Business Context and Reporting Period
Company: Southport Acquisition Corporation (SAC), a Special Purpose Acquisition Company (SPAC) formed to merge with Angel Studios, Inc. (ASI).
Reporting Period: Fiscal year ended December 31, 2024.
Status: SAC is a shell company with no operating history or revenue. It is currently in the process of consummating a proposed business combination with Angel Studios, Inc., having entered into a Merger Agreement on September 11, 2024. The company was delisted from the NYSE in April 2024 and now trades on the OTC Pink Marketplace.
Key Financial Metrics
| Metric | 2024 | 2023 |
|---|---|---|
| Net Loss / Income | $(5,107,051) | $2,729,602 |
| Operating Expenses | $1,587,286 | $1,670,440 |
| Warrant Liability Change (Loss) | $(4,058,500) | $(53,450) |
| Dividend Income (Trust Account) | $966,174 | $6,707,678 |
| Cash (Outside Trust) | $494,974 | $2,171,553 |
| Trust Account Balance | $429,151 | $44,709,805 |
| Working Capital | $(3,862,447) Deficit | $2,808,465 Surplus |
| Warrant Liability | $4,639,000 | $580,500 |
| Excise Tax Liability | $2,424,524 | $1,976,947 |
Material Changes vs. Prior Period
- Trust Account Depletion: The Trust Account balance plummeted from $44.7 million to $429,151 due to significant shareholder redemptions totaling approximately $44.8 million during the Third Extension Special Meeting in November 2024.
- Net Loss: The company reported a net loss of $5.1 million in 2024, a reversal from the $2.7 million net income in 2023. This was primarily driven by a $4.1 million loss on the change in fair value of warrant liabilities and a sharp decline in dividend income from the Trust Account.
- Liquidity Crisis: Working capital shifted from a surplus of $2.8 million to a deficit of $3.9 million. Cash held outside the Trust Account decreased by approximately $1.7 million.
- Extension Approval: Shareholders approved a third extension of the business combination deadline to September 30, 2025, and an amendment to eliminate the $5,000,001 net tangible asset limitation on redemptions.
Guidance, Outlook, Risks, and Unusual Items
- Proposed Business Combination: SAC agreed to merge with Angel Studios, Inc. The transaction values Angel Studios at $1.5 billion plus gross proceeds raised prior to closing. Public warrants will convert into 0.1 shares of common stock each.
- Going Concern: The independent auditor has expressed substantial doubt about the company's ability to continue as a going concern due to the working capital deficit and reliance on the successful completion of the merger.
- Internal Control Weaknesses: The company identified material weaknesses in internal controls regarding the recording of accrued liabilities, presentation of cash flows, and recognition of excise tax liabilities.
- Excise Tax: A liability of $2.4 million was recorded for the 1% federal excise tax on stock repurchases (redemptions) under the Inflation Reduction Act.
- Financing: The Sponsor has provided a promissory note of up to $1 million to cover expenses related to the business combination; $439,004 was drawn as of year-end.
Investor Verification Checklist
- Merger Completion Risk: Verify the likelihood of closing the Angel Studios merger by the September 30, 2025 deadline, given the minimal cash remaining in the Trust Account.
- Capital Sufficiency: Confirm whether the Sponsor's promissory note and potential additional loans are sufficient to fund operations and transaction costs until closing.
- Warrant Liability Volatility: Monitor the fair value of the warrant liability, which significantly impacts reported earnings and could fluctuate based on stock price and volatility.
- Internal Controls: Assess the progress of the remediation plan for the identified material weaknesses in financial reporting.
- Redemption Impact: Understand the implications of the near-total redemption of public shares, leaving the Sponsor with approximately 99% ownership of the pre-merger entity.