Business context and reporting period
This is Haymaker Acquisition Corp. III’s Form 10-K for the fiscal year ended December 31, 2021—not an operating-company 10-K filed by Biote Corp. Haymaker was a blank-check company with no operating business or revenue. On December 13, 2021, it agreed to combine with BioTE Holdings, LLC (“Biote”); the transaction was pending as of the 10-K’s April 6, 2022 filing date and remained subject to stockholder approval and other conditions.
Financial results and liquidity
- Revenue and margins: No operating revenue or operating business; margins are not applicable.
- Net income: $11.1 million in 2021, versus no income or loss from inception through December 31, 2020. The result was driven chiefly by an $18.8 million non-cash gain from revaluing warrant liabilities; operating and formation costs were $3.1 million.
- Cash flow: Operating cash use was $1.4 million. Investing cash use was $317.5 million, principally the trust-account deposit; financing provided $319.0 million.
- Liquidity: At year-end, the trust held $317.6 million and cash outside the trust was $130,359. Haymaker reported a $1.8 million working-capital deficit. The filing said $306.5 million was available for a business combination assuming no redemptions, after deferred underwriting fees of $11.1 million.
- Liabilities: Year-end liabilities included $11.1 million of deferred underwriting fees and $9.8 million of warrant liabilities. No operating-company debt was reported. Biote had a commitment letter for proposed senior secured facilities totaling $175 million: a $50 million revolver and a $125 million term loan.
Material changes and proposed transaction
Haymaker completed its $317.5 million IPO in March 2021 and entered the Biote merger agreement in December 2021; the comparable 2020 period was only from the company’s July 2020 inception and had no operating results. The proposed transaction valued Biote’s equity at approximately $555 million, subject to adjustments. The agreement contemplated up to $100 million of additional equity financing and cash consideration to the selling member capped at $199 million. With no redemptions and specified transaction expenses, the combined company was expected to own about 49.9% of Biote units, while Biote members were expected to retain control of the combined company.
Outlook, risks, and unusual items
- Management intended to complete the Biote transaction; the agreement could be terminated in certain circumstances, including if it had not closed by June 13, 2022. Haymaker’s deadline to complete a business combination was March 4, 2023; otherwise it expected to liquidate and redeem public shares.
- The auditor’s report included a going-concern explanatory paragraph. Management cited limited cash outside the trust, the working-capital deficit, ongoing deal costs, and uncertainty that the transaction or sponsor loans would provide sufficient support.
- Disclosure controls were deemed ineffective at year-end, and management identified a material weakness concerning accounting for complex financial instruments. Prior 2021 financial statements were restated, including for the classification of redeemable shares. Management described remediation plans but gave no assurance they would succeed.
- Net income was materially affected by warrant accounting: fair-value changes are non-cash and may cause earnings volatility. Warrant liabilities totaled $9.8 million at year-end.
- The proposed UP-C structure included a tax receivable agreement under which the combined company would pay Biote members 85% of specified realized tax savings. Payments could reduce cash available to the company, and certain events could accelerate payment obligations.
- Other stated risks included redemptions reducing transaction cash, third-party claims against trust assets, possible failure to obtain financing or close the deal, conflicts of interest and competition among SPACs, and economic, pandemic, inflation, interest-rate, supply-chain, and geopolitical uncertainty.
Investor facts to verify
- Confirm the transaction’s final closing status, consideration adjustments, redemptions, transaction expenses, and cash delivered to Biote.
- Verify whether the proposed $175 million debt facilities were executed, drawn, and subject to what covenants, rates, and maturity terms.
- Review the restated financial statements and remediation progress for the material weakness in complex-financial-instrument accounting.
- Assess the combined company’s post-close ownership and control, potential dilution from warrants, earnouts and equity plans, and obligations under the tax receivable agreement.
- Evaluate liquidity and financing needs against the going-concern disclosure and the SPAC liquidation deadline applicable at the time.