UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
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Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Accelerated filer |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of May 1, 2023,
Table of Contents
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Page No. |
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Item 1. |
2 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
20 |
Item 3. |
27 |
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Item 4. |
27 |
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Item 1. |
28 |
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Item 1A. |
28 |
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Item 2. |
Recent Sales of Securities; Use of Proceeds from Registered Offerings |
30 |
Item 3. |
30 |
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Item 4. |
30 |
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Item 5. |
30 |
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Item 6. |
31 |
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33 |
i
BEARD ENERGY TRANSITION ACQUISITION CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
PART I - FINANCIAL INFORMATION Item 1.Financial Statements
BEARD ENERGY TRANSITION ACQUISITION CORP. CONDENSED CONSOLIDATED BALANCE SHEETS |
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March 31, 2023 |
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December 31, 2022 |
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(Unaudited) |
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Assets: |
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Current assets: |
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Cash |
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$ |
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$ |
Prepaid expenses |
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Total current assets |
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Investments held in Trust Account |
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Total assets |
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$ |
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$ |
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Liabilities, Redeemable Class A Common Stock and Stockholders' Deficit: |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
Accrued expenses and other current liabilities |
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Accrued offering costs |
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Income tax payable |
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Franchise tax payable |
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Total current liabilities |
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Deferred underwriting fee payable |
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Total liabilities |
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Commitments and Contingencies (Note 7) |
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Class A common stock, $ |
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Stockholders' Deficit: |
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Preferred stock, $0.0001 par value; |
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Class A common stock, $ |
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Class V common stock, $ |
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Additional paid-in capital |
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— |
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— |
Accumulated deficit |
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( |
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( |
Total Beard Energy Transition Acquisition Corp. deficit |
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( |
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( |
Non-controlling interest in subsidiary |
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( |
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( |
Total stockholders' deficit |
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( |
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( |
Total Liabilities, Redeemable Class A Common Stock and Stockholders' Deficit |
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$ |
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$ |
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
BEARD ENERGY TRANSITION ACQUISITION CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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Three Months ended March 31, 2023 |
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Three Months ended March 31, 2022 |
Operating and formation costs |
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$ |
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$ |
Franchise tax |
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Loss from operations |
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( |
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( |
Interest and dividend income on investments held in Trust Account |
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Income (loss) before income taxes |
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( |
Income tax expense |
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( |
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— |
Net income (loss) |
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( |
Net income (loss) attributable to non-controlling interest in subsidiary |
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( |
Net income (loss) attributable to Beard Energy Transition Acquisition Corp. |
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$ |
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$( |
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Basic and diluted weighted average shares outstanding, Class A common stock |
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Basic and diluted net income (loss) per share, Class A common stock |
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$ |
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$( |
Basic and diluted weighted average shares outstanding, Class V common stock |
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Basic and diluted net loss per share, Class V common stock |
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$( |
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$( |
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
BEARD ENERGY TRANSITION ACQUISITION CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
(UNAUDITED)
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Three Months ended March 31, 2023 |
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Redeemable Class A Common Stock |
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Stockholders' Deficit |
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Class V Common Stock |
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Additional Paid-in Capital |
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Accumulated Deficit |
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Non-controlling Interest in Subsidiary |
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Total Stockholders' Deficit |
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Shares |
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Amount |
Shares |
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Amount |
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Balance – December 31, 2022 |
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$575 |
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$— |
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$(8,080,842) |
Subsequent accretion of Class A common stock subject to redemption as of March 31, 2022 |
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— |
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2,520,667 |
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— |
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— |
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— |
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(2,520,667) |
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— |
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(2,520,667) |
Net income |
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— |
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— |
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— |
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— |
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— |
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1,267,600 |
Balance – March 31, 2023 |
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$575 |
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$— |
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$(9,333,909) |
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Three Months ended March 31, 2022 |
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Redeemable Class A Common Stock |
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Stockholders' Deficit |
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Class V Common Stock |
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Additional Paid-in Capital |
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Accumulated Deficit |
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Non-controlling Interest in Subsidiary |
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Total Stockholders' Deficit |
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Shares |
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Amount |
Shares |
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Amount |
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Balance – December 31, 2021 |
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$575 |
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$— |
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$(5,967,466) |
Subsequent accretion of Class A common stock subject to redemption as of March 31, 2022 |
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— |
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15,144 |
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— |
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— |
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— |
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(15,144) |
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— |
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(15,144) |
Net loss |
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— |
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— |
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— |
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— |
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— |
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(403,884) |
Balance – March 31, 2022 |
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$575 |
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$— |
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$(6,386,494) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
BEARD ENERGY TRANSITION ACQUISITION CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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Three Months ended March 31, 2023 |
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Three Months ended March 31, 2022 |
Cash Flows from Operating Activities: |
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Net income (loss) |
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$ |
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$( |
Adjustments to reconcile net income (loss) to net cash used in operating activities: |
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Interest and dividend income on investments held in Trust Account |
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( |
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( |
Changes in operating assets and liabilities: |
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Prepaid expenses |
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Accounts payable |
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Accrued expenses |
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Income tax payable |
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— |
Franchise tax payable |
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( |
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Net cash used in operating activities |
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( |
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( |
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Cash Flows from Financing Activities: |
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Due to Sponsor |
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( |
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— |
Advance from related party |
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Repayment of advance from related party |
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( |
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( |
Net cash used in financing activities |
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( |
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( |
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Net Change in Cash |
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( |
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( |
Cash - Beginning of period |
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Cash - End of period |
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$ |
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$ |
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Supplemental disclosures of non-cash investing and financing activities: |
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Subsequent accretion of Class A common stock subject to redemption as of March 31, 2023 and 2022, respectively |
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$ |
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$ |
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
BEARD ENERGY TRANSITION ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Beard Energy Transition Acquisition Corp. (the “Company”) is a blank check company incorporated in Delaware on February 8, 2021. As used herein, “the Company” refers to Beard Energy Transition Acquisition Corp. and its majority-controlled operating subsidiary, Beard Energy Transition Acquisition Holdings LLC (the “Opco”), unless the context indicates otherwise. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”).
All activity for the three months ended March 31, 2023 and for the three months ended March 31, 2022 relates to the Company’s formation, and, since the closing of the initial public offering (“Initial Public Offering”), the search for a prospective initial Business Combination. The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company generates non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering and a portion of the proceeds derived from the sale of Private Placement Warrants (as defined below) that were placed in the Trust Account (as defined below). The Company has selected December 31 as its fiscal year end.
The registration statement for the Company's Initial Public Offering was declared effective on November 23, 2021. On November 29, 2021, the Company consummated the Initial Public Offering of
Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of
Following the closing of the Initial Public Offering on November 29, 2021, an amount of $
Transaction costs related to the issuances described above amounted to $
Following the Initial Public Offering, the Public Stockholders (as defined below) hold a direct economic equity ownership interest in the Company in the form of shares of Class A common stock, and an indirect ownership interest in Opco through the Company’s ownership of Class A Units of Opco. By contrast, the Initial Stockholders (as defined below) own direct economic interests in Opco in the form of Class A and Class B Units of Opco and a corresponding non-economic voting equity interest in the form of the Company’s Class V common stock, as well as a direct interest in the form of the Company’s Class A common stock. The Class A common stock forming part of the Sponsor Shares (as defined in Note 4) were purchased for $
The Company will provide the holders (the “Public Stockholders”) of the Public Shares with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. Unless otherwise stated herein, the term “Public Shares” includes the
6
BEARD ENERGY TRANSITION ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The holders of the Founder Shares and Sponsor Shares (the “Initial Stockholders”) will not be entitled to (i) redemption rights with respect to any Founder Shares, Sponsor Shares or Public Shares held by them in connection with the completion of a Business Combination, (ii) redemption rights with respect to any Founder Shares, Sponsor Shares or Public Shares held by them in connection with a stockholder vote to approve an amendment to the Company's amended and restated certificate of incorporation (the “Amended and Restated Certificate of Incorporation”)
The Company will have until 18 months (or 21 months, as applicable) from the closing of the Initial Public Offering (the “Combination Period”) to complete a Business Combination. If the Company is unable to complete a Business Combination within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account and not previously released to pay taxes of the Company or Opco (less an amount required to satisfy taxes of the Company and Opco and up to $
The underwriter has agreed to waive their rights to their deferred underwriting commission held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the Initial Public Offering price per Unit. The Company will not be permitted to withdraw any of the principal or interest held in the Trust Account except for the withdrawal of interest to pay taxes, if any.
7
BEARD ENERGY TRANSITION ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Liquidity, Capital Resources, and Going Concern
As of March 31, 2023, the Company had a working capital deficit of $
Management plans to address this uncertainty through a Business Combination as discussed above. There is no assurance that the Company’s plans to consummate a Business Combination will be successful or successful within the Combination Period. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Financial Statement Presentation
The accompanying 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 SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they 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, the accompanying condensed consolidated financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented. The accompanying condensed consolidated financial statements should be read in conjunction with the Company’s Form 10-K as filed with the SEC on March 13, 2023. The interim results for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023 or for any future periods.
The condensed consolidated financial statements include the accounts of the Company and its majority-owned and controlled operating subsidiary after elimination of all intercompany transactions and balances as of March 31, 2023 and December 31, 2022.
Non-controlling Interest
The ownership interest of non-controlling participants in the operating subsidiary is included as a separate component of stockholders’ deficit.
The non-controlling interest in the operating subsidiary consists of Class A Units in Opco issued to an affiliate of the Sponsor and Class B Units in Opco issued to the Sponsor. Prior to an initial Business Combination, profits and losses of Opco are allocated to the holders of the Class A Units pro rata in accordance with the number of Class A Units held by such holder. Holder of the Class B Units do not participate in the profits and losses of Opco until conversion of the Class B Units to Class A Units in connection with an initial Business Combination. See Note 6 for additional details regarding Class A and Class B Units issued by Opco.
Use of Estimates
The preparation of the 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 and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and
8
BEARD ENERGY TRANSITION ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The initial valuation of the Public Warrants (as defined in Note 3), Private Placement Warrants, and Class A common stock subject to redemption required management to exercise significant judgement in its estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash and cash equivalents. The Company did
Investments Held in Trust Account
As of March 31, 2023 and December 31, 2022, the assets held in the Trust Account are comprised solely of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities and generally have a readily determinable fair value, or a combination thereof. Such securities and investments in money market funds are presented on the consolidated balance sheets at fair value at the end of each reporting period. Interest and dividend income resulting from these securities is included in income from investments held in the Trust Account in the accompanying consolidated statements of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.
Warrants
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480 and ASC Topic 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at fair value at their issuance date and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the consolidated statements of operations. The Public Warrants and Private Placement Warrants are equity classified (see Note 5).
Offering Costs associated with the Initial Public Offering
The Company complies with the requirements of ASC Topic 340, Other Assets and Deferred Costs and SEC Staff Accounting Bulletin Topic 5A - Expenses of Offering. Offering costs consist of legal and other expenses incurred through the consolidated balance sheet date that are directly related to the Initial Public Offering. Offering costs are charged against the carrying value of Class A common stock or stockholders' deficit based on the relative value of the shares of Class A common stock and the Warrants, as described below, to the proceeds received from the Units sold upon the completion of the Initial Public Offering. The Company incurred offering costs amounting to $
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration of credit risk consist of a cash account in a financial institution which, at times may exceed the Federal depository insurance coverage of $
9
BEARD ENERGY TRANSITION ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Net Income (Loss) Per Common Share
Net income (loss) per common share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period. The Company has not considered the effect of the warrants sold in the Initial Public Offering and private placement to purchase an aggregate of
The following tables reflect the calculation of basic and diluted net income (loss) per common share (in dollars, except per share amounts):
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For the three months ended March 31, 2023 |
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For the three months ended March 31, 2022 |
Net income (loss) |
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$ |
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$( |
Accretion of Class A common stock to redemption amount |
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( |
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( |
Net loss including accretion of temporary equity to redemption value |
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$( |
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$( |
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For the three months ended March 31, 2023 |
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For the three months ended March 31, 2022 |
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Class A |
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Class V |
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Class A |
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Class V |
Basic and diluted net income (loss) per share: |
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Numerator: |
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Net loss including accretion of temporary equity to redemption value |
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( |
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( |
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( |
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( |
Accretion of Class A common stock to redemption amount |
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— |
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— |
Net income (loss) |
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( |
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( |
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( |
Denominator: |
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Weighted Average Shares |
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Basic and diluted income (loss) per share of common stock |
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$ |
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$( |
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$( |
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$( |
As of March 31, 2023 and December 31, 2022,
Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, Fair Value Measurements and Disclosures, (“ASC 820”), approximates the carrying amounts represented in the balance sheet, primarily due to their short-term nature.
10
BEARD ENERGY TRANSITION ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Fair Value Measurement
ASC 820 establishes a fair value hierarchy that prioritizes and ranks the level of observability of inputs used to measure investments at fair value. The observability of inputs is impacted by a number of factors, including the type of investment, characteristics specific to the investment, market conditions and other factors. 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).
Investments with readily available quoted prices or for which fair value can be measured from quoted prices in active markets will typically have a higher degree of input observability and a lesser degree of judgment applied in determining fair value.
The three levels of the fair value hierarchy under ASC 820 are as follows:
Level 1—Quoted prices (unadjusted) in active markets for identical investments at the measurement date are used.
Level 2—Pricing inputs are other than quoted prices included within Level 1 that are observable for the investment, either directly or indirectly. Level 2 pricing inputs include quoted prices for similar investments in active markets, quoted prices for identical or similar investments in markets that are not active, inputs other than quoted prices that are observable for the investment, and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3—Pricing inputs are unobservable and include situations where there is little, if any, market activity for the investment. The inputs used in determination of fair value require significant judgment and estimation.
In some cases, the inputs used to measure fair value might fall within different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the investment is categorized in its entirety is determined based on the lowest level input that is significant to the investment. Assessing the significance of a particular input to the valuation of an investment in its entirety requires judgment and considers factors specific to the investment. The categorization of an investment within the hierarchy is based upon the pricing transparency of the investment and does not necessarily correspond to the perceived risk of that investment. See Note 8 for additional information on assets and liabilities measured at fair value.
Class A Common Stock Subject to Possible Redemption
All of the
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. Such changes are reflected in accumulated deficit. On November 29, 2021, the Company recorded an adjustment to present the redeemable Class A common stock at redemption value of $
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under ASC Topic 740, Income Taxes ("ASC 740"). Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the condensed consolidated financial statements carrying amounts of existing
11
BEARD ENERGY TRANSITION ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
assets and liabilities and their respective tax bases. 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.
ASC 740 prescribes a recognition threshold and a measurement attribute for the 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. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were
See Note 8 for additional information on income taxes for the periods presented.
Recent Accounting Pronouncements
The Company’s management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the accompanying condensed consolidated financial statements.
NOTE 3. INITIAL PUBLIC OFFERING
The registration statement for the Company’s Initial Public Offering was declared effective on November 23, 2021. On November 29, 2021, the Company consummated the Initial Public Offering of
NOTE 4. RELATED PARTY TRANSACTIONS
Founder Shares and Sponsor Shares
On February 9, 2021, an affiliate of the Sponsor paid an aggregate of $
The Company refers to the
The Initial Stockholders have agreed to forfeit up to
12
BEARD ENERGY TRANSITION ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The Class B Units of Opco will convert into Class A Units of Opco in connection with an initial Business Combination on a
The Initial Stockholders have agreed, subject to limited exceptions, not to transfer, assign or sell any Founder Shares or Sponsor Shares held by them, and any shares of the Company’s Class A common stock acquired upon exchange of Founder Shares or Sponsor Shares, until
Private Placement Warrants
Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of
Indemnity
The Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has entered into a written letter of intent, confidentiality or other similar agreement or business combination agreement, reduce the amount of funds in the Trust Account to below (i) $
13
BEARD ENERGY TRANSITION ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
except as to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the Trust Account (whether or not such waiver is enforceable) and except as to any claims under our indemnity of the underwriter of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act. Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, then the Sponsor will not be responsible to the extent of any liability for such third party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers, prospective target businesses and other entities with which the Company does business execute agreements with the Company waiving any right, title, interest or claim of any kind in or to any monies held in the Trust Account. The Company has not independently verified whether the Sponsor has sufficient funds to satisfy its indemnity obligations. The Company has not asked the Sponsor to reserve for such indemnification obligations as the Company believes the likelihood of the Sponsor having to indemnify the Trust Account is limited because the Company will endeavor to have all vendors and prospective target businesses as well as other entities execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
Promissory Note - Related Party
On February 9, 2021, the Sponsor agreed to loan the Company an aggregate of up to $
Administrative Support Agreement
The Company entered into an agreement, commencing on the effective date of the Initial Public Offering, to reimburse an affiliate of the Sponsor a total of up to $
Advance from Related Party
The Sponsor, officers and directors, or any of their respective affiliates, will be reimbursed for any out-of-pocket expenses incurred in connection with activities on the Company's behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. The audit committee will review on a quarterly basis all payments that were made to the Sponsor, officers, directors or their affiliates and will determine which expenses and the amount of expenses that will be reimbursed. There is no cap or ceiling on the reimbursement of out-of-pocket expenses incurred by such persons in connection with activities on the Company's behalf. For the three months ended March 31, 2023, payments of $
Working Capital Loans
14
BEARD ENERGY TRANSITION ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
In order to finance transaction costs in connection with an intended Business Combination, the Sponsor or an affiliate of the Sponsor or certain of the Company's officers and directors may, but are not obligated to, loan the Company funds as may be required. (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds held in the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination is not completed, the Company may use a portion of the proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $
NOTE 5. WARRANTS
Public Warrants may only be exercised for a whole number of shares.
The Company has agreed that as soon as practicable, but in no event later than 20 business days after the closing of an initial Business Combination, the Company will use its commercially reasonable efforts to file a post-effective amendment to the registration statement for the Initial Public Offering or a new registration statement with the SEC under the Securities Act, of the shares of Class A common stock issuable upon exercise of the warrants. The Company will use its commercially reasonable efforts to cause the same to become effective and to maintain the effectiveness of such registration statement or post-effective amendment to the registration for the Initial Public Offering, and a current prospectus relating thereto, until the expiration of the warrants in accordance with the provisions of the warrant agreement. Notwithstanding the above, if the Class A common stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, but the Company will be required to use its commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. In addition, if any such registration statement has not been declared effective by the sixtieth (60th) business day following the closing of the initial Business Combination, holders of the warrants will have the right, during the period beginning on the sixty first (61st) business day after the closing of the initial Business Combination and ending upon such registration statement being declared effective by the Commission, and during any other period when the Company has failed to have maintained an effective registration statement covering the shares of Class A common stock issuable upon exercise of the warrants, to exercise such warrants on a “cashless basis.”
Once the warrants become exercisable, the Company may redeem the outstanding Public Warrants for cash:
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in whole and not in part; |
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at a price of $ |
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upon a minimum of |
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if, and only if, the last sale price of the Class A common stock equals or exceeds $ |
The Company will not redeem the warrants for cash unless a registration statement under the Securities Act covering the shares of Class A common stock issuable upon exercise of the warrants is effective and a current prospectus relating to those shares of Class A common stock is available throughout the 30-day redemption period or the Company has elected to require exercise of the warrants on a “cashless basis.” If and when the Public Warrants become
15
BEARD ENERGY TRANSITION ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
redeemable by the Company, the Company may exercise its redemption right even if the Company is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
The exercise price and number of the ordinary shares issuable upon exercise of the warrants may be adjusted in certain circumstances including consolidation, combination, reverse share split, reclassification or similar event. If (x) the Company issues additional Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of the initial Business Combination at an issue price or effective issue price of less than $
The Private Placement Warrants have terms and provisions that are substantially identical to the Public Warrants, except that the Private Placement Warrants will not be redeemable by the Company and may be exercised for cash or on a “cashless basis.”
The Company accounts for the
NOTE 6. STOCKHOLDERS' DEFICIT
Preferred stock — The Company is authorized to issue
Class A common stock — The Company is authorized to issue
Class V common stock — The Company is authorized to issue
Common stockholders of record are entitled to
16
BEARD ENERGY TRANSITION ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Class A and Class B Units issued by Opco — The Class B Units of Opco are considered profits interest only units with no initial value. Subject to the obligation of Opco to make tax distributions and to reimburse the Company for its corporate and other overhead expenses, Opco will have the right to determine when non-liquidating distributions will be made to the holders of Opco Units and the amount of any such distributions. Opco does not anticipate making any such distributions (other than tax distributions and reimbursements of expenses) to holders of Opco Units (including the Company) prior to an initial Business Combination, other than redemptions of Class A Units of Opco held by the Company in connection with a redemption of Public Shares. If Opco authorizes a non-liquidating distribution, whether before or following the initial Business Combination, the distribution will be made to holders of Opco Units on a pro rata basis in accordance with their respective percentage ownership of Opco Units.
The Class B Units of Opco will convert into Class A Units of Opco in connection with an initial Business Combination on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like.
In addition, following an initial Business Combination, holders of Class A Units of Opco (other than the Company) will have the right, subject to certain limitations, to exchange Class A Units of Opco (and a corresponding number of shares of Class V common stock) for, at the Company’s option, (i) shares of Class A common stock on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like, or (ii) a corresponding amount of cash. The decision to make a cash payment upon an exercise of an exchange right will be made by the Company’s independent directors.
In February 2021, an affiliate of the Sponsor purchased
NOTE 7. COMMITMENTS AND CONTINGENCIES
Registration and Stockholder Rights Agreement
The holders of the Founder Shares, Sponsor shares, Private Placement Warrants and warrants that may be issued upon conversion of working capital loans (and any shares of the Company's Class A common stock issuable upon the exercise of the Private Placement Warrants or exchange of the Founder Shares issued upon exercise of the Private Placement Warrants and warrants that may be issued upon conversion of working capital loans and upon exchange of the Founder Shares) are entitled to registration rights pursuant to a registration rights agreement signed on the effective date of the Initial Public Offering, requiring the Company to register such securities for resale (in the case of the Founder Shares, only after the Founder Shares become exchangeable for the shares of Class A common stock). The holders of these securities, having at least $
Underwriting Agreement
The underwriter purchased
The underwriter was paid a cash underwriting discount of two percent (
17
BEARD ENERGY TRANSITION ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 8. INCOME TAX
The Company's effective tax rate for the three months ended March 31, 2023 and for the three months ended March 31, 2022 was
18
NOTE 9. FAIR VALUE MEASUREMENTS
The following table presents information about the Company’s financial assets that are measured at fair value on a recurring basis as of March 31, 2023 and December 31, 2022, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
Description |
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Amount at Fair Value |
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Level 1 |
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Level 2 |
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Level 3 |
March 31, 2023 |
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Assets |
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Investments held in Trust Account: |
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U.S. Treasury Securities Money Market Funds |
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$ |
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$ |
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$— |
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$— |
Description |
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Amount at Fair Value |
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Level 1 |
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Level 2 |
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Level 3 |
December 31, 2022 |
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Assets |
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Investments held in Trust Account: |
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U.S. Treasury Securities Money Market Funds |
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$ |
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$ |
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$— |
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$— |
The assets held in the Trust Account as of March 31, 2023 and December 31, 2022 are comprised solely of U.S. government securities or investments in money market funds that invest in U.S. government securities and generally have a readily determinable fair value.
19
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
References to the “Company,” “our,” “us” or “we” refer to Beard Energy Transition Acquisition Corp. The following discussion and analysis of the Company’s 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 on Form 10-Q (this “Quarterly Report”). Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Such statements include, but are not limited to, possible business combinations and the financing thereof, and related matters, as well as all other statements other than statements of historical fact included in this Quarterly Report. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other U.S. Securities and Exchange Commission (“SEC”) filings. Except as expressly required by applicable securities law, we disclaim any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We are a blank check company incorporated on February 8, 2021 as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses, which we refer to throughout this Quarterly Report as our “initial business combination”. We have entered into a non-binding letter of intent that sets forth the preliminary terms and conditions of a potential business combination with a private company that meets the Company’s investment criteria and principles and with which the Company has had discussions over an extended period of time. No assurances can be made, however, that the Company will successfully negotiate and enter into a definitive agreement for a business combination. We intend to effectuate our initial business combination using cash from the proceeds of our initial public offering (the “Public Offering”) and the warrants issued to Beard Energy Transition Acquisition Sponsor LLC (“Sponsor”) in a private placement simultaneously with the closing of the Public Offering (“private placement warrants”), our capital stock, debt or a combination of the foregoing.
The issuance of additional shares of Class A common stock, Class A Units and Class B Units of Beard Energy Transition Acquisition Holdings LLC (“Opco”) (and corresponding shares of our Class V common stock) or shares of preferred stock:
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• |
may significantly dilute the equity interest of investors in our Public Offering, which dilution would increase if the anti-dilution provisions in the Class B Units of Opco initially acquired by our Sponsor prior to our Public Offering (or the Class A Units of Opco into which such Class B Units will convert) and a corresponding number of shares of our Class V common stock (“founder shares”) resulted in an increase in the number of Class A Units of Opco into which the Class B Units of Opco will convert; |
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may subordinate the rights of holders of our Class A common stock and Class V common stock (“common stock”) if preferred stock is issued with rights senior to those afforded our common stock; |
20
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could cause a change in control if a substantial number of shares of our common stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; |
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may have the effect of delaying or preventing a change of control of us by diluting the stock ownership or voting rights of a person seeking to obtain control of us; and |
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may adversely affect prevailing market prices for our Class A common stock and/or warrants. |
Similarly, if we issue debt securities or otherwise incur significant debt to bank or other lenders or the owners of a target, it could result in:
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default and foreclosure on our assets if our operating revenues after an initial business combination are insufficient to repay our debt obligations; |
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acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant; |
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our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand; |
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our inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security is outstanding; |
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our inability to pay dividends on our Class A common stock; |
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using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our common stock if declared, our ability to pay expenses, make capital expenditures and acquisitions and fund other general corporate purposes; |
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limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate; |
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increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; |
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limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, and execution of our strategy; and |
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other purposes and other disadvantages compared to our competitors who have less debt. |
As of March 31, 2023 and December 31, 2022, we held cash of $495,088 and $1,076,578, respectively, current liabilities of $2,094,318 and $1,434,679, respectively, and deferred underwriting compensation of $8,050,000. Further, we expect to continue to incur significant costs in the pursuit of our initial business combination. We cannot assure you that our plans to complete an initial business combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities for the three months ended March 31, 2023 and for the three months ended March 31, 2022 were organizational activities, those necessary to prepare for our Public Offering, described below, and since the closing of our Public Offering, the search for a prospective initial business combination. We do not expect to generate any operating revenues until after the completion of our initial business combination. We generate non-operating income in the form of interest income on cash and cash equivalents held after our Public Offering. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as due diligence expenses.
21
For the three months ended March 31, 2023, we had net income of $1,267,600, $2,520,667 which resulted from interest income on investments held in the trust account, offset in part by operating and formation costs of $684,227, income tax expense of $518,840 and franchise tax expense of $50,000.
For the three months ended March 31, 2022, we had net loss of $403,862, which resulted from operating and formation costs of $369,028 and franchise tax expense of $50,000, offset in part by interest income on investments held in the trust account of $15,144.
Liquidity, Capital Resources and Going Concern
On November 29, 2021, we consummated an initial public offering of 23,000,000 units, including 3,000,000 units issued pursuant to the exercise of the underwriter's over-allotment option in full, generating gross proceeds to the Company of $230,000,000. Simultaneously with the consummation of our initial public offering, we completed the private sale of 12,225,000 warrants to our Sponsor at a purchase price of $1.00 per warrant (the "private placement warrants"), generating gross proceeds of $12,225,000. The proceeds from the sale of the private placement warrants were added to the net proceeds from the initial public offering held in a trust account (the "trust account"). If we do not complete an initial business combination 18 months (or 21 months, as applicable) from the closing of the initial public offering, the proceeds from the sale of the private placement warrants will be used to fund the redemption of the public shares (subject to the requirements of applicable law) and the private placement warrants will expire worthless.
For the three months ended March 31, 2023, net cash used in operating activities was $581,120, which was primarily due to operational costs, income taxes, and franchise taxes paid during the period.
For the three months ended March 31, 2022, net cash used in operating activities was $206,870, which was due to our net loss of $403,884 and interest and dividend income on investments held in the trust account of $15,144, offset in part by changes in working capital of $212,158.
There were no investing activities for the three months ended March 31, 2023 and March 31, 2022, respectively.
For the three months ended March 31, 2023, net cash used in financing activities of $370 which was comprised of repayments of advance to our Sponsor of $1,425 and repayment of the advance from an affiliate of our sponsor of $353, partially offset in part by $1,408 in proceeds from an advance from an affiliate of our sponsor.
For the three months ended March 31, 2022, net cash used in financing activities of $11 was comprised of repayment of the advance from an affiliate of our sponsor of $209, offset in part by $198 in proceeds from an advance from an affiliate of our sponsor.
As of March 31, 2023 and December 31, 2022, we had cash of $495,088 and $1,076,578 held outside the trust account, respectively. We intend to use the funds held outside the trust account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, structure, negotiate and complete a business combination.
In order to fund working capital deficiencies or finance transaction costs in connection with an intended initial business combination or to finance possible costs in connection with the contribution of an addition amount to be held in the trust account if we extend our time to complete an initial business combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required (“Working Capital Loans”). If we complete our initial business combination, we would repay such loaned amounts. In the event that our initial business combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from our trust account would be used for such repayment. Up to $1,500,000 of such Working Capital Loans and up to $2,300,250 of such extension funding loans may be convertible into warrants of the post business combination entity at a price of $1.00 per warrant at the option of the lender. The warrants would be identical to the private placement warrants, including as to exercise price, exercisability and exercise period. The terms of such loans, if any, have not been determined and no written agreements exist with respect to such loans. Prior to the completion of our initial business combination, we do not expect to seek
22
loans from parties other than our Sponsor or an affiliate of our Sponsor as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account.
The Company has incurred and expects to continue to incur significant costs in pursuit of its acquisition plans. The Company anticipates that the cash held outside of the Trust Account as of March 31, 2023, will not be sufficient to allow the Company to operate until May 29, 2023, the date at which the Company must complete a business combination. While the Company expects to have sufficient access to additional sources of capital under Working Capital Loans (as defined in Note 4), there is no current commitment on the part of any financing source to provide additional capital and no assurances can be provided that such additional capital will ultimately be available if necessary. Further, if a business combination is not consummated by May 29, 2023 (subject to the extension discussed below), there will be a mandatory liquidation and subsequent dissolution of the Company. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of time within one year after the date that these condensed consolidated financial statements are issued.
Management plans to address this uncertainty through a business combination as discussed above. There is no assurance that the Company’s plans to consummate a business combination will be successful or successful within the Combination Period (as defined in Note 1 in the accompanying condensed consolidated financial statements). The condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Further, we intend to hold a special meeting of stockholders on May 25, 2023 in which our stockholders will vote on, among other things, whether to amend and restate our Amended and Restated Certificate of Incorporation to extend the date by which the Company may consummate a business combination from 18 months (or 21 months if we choose to exercise our option to extend the period of time to consummate a business combination by an additional three months if the Sponsor, or its affiliates or designees deposit $2,300,250 into the Trust Account) to 25 months from the closing of the Company’s Initial Public Offering or such earlier date as determined by our board of directors. We have also entered into a non-binding letter of intent that sets forth the preliminary terms and conditions of a potential business combination with a private company that meets the Company’s investment criteria and principles and with which the Company has had discussions over an extended period of time.
If we extend the date by which the Company may consummate a business combination and successfully enter into a business combination, any related transaction expenses, if not paid at closing of the business combination, would become the responsibility of the combined company.
Related Party Transactions
Administrative Support Agreement
The Company entered into an agreement, commencing on the effective date of the Initial Public Offering, to reimburse an affiliate of the Sponsor a total of up to $25,000 per month for administrative support as may be reasonably required by the Company. Upon the completion of an initial business combination, the Company will cease paying these monthly fees. The Company incurred and paid $50,001 in expenses under this agreement for the three months ended March 31, 2023. The Company incurred and paid $50,001 in expenses under this agreement for the three months ended March 31, 2022.
Our Sponsor, officers and directors, or any of their respective affiliates, will be reimbursed for any out-of-pocket expenses incurred in connection with activities on the Company's behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. The audit committee will review on a quarterly basis all payments that were made to the Sponsor, officers, directors or their affiliates and will determine which expenses and the amount of expenses that will be reimbursed. There is no cap or ceiling on the reimbursement of out-of-pocket expenses incurred by such persons in connection with activities on the Company's behalf. For the three months ended March 31, 2023, payments of $1,408 were paid by certain affiliate employees for operational expenses on behalf of the Company, and $353 was repaid back to the certain affiliate employees. For the three months ended March 31, 2022, payments of $200 were paid by certain affiliate employees for operational expenses on behalf of the company, and $219 was repaid back to the certain affiliate employees.
23
Related Party Loans
On February 9, 2021, the Sponsor agreed to loan the Company an aggregate of up to $300,000 to cover expenses related to the Public Offering pursuant to the Promissory Note. This loan was non-interest bearing and payable on the earlier of (i) August 8, 2021 (as subsequently extended to February 9, 2022) or (ii) the consummation of the Public Offering. On November 30, 2021, the Company repaid the Promissory Note in full. As of March 31, 2023 and December 31, 2022, there was no balance outstanding under the Promissory Note.
In order to finance transaction costs in connection with an intended business combination, the Sponsor or an affiliate of the Sponsor or certain of the Company's officers and directors may, but are not obligated to, loan the Company funds as may be required. (“Working Capital Loans”). If the Company completes a business combination, the Company would repay the Working Capital Loans out of the proceeds held in the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a business combination is not completed, the Company may use a portion of the proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a business combination, without interest, or, at the lender’s discretion, up to $1,500,000 of such Working Capital Loans may be convertible into warrants of the post business combination entity at a price of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants. As of March 31, 2023 and December 31, 2022, there was no balance outstanding under the Working Capital Loans.
We intend to hold a special meeting of stockholders on May 25, 2023 in which our stockholders will vote on, among other things, whether to amend and restate our Amended and Restated Certificate of Incorporation to extend the date by which the Company may consummate a business combination from 18 months (or 21 months if we choose to exercise our option to extend the period of time to consummate a business combination by an additional three months if the Sponsor, or its affiliates or designees deposit $2,300,250 into the Trust Account (the “Extension Option”)) to 25 months from the closing of the Company’s Initial Public Offering (the “Extended Date”) or such earlier date as determined by our board of directors (the “Extension,” and such proposal, the “Extension Amendment Proposal”). If the Extension Amendment Proposal is approved, the Sponsor will deposit into the Trust Account $100,000 on the thirtieth day of each month thereafter (or if such thirtieth day is not a business day, on the business day immediately preceding such thirtieth day), beginning on June 30, 2023, in exchange for a non-interest bearing, unsecured promissory note until the earliest of (a) consummation of a business combination, (b) the Extended Date, or (c) the voluntary dissolution and liquidation of the Company, as determined by the Board. In the event the Sponsor does not deposit such funds into the Trust Account, the Board intends to voluntarily dissolve and liquidate the Company. The gross proceeds from the issuance of such promissory note will be added to the offering proceeds in the Trust Account and will be used to fund the redemption of the public shares and may increase the per share amount available for distribution to such redeeming stockholders. If the Company consummates a business combination, it will repay the amount loaned under the promissory note out of the proceeds of the Trust Account released to it. If the Company does not consummate a business combination by the Extended Date, the Company will not repay the amount loaned under the promissory note until 100% of the public shares have been redeemed and only in connection with the liquidation of the Company to the extent funds are available outside of the Trust Account.
Private Placement Warrants
Our Sponsor purchased an aggregate of 12,225,000 private placement warrants at a price of $1.00 per warrant or $12,225,000 in the aggregate in a private placement that occurred simultaneously with the closing of our Public Offering. Each private placement warrant is exercisable to purchase for $11.50 one share of our Class A common stock. Our Sponsor is permitted to transfer the private placement warrants held by it to certain permitted transferees, including their officers and directors and other persons or entities affiliated with or related to them, but the transferees receiving such securities will be subject to the same agreements with respect to such securities as the Sponsor. Otherwise, these warrants are not, subject to certain limited exceptions, transferable, assignable or saleable until 30 days after the completion of our business combination. The private placement warrants are non-redeemable so long as they are held by our Sponsor or their permitted transferees. The private placement warrants may also be exercised by the Sponsor or their permitted transferees for cash or on a cashless basis. Otherwise, the private placement warrants
24
have terms and provisions that are identical to those of the warrants being sold as part of the units in our Public Offering, including as to exercise price, exercisability and exercise period.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of March 31, 2023 and December 31, 2022.
Contractual Obligations
Registration and Stockholder Rights Agreement
The holders of the founder shares, Sponsor shares, private placement warrants and warrants that may be issued upon conversion of Working Capital Loans (and any shares of our Class A common stock issuable upon the exercise of the private placement warrants or exchange of the founder shares issued upon exercise of the private placement warrants and warrants that may be issued upon conversion of Working Capital Loans and upon exchange of the founder shares) are entitled to registration rights pursuant to a registration rights agreement signed on the effective date of our Public Offering, requiring us to register such securities for resale (in the case of the founder shares, only after the founder shares become exchangeable for the shares of Class A common stock). The holders of these securities, having at least $25 million in the aggregate, are entitled to make up to three demands, excluding short form demands, that we register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of our initial business combination and rights to require us to register for resale such securities pursuant to Rule 415 under the Securities Act. We will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriter purchased 3,000,000 Units to cover over-allotments at the initial public offering price, less the underwriting commissions.
The underwriter was paid a cash underwriting discount of two percent (2%) of the gross proceeds of the initial public offering, or $4,600,000. Additionally, the underwriter will be entitled to a deferred underwriting commission of 3.5%, or $8,050,000, of the gross proceeds of the initial public offering held in the trust account upon the completion of our initial business combination subject to the terms of the underwriting agreement.
Critical Accounting Policies
The preparation of condensed consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting estimates:
Warrants
We account for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Accounting Standards Codification (“ASC”) Topic 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at fair value at their issuance date and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. The warrants sold as part of the units in our Public Offering (“public warrants”) and private placement warrants are equity classified.
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Class A common stock subject to redemption
All of the 23,000,000 shares of Class A common stock sold as part of the units in our initial public offering and the 1,250 shares of Class A common stock purchased by an affiliate of our Sponsor on February 9, 2021 contain a redemption feature which allows for the redemption of such shares in connection with our liquidation if there is a stockholder vote or tender offer in connection with our initial business combination and in connection with certain amendments to our amended and restated certificate of incorporation. In accordance with SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within the control of the Company require shares of common stock subject to redemption to be classified outside of permanent equity. Ordinary liquidation events, which involve the redemption and liquidation of all of the entity’s equity instruments, are excluded from the provisions of ASC 480.
We recognize changes in redemption value as it occurs and adjust the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. Such changes are reflected in accumulated deficit.
Net Income (Loss) Per Share of Common Stock
Net income (loss) per common share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period. We have not considered the effect of the warrants sold in the Initial Public Offering and private placement to purchase an aggregate of 23,725,000 shares in the calculation of diluted income (loss) per share, since the exercise of the warrants is contingent upon the occurrence of future events. In order to determine the net income (loss) attributable to both the Class A common stock and Class V common stock, we first considered the total income (loss) allocable to both sets of shares. This is calculated using the total net income (loss) less any dividends paid. For purposes of calculating net income (loss) per share, any remeasurement of the accretion to redemption value of the Class A common stock subject to possible redemption was considered to be dividends paid to the holders of the Class A common stock. Subsequent to calculating the total income (loss) allocable to both sets of shares, the Company split the amount to be allocated pro rata between Class A and Class V common stock for the three months ended March 31, 2023, reflective of the respective participation rights.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s condensed consolidated financial statements.
JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, our condensed consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
As an “emerging growth company,” we are not required to, among other things, (i) provide an independent registered public accounting firm’s attestation report on our internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the independent registered public accounting firm’s report providing additional information about the audit and the condensed consolidated financial statements (auditor discussion and analysis), and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of the Offering or until we are no longer an “emerging growth company,” whichever is earlier.
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Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
We are a smaller reporting company as defined in Rule 12b-2 under the Exchange Act. As a result, pursuant to Item 305(e) of Regulation S-K, we are not required to provide the information required by this Item.
Item 4. |
Controls and Procedures |
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 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 company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
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, 2023. 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 effective.
Internal Control over Financial Reporting
During the most recently completed fiscal quarter, there has been no change in our internal control over financial reporting 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 in their capacity as such.
Item 1A. |
Risk Factors |
In addition to the other information set forth in this Quarterly Report, you should carefully consider the risks discussed in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 13, 2023 (the “2022 Annual Report”). Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results. Except as set forth below, there have been no material changes in the risk factors discussed in Part I, Item 1A “Risk Factors” in the 2022 Annual Report.
Our financial conditions raise substantial doubt about our ability to continue as a “going concern” through one year from the date of the financial statements contained herein if a Business Combination is not consummated.
As of March 31, 2023, the Company had a working capital deficit of $765,069, including $495,088 in its operating bank account. The Company has incurred and expects to continue to incur significant costs in pursuit of its acquisition plans. The Company anticipates that the cash held outside of the Trust Account as of March 31, 2023, will not be sufficient to allow the Company to operate until May 29, 2023, the date at which the Company must complete a Business Combination, unless extended. While the Company expects to have sufficient access to additional sources of capital under the Working Capital Loans, there is no current commitment on the part of any financing source to provide additional capital and no assurances can be provided that such additional capital will ultimately be available if necessary. Further, if a Business Combination is not consummated by May 29, 2023 (or later, if extended), there will be a mandatory liquidation and subsequent dissolution of the Company. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of time within one year after the date that these condensed financial statements are issued.
Management plans to address this uncertainty through a Business Combination, although it also believes that our sponsor will provide the Working Capital Loans that will provide sufficient liquidity to meet the Company’s working capital needs through the earlier of the consummation of a Business Combination and one year from the date of this filing. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily include or be limited to, curtailing operations, suspending the pursuit of a potential transaction and reducing overhead expenses. The Company cannot provide any assurance that financing sources will be available to it on commercially acceptable terms or if at all, or that its plans to consummate a Business Combination will be successful or successful within the Combination Period. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
We may decide to maintain the funds in the Trust Account in cash in an interest-bearing demand deposit account, which may limit the interest income available for payment of taxes and dissolution expenses or for distribution to public stockholders.
The funds in the Trust Account are invested only in U.S. government treasury obligations with maturities of 185 days or less or in certain money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act, which invest solely in U.S. government treasury obligations.
The Company may convert its investments in the Trust Account into cash, which would remain in the Trust Account. If we maintain the funds in the Trust Account in an interest-bearing demand deposit account, we may receive lower interest on the funds held in such deposit account (as compared to continuing to invest such funds in interest-bearing U.S. government securities); however, we cannot assure you that such rate on the deposit account will not decrease or increase significantly. As a result, any decision to liquidate the investments held in the Trust Account and thereafter to hold all funds in the Trust Account in cash items may reduce the dollar amount our public stockholders would receive upon any redemption of the public shares or our liquidation. Accordingly, we will
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evaluate our options prior to making such a decision and intend to choose the option that we believe would be in the best interest of the Company.
There can be no assurance that, if the Extension Amendment is approved, we will be able to successfully negotiate and enter into a definitive agreement under our current non-binding letter of intent for a potential business combination or otherwise complete a Business Combination.
We intend to hold a special meeting of stockholders on May 25, 2023, in which our stockholders will vote on, among other things, the Extension Amendment Proposal. We have entered into a non-binding letter of intent that sets forth the preliminary terms and conditions of a potential business combination with a private company that meets the Company’s investment criteria and principles and with which the Company has had discussions over an extended period of time; however, the Board currently believes that there will not be sufficient time before May 29, 2023 to complete a Business Combination with this company or an alternative target. Accordingly, our Board believes that the Extension is necessary in order to be able to consummate a Business Combination.
Even if the Extension is approved, the Company can provide no assurances that a Business Combination will be consummated prior to the Extended Date, whether under the current letter of intent or otherwise. Our ability to consummate any Business Combination is dependent on a variety of factors, many of which are beyond our control. If the Extension is approved, the Company expects to seek stockholder approval of a Business Combination. Even if the Extension or a Business Combination are approved by our stockholders, it is possible that redemptions will leave us with insufficient cash to consummate a Business Combination on commercially acceptable terms, or at all. The fact that we will have separate redemption periods in connection with the Extension and a Business Combination vote could exacerbate these risks. Other than in connection with a redemption offer or liquidation, our stockholders may be unable to recover their investment except through sales of our shares on the open market. The price of our shares may be volatile, and there can be no assurance that stockholders will be able to dispose of our shares at favorable prices, or at all.
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Item 2. |
Recent Sales of Securities; Use of Proceeds from Registered Offerings |
None.
Item 3. |
Defaults Upon Senior Securities |
None.
Item 4. |
Mine Safety Disclosures |
Not applicable.
Item 5. |
Other Information |
None.
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Item 6. |
Exhibits. |
Exhibit |
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Description |
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3.1 |
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3.2 |
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3.3 |
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3.4 |
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4.1 |
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4.2 |
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4.3 |
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4.4 |
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4.5 |
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4.6 |
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31.1 |
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Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a). |
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31.2 |
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Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a). |
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32.1 |
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32.2 |
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101.INS |
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Inline XBRL Instance Document |
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101.SCH |
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Inline XBRLTaxonomy Extension Schema Document |
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101.CAL |
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Inline XBRLTaxonomy Extension Calculation Linkbase Document |
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Exhibit |
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Description |
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101.DEF |
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Inline XBRLTaxonomy Extension Definition Linkbase Document |
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101.LAB |
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Inline XBRLTaxonomy Extension Label Linkbase Document |
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101.PRE |
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Inline XBRLTaxonomy Extension Presentation Linkbase Document |
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104 |
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Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
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SIGNATURE
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.
BEARD ENERGY TRANSITION ACQUISITION CORP.
Date: May 9, 2023 |
By: |
/s/ Sarah James |
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Name: |
Sarah James |
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Title: |
Chief Financial Officer and Chief Accounting Officer |
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(Principal Financial Officer) |
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