UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from to
| (Exact name of registrant as specified in its charter) |
| (State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
| | ||
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Not Applicable
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Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
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 | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
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 August 1, 2023,
Table of Contents
| Page No. | ||
| PART I - FINANCIAL INFORMATION | ||
| Item 1. | Financial Statements | 1 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 24 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 33 |
| Item 4. | Controls and Procedures | 33 |
| PART II – OTHER INFORMATION | ||
| Item 1. | Legal Proceedings | 34 |
| Item 1A. | Risk Factors | 34 |
| Item 2. | Recent Sales of Securities; Use of Proceeds from Registered Offerings | 35 |
| Item 3. | Defaults Upon Senior Securities | 35 |
| Item 4. | Mine Safety Disclosures | 35 |
| Item 5. | Other Information | 35 |
| Item 6. | Exhibits | 36 |
| SIGNATURE | 38 | |
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BEARD ENERGY TRANSITION ACQUISITION CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
| June 30, 2023 | December 31, 2022 | |||||||
| Assets: | (Unaudited) | |||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Prepaid income tax | ||||||||
| Business combination reimbursement receivable | ||||||||
| Total current assets | ||||||||
| Investments held in Trust Account | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities, Redeemable Class A Common Stock and Stockholders’ Deficit: | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses and other current liabilities | ||||||||
| Accrued offering costs | ||||||||
| Income tax payable | ||||||||
| Franchise tax payable | ||||||||
| Promissory Note for Trust Extension Payments | ||||||||
| Due to Sponsor | ||||||||
| Total current liabilities | ||||||||
| Deferred underwriting fee payable | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies (Note 7) | ||||||||
| Class A common stock, $ | ||||||||
| Stockholders’ Deficit: | ||||||||
| Preferred stock, $ | ||||||||
| Class A common stock, $ | ||||||||
| Class V common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Beard Energy Transition Acquisition Corp. deficit | ( | ) | ( | ) | ||||
| Non-controlling interest in subsidiary | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| Total Liabilities, Redeemable Class A Common Stock and Stockholders’ Deficit | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1
BEARD ENERGY TRANSITION ACQUISITION CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Operating and formation costs | $ | ( | ) | $ | $ | $ | ||||||||||
| Franchise tax | ||||||||||||||||
| Income (loss) from operations | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Interest and dividend income on investments held in Trust Account | ||||||||||||||||
| Income (loss) before income taxes | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Income tax expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net income (loss) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Net income attributable to non-controlling interest in subsidiary | ( | ) | ( | ) | ||||||||||||
| Net income (loss) attributable to Beard Energy Transition Acquisition Corp. | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| $ | $ | $ | $ | ( | ) | |||||||||||
| $ | $ | ( | ) | $ | $ | ( | ) | |||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
BEARD ENERGY TRANSITION ACQUISITION CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(UNAUDITED)
| For the Three and Six months ended June 30, 2023 | ||||||||||||||||||||||||||||||||
| Stockholders’ Deficit | ||||||||||||||||||||||||||||||||
| Redeemable Class A Common Stock | Class V Common Stock | Additional Paid-in | Accumulated | Non- controlling Interest in | Total Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Subsidiary | Deficit | |||||||||||||||||||||||||
| Balance – December 31, 2022 | $ | $ | $ | — | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Subsequent accretion of Class A common stock subject to redemption as of March 31, 2023 | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||||||
| Balance – March 31, 2023 | $ | $ | $ | — | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Subsequent accretion of Class A common stock subject to redemption to redemption amount as of June 30, 2023 | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Redemption of Class A common stock | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||||||
| Balance – June 30, 2023 | $ | $ | $ | — | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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BEARD ENERGY TRANSITION ACQUISITION CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(UNAUDITED)
| For the Three and Six months ended June 30, 2022 | ||||||||||||||||||||||||||||||||
| Stockholders’ Deficit | ||||||||||||||||||||||||||||||||
| Redeemable Class A Common Stock | Class V Common Stock | Additional Paid-in | Accumulated | Non- controlling Interest in | Total Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Subsidiary | Deficit | |||||||||||||||||||||||||
| Balance – December 31, 2021 | $ | $ | $ | — | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Subsequent accretion of Class A common stock subject to redemption as of March 31, 2022 | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance – March 31, 2022 | $ | $ | $ | — | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Subsequent accretion of Class A common stock subject to redemption to redemption amount as of June 30, 2022 | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance – June 30, 2022 | $ | $ | $ | — | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
BEARD ENERGY TRANSITION ACQUISITION CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| For the Six Months Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Interest and dividend income on investments held in Trust Account | ( | ) | ( | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses | ||||||||
| Accounts payable | ( | ) | ||||||
| Accrued expenses | ||||||||
| Income tax payable | ( | ) | ||||||
| Franchise tax payable | ( | ) | ||||||
| Prepaid income tax | ( | ) | ||||||
| Business combination reimbursement receivable | ( | ) | — | |||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Cash withdrawn from Trust Account for payment to redeeming stockholders | ||||||||
| Cash withdrawn from Trust Account for tax payments | ||||||||
| Cash deposited into Trust Account | ( | ) | — | |||||
| Net cash provided by investing activities | ||||||||
| Cash Flows from Financing Activities: | ||||||||
| Due to Sponsor | ( | ) | ||||||
| Advance from related party | ||||||||
| Payment to redeeming stockholders | ( | ) | ||||||
| Proceeds from promissory note for trust extension payments | ||||||||
| Repayment of advance from related party | ( | ) | ( | ) | ||||
| Net cash (used in) provided by financing activities | ( | ) | ||||||
| Net Change in Cash | ( | ) | ( | ) | ||||
| Cash - Beginning of period | ||||||||
| Cash - End of period | $ | $ | ||||||
| Supplemental disclosures of non-cash investing and financing activities: | ||||||||
| Subsequent accretion of Class A common stock subject to redemption as of June 30, 2023 and 2022, respectively | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited 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 and six months ended June 30, 2023 and for the three and six months ended June 30, 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 $
6
BEARD ENERGY TRANSITION ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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
On May 25, 2023 the Company held a special meeting
of stockholders (the “Special Meeting”) where the stockholders of the Company approved the Amended and Restated Investment
Management Trust Agreement, by and between the Company, Opco and Continental Stock Transfer & Trust Company (the “A&R IMTA”).
On May 26, 2023, the Company, Opco and Continental Stock Transfer & Trust Company entered into the A&R IMTA. The A&R Charter
(i) extends the date by which the Company must complete a business combination (the “Extension”) from 18 months (or 21 months
if the Company chooses to exercise its option to extend the date by an additional three months) to 25 months from the closing of the Company’s
initial public offering (with no extension option) or such earlier date as determined by the Company’s board of directors (the “Board”)
and (ii) reflects certain other non-substantive changes to the Company’s charter. In connection
with the proposed business combination, Suntuity Renewables LLC (“Suntuity”) has agreed to assume the Sponsor’s intended
obligations to deposit into the Trust Account $
7
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”)
(a) in a manner that would affect the substance or timing of the Company’s obligation to redeem
The Company will have until 25 months 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. On May 18, 2023, Citi, the underwriter for the Initial Public Offering, delivered
a letter to the Company, wherein Citi expressly waived all deferred underwriting discounts and commissions owed to them upon, and subject
only to, consummation of the Transactions, of $
Suntuity Business Combination Agreement
On May 18, 2023, the Company, a Delaware corporation (“Acquiror” or “SPAC”), Suntuity Inc., a Delaware corporation and wholly owned subsidiary of Acquiror (“New PubCo”), Beard Merger Sub I Corp., a Delaware corporation and wholly owned subsidiary of New PubCo (“Merger Sub I”), Beard Merger Sub II LLC, a Delaware limited liability company and wholly owned subsidiary of New PubCo (“Merger Sub II” and together with Acquiror, New PubCo and Merger Sub I, the “Acquiror Group”), Suntuity Renewables LLC, a New Jersey limited liability company (“Suntuity), and solely for the purpose of Section 7.17 and Article X thereof, each of the Sponsor and Gregory A. Beard, an individual residing in New York (“Beard”), entered into a business combination agreement (the “Business Combination Agreement”).
8
BEARD ENERGY TRANSITION ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Pursuant to the Business Combination Agreement, the Company and Suntuity will become wholly-owned subsidiaries of New PubCo through a series of mergers. The Agreement specifically provides:
| ● | Each of New PubCo and the Merger Subs are newly formed entities that were formed for the sole purpose of entering into and consummating the transactions set forth in the Business Combination Agreement. New PubCo is a wholly-owned direct subsidiary of Beard and each Merger Sub is a wholly-owned direct subsidiary of New PubCo. |
| ● | On the Closing Date, each of the following transactions will occur in the following order: (i) Merger Sub I will merge with and into SPAC (the “First Merger”), with SPAC surviving the First Merger as a wholly-owned subsidiary of New PubCo (the “First Surviving Company”); (ii) pursuant to a contribution agreement (a) Beard will contribute to New PubCo all of the Class A units (“Class A Units”) of Beard Energy Transition Acquisition Holdings LLC (“OpCo”) held by him in exchange for an equal number of shares of New PubCo Class A Common Stock, (b) Sponsor will contribute to New PubCo all of the Class B units of OpCo (“Class B Units”) held by it (after giving effect to any forfeitures pursuant to the Sponsor Agreement) in exchange for an equal number of shares of New PubCo Class A Common Stock and (c) all outstanding shares of New PubCo Class V Common Stock issued in the First Merger shall be cancelled for no consideration; and (iii) Merger Sub II will merge with and into Suntuity (the “Suntuity Merger”, and together with the First Merger, the “Mergers”), with Suntuity surviving the Suntuity Merger as a wholly-owned subsidiary of New PubCo (together with the First Surviving Company, the “Surviving Companies”). Following the transactions, the Surviving Companies will be wholly-owned subsidiaries of New PubCo. |
Each Merger will become effective when a certificate of merger is filed with the Secretary of State of Delaware or the Secretary of State of New Jersey, as the case may be. The date and time at which the Mergers become effective is defined as the “Effective Time”.
At the First Merger Effective Time: each share
of SPAC Class A Common Stock and SPAC Class V Common Stock issued and outstanding immediately prior to the First Merger Effective Time
shall be cancelled and exchanged for one share of New PubCo Class A Common Stock and one share of New PubCo Class V Common Stock, respectively;
each issued and outstanding Public Warrant (as defined in Note 5) and Private Placement Warrant (as defined in Note 1) to purchase shares
of Class A Common Stock of the Company that is outstanding immediately prior to the First Merger Effective Time, will be cancelled and
exchanged for a New PubCo Warrant (the “New PubCo Warrants”); each outstanding SPAC Unit will automatically be cancelled and
exchanged for
At the Suntuity Merger Effective Time, (a) each unit representing limited liability company membership interests of Suntuity (“Suntuity Interest”) issued and outstanding immediately prior to the Suntuity Merger Effective Time will be cancelled and exchanged for (i) a number of shares of New PubCo Class A Common Stock equal to (x) the Suntuity Consideration Shares (as defined below) divided by (y) the sum of the total number of Suntuity Interests, including Suntuity Interests subject to awards representing the contingent right to receive a percentage of the Suntuity Interests (the “Suntuity Restricted Unit Awards”), issued and outstanding immediately prior to the Suntuity Merger Effective Time and (ii) a number of New PubCo Warrants pursuant to the Sponsor Agreement in accordance with the terms of the Sponsor Agreement referred to below and (b) each warrant to purchase Suntuity Interests (“Suntuity Warrant”), to the extent then outstanding and unexercised, will automatically without any action on the part of the holder thereof, be cancelled and exchanged for a number of shares of New PubCo Class A Common Stock equal to the number of Suntuity Interests subject to such Suntuity Warrant immediately prior to the Suntuity Merger Effective Time.
9
BEARD ENERGY TRANSITION ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Each Suntuity Restricted Unit Award that is outstanding as of immediately prior to the Suntuity Merger Effective Time, shall, effective as of the Suntuity Merger Effective Time, cease to represent a Suntuity Restricted Unit Award and thereafter constitute an award, on the same terms and conditions, with respect to the number of shares of New PubCo Class A Common Stock equal to (x) the Suntuity Consideration Shares divided by (y) the sum of the total number of Suntuity Interests, including Suntuity Interests subject to Suntuity Restricted Unit Awards, issued and outstanding immediately prior to the Suntuity Merger Effective Time.
The aggregate consideration to be paid to the
equityholders of Suntuity in the Mergers will consist of
Certain Suntuity Related Agreements
Lock-up Agreement
In connection with the entry into the Business
Combination Agreement, Acquiror, New PubCo and the current members of Suntuity and certain of their affiliates (the “Lock-Up Parties”)
entered into a Lock-Up Agreement (each, a “Lock-Up Agreement” and collectively, the “Lock-Up Agreements”), pursuant
to which, among other things, the Lock-Up Parties agreed not to transfer their New PubCo Class A Common Stock received in connection with
the Transactions until the earlier of (i) one year after the Closing, and (ii) subsequent to the Closing, if (A) the last reported sale
price of the New PubCo Class A Common Stock equals or exceeds $
Support Agreement
In connection with the entry into the Business Combination Agreement, Acquiror and the holder of a majority of the Suntuity Interests that is sufficient to approve and adopt the Business Combination Agreement and the Transactions (the “Requisite Suntuity Member”), entered into a support agreement (the “Support Agreement”), pursuant to which, among other things, the Requisite Suntuity Member agreed to execute and deliver a written consent approving the Business Combination Agreement and the Transactions (the “Written Consent”) within two business days after the effectiveness of the Registration Statement and to vote in favor of the approval and adoption of the Business Combination Agreement and the Transactions.
Sponsor Agreement
In connection with the entry into the Business Combination Agreement, Acquiror, Sponsor, OpCo, Beard, Suntuity and New PubCo entered into a Sponsor Agreement (the “Sponsor Agreement”), pursuant to which, among other things, the Sponsor agreed to (a) engage in certain transactions, including forfeitures, with respect to the OpCo Class B Units and Acquiror Class V Common Stock held by Sponsor or its permitted transferee immediately before the First Merger Effective Time as further described in the Sponsor Agreement, and (b) engage in certain transactions, including forfeitures, with respect to the Acquiror Warrants held by Sponsor or its permitted transferee immediately before the First Merger Effective Time as further described in the Sponsor Agreement, and the Sponsor and Beard agreed to (x) vote to adopt and approve the Business Combination Agreement and the Transactions, and (y) waive certain anti-dilution adjustments.
10
BEARD ENERGY TRANSITION ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Promissory Note
On May 26, 2023, Suntuity Renewables LLC (“Suntuity”)
agreed to loan the Company up to $
Suntuity Reimbursement Agreement
In connection with the Business Combination Agreement
dated May 18, 2023, Suntuity agreed to reimburse all expenses incurred by Beard in connection with the BCA, whether or not the business
combination is consummated; New PubCo shall pay or cause to be paid any expenses of the Company or the Sponsor incurred in connection
with the BCA; including, for the avoidance of doubt, (a) any Deferred IPO Fees, and (b) any fees, costs and expenses of counsel, accountants
or other advisors or service providers. As of June 30, 2023, the Company has $
Liquidity, Capital Resources, and Going Concern
As of June 30, 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.
11
BEARD ENERGY TRANSITION ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 and six months ended June 30, 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 June 30, 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 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 equivalents and presented as cash. The Company did not have any cash equivalents as of June 30, 2023 or December 31, 2022.
Investments Held in Trust Account
As of June 30, 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.
12
BEARD ENERGY TRANSITION ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 $
13
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
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Net income (loss) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Accretion of Class A common stock to redemption amount | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net income (loss) including accretion of temporary equity to redemption value | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||||||||
| Class A | Class V | Class A | Class V | Class A | Class V | Class A | Class V | |||||||||||||||||||||||||
| Basic and diluted net income (loss) per share: | ||||||||||||||||||||||||||||||||
| Numerator: | ||||||||||||||||||||||||||||||||
| Net income (loss) including accretion of temporary equity to redemption value | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||
| Accretion of Class A common stock to redemption amount | ||||||||||||||||||||||||||||||||
| Net income (loss) | $ | $ | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
| Denominator: | ||||||||||||||||||||||||||||||||
| Weighted Average Shares | ||||||||||||||||||||||||||||||||
| Basic and diluted income (loss) per share of common stock | $ | $ | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
As of June 30, 2023 and June 30, 2022, Founder Shares remain subject to forfeiture, as such the Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into common stock and share in earnings. As a result, diluted income (loss) per share is the same as basic income (loss) per share for the period presented.
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.
14
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
15
BEARD ENERGY TRANSITION ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 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 unrecognized tax benefits and no amounts accrued for interest and penalties as of June 30, 2023. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
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
16
BEARD ENERGY TRANSITION ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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
The Class B Units of Opco will convert into Class
A Units of Opco in connection with an initial Business Combination on a
17
BEARD ENERGY TRANSITION ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 one year after the date of the consummation of
an initial Business Combination or earlier if, subsequent to an initial Business Combination, (i) the last sale price of the Class A common
stock equals or exceeds $
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) $
18
BEARD ENERGY TRANSITION ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 and six months ended June 30, 2023,
payments of $
Working Capital Loans
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. No fractional shares will be issued upon exercise of the Public Warrants. The Public Warrants will become exercisable 30 days after the completion of a Business Combination, and are thereafter exercisable provided that the Company has an effective registration statement under the Securities Act covering the shares of Class A common stock issuable upon exercise of the Public Warrants and a current prospectus relating to them is available (or the Company permits holders to exercise their Public Warrants on a cashless basis and such cashless exercise is exempt from registration under the Securities Act). The Public Warrants will expire five years from the completion of a Business Combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
19
BEARD ENERGY TRANSITION ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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:
| ● | in whole and not in part; | |
| ● | at a price of $0.01 per warrant; | |
| ● | upon a minimum of 30 days’ prior written notice of redemption (the “30-day redemption period”); and | |
| ● | if, and only if, the last sale price of the Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders. |
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 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 $
20
BEARD ENERGY TRANSITION ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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
21
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
(
22
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 and six months ended June 30, 2023 was
NOTE 9. FAIR VALUE MEASUREMENTS
Description | Amount
at Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||
| June 30, 2023 | ||||||||||||||||
| Assets | ||||||||||||||||
| Investments held in Trust Account: | ||||||||||||||||
| U.S. Treasury Securities Money Market Funds | $ | $ | $ | $ | ||||||||||||
| Description | Amount at Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||
| December 31, 2022 | ||||||||||||||||
| Assets | ||||||||||||||||
| Investments held in Trust Account: | ||||||||||||||||
| U.S. Treasury Securities Money Market Funds | $ | $ | $ | $ | ||||||||||||
The assets held in the Trust Account as of June 30, 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.
NOTE 10. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements, other than as follows:
On July 28, 2023 the Company had an additional
draw on the Suntuity Promissory Note for $
23
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”.
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:
| ● | may significantly dilute the equity interest of investors in our initial public offering (our “Public Offering”), which dilution would increase if the anti-dilution provisions in the Class B Units of Opco initially acquired by our Sponsor (as defined below) 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; |
| ● | 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; |
| ● | 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; |
| ● | 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 |
| ● | may adversely affect prevailing market prices for our Class A common stock and/or warrants. |
24
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:
| ● | default and foreclosure on our assets if our operating revenues after an initial business combination are insufficient to repay our debt obligations; |
| ● | 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; |
| ● | our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand; |
| ● | 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; |
| ● | our inability to pay dividends on our Class A common stock; |
| ● | 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; |
| ● | limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate; |
| ● | increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; |
| ● | limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, and execution of our strategy; and |
| ● | other purposes and other disadvantages compared to our competitors who have less debt. |
As of June 30, 2023 and December 31, 2022, we held cash of $366,798 and $1,076,578, respectively, current liabilities of $3,470,163 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.
Recent Developments
Business Combination
On May 18, 2023, we (as the “Acquiror”) entered into a business combination agreement (the “Business Combination Agreement” and the transactions contemplated thereby, the “Business Combination”) with Suntuity Inc., a Delaware corporation and wholly owned subsidiary of Acquiror (“New PubCo”), Beard Merger Sub I Corp., a Delaware corporation and wholly owned subsidiary of New PubCo (“Merger Sub I”), Beard Merger Sub II LLC, a Delaware limited liability company and wholly owned subsidiary of New PubCo (“Merger Sub II”), Suntuity Renewables LLC, a New Jersey limited liability company (“Suntuity”), and solely for the purpose of Section 7.17 and Article X thereof, each of Beard Energy Transition Acquisition Sponsor LLC, a Delaware limited liability company (“Sponsor” or the “Sponsor”) and Gregory A. Beard pursuant to which, among other things:
(a) Merger Sub I will merge with and into the Acquiror (the “First Merger”), with the Acquiror surviving the First Merger as a wholly-owned subsidiary of New PubCo, and as a result of which (i) each share of our Class A common stock will be exchanged for one share of Class A common stock of New PubCo (“New PubCo Class A Common Stock”), (ii) each share of our Class V common stock will be cancelled and exchanged for one share of Class V common stock of New PubCo, (iii) each warrant to purchase one share of our Class A common stock will be cancelled and exchanged for one warrant to purchase one share of New PubCo Class A Common Stock (“New PubCo Warrant”), and (iv) each unit of Acquiror, comprised of one share of our Class A common stock and one-half of one warrant will be exchanged for one unit of New PubCo, comprised of one share of New PubCo Class A Common Stock and one-half of one New PubCo Warrant;
25
(b) in accordance with a certain Opco Unit Contribution Agreement to be entered into by and among New PubCo, Sponsor and Gregory A. Beard, (i) Gregory A. Beard will contribute to New PubCo all of the Class A units of Opco held by him in exchange for an equal number of shares of New PubCo Class A Common Stock, (ii) Sponsor will contribute to New PubCo all of the Class B units of Opco (“Opco Class B Units”) held by it (after giving effect to the forfeiture of a certain number of Class B Units of Opco pursuant to the Sponsor Agreement (as defined below)) in exchange for an equal number of shares of New PubCo Class A Common Stock and (iii) all outstanding shares of Class V common stock of New PubCo, par value $0.0001 par value per share issued in the First Merger will be cancelled for no consideration; and
(c) Merger Sub II will merge with and into Suntuity (the “Suntuity Merger”), with Suntuity surviving the Suntuity Merger as a wholly-owned subsidiary of New PubCo and as a result of which (a) the outstanding limited liability company interests in Suntuity (“Suntuity Interests”) (including Suntuity Interests subject to awards) will be exchanged for an aggregate of (1) 19,000,000 shares of New PubCo Class A Common Stock and (2) a number of New PubCo Warrants equal to the number of Acquiror’s private placement warrants held by Sponsor after giving effect to certain forfeitures contemplated by the Sponsor Agreement and (b) each warrant to purchase Suntuity Interests will be exchanged for a number of shares of New PubCo Class A Common Stock equal to 4.5% of the number of fully diluted shares of New PubCo Class A Common Stock to be outstanding after the Business Combination (giving effect to the forfeitures contemplated by the Sponsor Agreement and excluding shares issued pursuant to certain financings, shares of New PubCo Class A Common Stock underlying New PubCo Warrants and shares of New PubCo Class A Common Stock held by former public stockholders of Acquiror that do not exercise their redemption rights).
No assurances can be made, however, that the Business Combination will be consummated (see Note 1 in the accompanying condensed consolidated financial statements for additional information).
Support Agreement
In connection with the entry into the Business Combination Agreement, the Acquiror and TJFT STY Holdings, LLC (“TJFT”), entered into a support agreement, pursuant to which, among other things, TJFT agreed to execute and deliver a written consent approving the Business Combination Agreement and the transactions contemplated thereby (the “Transactions”) within two business days after the effectiveness of the registration statement on Form S-4, and to vote in favor of the approval and adoption of the Business Combination Agreement and the Transactions.
Sponsor Agreement
In connection with the entry into the Business Combination Agreement, the Acquiror, Sponsor, OpCo, Mr. Beard, Suntuity and New PubCo entered into a Sponsor Agreement (the “Sponsor Agreement”), pursuant to which, among other things, the Sponsor agreed to (a) engage in certain transactions, including forfeitures, with respect to the OpCo Class B Units and Acquiror Class V Common Stock held by Sponsor or its permitted transferee immediately before the First Merger Effective Time (as defined therein) as further described in the Sponsor Agreement, and (b) engage in certain transactions, including forfeitures, with respect to the Acquiror Warrants (as defined therein) held by Sponsor or its permitted transferee immediately before the First Merger Effective Time as further described in the Sponsor Agreement, and the Sponsor and Mr. Beard agreed to (x) vote to adopt and approve the Business Combination Agreement and the Transactions, and (y) waive certain anti-dilution adjustments.
Lock-up Agreements
In connection with the entry into the Business Combination Agreement, Acquiror, New PubCo and the current members of Suntuity and certain of their affiliates (the “Lock-Up Parties”) entered into a Lock-Up Agreement (each, a “Lock-Up Agreement” and collectively, the “Lock-Up Agreements”), pursuant to which, among other things, the Lock-Up Parties agreed not to transfer their New PubCo Class A Common Stock received in connection with the Transactions until the earlier of (i) one year after the closing, and (ii) subsequent to the closing, if (A) the last reported sale price of the New PubCo Class A Common Stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the consummation of the closing or (B) New PubCo consummates a subsequent liquidation, merger, stock exchange or other similar transaction that results in all of New PubCo’s stockholders having the right to exchange their shares of New PubCo Class A Common Stock for cash, securities or other property.
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Suntuity Reimbursement Agreement
In connection with the Business Combination Agreement, Suntuity agreed to reimburse all expenses incurred in connection with the Business Combination Agreement, whether or not the Business Combination is consummated; provided that, if the Business Combination Agreement is consummated, New PubCo shall pay or cause to be paid (i) the unpaid expenses of the Company incurred in connection with the Business Combination Agreement and (ii) any expenses of the Company or the Sponsor incurred in connection with the Business Combination Agreement, including, for the avoidance of doubt, (a) any Deferred IPO Fees (as defined in the Business Combination Agreement), and (b) any fees, costs and expenses of counsel, accountants or other advisors or service providers.
Amended and Restated Registration Rights Agreement
Concurrently with the closing of the Business Combination Agreement, we will amend and restate our registration rights agreement, dated November 23, 2021, pursuant to which New PubCo will agree that, within twenty (20) business days after the closing, New PubCo will file with the SEC (at New PubCo’s sole cost and expense) a registration statement registering the resale of certain securities held by or issuable to certain existing holders of our securities and Suntuity (the “Resale Registration Statement”), and New PubCo will use its reasonable best efforts to have the Resale Registration Statement declared effective within sixty (60) business days after the closing. In certain circumstances, the holders can demand New PubCo’s assistance with underwritten offerings and block trades. The holders will be entitled to customary piggyback registration rights.
Citi Fee Waiver
On May 18, 2023, Citigroup Global Markets Inc. (“Citi”), the underwriter for Acquiror’s Public Offering, delivered a letter to us (the “Fee Waiver Letter”), wherein Citi expressly waived all deferred underwriting discounts and commissions owed to them upon, and subject only to, consummation of the Transactions, of $8,050,000, pursuant to the underwriting agreement entered into in connection with the initial public offering.
Extension Amendment Proposal
On May 25, 2023, we held a special meeting of stockholders to vote on, among other things, a proposal to amend and restate the Company’s Amended and Restated Certificate of Incorporation to (i) extend the date by which we must consummate a business combination (the “Extension”) from 18 months (or 21 months if we chose to exercise our option to extend the period of time to consummate a business combination by an additional three months if Sponsor, or its affiliates or designees, deposited $2,300,250 into the Trust Account) to 25 months from the closing of our Public Offering (with no extension option) (the “Extension Amendment Proposal”) and (ii) amend and restate the Investment Management Trust Agreement, dated November 23, 2021 (the “Trust Agreement”), by and between the Company and Continental Stock Transfer & Trust Company, to (a) reflect the Extension and (b) make certain other non-substantive changes to the Trust Agreement. All of the proposals presented at the special meeting of stockholders were approved by our stockholders. As a result of the Extension, the date by which the Company must consummate its business combination is now December 29, 2023.
Further, stockholders holding 15,872,896 shares of Class A common stock exercised their right to redeem such shares for a pro rata portion of the funds in the Company’s Trust Account. As a result, approximately $165.7 million (or approximately $10.44 per share) was removed from the Trust Account to pay such holders. Following such redemptions, the Company has 7,128,354 shares of Class A common stock issued and outstanding and $75,213,164 remained in the Trust Account (i.e. approximately $10.55 per share of the Company’s Class A common stock).
Suntuity Promissory Note
In connection with the Extension Amendment Proposal, Suntuity has agreed to assume Sponsor’s intended obligations to deposit into the Trust Account $160,000 on the thirtieth day of each month (or if such thirtieth day is not a business day, on the business day immediately preceding such thirtieth day, and except in the case of December 2023, when payment shall be made on the twenty-ninth day of the month) beginning on June 30, 2023, in exchange for a non-interest bearing, unsecured promissory note (the “Suntuity Promissory Note”) until the earlier of (a) the consummation of a business combination, (b) 25 months from the closing of our Public Offering, (c) the termination of the Business Combination Agreement in accordance with its terms, or (d) our voluntarily dissolution and liquidation as determined by our board of directors.
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In the event that the Business Combination Agreement is terminated, Sponsor intends to enter into a replacement promissory note in connection with the aforementioned obligations. The gross proceeds from the issuance of the Suntuity 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 we consummate a business combination, we will repay the amount loaned under the Suntuity Promissory Note out of the proceeds of the Trust Account released to it. If we do not consummate a business combination by the extended date, we will not repay the amount loaned under the Suntuity 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.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities for the three and six months ended June 30, 2023 and the three and six months ended June 30, 2022 were organizational activities, and since the closing of our Public Offering, the search for a prospective initial business combination and entering into the Business Combination Agreement. 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.
For the three months ended June 30, 2023, we had net income of $1,729,914, $2,153,794 which resulted from interest income on investments held in the trust account and a gain from operations of $67,917, offset in part by income tax expense of $441,797 and franchise tax expense of $50,000.
For the three months ended June 30, 2022, we had net loss of $65,689, which resulted from operating and formation costs of $313,415, franchise tax expense of $50,000, and income tax expense of $9,619, offset in part by interest income on investments held in the trust account of $307,345.
For the six months ended June 30, 2023, we had net income of $2,997,514, $4,674,461 which resulted from interest income on investments held in the trust account, offset in part by operating and formation costs of $616,310, income tax expense of $960,637 and franchise tax expense of $100,000.
For the six months ended June 30, 2022, we had net loss of $469,573, which resulted from operating and formation costs of $682,443, franchise tax expense of $100,000, and income tax expense of $9,619, offset in part by interest income on investments held in the trust account of $322,489.
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 Public Offering held in a trust account (the “Trust Account”). If we do not complete an initial business combination 25 months from the closing of the 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 six months ended June 30, 2023, net cash used in operating activities was $2,546,283, which was primarily due to operational costs, income taxes, and franchise taxes paid during the period.
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For the six months ended June 30, 2022, net cash used in operating activities was $410,395, which was due to our net loss of $469,573 and interest and dividend income on investments held in the Trust Account of $322,489, offset in part by changes in working capital of $381,667.
For the six months ended June 30, 2023, net cash provided by investing activities was $167,408,972, which was due to cash withdrawn from Trust Account for payment to redeeming stockholders of $165,730,694 and $1,838,278 of cash withdrawn from Trust Account for tax payments offset in part by cash deposits into the Trust Account of $160,000.
There were no investing activities June 30, 2022.
For the six months ended June 30, 2023, net cash used in financing activities of $165,572,469 which was due to payments to redeeming stockholders of $165,730,694, advance to our Sponsor of $1,425, and repayment of the advance from an affiliate of our sponsor of $4,100, partially offset by cash deposits into the Trust Account of $160,000 and $3,750 in proceeds from an advance from an affiliate of our sponsor.
For the six months ended June 30, 2022, net cash provided by financing activities of $1,553 was comprised of proceeds from an advance from an affiliate of our sponsor of $1,762, offset in part by $209 in repayments of the advance from an affiliate of our sponsor.
As of June 30, 2023 and December 31, 2022, we had cash of $366,798 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, 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 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 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 June 30, 2023, will not be sufficient to allow the Company to operate until December 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 December 29, 2023, 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.
On May 18, 2023, we entered into the Business Combination Agreement. Management plans to address the going concern uncertainty through a business combination as discussed in “—Recent Developments—Business Combination” 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.
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In connection with the Extension Amendment Proposal, we entered into the Suntuity Promissory Note. See “—Recent Developments—Suntuity Promissory Note” above for additional information.
In connection with the Business Combination Agreement, Suntuity agreed to reimburse all expenses incurred in connection with the Business Combination Agreement, whether or not the Business Combination is consummated; provided that, if the Business Combination Agreement is consummated, New PubCo shall pay or cause to be paid (i) the unpaid expenses of the Company incurred in connection with the Business Combination Agreement and (ii) any expenses of the Company or the Sponsor incurred in connection with the Business Combination Agreement, including, for the avoidance of doubt, (a) any Deferred IPO Fees (as defined in the Business Combination Agreement), and (b) any fees, costs and expenses of counsel, accountants or other advisors or service providers.
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 $50,001 and $100,002 in expenses under this agreement during the three and six months ended June 30, 2023. The Company paid $50,001 and $100,002 in expenses under this agreement during the three and six months ended June 30, 2023. The Company incurred $50,001 and $100,002 in expenses under this agreement during the three and six months ended June 30, 2022, respectively. The Company paid $33,334 and $83,335 under this agreement during the three and six months ended June 30, 2022, respectively.
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 and six months ended June 30, 2023, payments of $2,342 and $3,750 were paid by certain affiliate employees for operational expenses on behalf of the Company, and $3,747 and $4,100 was repaid back to the certain affiliate employees, respectively.
Related Party Working Capital Loans
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 June 30, 2023 and December 31, 2022, there was no balance outstanding under the Working Capital Loans.
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 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.
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Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of June 30, 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.
Concurrently with the closing of the Transactions contemplated by the Business Combination Agreement, we will amend and restate this registration rights agreement. See “—Recent Developments—Business Combination” above for additional information.
Underwriting Agreement
Citi, the underwriter for Acquiror’s Public Offering, 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 would have been 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. On May 18, 2023, Citi delivered the Fee Waiver Letter to us, wherein Citi expressly waived all deferred underwriting discounts and commissions owed to them upon, and subject only to, consummation of the Transactions, of $8,050,000, pursuant to the underwriting agreement entered into in connection with the Public Offering.
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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.
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 and six months ended June 30, 2023 and for the three and six months ended June 30, 2022, 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.
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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 Public Offering or until we are no longer an “emerging growth company,” whichever is earlier.
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 June 30, 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 June 30, 2023, the Company had a working capital deficit of $29,510, including $366,798 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 June 30, 2023, will not be sufficient to allow the Company to operate until December 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 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 December 29, 2023, 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.
There can be no assurance that the Extension will enable us to consummate a business combination.
On May 25, 2023, we held a special meeting of stockholders in which our stockholders voted on, among other things, the Extension Amendment Proposal. The Extension Amendment Proposal and all other proposals were approved. Even though the Extension was approved, we can provide no assurances that our initial Business Combination will be consummated prior to the extended date, whether under the current definitive agreement or otherwise. Our ability to consummate any Business Combination is dependent on a variety of factors, many of which are beyond our control.
With the Extension approved, the Company expects to seek stockholder approval of a business combination. Even if a business combination is 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.
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| # | Certain information has been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of the omitted information will be furnished to the SEC upon request. |
| * | Filed herewith. |
| ** | Furnished herewith. |
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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: August 7, 2023 | By: | /s/ Sarah James |
| Name: | Sarah James | |
| Title: | Chief Financial Officer and Chief Accounting Officer | |
| (Duly Authorized Officer and Principal Financial Officer) | ||
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