from February 5, 2021
(inception) through June 30, 2021 of $152,070,885 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, offset by the payment of $516,615 for 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 June 30, 2022, we had $479,010 in cash held outside of the Trust Account
and working capital surplus of $927,747. We have incurred and expect to continue
to incur significant costs in pursuit of our acquisition plans. We anticipate
that the cash held outside of the Trust Account as of June 30, 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 condensed 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 condensed 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
condensed financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
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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 condensed 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.
Critical Accounting Policies
The preparation of condensed 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 the Private Placement Warrants and the redeemable warrants the
("Public Warrants") that were included in units issued by the Company in its
initial public offering (collectively, the "Warrants") in accordance with
Accounting Standards Codification ("ASC") Topic 815-40, Derivatives and
Hedging-Contracts in Entity's Own Equity ("ASC 815"), under which the Warrants
do not meet the criteria for equity classification and must be recorded as
liabilities. As the Warrants meet the definition of a derivative as contemplated
in ASC 815, the Warrants are measured at fair value at inception and at each
reporting date in accordance with ASC 820, Fair Value Measurement, with changes
in fair value recognized in the statement of operations in the period of change.
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 (the "Public Shares") 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 our 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, Distinguishing Liabilities from Equity ("ASC
480"), 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.
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Net Income Per Ordinary Share
Net income per ordinary share is computed by dividing net earnings by the
weighted average number of ordinary shares outstanding during the period. 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. The Company
has not considered the effect of the Warrants sold in the initial public
offering and private placement to purchase an aggregate of 8,225,000 shares in
the calculation of diluted earnings per share, since the exercise of the
Warrants are contingent upon the occurrence of future events and the inclusion
of such Warrants would be anti-dilutive.
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 unaudited condensed 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 condensed financial statements.
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