UNITED STATES
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FORM
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RAIN ENHANCEMENT TECHNOLOGIES HOLDCO, INC.
Table of Contents
i
PART I. FINANCIAL INFORMATION
Item 1. Unaudited Condensed Consolidated Financial Statements
RAIN ENHANCEMENT TECHNOLOGIES HOLDCO, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| March 31, 2025 | December 31, 2024 | |||||||
| (unaudited) | ||||||||
| Assets: | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Deferred financing costs | ||||||||
| Subscription receivable | ||||||||
| Total current assets | ||||||||
| Equipment | ||||||||
| Construction in-process equipment | ||||||||
| Intangible assets, net | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders' Deficit: | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Line of credit - related party | ||||||||
| Note payable from related parties | ||||||||
| Accrued interest - related parties | ||||||||
| Shortfall payment liability | ||||||||
| Total current liabilities | ||||||||
| Derivative warrant liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Stockholders' Deficit: | ||||||||
| Preferred stock, $ | ||||||||
| Class A common stock, $ | ||||||||
| Class B common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders' deficit | ( | ) | ( | ) | ||||
| Total Liabilities and Stockholders' Deficit | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
1
RAIN ENHANCEMENT TECHNOLOGIES HOLDCO, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| For the three months ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| General and administrative expenses | $ | $ | ||||||
| Amortization expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expenses): | ||||||||
| Change in fair value of derivative warrant liabilities | ( | ) | ||||||
| Interest expense on notes payable to related parties | ( | ) | ( | ) | ||||
| Interest income earned from operating cash | ||||||||
| Total other expenses | ( | ) | ( | ) | ||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Weighted average Class A common stock outstanding, basic and diluted | ||||||||
| Basic and diluted net loss per Class A common stock | $ | ( | ) | $ | ( | ) | ||
| Weighted average Class B common stock outstanding, basic and diluted | ||||||||
| Basic and diluted net loss per Class B common stock | $ | ( | ) | $ | ||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
2
RAIN ENHANCEMENT TECHNOLOGIES HOLDCO, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
| For the three months ended March 31, 2025 | ||||||||||||||||||||||||||||
| Class A Common Stock | Class B Common Stock | Additional Paid-In | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance - December 31, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance - March 31, 2025 (unaudited) | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| For the three months ended March 31, 2024 | ||||||||||||||||||||||||||||||||||||
| Legacy RET | Class A | Additional | Total | |||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Common Stock | Paid-In | Accumulated | Stockholders’ | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||||||||
| Balance - December 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Retroactive application of Business Combination (Note 1) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Balance - December 31, 2023, recasted | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Conversion of Series A preferred stock into common stock | ||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance - March 31, 2024 (unaudited) | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
3
RAIN ENHANCEMENT TECHNOLOGIES HOLDCO, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the three months ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | ||||||||
| Amortization expenses | ||||||||
| General and administrative expenses advanced by related parties | ||||||||
| Change in fair value of warrant liability | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses | ( | ) | ( | ) | ||||
| Accounts payable | ( | ) | ||||||
| Accrued expenses | ( | ) | ||||||
| Accrued interest - related parties | ||||||||
| Tax payable | ( | ) | ||||||
| Net cash (used in) provided by operating activities | ( | ) | ||||||
| Cash Flows from Investing Activities: | ||||||||
| Capital expenditures for equipment | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from draw down under line of credit | ||||||||
| Receipt of subscription receivable | ||||||||
| Net cash provided by financing activities | ||||||||
| Net change in cash | ( | ) | ||||||
| Cash - beginning of the year | ||||||||
| Cash - end of the year | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
4
RAIN ENHANCEMENT TECHNOLOGIES HOLDCO, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025
Note 1 — Description of Organization and Business Operations
Description of Business
Rain Enhancement Technologies Holdco, Inc. (the “Company” or “Holdco”) was formed in Massachusetts to combine unique expertise, personnel, and weather data to develop, improve and commercialize ionization rainfall generation technology. The Company plans to develop improvements on existing rainfall generation technologies by introducing robust measurement tools, including software monitoring technology, machine learning, rain gauges, and weather stations.
Business Combination Agreement
On December 31, 2024 (the “Closing Date”), Holdco, Coliseum Acquisition Corp, a Cayman Islands exempted company (“Coliseum”), Rain Enhancement Technologies, Inc., a Massachusetts corporation (“RWT”), Rainwater Merger Sub 1, Inc., a Cayman Islands exempted company and wholly-owned subsidiary of Holdco (“Merger Sub 1”), and Rainwater Merger Sub 2A, Inc., a Massachusetts corporation and wholly-owned subsidiary of Coliseum (“Merger Sub 2”) consummated the previously announced business combination (the “Business Combination”) pursuant to the terms of the Business Combination Agreement, dated as of June 25, 2024 (as amended on August 22, 2024, the “Business Combination Agreement”).
Pursuant to the Business Combination Agreement, on the Closing Date, (i) Coliseum merged with and into Merger Sub 1, with Merger Sub 1 as the surviving company of such merger (the “SPAC Merger”) and (ii) following the SPAC Merger and as a part of the same overall transaction, Merger Sub 2 merged with and into RWT, with RWT as the surviving entity of such merger (the “Company Merger” and, together with the SPAC Merger, the “Mergers”), and, after giving effect to such Mergers, each of Merger Sub 1 and RWT became a wholly owned subsidiary of Holdco (the time that the SPAC Merger became effective being referred to as the “SPAC Merger Effective Time,” the time that the Company Merger became effective being referred to as the “Company Merger Effective Time,” and the time after which both Mergers became effective being referred to as the “Closing”). Following the Closing, Holdco holds all of the equity interests of RWT and Merger Sub 1.
The Business Combination was treated as a reverse recapitalization in accordance with U.S. GAAP. Under this method of accounting, Coliseum was treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of RWT issuing stock for the net assets of Coliseum, accompanied by a recapitalization. The net assets of Coliseum were stated at historical cost, with no goodwill or other intangible assets recorded.
The Company’s common stock and warrants commenced trading on the Nasdaq Stock Market LLC under the symbols “RAIN” and “RAINW”, respectively, on January 2, 2025. Refer to Note 3, Business Combination, for additional details.
Recent Developments
Nasdaq Compliance Notices
On February 18, 2025, the Company received written
notice (the “MVLS Notice”) from Nasdaq which notified the Company that, for the
In accordance with Nasdaq Listing Rule 5810(c)(3)(C),
the Company has 180 calendar days, or until August 18, 2025 (the “MVLS Compliance Period”), to regain compliance with the
MVLS Rule. The MVLS Notice notes that, to regain compliance, the Company’s MVLS must close at or above $
5
RAIN ENHANCEMENT TECHNOLOGIES HOLDCO, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025
Also on February 18, 2025, the Company received
written notice (the “MVPHS Notice”) from Nasdaq that for the
In accordance with Nasdaq Listing Rule 5810(c)(3)(D),
the Company has 180 calendar days, or until August 18, 2025 (the “MVLS Compliance Period”), to regain compliance with the
MVPHS Rule. The MVPHS Notice notes that, to regain compliance, the Company’s MVPHS must close at or above $
The MVLS Notice and MVPHS Notice are notifications of deficiency, not of imminent delisting, and have no immediate effect on the listing of the Company’s securities. The Class A Common Stock and Warrants continue to trade on Nasdaq under the symbols “RAIN” and “RAINW”, respectively.
The Company intends to actively monitor the MVLS and MVPHS between now and August 18, 2025, and may, if appropriate, evaluate available options to resolve the deficiencies and regain compliance with the MVLS Rule and MVPHS Rule. While the Company is exercising diligent efforts to maintain the listing of its securities on Nasdaq, there can be no assurance that it will be able to regain or maintain compliance with Nasdaq listing standards.
Departure of Co-Chief Executive Officer
On January 29, 2025, Holdco, RWT and Christopher
Riley entered into a letter agreement whereby Mr. Riley resigned as Co-Chief Executive Officer of the Company and RWT effective as of
January 30, 2025 (the “Termination Letter”). Pursuant to the Termination Letter, in lieu of all other compensation and payments
of any kind due and payable to Mr. Riley, Mr. Riley will be paid for services rendered in an amount of $
Mr. Riley’s decision to resign as Chief Executive Officer was not the result of any disagreement with the Company or the Board, including any matters relating to the Company’s operations, polices, accounting practices or financial reporting. Mr. Riley will remain as a member of the Board.
As previously announced, the Company appointed Randall Seidl to serve as Co-Chief Executive Officer effective as of January 2, 2025. Following the resignation of Mr. Riley, Mr. Seidl is the Company’s sole Chief Executive Officer.
Liquidity
As of March 31, 2025, the Company had approximately
$
In connection with the Business Combination, on
December 30, 2024, RHY Management LLC (“RHY”), an affiliate of Harry You, the Company’s Chairman, entered into a loan
agreement with Holdco (the “Loan Agreement”) pursuant to which RHY agreed to issue a line of credit (the “LOC”)
to Holdco for up to $
6
RAIN ENHANCEMENT TECHNOLOGIES HOLDCO, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025
The Company’s management expects that its funds will be used for producing units, integrating and rolling out software for the rain enhancement platform, expanding water services through the ‘land and expand’ client acquisition model, and potentially acquiring other weather technologies. Since the base technology and products are developed and proven, the need for additional capital will primarily be driven by growth in customer acquisition and projects. Management believes that the budget can be scaled in line with the funds actually received, enabling the Company to expand its client base, deliver equipment and technology to newly acquired clients, and develop new products for the rain platform.
The Company expects to fund its future development and exploration activities using the available funding under the LOC and future operating cash flow. The timing of most capital expenditures is largely discretionary. The Company has a significant degree of flexibility to adjust the level of its capital expenditures as circumstances warrant. If the Company’s plans or assumptions change, it may seek additional funding through debt or other equity financing arrangements, implement incremental expense reduction measures or a combination thereof to continue financing its operations. Although the management continues to pursue these plans, there is no assurance that the Company will be successful in obtaining sufficient funding on terms acceptable to the Company to fund continuing operations, if at all.
In connection with the Company’s assessment of going concern considerations in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Classification (“ASC”) Subtopic 205-40, “Presentation of Financial Statements - Going Concern,” management has determined that although the Company does not have sufficient liquidity to meet its anticipated obligations over the next year from the date of issuance of these unaudited condensed consolidated financial statements, it has access to funds under the LOC. Additionally, an existing shareholder, Mr. You, has pledged financial support as necessary and has the financial ability to provide such funds, that are sufficient to fund the working capital needs of the Company over the next twelve months from the date of issuance of these unaudited condensed consolidated financial statements.
Risks and Uncertainties
Various macroeconomic, geopolitical and regulatory uncertainties and challenges pose risks to economic conditions in the U.S. and globally, including, among others, any resurgence in inflation; changes to trade and tariff, immigration, energy and other policies resulting from the new U.S. administration; changes in interest rate policies; the Russia-Ukraine war; conflicts in the Middle East; and economic conditions and tensions involving China.
Any of the above mentioned factors, or any other negative impact on the global economy, capital markets or other geopolitical conditions resulting from the Russian invasion of Ukraine, the escalation of the Israel-Hamas conflict and subsequent sanctions or related actions, could adversely affect the Company’s business, financial and operating results.
Note 2 — Summary of Significant Accounting Policies
Basis of Consolidation and Presentation
The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries: Rainwater Acquisition Corp (f.k.a Merger Sub 1) and RWT. All significant intercompany accounts and transactions have been eliminated.
7
RAIN ENHANCEMENT TECHNOLOGIES HOLDCO, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025
The unaudited condensed consolidated financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) for interim financial information. Certain disclosures normally included in financial statements have been condensed or omitted from these unaudited condensed consolidated financial statements as they are not required for interim financial statements under GAAP and the rules of the SEC. Accordingly, these unaudited condensed consolidated financial statements do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. In the opinion of management, all adjustments (consisting of normal accruals) considered for a fair presentation of the financial position, operating results and cash flows for the periods presented have been included. Operating results for the three months ended March 31, 2025 are not necessarily indicative of the results that may be expected for the year ending December 31, 2025 or any future period.
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report Form 10-K as of December 31, 2024, as filed with the SEC on April 16, 2025, which contains the Company’s audited consolidated financial statements and notes thereto.
Use of Estimates
The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets, liabilities and expenses and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities at the date of purchase of three months or less to be cash equivalents. Cash and cash equivalents are stated at fair value and may include money market funds, U.S. Treasury and U.S. government-sponsored agency securities, corporate debt, commercial paper, and certificates of deposit. The Company had cash equivalents as of March 31, 2025 and December 31, 2024.
Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under the FASB ASC Topic 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the accompanying consolidated balance sheets, either because of the short-term nature of the instruments or because the instrument is recognized at fair value.
Fair Value Measurements
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
| ● | Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; | |
| ● | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and | |
| ● | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
8
RAIN ENHANCEMENT TECHNOLOGIES HOLDCO, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025
Derivative Financial Instruments
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to FASB ASC Topic 480 “Distinguishing Liabilities from Equity” (“ASC 480”) and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). 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 assessment considers whether the financial instruments are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the financial instruments meet all of the requirements for equity classification under ASC 815, including whether the financial instruments are indexed to the Company’s own ordinary shares, among other conditions for equity classification.
Foreign Currency Translation and Transactions
The U.S. dollar is the Company’s functional currency. Transactions denominated in currency other than the Company’s functional currency are recorded upon initial recognition at the exchange rate on the date of the transaction. After initial recognition, monetary assets and liabilities denominated in foreign currency are remeasured at each reporting date into the foreign currency at the exchange rate on that date. Exchange rate differences, other than those accounted for as hedging transactions, are recognized as foreign currency transaction gain or loss included in the Company’s statements of operations within the general and administrative expenses.
During the three months ended March 31, 2025 and 2024, the only foreign currency transaction the Company incurred was the amount paid to its senior technology advisor in Australian Dollars. The amount of these foreign currency payments was translated into U.S. dollars.
Equipment and Construction In-Process Equipment
The Company capitalizes its cost to build its
rainfall ionization equipment (the “Equipment”), including materials and allocated labor costs. Upon the completion of building
the Equipment, the Company transferred its capitalized cost from Construction in-process to Equipment. In July 2024, the Company completed
its building process for its two initial units and transferred those into Equipment. As soon as the Equipment is placed in service upon
agreement with the customers, the Company will begin to depreciate those assets on a straight-line basis over the estimated useful lives
of the assets, generally
Equipment as of March 31, 2025 and December 31, 2024 was comprised of the following:
| March 31, 2025 | December 31, 2024 | |||||||
| Equipment: | ||||||||
| Rainfall ionization equipment and systems, in-process | $ | $ | - | |||||
| Rainfall ionization equipment and systems, completed | | |||||||
| Total | $ | $ | ||||||
Intangible Assets
Recognized intangible assets have finite lives and include acquired licenses for market-ready technology and designs of weather modification and rainfall ionization equipment. Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and accumulated impairment losses.
Intangible assets with finite lives are amortized using the straight-line method over the estimated useful economic life. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortization period or method, as appropriate, and are treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in the statements of operations and in the expense category that is consistent with the function of the intangible assets.
9
RAIN ENHANCEMENT TECHNOLOGIES HOLDCO, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025
Intangible assets with finite lives are tested for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable. These conditions may include a change in the extent or manner in which the asset is being used or a change in future operations. The Company assesses the recoverability of the carrying amount by preparing estimates of future revenue, margins, and cash flows. If the sum of expected future cash flows (undiscounted and without interest charges) is less than the carrying amount, an impairment loss is recognized. The impairment loss recognized is the amount by which the carrying amount exceeds the fair value of the asset. Fair value of these assets may be determined by a variety of methodologies, including discounted cash flow models. As of March 31, 2025 and December 31, 2024, the Company did not have any intangible assets with indefinite useful lives.
Stock Compensation
The Company’s policy is to account for stock-based compensation expense in accordance with FASB ASC Topic 718, “Compensation-Stock Compensation” (“ASC 718”). Under ASC 718, stock-based compensation associated with equity awards is measured at fair value upon the grant date and recognized over the requisite service period. To the extent a stock-based award is subject to performance conditions, the amount of expense recorded in a given period, if any, reflects an assessment of the probability of achieving such performance condition, with compensation recognized once the event is deemed probable to occur. Forfeitures are recognized as incurred.
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under FASB ASC 740, “Income Taxes” (“ASC 740”). Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the unaudited condensed consolidated financial statements carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established,
when necessary, to reduce deferred tax assets to the amount expected to be realized. As of March 31, 2025 and December 31, 2024, the
Company had approximately $
ASC 740 prescribes a recognition threshold and a measurement attribute for the unaudited condensed consolidated financial statements recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. There were unrecognized tax benefits as of March 31, 2025 and December 31, 2024. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. amounts were accrued for the payment of interest and penalties as of March 31, 2025 and December 31, 2024. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major tax authorities since inception.
Net Loss Per Common Share
Basic net loss per share of common stock is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the periods. Diluted net loss per share is computed by giving effect to all potential shares of common stock, including warrants, and stock options, to the extent dilutive. Stock options and warrants with exercise prices greater than the average market price of the Company’s common stock for the period are excluded from the calculation of diluted net income (loss) per share as their inclusion would be anti-dilutive. For the three months ended March 31, 2025 and 2024, due to a net loss, all potential shares of common stock were not included in the calculation of dilutive net loss per share as their effect would have been anti-dilutive. As a result, diluted net loss per share is the same as basic net loss per share for the periods presented.
10
RAIN ENHANCEMENT TECHNOLOGIES HOLDCO, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025
The net loss per share presented in the unaudited condensed consolidated statements of operations is based on the following for the three months ended March 31, 2025 and 2024:
| For the three months ended March 31, | ||||||||||||||||
| 2025 | 2024 | |||||||||||||||
| Class A common stock | Class B common stock | Class A common stock | Class B common stock | |||||||||||||
| Basic and diluted net loss per common share: | ||||||||||||||||
| Numerator: | ||||||||||||||||
| Allocation of net loss | $ | ) | $ | ( | ) | $ | ( | ) | $ | |||||||
| Denominator: | ||||||||||||||||
| Basic and diluted weighted average share outstanding | ||||||||||||||||
| Basic and diluted net loss per common share | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||
Recent Accounting Pronouncements
In December 2023, the FASB issued ASU No. 2023-09 (Topic 740), Improvements to Income Tax Disclosures. The ASU requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as an expansion of other income tax disclosures. The ASU is effective on a prospective basis for annual reporting periods beginning after December 15, 2024. The Company is currently evaluating the impact this ASU will have on its consolidated financial statements and related disclosures.
Issued in November 2024, ASU 2024-03, Disaggregation of income Statement Expenses (Subtopic 220-40), requires the disaggregated disclosure of specific expense categories, including purchases of inventory, employee compensation, depreciation, and amortization, within relevant income statement captions. This ASU also requires disclosure of the total amount of selling expenses along with the definition of selling expenses. The ASU is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Adoption of this ASU can either be applied prospectively to consolidated financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the consolidated financial statements. While early adoption is permitted, the Company does not plan to adopt this standard early. This ASU will likely result in additional disclosures being included in the Company’s consolidated financial statements once adopted. The Company is currently evaluating the provisions of this ASU will have on its consolidated financial statements.
Note 3 — Business Combination
Business Combination
On December 31, 2024, the Company consummated its Business Combination pursuant to the terms of the Business Combination Agreement. The Business Combination was structured as follows:
| a) | Prior to Closing, the sole outstanding Class B ordinary share of Coliseum, par value $ |
| b) | Prior to Closing, pursuant to (x) non-redemption agreements entered into by Coliseum in connection with its November 2023 amendment to extend the time it had to complete an initial business combination among Coliseum, Harry You, and certain of Coliseum’s existing shareholders and (y) a support agreement entered into by Coliseum, Coliseum Acquisition Sponsor, LLC, and Harry You, Coliseum Acquisition Sponsor, LLC and Harry You forfeited and surrendered for no consideration an aggregate of |
11
RAIN ENHANCEMENT TECHNOLOGIES HOLDCO, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025
| c) | On the Closing Date, each Coliseum Class A Ordinary Share issued and outstanding immediately prior to Closing (excluding redeemed public shares) was automatically converted into the right to receive |
| d) | On the Closing Date, each private placement warrant of Coliseum (the “Coliseum Private Placement Warrants”) was exchanged for |
| e) | On the Closing Date, (i) each outstanding share of RWT’s preferred stock, par value $ |
| f) | At Closing, each of the |
PIPE Subscriptions
In connection with the Business Combination, in
December 2024, Holdco entered into subscription agreements (collectively, the “PIPE Subscription Agreements”) with certain
investors and related parties to sell an aggregate of
Forward Purchase Agreement with Meteora
On December 30, 2024, Holdco entered into a forward
purchase agreement (the “Forward Purchase Agreement”) with Meteora Capital Partners, LP and affiliated funds (“Meteora”)
for an OTC equity prepaid forward transaction. An aggregate of
The Company’s management determined that
the prepaid Forward Purchase Agreement is a hybrid instrument with an embedded derivative (forward purchase contract), which meets the
definition of a derivative and does not meet the criteria for the derivative accounting scope exception in ASC 815. As such, the embedded
derivative is recognized initially and subsequently at fair value, with changes in fair value reported in earnings in accordance with
ASC 815. Because the bifurcated embedded derivative is a forward contract, it must have an initial fair value of
12
RAIN ENHANCEMENT TECHNOLOGIES HOLDCO, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025
Until the earlier of 1) the Maturity Date, and
2) the date that gross proceeds from the sale of the shares by Meteora equal
Upon receipt of consideration related to the sale of any shares sold by Meteora, the Company will record the receipt of funds as an increase to cash and a decrease to the “Prepayment Shortfall liability” until the “Prepayment Shortfall Liability” is zero, and then any remaining proceeds received will reduce the receivable previously recorded as contra-equity.
The Company incurred no transaction costs that were directly related to the issuance of the Forward Purchase Agreement.
As of December 31, 2024, the Company recorded
the $
Public and Private Placement Warrants
Prior to Closing, Coliseum had
Redemption
Prior to the Closing, certain Coliseum public
shareholders exercised their right to redeem certain of their outstanding shares for cash, resulting in the redemption of
Transaction Proceeds
For a reconciliation of the net proceeds from the Business Combination to the related changes in cash flows and stockholders’ deficit as of the closing date, please refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.
The number of shares of Common Stock issued immediately following the consummation of the Business Combination were:
| Class A Common Stock | Class B Common Stock | |||||||
| Coliseum Public Shares, outstanding prior to the Business Combination | ||||||||
| Less: Redemption of Coliseum Class A common stock | ( | ) | ||||||
| Public shares of Coliseum, including | ||||||||
| Coliseum Founder Shares, outstanding prior the Business Combination | ||||||||
| Coliseum Private Placement Warrants converted to Class A Common shares | ||||||||
| Business Combination shares | ||||||||
| RWT Shares | ||||||||
| Issuance of shares in connection with PIPE | ||||||||
| Class A common stock issued for services | ||||||||
| Common Stock immediately after the Business Combination | ||||||||
13
RAIN ENHANCEMENT TECHNOLOGIES HOLDCO, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025
The number of RWT shares was determined as follows:
| Legacy RWT Shares | RWT Shares after conversion ratio | |||||||
| Preferred Stock | ||||||||
| Class A Common Stock | ||||||||
| Class B Common Stock | ||||||||
| Total | ||||||||
Note 4 — Intangible Assets
Patent License
On November 21, 2022, the Company entered
into a license agreement with Dr. Theodore Anderson, a plasma physicist, whereby the Company was granted an exclusive, worldwide
license under certain of Dr. Anderson’s patents. The consideration paid for the license of $
Consulting Agreement for Rainfall Ionization Equipment
In November 2022, the Company entered into
a consulting agreement, which was later amended on December 8, 2022, to engage its senior technology advisor (“Technical Advisor”).
The Company agreed to pay the Technical Advisor a one-time fee upon execution of the agreement (“First-time fee”) and a consulting
fee of AUD
In connection with the consulting agreement,
the Company also obtained from the Technical Advisor an irrevocable, perpetual, non-exclusive license under certain engineering designs
in connection with rainfall ionization equipment and systems. The Company fully paid the license amount of $
Intangible Assets
Intangible assets as of March 31, 2025 and December 31, 2024 are composed of licenses under certain patents and designs for weather modification and rainfall ionization equipment to Dr. Anderson and the Technical Advisor as discussed above.
Management anticipates that equipment utilizing certain of these patents and designs will become operational and placed in service within 2025. The Company amortizes those assets on a straight-line basis over the estimated useful lives of the assets under full-month convention. The Company plans to continually adapt to incorporate new technologies and to expand into markets that may be created by new technologies for rainfall generation. As a result, the Company anticipates that the licensed patents and designs will have a -year useful life before the Company transitions and adopts new technologies.
Intangible assets as of March 31, 2025 and December 31, 2024 were comprised of the following:
| Weighted Average | Carrying Value | |||||||||||
| Useful | March 31, | December 31, | ||||||||||
| Life (Years) | 2025 | 2024 | ||||||||||
| Intangible assets: | ||||||||||||
| Licensed technology for weather modification | $ | $ | ||||||||||
| Purchased intellectual property for rainfall ionization equipment | $ | |||||||||||
| Less: | ||||||||||||
| Accumulated amortization | ( | ) | ( | ) | ||||||||
| Total intangible assets, net | $ | $ | ||||||||||
14
RAIN ENHANCEMENT TECHNOLOGIES HOLDCO, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025
The Company incurred approximately $
Note 5 — Related Party Transactions
Note Payable and Line of Credit from Related Parties
On February 2, 2023, RWT issued a promissory
note (the “Note”) to its former CEO and Mr. You and Mr. de Masi for an aggregate amount of $
On December 30, 2024, Holdco entered into the
Loan Agreement with RHY, an affiliate of Harry You, pursuant to which RHY agreed to issue an LOC to Holdco for up to $
Prior to Closing, the outstanding amount that
Coliseum and RWT owed to Mr. You and his affiliates was: (i) approximately $
As of March 31, 2025, the Company had drawn approximately
$
Employment Agreement
On December 31, 2024, Holdco entered into a binding offer letter (the “Offer Letter”) with its new CEO, Mr. Seidl, effective
January 2, 2025, pursuant to which Holdco agreed to pay to the CEO (i) an annual salary of $
15
RAIN ENHANCEMENT TECHNOLOGIES HOLDCO, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025
Note 6 — Warrants
On the Closing Date, all of the outstanding
The remaining
The Warrants are derivative warrant liabilities in accordance with ASC 815. Accordingly, the Company recognizes the warrant instruments as liabilities at fair value and adjusts the instruments to fair value at each reporting period. The warrant liabilities are subject to re-measurement at each balance sheet date. With each such re-measurement, the warrant liabilities are adjusted to current fair value, with the change in fair value recognized in the Company’s statements of operations. The Company will reassess the classification at each balance sheet date. If the classification changes as a result of events during the period, the warrants will be reclassified as of the date of the event that causes the reclassification. Refer to Note 7 for additional information on the fair value measurements of these warrants.
Note 7 — Fair Value Measurements
Financial liabilities measured at fair value during the year on a recurring basis consisted of the following as of March 31, 2025 and December 31, 2024:
March 31, 2025
| Fair Value Hierarchy | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Financial liabilities: | ||||||||||||||||
| Warrant liability – Public Warrants | $ | $ | $ | $ | ||||||||||||
| Shortfall payment liability | ||||||||||||||||
| Total financial liabilities | $ | $ | $ | $ | ||||||||||||
December 31, 2024
| Fair Value Hierarchy | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Financial liabilities: | ||||||||||||||||
| Warrant liability – Public Warrants | $ | $ | $ | $ | ||||||||||||
| Shortfall payment liability | ||||||||||||||||
| Total financial liabilities | $ | $ | $ | $ | ||||||||||||
The Warrants are listed on Nasdaq Stock Market LLC under the ticker “RAINW”. As of March 31, 2025 and December 31, 2024, the fair value measurements for the Warrants were classified as Level 2 due to low trading volume.
During the three months ended March 31, 2025, there were no transfers between levels of the fair value hierarchy.
16
RAIN ENHANCEMENT TECHNOLOGIES HOLDCO, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025
Note 8 — Stockholders’ Deficit
According to the Company’s Amended and
Restated Articles of Organization (the “Holdco A&R Articles”), as of March 31, 2025, the Company is authorized to issue
Holdco Class A Common Stock entitles the holders
thereof to
The dual class structure will terminate on the
date that is
Holdco Preferred Stock
As of March 31, 2025 and December 31, 2024, there was preferred shares outstanding, as retroactively restated to reflect the Business Combination.
Holdco Class A Common Stock
In connection with the Business Combination,
Holdco converted an aggregate of (i)
Also, in connection with the Business Combination,
Holdco also converted an aggregate of
In connection with the Business Combination,
the Company issued an aggregate of
In addition, at Closing, the Company issued
As of March 31, 2025 and December 31, 2024, the
Company had an aggregate of
17
RAIN ENHANCEMENT TECHNOLOGIES HOLDCO, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025
Holdco Class B Common Stock
As of March 31, 2025 and December 31, 2024, the
Company had an aggregate of
Stock Options
On August 23, 2024, the Company granted
The Company fully recognized approximately $
Note 9 — Segment Information
ASC Topic 280, “Segment Reporting,” establishes standards for companies to report in their financial statement information about operating segments, products, services, geographic areas, and major customers. Operating segments are defined as components of an enterprise for which separate financial information is available that is regularly evaluated by the Company’s chief operating decision maker, or group, in deciding how to allocate resources and assess performance.
The Company operates and manages the business
as
When evaluating the Company’s performance and making key decisions regarding resource allocation the CODM reviews several key metrics, which include the following:
| For the three months ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| General and administrative expenses | $ | $ | ||||||
| Other significant non-cash items: | ||||||||
| Amortization expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Total other expenses | ( | ) | ( | ) | ||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
As the Company has not earned any revenue, the key measures of segment profit or loss reviewed by the Company’s CODM are general and administrative expenses to monitor, manage and forecast cash to ensure enough capital is available for working capital needs. The CODM also reviews general and administrative costs to manage, maintain and enforce all contractual agreements to ensure costs are aligned with all agreements and budget.
18
RAIN ENHANCEMENT TECHNOLOGIES HOLDCO, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025
Note 10 — Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date through May 15, 2025, the date at which the unaudited condensed consolidated financial statements were issued. Based upon this review, the Company did not identify any subsequent events that required adjustment or disclosure in the unaudited condensed consolidated financial statements, except as noted below.
Subsequent to March 31, 2025, the Company drew
an additional amount of approximately $
On April 1, 2025, the Board increased the size of the Board from five to seven directors and appointed Mr. Marcus Peperzak and Mr. Robert Reardon to the Board to fill the resulting vacancies.
In connection with their appointments to the
Board, Mr. Reardon and Mr. Peperzak each entered into the Director Agreements which are the form of agreement adopted by the Board in
April 2025 to govern the terms of service and compensation of the Company’s non-employee directors. Additionally, effective as
of April 4, 2025, the Company entered into Director Agreements with Lyman Dickerson, Alexandra Steele, and Christopher Riley, each non-employee
members of the Board. Pursuant to the terms of the Director Agreements, the Company agreed to pay to each board member (i) subject to
approval by the Board and compensation committee of the Board (the “Compensation Committee”), a cash payment of $
19
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto contained elsewhere in this quarterly report. References in this quarterly report on Form 10-Q (this “Report”) to the “Company,” “Holdco”, “us” or “we” refer to Rain Enhancement Technologies Holdco, Inc. on a consolidated basis. References to our “management” or our “management team” refer to our officers and directors.
Special Note Regarding Forward-Looking Statements
This Report includes “forward-looking statements” for purposes of the safe harbor provisions under the United States Private Securities Litigation Reform Act of 1995, including statements regarding, among other things, the plans, strategies and prospects, both business and financial, of the Company. 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 4. Risk Factors” in this Report, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024, and in our other Securities and Exchange Commission (“SEC”) filings. 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 were founded to provide the world with reliable access to water, one of life’s most important resources. To achieve this mission, we aim to develop, manufacture and commercialize ionization rainfall generation technology.
We are combining unique expertise and personnel to develop, improve and undertake efforts to commercialize ionization rainfall generation technology that enhances rainfall when conditions are appropriate in the atmosphere. We are building our core platform with software, meteorology, hardware, product design and operations to make rainfall generation more dependable. We aim to improve on existing rainfall generation technologies by introducing robust measurement tools, including automation technology, rain gauges, and weather stations, to more precisely quantify the positive water benefit it expects to deliver to millions globally.
We intend to develop, invent, improve, manufacture, commercialize and operate technologies that enhance rainfall and elevate water reserves. We believe that our future services will yield potable water that can be used for all purposes. The projected cost (not including land costs, which are still being determined) and energy requirements for our future technology are modest on a per gallon basis for communities and ecosystems, estimated to be $0.10 per cubic meter, less than other alternative technologies. We aim to enhance agricultural, industrial and household water supplies for all the communities in which we operate by developing technology and services to serve governmental and commercial clients’ needs in creating water resiliency and abundancy.
Our business model is based on a unique one-to-many community-centric business model. The numerous client segments to which we market includes large landowners including agriculture, resorts, energy and transportation companies, insurance and reinsurance companies, decarbonization initiatives of major corporations and philanthropists, supranational governmental organizations, and city, county, state, federal and non-U.S. governments. In addition, we aim to leverage our offerings and enhance our potential market position by exploring ways to expand our future water generation products through licensing and acting as a channel partner for additional water generation technologies.
20
Since the beginning of 2025 we have created new marketing and sales programs, identified and contacted potential customers in core market segments, expanded our contacts with rain enhancement experts who could endorse our technology and introduce us into existing projects looking to address lack of rainfall, and organized our production of systems to serve expected demand.
We have a limited operating history and have not yet generated any revenue, and our ability to generate revenue sufficient to achieve profitability will depend on our ability to successfully build and commercialize rainfall generation technology and successfully execute our sales strategy.
Business Combination
On the Closing Date, Coliseum, RWT, Holdco, Merger Sub 1, and Merger Sub 2 consummated the Business Combination pursuant to the terms of the Business Combination Agreement. Following the Closing, Holdco holds all of the equity interests of RWT and Merger Sub 1.
The Business Combination was treated as a reverse recapitalization in accordance with U.S. GAAP. Under this method of accounting, Coliseum was treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of RWT issuing stock for the net assets of Coliseum, accompanied by a recapitalization. The net assets of Coliseum were stated at historical cost, with no goodwill or other intangible assets recorded.
Our common stock and warrants commenced trading on the Nasdaq Stock Market LLC under the symbols “RAIN” and “RAINW”, respectively, on January 2, 2025.
PIPE Subscriptions
In connection with the Closing, Holdco entered into the PIPE Subscription Agreements with the PIPE Investors and related parties to sell an aggregate of 118,557 shares of Holdco Class A Common Stock at $11.39 per share, for a total of $1.35 million. Of this, Holdco received $700,000 of the PIPE Investment and recorded a subscription receivable of $650,000 on the consolidated balance sheet as of December 31, 2024. Such receivable was fully paid on February 6, 2025.
Forward Purchase Agreement with Meteora
On December 30, 2024, Holdco entered into a forward purchase agreement (the “Forward Purchase Agreement”) with Meteora Capital Partners, LP and affiliated funds (“Meteora”) for an OTC equity prepaid forward transaction. An aggregate of 361,858 shares of Holdco Class A Common Stock (the “Forward Purchase Shares”) are subject to the Forward Purchase Agreement, for which Meteora was paid approximately $4.1 million at Closing (the “Prepayment”) and we retained approximately $20,000 (the “Prepayment Shortfall”). The Forward Purchase Agreement matures on the date of the effectiveness of a certain registration statement filed by Holdco with the Securities and Exchange Commission following the Closing Date (the “Maturity Date”). Meteora may sell the Forward Purchase shares at any time following the Closing Date until the Maturity Date at a price not less than $10.00 per share. If Meteora sells any of the Forward Purchase Shares, Meteora will pay to Holdco $10.00 for each share sold, less the Prepayment Shortfall. On Maturity Date, any Forward Purchase Shares that have not been sold by Meteora will be returned to us for no consideration, provided that if the proceeds of the shares sold by Meteora prior to the Maturity Date is less than the Prepayment Shortfall, then we will pay cash to Meteora in an amount equal to such difference.
Loan Agreement with an Affiliate of Harry You
On December 30, 2024, Holdco entered into the Loan Agreement with RHY, an affiliate of Harry You, our Chairman, pursuant to which RHY committed to provide Holdco with up to $7 million in new loans. Prior to each drawdown, pursuant to the Loan Agreement, Holdco must certify to RHY, among other things, that it has used its best efforts to raise equity, equity-linked, or debt financing on terms available in the market to a similarly-situated company in similar circumstances, and is unable to obtain alternate financing in the amount of such drawdown. Once amounts are borrowed, they may not be re-borrowed. Additionally, Mr. You agreed to roll over an aggregate of approximately $3.1 million of loans and advances owed to him or to his affiliates by Coliseum and RWT into the Loan Agreement and such amounts were treated for all purposes as loans outstanding pursuant to the Loan Agreement (which, for the avoidance of doubt, does not decrease the $7 million commitment). The Loan has an interest rate of 5%, and interest will be due and payable quarterly in arrears. As of March 31, 2025, we had drawn around $737,000 from the LOC, bringing the total outstanding balance under the Loan Agreement to approximately $3.8 million (including the Rollover). Subsequent to March 31, 2025, we drew an additional amount of approximately $554,000 under the LOC.
21
Recent Developments
Appointment of Directors
On April 1, 2025, the Board increased the size of the Board from five to seven directors and appointed Mr. Marcus Peperzak and Mr. Robert Reardon to the Board to fill the resulting vacancies.
In connection with their appointments to the Board, Mr. Reardon and Mr. Peperzak each entered into the Director Agreements which are the form of agreement adopted by the Board in April 2025 to govern the terms of service and compensation of our company’s non-employee directors. Additionally, effective as of April 4, 2025, we entered into Director Agreements with Lyman Dickerson, Alexandra Steele, and Christopher Riley, each non-employee members of the Board. Pursuant to the terms of the Director Agreements, we agreed to pay to each board member (i) subject to approval by the Board and compensation committee of the Board (the “Compensation Committee”), a cash payment of $12,500 promptly following attendance at each quarterly Board meeting, for a total annual cash compensation of $50,000; and (ii) subject to approval by the Board and the Compensation Committee, a grant of restricted stock, with the number of shares and terms to be determined by the Board.
Nasdaq Compliance Notices
On February 18, 2025, we received the MVLS Notice from Nasdaq which notified the Company that, for the 30 consecutive business days ended February 14, 2025, our MVLS closed below the $50,000,000 MVLS threshold required for continued listing on the Nasdaq Global Market under Nasdaq Listing Rule 5450(b)(2)(A).
In accordance with Nasdaq Listing Rule 5810(c)(3)(C), we have 180 calendar days, or until August 18, 2025, to regain compliance with the MVLS Rule. The MVLS Notice notes that, to regain compliance, our MVLS must close at or above $50,000,000 for a minimum of ten consecutive business days during the MVLS Compliance Period. The MVLS Notice further notes that if we are unable to satisfy the MVLS requirement prior to such date, we may be eligible to transfer the listing of its securities to The Nasdaq Capital Market (provided that we then satisfy the requirements for continued listing on that market). If we do not regain compliance by the end of the MVLS Compliance Period, Nasdaq staff will provide written notice to us that our securities are subject to delisting. At that time, we may appeal any such delisting determination to a hearings panel.
Also on February 18, 2025, we received the MVPHS Notice from Nasdaq that for the 30 consecutive business days ended February 14, 2025, our MVPHS closed below the $15,000,000 MVPHS threshold required for continued listing on Nasdaq under Nasdaq Listing Rule 5450(b)(2)C).
In accordance with Nasdaq Listing Rule 5810(c)(3)(D), we have 180 calendar days, or until August 18, 2025, to regain compliance with the MVPHS Rule. The MVPHS Notice notes that, to regain compliance, our MVPHS must close at or above $15,000,000 for a minimum of ten consecutive business days during the MVPHS Compliance Period. The MVPHS Notice further notes that if we are unable to satisfy the MVPHS requirement prior to such date, we may be eligible to transfer the listing of its securities to The Nasdaq Capital Market (provided that we then satisfy the requirements for continued listing on that market). If we do not regain compliance by the end of the MVPHS Compliance Period, Nasdaq staff will provide written notice to us that our securities are subject to delisting. At that time, we may appeal any such delisting determination to a hearings panel.
The MVLS Notice and MVPHS Notice are notifications of deficiency, not of imminent delisting, and have no immediate effect on the listing of our securities. Our Class A Common Stock and Warrants continue to trade on Nasdaq under the symbols “RAIN” and “RAINW”, respectively.
22
We intend to actively monitor our MVLS and MVPHS between now and August 18, 2025, and may, if appropriate, evaluate available options to resolve the deficiencies and regain compliance with the MVLS Rule and MVPHS Rule. While we are exercising diligent efforts to maintain the listing of our securities on Nasdaq, there can be no assurance that we will be able to regain or maintain compliance with Nasdaq listing standards.
Departure of Co-Chief Executive Officer
On January 29, 2025, Holdco, RWT and Christopher Riley entered into a letter agreement whereby Mr. Riley resigned as Co-Chief Executive Officer of our company and RWT effective as of January 30, 2025 (the “Termination Letter”). Pursuant to the Termination Letter, in lieu of all other compensation and payments of any kind due and payable to Mr. Riley, Mr. Riley will be paid for services rendered in an amount of $124,500, payable in 18 monthly installments beginning in February 2025. Additionally, conditioned on approval by the Compensation Committee of our board of directors, the Termination Letter provides that Mr. Riley will be granted 10,000 shares of Class A Common Stock of the Company vesting one year from the date of grant.
Mr. Riley’s decision to resign as Chief Executive Officer was not the result of any disagreement with our company or our board of directors, including any matters relating to our operations, polices, accounting practices or financial reporting. Mr. Riley will remain as a member of our board of directors.
As previously announced, we appointed Randall Seidl to serve as Co-Chief Executive Officer effective as of January 2, 2025. Following the resignation of Mr. Riley, Mr. Seidl is our sole Chief Executive Officer.
Plan of Operations
12-Month Plan
RWT currently is warehousing two fully built rain generation systems in Sydney, Australia. The systems were built by a leading ionization rainfall generation engineer, and have undergone rigorous evaluation, testing, and documentation. These units are expected to arrive in the U.S. by August 2025 and expect to execute our first client contract and begin the installation process in the third quarter of 2025. Concurrently, we plan to identify, recruit, and hire a CTO, CFO and other go to market resources.
In March 2025, we began planning the development of ten additional rain generation systems for deployment in new locations. While we have begun documenting the sourcing, manufacturing, and building processes, we will collaborate with highly skilled technical advisors to develop a step-by-step training manual that can be scaled as our system volume increases. While systematically documenting the process, we will also explore ways to enhance efficiency and scalability, such as reviewing the bill of materials to domesticate component sourcing and initiating the request-for-proposal process with prospective U.S.-based manufacturers.
We are actively hiring and plan to recruit up to five employees to support sales, operations, or climate science functions by the end of 2025.
We will also plan and prepare for the installation of our system at our first location in August 2025. This process will include securing the services of a general contractor (“GC”) in the area. We will collaborate with the GC to obtain all necessary building permits, which we anticipate will be similar to those required for cell tower installations and should be acquired efficiently and at a reasonable cost.
23
Once the rain generation systems are installed at our first location, we will aim to begin development of a rain gauge with our intellectual property to assist with automating the operation of both the installed system and future systems based on local weather conditions.
We will also begin finalizing site selection for the region where we plan to install a system in 2025. These regions are expected to host one or more systems to serve one or multiple clients. Our goal is to install the systems in a way that creates contiguous or overlapping areas of potential rainfall enhancement. Depending on updrafts, humidity, and other weather conditions, each installed system is expected to generate rainfall within an approximately 50-mile radius. Site selection will be prioritized based on client engagement, projected returns for the company, and expected local weather and topography. We anticipate that our supply chain will support the manufacturing and installation of additional systems within 2026, allowing RWT to scale operations rapidly as client referral effects drive increased demand.
We will continue to update and refine internal documentation that outlines the criteria for selecting sites to install and operate the systems. This will include, but not be limited to, factors such as weather patterns, terrain, setbacks, access, prevailing wind direction, and average humidity. Additionally, we plan to enhance our operations process to include a complete set of drawings necessary for permitting, as well as incorporating all feedback received from the site of our initial installation.
We expect to begin operationalizing the manufacturing, testing, and warehousing of devices for the installation pipeline in 2026. At that point, we anticipate having well-developed documentation that we can follow to ensure a steady stream of successful system installations.
As we continue to refine our manufacturing process for rain technology devices, we will also seek research partnerships with universities. Our goal for these partnerships is to launch a multi-year case study that evaluates the impact of our devices and related technology on rainfall enhancement in the initial U.S. locations where our systems have been installed.
Liquidity and Capital Resources
As of March 31, 2025, we had approximately $273,000 in cash and had a working capital deficit of approximately $6.6 million. We expect to continue to incur expenses and begin to generate revenues as we continue to grow and scale our business.
In connection with the Business Combination, on December 30, 2024, RHY, an affiliate of Harry You, our Chairman, entered into the Loan Agreement and agreed to issue a LOC to Holdco for up to $7 million. In addition, Mr. You and his affiliate also agreed to rollover all outstanding amount that Coliseum and RWT owed to them prior to Closing under the LOC. The Rollover amount does not reduce the $7 million funding available to the Company under the LOC. The Loan has an interest rate of 5%, and interest will be due and payable in arrears quarterly. As of March 31, 2025, we had drawn approximately $737,000 from the LOC, bringing the total outstanding balance under the LOC to approximately $3.8 million (including the Rollover). Subsequent to March 31, 2025, we drew an additional amount of approximately $554,000 under the LOC.
Our management estimates approximately $6.3 million and approximately $62 million in expenses for our one-year and five-year business plan. These funds are expected to be used for producing units, integrating and rolling out software for the rain enhancement platform, expanding water services through the ‘land and expand’ client acquisition model, and potentially acquiring other weather technologies. Since the base technology and products are developed and proven, the need for additional capital will primarily be driven by growth in customer acquisition and projects. Our management believes that the budget can be scaled in line with the funds actually received, enabling RWT to expand its client base, deliver equipment and technology to newly acquired clients, and develop new products for the RWT platform.
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We expect to fund our future development and exploration activities using the available funding under the LOC and future operating cash flow. The timing of most capital expenditures is largely discretionary. We have a significant degree of flexibility to adjust the level of our capital expenditures as circumstances warrant. If our plans or assumptions change, we may seek additional funding through debt or other equity financing arrangements, implement incremental expense reduction measures or a combination thereof to continue financing our operations. Although our management continues to pursue these plans, there is no assurance that we will be successful in obtaining sufficient funding on terms acceptable to us to fund continuing operations, if at all.
In connection with the Company’s assessment of going concern considerations in accordance with FASB ASC Subtopic 205-40, “Going Concern,” our management has determined that although we do not have sufficient liquidity to meet our anticipated obligations over the next year from the date of issuance of these unaudited condensed consolidated financial statements, we have access to funds under the LOC. Additionally, an existing shareholder has pledged financial support as necessary and has the financial ability to provide such funds, that are sufficient to fund our working capital needs over the next twelve months from the date of issuance of these unaudited condensed consolidated financial statements.
Results of Operations
For the three months ended March 31, 2025, we had net loss of approximately $1.5 million, which consisted of general and administrative expenses of approximately $1.3 million, amortization expenses of approximately $3,000, loss in change in fair value of warrant liability of $90,000, and interest expense in connection with the note payable to related parties of approximately $47,000. The Company experienced higher expenses compared to previous years due to the merger completed on December 31, 2024.
For the three months ended March 31, 2024, we had net loss of approximately $31,000, which consisted of general and administrative expenses of approximately $21,000, amortization expenses of approximately $3,000 and interest expense in connection with the note payable to related parties of approximately $7,000.
Cash Flows
For the three months ended March 31, 2025, net cash used in operating activities was approximately $1.0 million, net cash used in investing account was approximately $139,000, and net cash provided by financing activities was approximately $1.4 million. Net loss of approximately $1.5 million was partially offset by changes in operating assets and liabilities of approximately $368,000 and non-cash activities, including amortization expense of approximately $3,000, minimal expenses paid by related parties on behalf of RWT, and change in fair value of warrant liability of $90,000, resulted in approximately $1.0 million of cash used in operating activities. Cash used in investing activities consisted solely of payment for building Equipment of approximately $139,000. Cash provided by financing activities resulted from proceeds from payment of subscription receivable of $650,000 and proceeds from drawdown under the LOC of approximately $737,000.
For the three months ended March 31, 2024, net cash provided by operating activities was approximately $13,000, net cash used in investing account was approximately $41,000. Net loss of approximately $31,000 plus changes in operating assets and liabilities of approximately $128,000 was affected by amortization expense of approximately $3,000 and expenses paid by related parties on behalf of RWT of approximately $169,000, resulted in cash provided by operating activities of approximately $13,000. Cash used in investing activities consisted solely of payment for building Equipment of approximately $41,000.
Patent and Consulting Agreements
Patent License
On November 21, 2022, RWT entered into a license agreement with Dr. Theodore Anderson, a plasma physicist, whereby RWT was granted an exclusive, worldwide license under certain of Dr. Anderson’s patents. The consideration paid for the license of $33,000, which was fully paid in November 2022, was recorded as a finite-lived intangible asset.
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Consulting Agreement for Rainfall Ionization Equipment
In November 2022, RWT entered into a consulting agreement, which was later amended on December 8, 2022, to engage with its senior technology advisor (“Technical Advisor”). RWT agreed to pay the Technical Advisor a one-time fee upon execution of the agreement (“First-time fee”) and a consulting fee of AUD 250,000 per year (equivalent to approximately $170,000 as of the effective date), which was later amended to $186,000 in February 2025, as well as certain bonuses that will be paid upon reaching certain milestones.
In connection with the consulting agreement, we also agreed to obtain from the Technical Advisor an irrevocable, perpetual, non-exclusive license under certain engineering designs in connection with rainfall ionization equipment and systems. We fully paid this amount of $83,750 in June 2023.
Related Party Transactions
Note Payable and Line of Credit from Related Parties
On February 2, 2023, RWT issued a promissory note (the “Note”) to its former CEO and Mr. You and Mr. de Masi for an aggregate amount of $600,000. The Note has an annual interest rate of 5% and is currently due on demand.
On December 30, 2024, Holdco entered into the Loan Agreement with RHY, an affiliate of Harry You, our Chairman, pursuant to which RHY agreed to issue an LOC to Holdco for up to $7 million, in addition to the Rollover amount described below. The Loan has an interest rate of 5%, and interest will be due and payable in arrears quarterly.
Prior to Closing, the outstanding amount that Coliseum and RWT owed to Mr. You and his affiliates were: (i) approximately $1.7 million and approximately $333,000 of advances to Coliseum and RWT, respectively, (ii) convertible note balance of $667,500 to Coliseum, and a portion under the Note discussed above of approximately $216,000 to RWT (which amount includes $200,000 in principal and approximately $16,000 in accrued interest), and (iii) an outstanding balance of $180,000 in accrued administrative fees to Coliseum, for a total of approximately $3.1 million. The Rollover amounts were assigned to and assumed by Holdco and are treated for all purposes as Loans outstanding under the Loan Agreement. The Rollover amount does not reduce the $7 million funding available to the Company under the LOC. As of March 31, 2025, we had drawn approximately $737,000 from the LOC, bringing the total outstanding balance under the LOC to approximately $3.8 million (including the Rollover). Subsequent to March 31, 2025, we drew down an additional amount of approximately $554,000 under the LOC.
Employment Agreement
On December 31, 2024, Holdco entered into a binding offer letter (the “Offer Letter”) with its new CEO, Mr. Seidl effective January 2, 2025, pursuant to which Holdco agreed to pay to the CEO (i) an annual salary of $500,000, (ii) an annual incentive bonus up to 200% of his base salary, (iii) a contingent bonus payment of $5.0 million that will be issued under a form of an unsecured note payable (the “Officer Note”) on the earlier of (x) the four-year anniversary of the Officer Note, subject to the CEO’s continued service with Holdco through such date, (y) the date of a change in control of Holdco, and (z) the date of termination, if Holdco terminates the CEO’s employment without cause. Holdco and Mr. Seidl agreed to replace the Officer Note, which was not yet issued, with a retention bonus agreement to better reflect the nature of the commitment (“Retention Bonus”). As of March 31, 2025, the Retention Bonus has not been issued.
Board Agreement
On April 1, 2025, the Board increased the size of the Board from five to seven directors and appointed Mr. Marcus Peperzak and Mr. Robert Reardon to the Board to fill the resulting vacancies.
In connection with their appointments to the Board, Mr. Reardon and Mr. Peperzak each entered into the Director Agreements which are the form of agreement adopted by the Board in April 2025 to govern the terms of service and compensation of our company’s non-employee directors. Additionally, effective as of April 4, 2025, we entered into Director Agreements with Lyman Dickerson, Alexandra Steele, and Christopher Riley, each non-employee members of the Board. Pursuant to the terms of the Director Agreements, we agreed to pay to each board member (i) subject to approval by the Board and compensation committee of the Board (the “Compensation Committee”), a cash payment of $12,500 promptly following attendance at each quarterly Board meeting, for a total annual cash compensation of $50,000; and (ii) subject to approval by the Board and the Compensation Committee, a grant of restricted stock, with the number of shares and terms to be determined by the Board.
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Segments
We operate and manage the business as one reportable and operating segment, which is the business of developing, manufacturing and commercializing ionization rainfall generation technology. Our chief executive officer, who is the chief operating decision maker, or CODM, reviews financial information on an aggregate basis for allocating resources and evaluating financial performance.
Off-Balance Sheet Arrangements
We did not have off-balance sheet arrangements as of March 31, 2025, and do not currently have, any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Critical Accounting Estimates
The unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP and pursuant to the rules and regulations of the SEC.
Preparation of the unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities. We also make estimates and assumptions on revenue generated and reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that it believes are reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
While our significant accounting policies are described in the notes to our unaudited condensed consolidated financial statements included elsewhere in this Annual Report, our management believes there was no critical accounting estimates identified during the three months ended March 31, 2025 and 2024.
Derivative Financial Instruments
We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to FASB ASC Topic 480 “Distinguishing Liabilities from Equity” (“ASC 480”) and ASC 815. 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 assessment considers whether the financial instruments are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the financial instruments meet all of the requirements for equity classification under ASC 815, including whether the financial instruments are indexed to our own ordinary shares, among other conditions for equity classification.
Equipment
We capitalize our cost to build its rainfall ionization equipment (the “Equipment”), including materials and allocated labor costs. In July 2023, we finished building the Equipment and transferred its capitalized cost from Construction in-process to Equipment. As soon as the Equipment is placed in service upon agreement with the customers, we will begin to depreciate those assets on a straight- line basis over the estimated useful lives of the assets, generally 10 to 15 years. At the time of retirement or other disposition of the Equipment, the cost and accumulated depreciation will be removed from the accounts and the resulting gain or loss, if any, will be reflected in operations. As of March 31, 2025, no Equipment has been placed in service.
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Intangible Assets
Recognized intangible assets have finite lives and include acquired licenses for market-ready technology and designs of weather modification and rainfall ionization equipment. Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and accumulated impairment losses.
Intangible assets with finite lives are amortized using the straight-line method over the estimated useful economic life. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortization period or method, as appropriate, and are treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in the unaudited condensed consolidated statements of operations and in the expense category that is consistent with the function of the intangible assets.
Intangible assets with finite lives are tested for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable. These conditions may include a change in the extent or manner in which the asset is being used or a change in future operations. We assess the recoverability of the carrying amount by preparing estimates of future revenue, margins, and cash flows. If the sum of expected future cash flows (undiscounted and without interest charges) is less than the carrying amount, an impairment loss is recognized. The impairment loss recognized is the amount by which the carrying amount exceeds the fair value of the asset. Fair value of these assets may be determined by a variety of methodologies, including discounted cash flow models. As of March 31, 2025, we did not have any intangible assets with indefinite useful lives.
Stock Compensation
Our policy is to account for stock-based compensation expense in accordance with FASB ASC Topic 718, “Compensation-Stock Compensation” (“ASC 718”). Under ASC 718, stock-based compensation associated with equity awards is measured at fair value upon the grant date and recognized over the requisite service period. To the extent a stock-based award is subject to a performance condition, the amount of expense recorded in a given period, if any, reflects an assessment of the probability of achieving such performance condition, with compensation recognized once the event is deemed probable to occur. Forfeitures are recognized as incurred.
Recent Accounting Pronouncements
In December 2023, the FASB issued ASU No. 2023-09 (Topic 740), Improvements to Income Tax Disclosures. The ASU requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as an expansion of other income tax disclosures. The ASU is effective on a prospective basis for annual reporting periods beginning after December 15, 2024. The Company is currently evaluating the impact this ASU will have on its consolidated financial statements and related disclosures.
Issued in November 2024, ASU 2024-03, Disaggregation of income Statement Expenses (Subtopic 220-40), requires the disaggregated disclosure of specific expense categories, including purchases of inventory, employee compensation, depreciation, and amortization, within relevant income statement captions. This ASU also requires disclosure of the total amount of selling expenses along with the definition of selling expenses. The ASU is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Adoption of this ASU can either be applied prospectively to consolidated financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the consolidated financial statements. While early adoption is permitted, the Company does not plan to adopt this standard early. This ASU will likely result in additional disclosures being included in the Company’s consolidated financial statements once adopted. The Company is currently evaluating the provisions of this ASU.
Emerging Growth Company Status
Holdco is an emerging growth company, as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a registration statement under the Securities Act declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards.
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Section 107 of the JOBS Act allows emerging growth companies to take advantage of the extended transition period for complying with new or revised accounting standards. Under Section 107, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. Any decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable. The Company has elected to use the extended transition period available under the JOBS Act, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s consolidated financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
The Company will remain an emerging growth company until the earlier of: (1) the last day of the fiscal year (a) following the fifth anniversary of the effectiveness of the Company’s registration statement on Form S-4 in connection with the Business Combination, (b) in which the Company has total annual revenue of at least $1,235,000,000, or (c) in which the Company is deemed to be a large accelerated filer, which means the market value of its common equity that is held by non-affiliates exceeds $700.0 million as of the end of the prior fiscal year’s second fiscal quarter; and (2) the date on which the Company has issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.
We are also a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. The Company will remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of the shares of Class A Common Stock held by non-affiliates exceeds $250.0 million as of the prior June 30, and (ii) the Company’s annual revenue exceeds $100.0 million during such completed fiscal year and the market value of the shares of Class A Common Stock held by non-affiliates exceeds $700.0 million as of the prior June 30. To the extent the Company takes advantage of such reduced disclosure obligations, it may also make comparison of the Company’s financial statements with other public companies difficult or impossible.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
This item is not applicable as we are a smaller reporting company.
ITEM 4. DISCLOSURE CONTROLS AND PROCEDURES.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding and the preparation of the Company's consolidated financial statements and required disclosures.
Evaluation of Disclosure Controls and Procedures
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2025. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act) were not effective due to the material weakness discussed below. As a result, we performed additional analysis as deemed necessary to ensure that our consolidated financial statements were prepared in accordance with U.S. GAAP. Accordingly, management believes that the consolidated financial statements included in this Report present fairly in all material respects our financial position, results of operations and cash flows for the periods presented.
As previously disclosed, in connection with the restatement of RWT’s audited financial statements as of and for the year ended December 31, 2023 and as of December 31, 2022 and for the period from November 10, 2022 (inception) through December 31, 2022, RWT’s management identified a material weakness in RWT’s internal controls over financial reporting regarding the calculation of deferred tax assets and disclosure of income taxes in accordance with FASB ASC 740. Upon the completion of the Business Combination, RWT became a wholly-owned subsidiary of the Company. In connection with the preparation and audit of the Company’s consolidated financial statements as of and for the year ended December 31, 2024, management determined that such material weakness had not been remediated as of March 31, 2025.
While we have processes to identify and appropriately apply applicable accounting requirements, we intend to take steps to remediate this material weakness, including plans to hire or engage a specialist to assist in the preparation of the income tax provision and disclosures. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.
Changes in Internal Control Over Financial Reporting
Management has implemented steps to remediate the material weakness identified. Specifically, we expanded and improved our review process for income taxes calculation and disclosures, and hired third-party professionals with whom to consult for such issues.
During the most recently completed fiscal quarter, there has been no other changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There is no material litigation, arbitration or governmental proceeding currently pending against us or any members of our management team.
ITEM 1A. RISK FACTORS
Factors that could cause our actual results to differ materially from those in this Report are any of the risks described in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on April 5, 2024 (the “Annual Report”). Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this Report, except as set forth below, there have been no material changes to the risk factors disclosed in the Annual Report. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC.
We are currently in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by a new U.S. presidential administration and accompanying regulatory activities and economic policies and events related thereto, ongoing military conflicts and geopolitical instability and inflation and interest rates.
U.S. and global markets have recently been experiencing volatility and disruption caused by economic uncertainty, including as a result international trade disputes and ongoing military disputes and related geopolitical uncertainty. International trade disputes, including threatened or implemented tariffs by the Trump administration and threatened or implemented tariffs by foreign countries in retaliation, could adversely impact our business. Trade disputes could also adversely impact supply chains which could now or in the future increase costs for us or delay delivery of key inventories and supplies. Trade disputes can also be highly disruptive to global financial markets. The length and impact of the ongoing trade disputes and military conflicts are highly unpredictable. We are continuing to monitor the trade disputes, inflation, interest rates and the military conflicts and the impacts to global capital markets and to our business.
RWT’s future success depends in part on recruiting and retaining key personnel and failure to do so may make it more difficult for us to execute the business strategy.
RWT is dependent upon the continued services of key personnel, including members of its executive management team. The loss of any one of these individuals could disrupt our operations or its strategic plans. Additionally, RWT’s future success will depend on, among other things, its ability to hire and retain the necessary qualified sales, marketing and managerial personnel, for whom it competes with numerous other companies, academic institutions and organizations. Restraints on the flow of technical and professional talent, including as a result of changes to U.S. immigration policies or laws, may inhibit our ability to adequately staff our engineering, research and development efforts. If RWT loses key employees, if it is unable to retain other qualified personnel, or if its management team is not able to effectively manage it through these events, RWT’s business, financial condition, and results of operations may be adversely affected.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On December 31, 2024, in connection with the Closing, the former RWT shareholders received an aggregate of 2,125,540 shares of Holdco Class A Common Stock and 57,572 shares of Holdco Class B Common Stock pursuant to the terms of the Business Combination Agreement.
On December 31, 2024, in connection with the Closing, Holdco issued 61,474 shares of Holdco Class A Common Stock to the PIPE Investors pursuant to the PIPE Subscription Agreements, for aggregate proceeds of approximately $700,000 and also recorded a subscription receivable of $650,000 from two PIPE Investors for the purchase of 57,083 shares of Holdco Class A Common Stock. On January 29, 2025, Holdco closed $500,000 of such subscription receivable pursuant to the PIPE Subscription Agreements and issued an aggregate of 43,910 shares of Holdco Class A Common Stock to the PIPE Investors. On February 6, 2025, Holdco closed on the remaining $150,000 of subscription receivable pursuant to the PIPE Subscription Agreements and issued an aggregate of 13,173 shares of Holdco Class A Common Stock to the PIPE Investors.
In connection with the Business Combination, pursuant to the terms of a Warrant Exchange Agreement, dated December 17, 2024, by and between Coliseum, Holdco, Coliseum Acquisition Sponsor, LLC, and Berto, LLC (the “Warrant Exchange Agreement”) on December 31, 2024, Holdco issued an aggregate of 806,250 shares of Holdco Class A Common Stock to the former holders of Coliseum Private Placement Warrants (the “Warrant Exchange”).
In connection with the Business Combination, on December 31, 2024, Holdco issued an aggregate of 5,000 shares of Holdco Class A Common Stock to a vendor as consideration for services rendered.
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The shares of Holdco Class A Common Stock issued to the PIPE Investors pursuant to the PIPE Subscription Agreements, the shares of Holdco Class A Common Stock and Holdco Class B Common Stock issued to the RWT shareholders pursuant to the Business Combination Agreement, the shares of Holdco Class A Common Stock issued pursuant to the Warrant Exchange, and the shares of Holdco Class A Common Stock issued to the vendor, have not been registered under the Securities Act and have been issued in reliance upon the exemption provided in Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D promulgated under the Securities Act, as a transaction by an issuer not involving a public offering.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS
The following exhibits are filed as part of, or incorporated by reference into, this Report on Form 10-Q.
| * | Filed herewith. |
| ** | Furnished herewith. |
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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, thereunto duly authorized.
Rain Enhancement Technologies Holdco, Inc. | ||
| Date: May 15, 2025 | By: | /s/ Randall Seidl |
| Name: Randall Seidl | ||
| Title: Chief Executive Officer and Director | ||
| Date: May 15, 2025 | By: | /s/ Oanh Truong |
| Name: Oanh Truong | ||
| Title: Interim Chief Financial Officer | ||
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