UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 001-42460
RAIN ENHANCEMENT TECHNOLOGIES HOLDCO, INC.
(Exact name of registrant as specified in its
charter)
(Address of Principal Executive Offices) (Zip Code)
339-222-6714
Registrant’s telephone number, including
area code
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of the Act:
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at such date. The registrant’s Class A common stock began trading on the Nasdaq Stock Market LLC on January 2, 2025.
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DOCUMENTS INCORPORATED
BY REFERENCE
None.
RAIN ENHANCEMENT TECHNOLOGIES HOLDCO, INC.
Table of Contents
Page
PART I
Item 1. Business 1
Item 1A. Risk Factors 12
Item 1B. Unresolved Staff Comments 41
Item 1C. Cybersecurity 41
Item 2. Properties 41
Item 3. Legal Proceedings 41
Item 4. Mine Safety Disclosures 41
PART II
Item 6 [Reserved] 42
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 51
Item 8. Financial Statements and Supplementary Data 51
Item 9A. Controls and Procedures 52
Item 9B. Other Information 52
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. 52
PART III
Item 10. Directors, Executive Officers and Corporate Governance 53
Item 11. Executive Compensation 57
Item 14. Principal Accountant Fees and Services 67
Part IV
Item 15. Exhibits and Financial Statement Schedules 68
SIGNATURES 71
i
EXPLANATORY NOTE
On
December 31, 2024 (the “Closing Date”), Coliseum Acquisition Corp, a Cayman
Islands exempted company (“Coliseum”), Rain Enhancement Technologies,
Inc., a Massachusetts corporation (“RWT”), Rain Enhancement Technologies
Holdco, Inc., a Massachusetts corporation (“Holdco”, the“Company”, “we”,
“us” or “our”),
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.
ii
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS AND RISK FACTOR SUMMARY
This Annual Report on Form 10-K (this “Annual Report”)
contains 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. These statements are based on the beliefs and assumptions, whether or not identified in this Annual Report, of the management
of the Company. Although the Company believes that its plans, intentions and expectations reflected in or suggested by these forward-looking
statements are reasonable, the Company cannot assure you that it will achieve or realize these plans, intentions or expectations. Forward-looking
statements are inherently subject to risks, uncertainties and assumptions. Generally, statements that are not historical facts, including
statements concerning possible or assumed future actions, business strategies, events or results of operations, and any statements that
refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are
forward-looking statements. These statements may be preceded by, followed by or include the words “anticipate,” “believe,”
“could,” “continue,” “estimate,” “expect,” “forecast,” “intend,”
“may,” “might,” “plan,” “possible,” “potential,” “project,” “scheduled,”
“seek,” “should,” “will” or similar expressions, but the absence of these words does not mean that
a statement is not forward-looking. Forward-looking statements contained in this Annual Report include, but are not limited to, statements
about the ability of the Company to:
● general economic uncertainty;
● the volatility of currency exchange rates;
● RWT’s ability to manage growth;
● risks related to the rollout of RWT’s business and expansion strategy;
● the effects of competition on RWT’s future business;
● changes in personnel and availability of qualified personnel;
● the anticipated benefits of the Business Combination may not be achieved;
iii
● the Company’s revenues and results of operations may fluctuate significantly;
Forward-looking statements are provided for illustrative
purposes only and are not guarantees of performance. You should not put undue reliance on these statements which speak only as of the
date hereof. You should understand that the factors discussed under the heading “Risk Factors” and elsewhere in this
Annual Report, could affect the future results of the Company, and could cause those results or other outcomes to differ materially from
those expressed or implied in the forward-looking statements in this Annual Report.
In addition, the risks described under the heading
“Risk Factors” are not exhaustive. Other sections of this Annual Report describe additional factors that could adversely
affect the businesses, financial conditions, or results of operations of the Company. New risk factors emerge from time to time and it
is not possible to predict all such risk factors, nor can the Company assess the impact of all such risk factors on the businesses of
the Company, or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained
in any forward-looking statements. All forward-looking statements attributable to the Company or persons acting on their behalf are expressly
qualified in their entirety by the foregoing cautionary statements. The Company undertakes no obligations to update or revise publicly
any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
In addition, this Annual Report contains statements
of belief and similar statements that reflect the beliefs and opinions of the Company on the relevant subject. These statements are based
upon information available to the Company as of the date of this Annual Report, and while the Company believes such information forms
a reasonable basis for such statements, such information may be limited or incomplete, and statements should not be read to indicate that
the Company has conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are
inherently uncertain and you are cautioned not to unduly rely upon these statements.
Summary Risk Factors
Our
business is subject to numerous risks and uncertainties, including those highlighted in the section entitled “Risk Factors”,
that represent challenges that we face in connection with the successful implementation of our strategy and the growth of our business.
In particular, the following considerations, among others, may offset our competitive strengths or have a negative effect on our business
strategy, which could cause a decline in the price of shares of our Class A Common Stock or Warrants and result in a loss of all or a
portion of your investment:
iv
Risks Relating to RWT’s Business and Industry
● RWT may not manage growth effectively.
● RWT may be harmed by competing technologies.
v
Risks Relating to Ownership of Holdco Securities
vi
Item 1. Description of Business
Overview
Rain Enhancement Technologies,
Inc. (“RWT”) was founded to provide the world with reliable access to water, one of life’s most important resources.
To achieve this mission, RWT aims to develop, manufacture and commercialize ionization rainfall generation technology.
Today, water scarcity
issues are one of the world’s foremost concerns. According to the World Wildlife Fund, 1.1 billion people globally lack access to
water for basic necessities, and, according to the American Geophysical Union, 80% of global croplands are expected to experience water
scarcity by 2050, threatening agricultural yields.
RWT is combining unique
expertise, personnel, and weather data to develop, improve and undertake efforts to commercialize ionization rainfall generation technology
that enhances rainfall when conditions are appropriate in the atmosphere. RWT plans to build its core platform with software, meteorology,
hardware, product design and operations to make rainfall generation more dependable. RWT intends 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.
RWT is working to develop, invent, improve, manufacture, commercialize
and operate technologies that enhance rainfall and elevate water reserves. We believe that RWT’s future technology 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 RWT’s future technology are modest on a per gallon basis for communities and ecosystems, estimated to be $0.10 per cubic meter,
approximately 10 times less than other alternative technologies. RWT intends to enhance agricultural, industrial and household water supplies
for all the communities in which it operates by developing technology and services to serve governmental and commercial clients’
needs in creating water resiliency and abundancy.
RWT’s business
model is based on a unique one-to-many community-centric business model. The numerous client segments to which RWT markets and sells include
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, RWT aims to leverage its offerings and enhance its proprietary position by expanding RWT’s water
generation products through licensing and acting as a channel partner for additional water generation technologies.
RWT has a limited operating
history and has not yet generated any revenue, and its ability to generate revenue sufficient to achieve profitability will depend on
its ability to successfully build and commercialize rainfall generation technology.
RWT’s management
and expected members of the Board include individuals with extensive experience in the water technology industry, which will offer RWT
advantages, both in terms of its research and development and the commercial value of its intended product offerings.
RWT’s website can be found at https://rainwatertech.com/.The
references to the SEC’s and our website are inactive textual references only, and information contained therein or connected thereto
is not incorporated into this Annual Report.
RWT’s Strategy
RWT’s mission is
to provide the world with reliable access to water at a time when water scarcity is one of the world’s foremost concerns. RWT intends
to fulfill its mission by:
1
Industry Background:
Ionization Rainfall Generation
History and Development
of Core Technology
RWT’s ionization
rainfall generation platform will capitalize on approximately 70 years of technological efforts beginning in the 1950s at one of the largest
industrial conglomerates in the United States. Ionization rainfall generation technology has been used for fog dissipation during the
cold war, as well as rainfall generation and hail reduction in a number of locales over the decades. Weather forecasting models, computing
power plus ground-based radar networks have allowed weather forecasting to improve exponentially over the past decade. Cloud condensation
nuclei and the water cycle are now broadly accepted science. Water scarcity has unfortunately reached critical levels throughout North
America and Europe. Federal and local governments, and Fortune 500 companies all recognize the urgency of action as water becomes a social
justice issue.
Traditional cloudseeding
involves the use of chemicals dispensed from aircraft at precise moments of raincloud formation, creating potential risks (such as environmental
concerns and unintended downstream consequences, for example, small concentrations of chemical substances affecting cloudseeding-produced
rain). Desalination plants offer an alternative technology for increasing the supply of potable water but such process is highly energy
intensive, expensive and requires transportation from the coast to inland clients.
Ionization rainfall generation
technology allows for lower operating costs at scale and provides a method that does not use chemicals in the rainfall generation process.
Both chemical and ionic approaches have been utilized for weather modification, including rainfall generation, hail reduction, and cloud
dispersal.
2
Historically, piloted aircraft (e.g. cropping) or drones delivered
chemicals into clouds at the right time in order to enhance rainfall. However, ionized rainfall generation technology is ground-based,
capitalizing on natural updraft airflow. Based on third party trials in Oman, the operating range of RWT’s ionized rainfall generation
equipment is expected to be considerable, as it will be reliant upon natural updrafts to carry the ions into clouds with sufficient water
vapor to condense and form rain droplets. Such third-party testing has demonstrated that the equipment’s reliance on natural updrafts
would result in it being powered by a minimal source of energy, approximately 600kWh annually based on 100 hours of operation per month,
which is approximately the amount required in one year by an average household oven. Moreover, as the technology is developed, RWT intends
to continue working on ways to maintain low and efficient energy usage.
Ionized rainfall generation technology does not allow rainfall to be
created. It may enhance the amount and possibility of rainfall when conditions are appropriate in the atmosphere and cloud formation is
underway in an approximately 40-mile radius, according to third-party testing. The third-party experiments in Oman, using ionizers based
on existing rainfall generation technology, indicate that the majority of the rainfall generation occurs within approximately 60 miles
of the ground-based ionizers. This range allows for placement of the equipment to optimize for the cost of land leases, as well as predominant
wind flows.
By installing multiple systems at appropriate ranges away from the
desired impact area, RWT’s approach would allow for enhanced rainfall with high level, broad-based targeting, by synchronizing the
ionization on-off with increasingly accurate weather information and forecasting. RWT is in the process of partnering with ground-based
radars and satellite imaging for optimal and powerful real time weather forecasting data access.
In addition, RWT expects
that its systems will be able to be manufactured and installed in approximately four to six months, which differs from the desalination
process that generally takes several years to obtain permits and build associated energy generation. RWT believes that the expected rapid
time-to-market and anticipated use of off-grid solar and wind power systems will provide an advantage in addressing water scarcity in
the coming decades.
Initial installation would be more costly than the cloudseeding approaches
and requires a small amount of semi-permanent land to operate from. However, RWT’s system would be able to operate continually up
to 365 days per year, and key post-installation costs would be modest, including electricity and monitoring. Once installed, the system
is expected to use approximately 600 kwH of energy consumption per year. Reliance on natural updrafts would limit targeting but would
minimize energy use and avoid using chemicals in the rain enhancement process. Ultimately, some of the water that condenses due to RWT’s
operation will come out of nearby oceans per the established “water cycle”.
In Oman, over a six-year
randomized third-party trial from 2013 to 2018, an ionization rainfall generation system based on existing technology generated an average
of approximately 16% of additional rainfall according to results published by the National Institute for Applied Statistics Research Australia
(“NIASRA”), a third-party research organization, in the International Statistical Review. Three years after this trial occurred,
news reporters in Oman continued to report enhanced rainfall as compared to prior years when the hardware was not operating. In addition,
trials performed by third-party individuals funded by the National Key Research and Development Plan of China and the National Natural
Science Foundation of China in the Wushaoling and Liupan Mountains in China also indicate that an ionization rainfall generation system
helped increase rainfall in the area by 20%. RWT believes significant improvements from software, synchronization with real-time weather,
and broader placement would lead to even greater rainfall generation. Furthermore, RWT believes it can create an ionization rainfall generation
team that will be well capitalized, with the full suite of expertise required, to commercialize and scale ionization rainfall generation.
Commercialization
and Scale of Ionization Rainfall Generation Technology
Ionization rainfall generation
technology has shown promise in third-party trials, and thus commercialization and scale of this technology will require a strong go-to-market
and operations infrastructure to show the market the rain enhancement capacities of these systems. The first phase of commercialization
is expected to include leveraging RWT’s management and Board to develop global sales organizational structures and methodologies,
as well as building operations, sales, marketing and customer service functions to accelerate client traction. RWT also intends to create
operating momentum by achieving enhanced rainfall in the initial systems that it deploys, in order to demonstrate the viability of this
technology to the market. It is anticipated that this will enable RWT to expand into existing client bases, create additional client verticals,
and drive future global expansion. The second phase of commercialization and scale of rainfall generation technology is expected to involve
investment in additional technologies to optimize the performance of the systems. This includes investment and development of weather
forecasting models, computing power, data collection tools and ground-based radar networks, among other things, in order to improve RWT’s
weather forecasting abilities. Supporting growth at scale will require manufacturing optimizations, bill of materials value engineering,
and enhancing software controls and machine learning to automate the operational and data collecting processes.
3
For more details regarding
the steps that RWT’s management team believe are necessary to commercialize and scale ionization rain enhancement technology, please
see “RWT Management’s Discussion and Analysis of Financial Condition and Results of Operations - Plan of
Operations.”
Trial Results Based
on Existing Third-Party Technology
There is a void for institutionally
supported analysis for quantifying rainfall generation from rainfall generation technology. Previous rainfall generation trials by third
parties relied on comparisons of trial results with long-term averages of rainfall on a given catchment. However, the high variability
of rainfall data has hindered conclusive demonstrations of efficacy using such techniques. Demonstrating efficacy, however, will rely
on statistical evaluation of data obtained while operating the technology under real-world scenarios.
In the third-party trials
for previously existing rainfall generation technology in Oman, the NIASRA employed statistical estimation methodology estimating the
correlation between observations of rainfall at different locations at specific time intervals to make concurrent predictions of rainfall
in a target area with both a control model and effects model to assess the ground-based ionization technology performance. The NIASRA
concluded in these third-party trials that the methodology used is well instrumented and scientifically rigorous, and that it has the
potential to increase precipitation. Third-party trials in Oman have indicated a high probability of rainfall generation if ionization
rainfall generation technologies are used.
In 2022, the model-based
approach used in these third-party trials was noted in the Journal of Royal Statistical Society and the International Statistical Review.
The results in these third-party trials demonstrate the plausible practical effects of and plausible analysis methods for the technology
that RWT intends to develop.
RWT’s Business
Overview
Ionization Rainfall
Generation Market Opportunity
The global water crisis
has massive economic implications. Global health organizations estimate that water scarcity in some regions could impact GDP by up to
6% with $260 billion lost globally each year due to lack of basic water and sanitation. Morgan Stanley estimates that $1.4 trillion will
be invested in expanding and improving global water infrastructure over the next four years. RWT’s economic impact is intertwined
with the number of people it can help get access to water they would have otherwise not received, allowing it to capture a significant
portion of the impending water spend.
Unlike with the price
of fossil fuel commodities, where governments can step in to shield consumers from volatility, water cannot easily be manufactured at
large scale. For instance, due to droughts there are cities in California’s Central Valley whose access to water is severely limited,
with populations relying upon emergency bottled water handouts to survive. Water tables continue to decline across the West, South and
Southwest of the United States to near-emergency levels, and the price of water has climbed.
RWT’s ionization
rainfall generation platform is expected to create large new markets due to its low energy consumption, ease of operation, and large area
impact. With a low entry price for access, demand from all client segments is anticipated to grow strongly, indicated by both initial
client data points as well as the past decade of trials in Oman. RWT’s planned technological approach of ground-based ionization
stations is expected to allow it to implement a one-to-many community-centric business model, as described above under “RWT’s
Strategy.” Numerous clients can be sold services off of the same hardware platform. RWT intends to create new markets to commercialize
and scale ionization rainfall generation by bringing down the cost of its technology, reducing friction to access, and continually improving
its technology and capabilities.
4
RWT intends to pioneer
and create a new market for enhanced rainfall. RWT is beginning its sales focus in the United States with the intent to expand to Canada
and Western Europe, and take advantage of new opportunities that may present themselves in any region. By setting up its ionization rainfall
generation systems in areas with many constituent potential clients, it expects to be able to sell up to a dozen segments of user benefits
from the same hardware array. Small improvements in annual rainfall make significant differences to industries such as insurance, agriculture
and resorts.
RWT recognizes that increasing
the water table, potable water reserves, and greening urban and suburban areas are another way to attract clients, while making a positive
operating contribution with as few as one client per site. RWT is targeting commercial clients in each operating area, and adding potential
governmental and philanthropic clients as the business develops.
RWT’s Business
Model
RWT’s strategy
consists primarily of a focus on ground-based ionization stations to implement a one-to-many community-centric business model, as described
above under “RWT’s Strategy”.
For its initial enhanced
rainfall business, RWT plans to invest in the development and improvement of ground-based ionization stations, hardware platforms and
technologies to enable enhanced rainfall. Leveraging its extensive design, simulation and prototyping capability, it intends to set up
its ionization rainfall generation systems in areas with many constituent potential clients, allowing it to sell its technology to numerous
segments of users who will all benefit from the same hardware array. Small increases in annual rainfall make significant differences to
industries such as insurance, agriculture and resorts, and RWT aims to partner with leaders throughout these diverse client segments to
develop, demonstrate, optimize, commercialize and license its technologies.
To increase the likelihood
that its technologies are adopted, RWT plans to lead with the development of its technology and then determine reasonable royalties. Successful
negotiation of these royalties is generally dependent on:
● Explaining the value proposition over existing or alternative technologies;
● Explaining the manufacturability of the technologies;
● Countering bias against externally developed solutions; and
● Providing technical and market data supporting our products.
Rainfall generation technology
integrates several advanced engineering and scientific disciplines, and the resulting products are of interest in a broad variety of application
domains. As such, RWT continues its ongoing development of strong technical and business relationships with both current and prospective
clients across diverse industries. Those client relationships provide not only a source of ongoing and growing revenue but also insights
into industry trends that will help RWT build desirable products. For instance, RWT plans to pioneer new technologies for image processing
and object recognition, while staying apprised of potentially relevant technical advances from elsewhere.
RWT’s business model will allow for affordable installation and
manufacturing costs, expected to initially be approximately $280,000 per system, and an all-in cost of approximately $425,000 that includes
labor, a meteorologist and other related costs. We expect these initial administrative, setup and manufacturing costs to include, among
other expenses: power systems, control systems, all the fiber-reinforced plastic and steel work, shipping and inspections. This entry
level installation price point will allow clients to be “laddered up” with a “land and expand” sales strategy,
which will also involve continued involvement with RWT as it expects to be the sole operator for its rainfall generation services.
RWT intends to develop
and improve software and machine learning control systems to provide more specific area targeting, as well as more precise operating timing.
We believe that RWT’s prospective partnerships for proprietary radar and weather data will give it client segmentation and pricing
opportunities. Wherever possible RWT will endeavor to strike multi-year WaaS (“water as a service”)-like client contracts.
5
Commercialization
of Water Technology
RWT has pulled together
ingredients to commercialize and scale ionization rainfall generation. RWT also intends to acquire and license adjacent technologies that
expand its solutions offering to clients. Its management have experience scaling businesses over the prior decades. R&D leadership
and technology is important; however the RWT team knows that operations, sales, marketing, and client service are equally vital to drive
product-market fit at scale.
RWT also has a global
hiring and relationships network to tap into to promote the acceleration of its channel and client traction. It is implementing best in
class global sales organization structures and methodologies. By adding adjacent technologies over time, RWT expects to leverage a unified
global sales team in the hundreds to sell multiple solutions to the same client base, increasing its presence with clients as well as
drive bottom-line margin contribution.
RWT recognizes that long
term success is about client satisfaction and delivering solution efficacy and reliability. Manufacturing optimization, build-of-material
value engineering, and the generation of software controls and machine learning are all expected to play vital roles in driving sustained
and profitable growth. RWT also is negotiating partnerships with global manufacturing, supply-chain firms to ensure the smooth rollout
of its ionization rainfall generation systems worldwide.
As part of its commercial
strategy, RWT intends to negotiate agreements with various resorts across the Americas and Western Europe to utilize RWT’s technology
to build up the water tables around these resorts. Success in these initial agreements will allow RWT to leverage its success to a number
of different resorts and properties worldwide.
Manufacturing
RWT plans to involve
a set of manufacturing partners that have previously manufactured versions of RWT’s technology in Australia, along with a list of
similar manufacturing partners in the United States.
RWT’s apparatus design will be optimized to be modular, resulting
in a high level of consistency and predictability with each build. The initial design is projected to weigh about 4,000 kilograms (8,000
pounds), and be shipped in four large crates. It will require a crane and some on site general contractor project management to pour a
concrete pad for the footings. The power necessary to operate the system is expected to be generated by off-grid solar and wind power
systems, for which a small array will typically suffice (however, batteries may be used depending on daylight and weather conditions).
We believe that the apparatus will be capable of being assembled with several people and a crane in only a few days.
The largest components
are custom manufactured from Fiber Reinforced Polyester (“FRP”) to form the non-conductive legs of the system by a third-party
manufacturer experienced in large scale FRP work (e.g. chemical tank manufacturers). The antenna components will largely be made from
Pultruded and sheet FRP by RWT in-house. Additional pultruded FRP is used to form braces and ancillary components, along with custom machined
nylon. Some steel fabrication is completed for adapters and supports, including the footing sections and winching components to raise
and lower the system. The systems are pre-assembled by RWT prior to shipping to customers to ensure all components fit, meet quality assurance
requirements and form a complete “ready-to-install” system in kit format.
The main components to be sourced will be steel and FRP, along with
readily available controllers, high voltage insulators, electronics, metal and nylon fasteners. RWT intends to develop and incorporate
into the machines advanced technology, including systems integration and artificial intelligence to improve predictability of location
and timing of enhanced rainfall.
RWT plans to do its own sourcing for the materials required to operate
its products and intends to maintain a small inventory in its own leased warehouse. RWT expects to work with clients and their general
contractor partners for installation plans for each device to suit the final selected site.
Clients
RWT’s business
model is based on a unique one-to-many community centric business model. We initially intend to focus primarily on geographic areas in
North America and Western Europe, before further global expansion. The various client segments where RWT intends to sell to include, among
others:
6
5. Insurance and reinsurance companies (i.e., fire prevention);
7. Supranational governmental organizations headquartered in the US and EU;
Large landowners have
the benefit of controlling the land for ionization rainfall generation equipment deployment and its measurement using automated rain gauges,
as well as benefitting from the entire rainfall generation. Large landowners who are willing to provide positive externalities to land
adjacent to them are anticipated as early adopters of RWT’s services.
We think energy and transportation
companies will also benefit in a very binary manner from enhanced rainfall, as they often cannot operate without sufficient water levels.
RWT’s business plan contemplates that these companies will be willing to pay an annual sum to subscribe to and utilize RWT’s
services to maximize their operational capacities.
In another segment, we
plan to enter into arrangements (which currently do not exist) that will allow insurance premiums to be reduced for homeowners in regions
taking active measures to enhance rainfall. The added benefit to such homeowners comes in the form of decarbonization contribution, habitat
expansion and greening.
Governments are a typically
slower sales cycle, however at all levels are capable of including an annual allowance for rainfall generation, which we expect would
be a longstanding budget item once adopted.
Supranational organizations
such as the World Bank and IFC have the ability to commit to sizable programs for improving water reserves, the water table and potable
water (although there can be no assurances that they will do so). Both developed and emerging markets are in need of RWT’s technology
and we anticipate significant traction in this category.
Sales and Marketing
RWT’s sales activities
focus primarily on rain enhancement services to public clients and commercial markets, as well as water conservation consulting and solutions.
In the future, RWT plans to expand its sales activities to other water generation technologies, such as desalination, wastewater treatment,
water purification, mineral extraction and cloudseeding, among others. Product marketing focuses on identifying the needs and product
requirements of its clients. Product marketing also manages the development of all of its technologies throughout the development cycle
and creates the required marketing materials to assist with the adoption of the technologies to its various client segments.
Principal Factors
Affecting Barriers to Entry & Competitive Landscape
Barriers to Entry
There are a number of
barriers to entry in the ionization rainfall generation industry, including, among others: (a) key technical personnel, (b) scientific
expertise to drive development and improvements of technology (including software and machine learning automation), (c) client relationships/contracts,
(d) manufacturing and supply chain efficiencies, (e) key sales & marketing personnel, and (f) brand awareness. Another barrier to
entry involves market expansion, specifically with respect to expanding our services from initial trials into clients including, among
others, commercial clients, land developers and the agricultural sector.
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Competitive Position
The operating competitive
landscape has minimal to no brand awareness amongst clients, and is comprised of primarily players in the following categories: (i) mature
industrial/chemicals/wastewater, (ii) cloudseeding startups, (iii) adjacent water startups, and (iv) existing governmental operations.
As with every vibrant pioneering technology ecosystem, several startups in the water technology sector have ceased operating over the
years, however we also expect to see other competing technologies emerge.
The capital raised from
the Business Combination will provide RWT with some of the funding necessary to drive growth both organically and inorganically. We plan
to acquire and/or license adjacent technologies and add them to the product portfolio of RWT. We intend to implement best practices for
structuring compensation to help retain all key technical and client-facing talent.
We anticipate that being
the first publicly traded rainfall generation firm can facilitate growth in client momentum, due to the enhanced visibility and higher
caliber of employees RWT can attract with liquid equity instruments. RWT expects that having an acquisition currency will also allow it
to outcompete private competitor companies in terms of inorganic growth opportunities.
Holdco’s listing
on Nasdaq is a considerable advantage over smaller private companies in the water technology sphere. RWT also aims to retain the advantages
of a nimbler startup over long-established industrial players. Moving quickly to capitalize on innovations and unlock new client demand
is expected to be a hallmark of RWT’s approach given its team’s track record.
RWT has begun operations
with a clear eye on value engineering, manufacturing scale and optimizations, as well as a world class software and machine learning team.
RWT is currently negotiating a near-shore supply chain to minimize lead time and shorten turnaround times for new innovation, and it intends
to have R&D and manufacturing all in the same building.
While the current iteration
of the rain enhancement systems that RWT initially plans to install will not require additional R&D, as they have been proven to work
in third-party trials, RWT intends to invest in significant research and development in order to commercialize and scale the technology.
In particular, the current systems require local support personnel to operate the devices, and require manual reading of rain gauges and
manual analysis of the statistics derived from the weather data. Accordingly, in order to scale and commercialize the business, RWT plans
to engage in R&D to automate these functions, as well as to develop and adopt new ways of delivering the ionization aerosols from
the systems to allow the technology to be deployed in the widest possible field conditions. For more information on the steps, technological
developments and improvements that RWT will need to make to the rain enhancement technology in order to bring advancements to the systems
to market, please see “RWT Management’s Discussion and Analysis of Financial Condition and Results of Operations”,
in particular the sub-headers “- Investment in Research and Development (R&D), Innovation and Technology”,
“- Development and Enhancement of Proprietary Technology”, and “- Plan of Operations”.
Integrating the latest
weather forecast techniques and data, along with automated control systems and water gauge measurements will enable continual improvement
of any existing generation of hardware in the field.
RWT management estimates
that each equipment site is expected to break even on approximately $1 million of annual revenue on a cash flow basis (with hardware costs
factored in year one), plus operating costs. Multi-year contracts will be sought to make it difficult for new entrants to win market share.
RWT’s business model will be focused on achieving long term client lock-in through SaaS-like, multi-annual contracts.
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Moreover, there are several
approaches to rainfall generation besides RWT’s approach. There are companies developing and commercializing chemical-based cloudseeding
technologies. These companies utilize traditional cloudseeding technology, which involves the use of chemicals such as silver iodide,
potassium iodide and dry ice that are dispensed from aircrafts at precise moments of raincloud formation creating potential risks and
unintended consequences. Compared to the traditional chemical cloudseeding approach, RWT’s ionization rainfall generation approach
does not use chemicals in the rain enhancement process. Moreover, we think that RWT’s ionization rainfall generation could enjoy
lower operating costs than traditional chemical cloudseeding. Lastly, the difference between RWT and these companies lies in the expertise
in operations and leading team of water entrepreneurs that provides RWT with a competitive advantage.
Proceeds of the Business
Combination
As described in more
detail elsewhere in this Annual Report, the Business Combination between Holdco, RWT, Coliseum, and Merger Sub closed on December 31,
2024. The gross funds available upon the Closing was approximately $9.0 million. The parties to the Business Combination incurred an aggregate
of approximately $11.6 million of transaction expenses. At the Closing, the Company paid an aggregate of approximately $8.9 million of
transaction expenses, and deferred the remaining $2.7 million. Following the payment of transaction expenses, the net cash available to
the Company from the Business Combination was approximately $0.1 million.
In connection with the
Closing, the Company also recorded a subscription receivable of $650,000 from two PIPE Investors for the purchase of 57,083 shares of
Class A Common Stock. On January 29, 2025, the Company closed $500,000 of such subscription receivable pursuant to the terms of subscription
agreements (collectively, the “PIPE Subscription Agreements”) between the Company and certain investors (the “PIPE Investors”)
and issued an aggregate of 43,910 shares of Class A Common Stock to the PIPE Investors. On February 6, 2025, the Company closed on the
remaining $150,000 of subscription receivable pursuant to the PIPE Subscription Agreements and issued an aggregate of 13,173 shares of
Class A Common Stock to the PIPE Investors. Additionally, the Company has a $7 million loan agreement (the “Loan Agreement”)
from an affiliate of Harry You, subject to the terms and conditions of the Loan Agreement, of which $839,000 has been borrowed as of the
date of this Annual Report. The Company may seek additional sources of capital, but there can be no assurance that additional financing
will be available to the Company on favorable terms or at all. See “Risk Factors – the Company will need additional capital
to pursue its business objectives and respond to business opportunities, challenges or unforeseen circumstances, and it cannot be sure
that additional financing will be available.”
RWT’s primary use
of proceeds from the Business Combination will be to support the development and organic growth of its ionization rainfall generation
platform. Additional water technologies can be acquired or licensed provided a significant margin of error is maintained on reaching profitability
on the ionization rainfall generation.
Approximately equal components
of investment are expected in building RWT’s sales and marketing infrastructure, as its technical (hardware, software, physics and
engineering) and operations (client, install, maintenance and manufacturing) talent. Attracting and retaining the leading talent in the
world, and manufacturing and installing its hardware will be the primary use of capital through breakeven.
Additional rainfall generation
technologies, as well as adjacent desalination, wastewater treatment, water purification, mineral extraction, cloudseeding and other water
generation services may be considered for inorganic expansion.
RWT management currently
estimates approximately $6.3 million and approximately $62 million in expenses for its one-year and five-year business plan. Prior to
the Closing, RWT management determined that RWT would be able to execute on its operating plan for at least the next 12 months following
the Closing if RWT received at least $10 million in proceeds from the Business Combination, after giving effect to redemptions of Public
Shares but before the payment of transaction expenses. Because the Company received $9 million in gross proceeds from the Business Combination
before the payment of transaction expenses, the Company has adjusted production ramp-up in order to align the associated cash requirements,
especially for working capital, with actual timing and/or realized proceeds of the Business Combination. Adjustments have been made by
reducing or shifting planned operational costs and R&D investments, on a short-term basis, until additional funding is obtained. RWT
management has determined that the RWT system’s design is complete, requiring no additional R&D in the near-term, and that the
main cash requirement for operations in the next 12 months will be staffing and operations. As of December 31, 2024, the Company
had approximately $37,000 in cash. Additionally, the Company has a $7 million Loan Agreement from an affiliate of Harry You, of which
$839,000 has been borrowed as of the date of this Annual Report. However, we cannot assure you that the Company will not need additional
sources of capital to operate its business in the next 12 months, or that it will be able to obtain additional capital for its five-year
business plan. See “Risk Factors - RWT will need additional capital to pursue its business objectives and respond to business
opportunities, challenges or unforeseen circumstances, and it cannot be sure that additional financing will be available.”
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For more information,
see “RWT Management’s Discussion and Analysis of Financial Condition and Results of Operations - Plan of
Operations - Summary of Milestones and Material Cash Requirements.”
Government and Other
Regulations
RWT expects its technology
will be subject to certain environmental and governmental regulations. Certain jurisdictions have codified regulations around cloudseeding
that may subject RWT’s rainfall generation platforms to certain licensing and permitting requirements. For instance, the Texas Department
of Licensing and Regulation regulates the use of cloudseeding through a licensing and permitting procedure codified in the Texas Weather
Modification Act. Furthermore, the use of certain materials for seeding purposes will likely be subject to governmental and other regulations.
For more information, see “Risk Factors - Risks Relating to Regulatory and Legal Matters”.
Research & Development
RWT’s research
and development groups will work closely with its sales and marketing groups, as well as its clients and partners, to bring its products
to market in a timely, high-quality and cost-efficient manner. RWT expects research and development costs to total approximately $2.2
million per year.
RWT has a roadmap of technological developments and improvements it
plans to undertake, including optimizing the electrical and mechanical components to maximize the number of ions produced, improving the
design for cost, installation, and attaining the maximum number of ions aloft and directionally into the cloud layer. RWT also intends
to develop and improve software and machine learning control systems to provide more specific area targeting, as well as more precise
operating timing. We are developing a roadmap of software features to optimize power consumption, improve serviceability and reduce site
visits, as well as to integrate with third party weather-data sources.
In its ionization rainfall
generation business, RWT will invest in world-class R&D supported by strong relationships. RWT aims to offer advantages in generation
rainfall technology, providing distinctive features, low-energy technology, ease of operation and large area impact to its clients. RWT
further intends to license and act as a channel partner in additional water generation technologies. RWT intends to have relationships
with an assortment of water technology partners, whose licensed technologies include cloudseeding, water purification, and mineral extraction,
among others. RWT intends to license these technologies and introduce them to its already established clients and prospective clients.
Intellectual Property
RWT is focused on building
a strong scientific roadmap to underpin an analytical understanding with meaningful predictive power of its ionization rainfall generation