Biote Corp. quarterly report, Q1 FY2022

Business context and reporting period

Important entity distinction: Although the request identifies Biote Corp., this March 31, 2022 Form 10-Q was filed by Haymaker Acquisition Corp. III, a blank-check SPAC proposing to combine with Biote. It reports no Biote operating results. The quarter ended March 31, 2022; the statements are unaudited.

Haymaker had not commenced operations and had no operating revenue. Its activity was limited to pursuing a business combination. A December 2021 agreement contemplated a transaction valuing Biote’s equity at approximately $555 million, subject to adjustments. The proposed structure included up to $100 million of potential equity financing and committed debt facilities of $50 million revolving and $125 million term loans, subject to closing and other conditions. A stockholder meeting was scheduled for May 24, 2022; the agreement could be terminated if the transaction had not closed by June 13, 2022.

Financial metrics

• Assets and liquidity: Total assets were $317.95 million, principally $317.58 million held in the Trust Account. Trust funds were generally restricted to a business combination or specified redemptions. Working capital deficit was $2.81 million, excluding franchise tax payable.
• Liabilities: Total liabilities were $21.77 million, including $11.11 million of deferred underwriting fees payable upon a successful business combination, $7.43 million of warrant liabilities, and $3.23 million of current liabilities. Stockholders’ deficit was $21.32 million. No conventional operating debt balance is clearly identified; the related-party convertible working-capital note had a $72,800 fair value at quarter-end.
• Cash flow and margins: Investing activities provided $63,747, from Trust Account funds released to pay taxes. Financing activities provided $208,827 from the Sponsor-related note. Margins are not meaningful because the SPAC had no operating revenue.
• Drivers of earnings: Q1 2022 net income primarily reflected a $2.35 million noncash gain from the change in fair value of warrant liabilities, partly offset by operating costs and franchise taxes. It should not be read as operating profitability.

Material changes versus prior comparable period

• Net results shifted from a $3.94 million loss to $1.17 million income, mainly because the prior-year loss included $3.51 million of private-placement warrant issuance expense and $962,447 of transaction costs allocated to warrants; Q1 2022 instead included a $2.35 million warrant fair-value gain.
• Operating and formation costs increased to $1.19 million from $58,560.
• Operating cash use fell to $335,035 from $626,996, while cash outside the Trust Account declined to $67,898 from $130,359 at December 31, 2021.
• Warrant liabilities fell to $7.43 million from $9.78 million at December 31, 2021, reflecting fair-value changes.

Outlook, risks, contingencies, and unusual items

• Management stated that limited cash outside the Trust Account, a working-capital deficit, and expected ongoing transaction costs raised substantial doubt about Haymaker’s ability to continue as a going concern within one year after issuance. Management expected the proposed combination and possible Sponsor working-capital loans to address funding needs, but neither outcome was assured.
• Haymaker had until March 4, 2023 to complete a business combination or face liquidation. Public shares could be redeemed under specified circumstances; warrants would expire worthless if no combination were completed.
• The proposed transaction contemplated cash payments to Biote and a selling member, earnout securities tied to share-price targets, and possible dilution. The post-combination company was expected to own approximately 49.8% of Biote units under stated assumptions, while Biote members were expected to retain control through voting rights.
• A proposed tax receivable agreement would require the combined company to pay Biote members 85% of certain realized tax savings. The filing notes that acceleration events could require a lump-sum payment based on forecast future benefits.
• The filing identifies risks from inflation, the Russia-Ukraine conflict, COVID-19, and proposed SEC SPAC rules, which could disrupt markets or delay or complicate a transaction.
• Controls: Management concluded disclosure controls were ineffective at March 31, 2022 due to material weaknesses involving complex financial instruments, accruals and payables, franchise taxes, related-party transactions, and cash-flow presentation. Prior-period financial statements had been restated; remediation was planned, with no assurance it would be effective.

Investor facts to verify

• Confirm the reporting entity: this is Haymaker Acquisition Corp. III’s SPAC filing, not Biote’s standalone operating-company 10-Q.
• Check whether the proposed combination received stockholder approval and closed, and review final redemption levels, financing, and transaction expenses.
• Assess Biote’s actual operating results, debt, cash flows, and outlook using Biote’s own financial disclosures; this filing does not provide them.
• Review the going-concern disclosure, limited unrestricted cash, Sponsor loan terms, and the March 4, 2023 combination deadline.
• Evaluate the control weaknesses and remediation, warrant-related dilution, earnout terms, and potential tax receivable agreement obligations.