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CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Quarterly Period ended March 31, 2022 and 2021
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Quarterly Period Ended March 31, 2022 and 2021
| Condensed Consolidated Financial Statements (Unaudited): | ||||
| Condensed Consolidated Balance Sheets | 1 | |||
| Condensed Consolidated Statements of Income and Comprehensive Income | 2 | |||
| Condensed Consolidated Statements of Changes in Members Equity (Deficit) | 3 | |||
| Condensed Consolidated Statements of Cash Flows | 4 | |||
| Notes to Condensed Consolidated Financial Statements | 5 |
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts) (Unaudited)
| March 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | 27,704 | $ | 26,766 | ||||
| Accounts receivable, net | 6,544 | 5,231 | ||||||
| Inventory, net | 9,178 | 9,615 | ||||||
| Other current assets | 8,489 | 5,473 | ||||||
| Total current assets | 51,915 | 47,085 | ||||||
| Property and equipment, net | 2,395 | 2,335 | ||||||
| Capitalized software, net | 4,813 | 4,554 | ||||||
| Operating lease right-of-use assets | 298 | 356 | ||||||
| Total assets | $ | 59,421 | $ | 54,330 | ||||
| Liabilities and Members Equity (Deficit) | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 6,777 | $ | 4,349 | ||||
| Accrued expenses | 3,164 | 6,011 | ||||||
| Note payable, current | 5,000 | 5,000 | ||||||
| Deferred revenue | 1,780 | 1,705 | ||||||
| Operating lease liabilities, current | 250 | 248 | ||||||
| Total current liabilities | 16,971 | 17,313 | ||||||
| Note payable, net of current portion | 30,768 | 31,963 | ||||||
| Deferred revenue, long-term | 872 | 802 | ||||||
| Operating lease liabilities, long-term | 64 | 127 | ||||||
| Total liabilities | 48,675 | 50,205 | ||||||
| Commitments and contingencies (See Note 12) | ||||||||
| Members Equity (Deficit) | ||||||||
| Class A, Class AA, and Class AAA, no par value; unlimited units authorized; 16,721 Class A, 903,079 Class AA, and 60,000 Class AAA units issued and outstanding at March 31, 2022 and December 31, 2021 | ||||||||
| Class AAAA units, no par value; unlimited units authorized; 33,397 units issued; 3,000 units outstanding at March 31, 2022 and December 31, 2021, respectively. | ||||||||
| Retained Earnings | 10,780 | 4,165 | ||||||
| Accumulated other comprehensive loss | (34 | ) | (40 | ) | ||||
| Total members equity | 10,746 | 4,125 | ||||||
| Total liabilities and members equity (deficit) | $ | 59,421 | $ | 54,330 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(in thousands, except share and per share amounts) (Unaudited)
| Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Revenue | ||||||||
| Product revenue | $ | 36,758 | $ | 31,193 | ||||
| Service revenue | 385 | 350 | ||||||
| Total revenue | 37,143 | 31,543 | ||||||
| Cost of revenue (excluding depreciation and amortization included in selling, general, and administrative, below) | ||||||||
| Cost of products | 11,657 | 10,877 | ||||||
| Cost of services | 620 | 484 | ||||||
| Cost of revenue | 12,277 | 11,361 | ||||||
| Commissions | 216 | 577 | ||||||
| Marketing | 1,241 | 749 | ||||||
| Selling, general, and administrative | 13,646 | 9,463 | ||||||
| Income from operations | 9,763 | 9,393 | ||||||
| Other income (expense): | ||||||||
| Interest expense | (359 | ) | (492 | ) | ||||
| Other income | 10 | 4 | ||||||
| Total other expense | (349 | ) | (488 | ) | ||||
| Income before provision for income taxes | 9,414 | 8,905 | ||||||
| Income tax expense | 64 | 64 | ||||||
| Net income | $ | 9,350 | $ | 8,841 | ||||
| Other comprehensive income: | ||||||||
| Foreign currency translation adjustments | 6 | (9 | ) | |||||
| Other comprehensive income (loss) | 6 | (9 | ) | |||||
| Comprehensive income | $ | 9,356 | $ | 8,832 | ||||
| Earnings per common unit | ||||||||
| Class A, AA, and AAA, basic and diluted | $ | 9.54 | $ | 9.02 | ||||
| Weighted average common units outstanding | ||||||||
| Class A, AA, and AAA, basic and diluted | 979,800 | 979,800 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF MEMBERS EQUITY (DEFICIT)
(in thousands, except share amounts) (Unaudited)
| Accumulated Other | ||||||||||||||||||||||||||||
| Class A, AA, and AAA | Class AAAA | Retained Earnings / | Comprehensive | Total Members | ||||||||||||||||||||||||
| Units | Amount | Units | Amount | (Accumulated Deficit) | Income (Loss) | Equity (Deficit) | ||||||||||||||||||||||
| Balance at December 31, 2020 | 979,800 | $ | 3,000 | $ | $ | (17,052 | ) | $ | (23 | ) | $ | (17,075 | ) | |||||||||||||||
| Distributions | (2,342 | ) | (2,342 | ) | ||||||||||||||||||||||||
| Net income | 8,841 | 8,841 | ||||||||||||||||||||||||||
| Other comprehensive income (loss) | (9 | ) | (9 | ) | ||||||||||||||||||||||||
| Balance at March 31, 2021 | 979,800 | $ | 3,000 | $ | $ | (10,553 | ) | $ | (32 | ) | $ | (10,585 | ) | |||||||||||||||
| Balance at December 31, 2021 | 979,800 | $ | 3,000 | $ | $ | 4,165 | $ | (40 | ) | $ | 4,125 | |||||||||||||||||
| Distributions | (2,735 | ) | (2,735 | ) | ||||||||||||||||||||||||
| Net income | 9,350 | 9,350 | ||||||||||||||||||||||||||
| Other comprehensive income (loss) | 6 | 6 | ||||||||||||||||||||||||||
| Balance at March 31, 2022 | 979,800 | $ | 3,000 | $ | $ | 10,780 | $ | (34 | ) | $ | 10,746 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) (Unaudited)
| Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Operating Activities | ||||||||
| Net income | $ | 9,350 | $ | 8,841 | ||||
| Adjustments to reconcile net income to net cash provided by operating activites: | ||||||||
| Depreciation and amortization | 502 | 322 | ||||||
| Bad debt expense | 30 | 15 | ||||||
| Amortization of capitalized note payable issuance costs | 55 | 55 | ||||||
| Provision for obsolete inventory | 60 | 60 | ||||||
| Non-cash lease expense | 58 | 55 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (1,344 | ) | (1,261 | ) | ||||
| Inventory | 377 | (1,195 | ) | |||||
| Other current assets | (1,445 | ) | (253 | ) | ||||
| Accounts payble | 2,089 | 275 | ||||||
| Deferred revenue | 145 | 39 | ||||||
| Accrued expenses | (2,847 | ) | 1,063 | |||||
| Operating lease liabilities | (61 | ) | (59 | ) | ||||
| Net cash provided by operating activities | 6,969 | 7,957 | ||||||
| Investing Activities | ||||||||
| Purchases of property and equipment | (262 | ) | (142 | ) | ||||
| Purchases of capitalized software | (220 | ) | (344 | ) | ||||
| Net cash used in investing activities | (482 | ) | (485 | ) | ||||
| Financing Activities | ||||||||
| Payments on note payable | (1,250 | ) | (1,250 | ) | ||||
| Distributions | (2,735 | ) | (2,342 | ) | ||||
| Capitalized Transaction Costs | (1,577 | ) | ||||||
| Net cash used in financing activities | (5,562 | ) | (3,592 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents | 13 | (9 | ) | |||||
| Net increase in cash and cash equivalents | 939 | 3,871 | ||||||
| Cash and cash equivalents at beginning of year | 26,766 | 17,208 | ||||||
| Cash and cash equivalents at end of year | $ | 27,705 | $ | 21,079 | ||||
| Supplemental Disclosure of Cash Flow Information | ||||||||
| Cash paid for interest | $ | 304 | $ | 425 | ||||
| Cash paid for income taxes | 1 | 11 | ||||||
| Non-cash investing and financing activities | ||||||||
| Capital expenditures in accounts payable and capital software | $ | 271 | $ | 120 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share and per share amounts)
Description of Business BioTE Holdings, LLC (the Company ) is a limited liability company headquartered in Irving,
Texas. The Company was founded by Gary S. Donovitz, M.D. and trains physicians and nurse practitioners in hormone optimization using bio-identical hormone replacement pellet therapy in men and women
experiencing hormonal imbalance. The Company primarily operates in the United States, Canada, and Mexico.
Presentation The condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ( US GAAP ) for interim financial reporting and therefore do not include all
information and disclosures normally included in the annual consolidated financial statements. The condensed consolidated financial statements include the accounts of BioTE Holdings, LLC and its subsidiaries. All intercompany balances and
transactions have been eliminated in consolidation.
Business Combinations On December 13, 2021, the Company entered into
a business combination agreement with Haymaker Acquisition Corp. III ( Haymaker ), a publicly traded Special Purpose Acquisition Company ( SPAC ), pursuant to which Haymaker will acquire an interest in the Company through a
series of transactions. As a result of the transaction, the combined company will be renamed biote Corp.
Unaudited Interim Financial
Information In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of its financial
position and its results of operations, changes in members equity (deficit) and cash flows. The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the
The condensed consolidated balance sheet as of December 31, 2021, was derived from audited annual financial statements
but does not contain all the footnote disclosures from the annual financial statements. The accompanying unaudited condensed consolidated financial statements and related financial information should be read in conjunction with the audited
consolidated financial statements and the related notes thereto for the fiscal year ended December 31, 2021.
Segment Information Operating segments are defined as components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company s chief operating decision maker is the chief executive officer. The Company has one
business activity and there are no segment managers who are held accountable for operations, operating results, and plans for levels or components below the consolidated unit level. Accordingly, the Company has one operating segment and, therefore,
one reportable segment.
Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable are recorded net of
allowances for doubtful accounts.
Other Current Assets As of March 31, 2022 and December 31, 2021, the
Company s total other current assets consist of the following:
| March 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Prepaid Expenses | $ | 1,610 | $ | 847 | ||||
| Advances | 1,361 | 685 | ||||||
| Capitalized Transaction Costs | 5,518 | 3,941 | ||||||
| Total Other Current Assets | $ | 8,489 | $ | 5,473 |
Prepaid expenses include software and technology licensing agreements, insurance premiums and other advance
payments for services to be received over the next 12 months. Advances are comprised of deposit payments to vendors for inventory purchase orders to be received in the next 12 months. The capitalized transaction costs relate to costs incurred that
are directly related to the planned future issue of equity securities upon completion of the business combination as described in note 1.
Impairment of Long-Lived Assets Long-lived assets, such as property and equipment and capitalized software, are reviewed for
impairment annually or whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted future
cash flows expected to result from the use and eventual disposition of the asset. The amount of impairment loss, if any, is measured as the difference between the carrying value of the asset and its estimated fair value. Fair value is determined
through various valuation techniques, including discounted cash flow models, quoted market values, and third-party independent appraisals, as considered necessary. No impairment charges have been recorded during the three months ended March 31,
Leases At the inception of an arrangement, the Company determines whether the arrangement is or contains a
lease based on the unique facts and circumstances present in the arrangement including the use of an identified asset(s) and the Company s control over the use of that identified asset. The Company elected, as allowed under Financial Accounting
Standards Board ( FASB ) ASU 2016-02, Leases ( ASC 842 ), to not recognize leases with a lease term of one year or less on its balance sheet. Leases with a term greater than one year are
recognized on the balance sheet as right-of-use ( ROU ) assets and current and non-current lease liabilities, as
applicable. As of December 31, 2021, and 2020, the Company does not have any financing leases.
Lease liabilities and their
corresponding ROU assets are initially recorded based on the present value of lease payments over the expected remaining lease term. Certain adjustments to the ROU asset may be required for items such as incentives, prepaid lease payments, or
initial direct costs. When an option to extend the lease exists, a determination is made whether that option is reasonably certain of exercise based on economic factors present at the measurement date and as circumstances may change. Lease cost for
operating leases is recognized on a straight-line basis over the lease term as an operating expense. Variable lease costs are expensed as incurred as an operating expense.
As the rates implicit in the Company s leases have not historically been readily determinable, the Company utilizes the appropriate
incremental borrowing rate, which is the rate the Company would incur to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment over the lease term. To estimate our incremental
borrowing rate, a credit rating applicable to the Company is estimated using a synthetic credit rating analysis, since the Company does not currently have a rating agency-based credit rating.
In accordance with ASC 842, contracts containing a lease should be split into three categories: lease components, non-lease components, and activities or costs that do not transfer a distinct good or service ( non-components ). The fixed and
in-substance fixed contract consideration (including any consideration related to non-components) must be allocated, based on the respective relative fair values, to the
lease components and non-lease components.
Entities may elect not to separate lease and non-lease components. Accordingly, entities making this election would account for each lease component and related non-lease component together as a single lease component.
The Company has elected to account for lease and non-lease components together as a single lease component for all underlying assets and allocate all of the contract consideration to the lease component only.
See Note 10 for further details.
Commissions Commissions consist primarily of fees paid to a third-party sales force, internal sales force, and partner clinics
which participate in the Company s new clinic mentor program. Commissions paid to the Company s internal and third-party sales forces relate to market support and development activities undertaken to drive channel sales through existing
customers and are not considered incremental costs to obtain a customer contract.
Also included in commissions are expenses under the
Company s mentorship program which represent amounts paid to existing clinics which provide services to help new customers complete onboarding and other startup activities and are only incurred after contract initiation. These costs are
expensed as incurred, consistent with other contract fulfillment costs.
Members Equity (Deficit) The Company s
capital structure includes common voting units (Class A), common non-voting units (Class AA and AAA), and non-voting incentive units (Class AAAA), with no limit to the
number of units that may be issued. Class A units have 100% of the voting rights, and there is no par value assigned to any of the classes of units.
As of March 31, 2022, and December 31, 2021 the following members equity units were issued and outstanding:
| March 31, | December 31, | |||||||||||||||
| 2022 | 2021 | |||||||||||||||
| Units | Issued | Outstanding | Issued | Outstanding | ||||||||||||
| Class A (Voting) | 16,721 | 16,721 | 16,721 | 16,721 | ||||||||||||
| Class AA (Non-Voting) | 903,079 | 903,079 | 903,079 | 903,079 | ||||||||||||
| Class AAA (Non-Voting) | 60,000 | 60,000 | 60,000 | 60,000 | ||||||||||||
| Class AAAA (Non-Voting Incentive Units) | 33,397 | 3,000 | 33,397 | 3,000 | ||||||||||||
| Total | 1,013,197 | 982,800 | 1,013,197 | 982,800 |
The Company made operating distributions to unit holders and taxing authorities on the unit holders
behalf totaling $2,732 and $2,342 for the three months ended March 31, 2022 and 2021 respectively.
Taxes Management of the Company has not taken a tax position that, if challenged, would be expected to have a material effect on the condensed consolidated financial statements as of or for the three months ended March 31, 2022 and
The Company did not incur any penalties or interest related to its state tax returns during the three months ended March 31,
Under the new centralized partnership audit rules effective for tax years beginning after 2017, the Internal Revenue
Service ( IRS ) assesses and collects underpayments of tax from the Company instead of from each member. The Company may be able to pass the adjustments through to its members by making a push-out
election or, if eligible, by electing out of the centralized partnership audit rules.
The collection of tax from the Company is only an
administrative convenience for the IRS to collect any underpayment of income taxes including interest and penalties. Income taxes on Company income, regardless of who pays the tax or when the tax is paid, is attributed to the members. Any payment
made by the Company as a result of an IRS examination will be treated as a distribution from the Company to the members in the condensed consolidated financial statements. Tax years 2019 through 2021 are still open for examination by the IRS. There
were no payments made to the IRS as a result of examinations in 2021, 2020, and 2019.
Fair Value Measurements The Company s financial instruments consist of
accounts receivable, accounts payable, accrued expenses, and short- and long-term debt. Accounts receivable, accounts payable, and accrued expenses are stated at their carrying value, which approximates fair value due to the short time to the
expected receipt or payment date. The carrying value of short- and long-term debt also approximates fair value since these instruments bear market rates of interest. None of these instruments are held for trading purposes.
Concentrations Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of
cash, accounts receivable, credit agreements, and inventory purchases. The Company s cash balances exceed those that are federally insured. To date, the Company has not recognized any losses caused by uninsured balances.
As of March 31, 2022, 100% of the Company s outstanding debt and available line of credit was from one provider. A failure of the