Better Home & Finance pany(BETR) - 2022 Q4 - Annual Report

PART I Business Aurora Acquisition Corp., a SPAC, is pursuing a merger with Better HoldCo, Inc. by September 30, 2023, implying a $6.9 billion equity value - Aurora, a blank check company, has a merger agreement with Better HoldCo, Inc. to take Better public[408][410] - The transaction implies an equity value for Better of approximately $6.9 billion and a post-money equity value of about $7.7 billion[410] - The deadline for business combination is September 30, 2023, with failure leading to liquidation[459][7] - Shareholders redeemed 24,087,689 Class A ordinary shares in February 2023, releasing approximately $263.1 million from the Trust Account[431][121] - As of December 31, 2022, the Trust Account held $282,284,619, with securities liquidated to cash in February 2023 to mitigate Investment Company Act risks[409] Risk Factors The company faces significant risks, including consummating the Better merger by September 30, 2023, SEC investigation, and going concern doubts Risks Relating to Consummation of a Business Combination Transaction Consummation risks include the September 30, 2023, deadline, financial advisor resignations, an SEC investigation, potential CFIUS review, and going concern doubts - The September 30, 2023, business combination deadline may grant targets leverage and limit due diligence[445][422] - Financial advisors Barclays and Citigroup resigned in June 2022, waiving deferred fees, potentially harming market perception of the merger[449][15][17] - The company is cooperating with an SEC investigation into potential federal securities law violations by Aurora and Better[19] - The Sponsor's non-U.S. control may subject the business combination to CFIUS review, potentially causing delays or prohibition[44][478] - The auditor's report expresses substantial doubt about the company's ability to continue as a 'going concern' due to the mandatory liquidation date[452][1][502] Risks Relating to Our Securities Securities risks include potential Nasdaq delisting, fair value volatility of warrant liabilities, and adverse amendment of public warrant terms - Nasdaq may delist the company's securities for failing to meet listing requirements, limiting trading and subjecting them to 'penny stock' rules[90][501][423] - Warrants are liability-accounted, with fair value changes impacting earnings and potentially the Class A ordinary share price[92][553][424] - Public warrant terms can be amended with 50% holder approval, potentially adverse to individual holders' interests[526][527] Risks Relating to Our Management Team Management risks include dependence on key personnel and potential conflicts of interest from officers' and directors' other business affiliations - The company's business combination depends on key personnel, whose loss could negatively impact the post-combination entity[39][85][497] - Officers and directors' other business activities may create conflicts of interest regarding time allocation and business opportunities[41][64][386] General Risk Factors General risks include no operating history, material weaknesses in internal controls, difficulty enforcing U.S. judgments as a Cayman Islands company, and 'emerging growth company' status - As a blank check company with no operating history, investors lack a basis to evaluate its business combination capability[94][556][419] - Material weaknesses exist in internal control over financial reporting for complex financial instruments and related-party expense reconciliations[96][529][405] - As a Cayman Islands exempted company, enforcing U.S. court judgments against directors or officers may be difficult for investors[73][559] - As an 'emerging growth company,' the company benefits from reduced disclosure, potentially making its securities less attractive to some investors[100][533][101] Unresolved Staff Comments The company has no unresolved staff comments - Not applicable[102] Properties The company's executive offices are located in London, United Kingdom, and are considered adequate for operations - The company's executive offices are located at 20 North Audley Street, London W1K 6LX, United Kingdom[75][7] Legal Proceedings The company resolved litigation with Pine Brook in November 2021 and is cooperating with an SEC investigation into potential securities law violations - Litigation with Pine Brook Capital Partners II, L.P. regarding the Better business combination was fully resolved and dismissed with prejudice as of November 3, 2021[77][382] - In Q2 2022, Aurora received a voluntary document request from the SEC's Division of Enforcement for an investigation into Aurora and Better[19] Mine Safety Disclosures This item is not applicable to the company - Not applicable[104] PART II Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities The company's securities are listed on Nasdaq, with no cash dividends paid or planned before a business combination - Company securities trade on Nasdaq Capital Market: AURCU (units), AURC (Class A shares), and AURCW (warrants)[564] - As of March 31, 2023, there was one holder of record for Class A ordinary shares[106] - The company has not paid and does not plan to pay cash dividends on Class A ordinary shares before a business combination[78] Reserved This item is reserved Management's Discussion and Analysis of Financial Condition and Results of Operations Aurora's financial results are driven by warrant fair value changes, reporting $8.7 million net income in 2022, with a $14.6 million working capital deficiency and going concern doubts due to the September 30, 2023, liquidation date Results of Operations The company reported $8.7 million net income in 2022, a turnaround from a $6.5 million net loss in 2021, primarily due to a $12.9 million gain on warrant fair value changes Results of Operations Summary | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Net Income (Loss) | $8,735,542 | ($6,527,175) | | Gain from changes in fair value of derivative warrant liabilities | $12,868,205 | $1,576,196 | | General and administrative costs | $8,577,543 | $8,120,280 | Liquidity and Capital Resources As of December 31, 2022, the company had a $14.6 million working capital deficiency, relying on Sponsor loans, with the September 30, 2023, liquidation date raising going concern doubts - As of December 31, 2022, the company had a working capital deficiency of $14,605,202[140] - The Sponsor may loan the company up to $12,000,000 to fund working capital[143] - The mandatory liquidation date of September 30, 2023, raises substantial doubt about the company's ability to continue as a going concern[148][1] - To mitigate Investment Company Act risk, the company liquidated Trust Account securities, now holding all funds in cash, resulting in minimal interest income[161][52] Critical Accounting Policies Critical accounting policies include classifying redeemable Class A ordinary shares as temporary equity and accounting for warrants as derivative liabilities at fair value - Class A ordinary shares subject to possible redemption are classified as temporary equity per ASC Topic 480[170][151] - Public and Private Placement Warrants are derivative liabilities per ASC 815-40, with fair value changes recorded in the statement of operations[172][153] Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, Aurora is not required to provide the information under this item - The company is a smaller reporting company and is not required to provide the information otherwise required under this item[155] Financial Statements and Supplementary Data This item refers to the company's audited financial statements and related notes, which are included in the report starting on page F-1 - The company's financial statements and supplementary data are included in the report, beginning on page F-1[544] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure There were no changes in or disagreements with the company's accountants on accounting and financial disclosure - None[194] Controls and Procedures As of December 31, 2022, disclosure controls were ineffective due to material weaknesses in accounting for complex financial instruments and related-party expense reconciliations, despite remediation efforts - As of December 31, 2022, disclosure controls and procedures were deemed ineffective by management[195] - Material weaknesses were identified in internal controls for complex financial instruments and related-party expense reconciliations[176][195][522] - Management implemented remediation steps, including enhanced accounting literature access and increased third-party professional communication, to improve internal controls[178] Other Information There is no other information to report - None[181] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - None[199] PART III Directors, Executive Officers and Corporate Governance The company's leadership includes key executives and a five-member board with Audit and Compensation Committees, the Audit Committee chair qualifying as a financial expert Key Management and Directors | Name | Age | Position | | :--- | :--- | :--- | | Arnaud Massenet | 57 | Chief Executive Officer | | Prabhu Narasimhan | 42 | Chief Investment Officer | | Caroline Harding | 42 | Chief Financial Officer and Director | | Thor Björgólfsson | 55 | Chairman | | Shravin Mittal | 35 | Director | | Sangeeta Desai | 47 | Director | | Michael Edelstein | 55 | Director | - The board of directors has two standing committees: an Audit Committee and a Compensation Committee[211] - The Audit Committee comprises three independent directors, with Sangeeta Desai serving as chair and qualifying as an 'audit committee financial expert'[212][228] Executive Compensation Only CFO Caroline Harding receives cash compensation, including $10,000 monthly for CFO services and $15,000 annually for director services, while others are reimbursed for expenses - Only Chief Financial Officer Caroline Harding receives cash compensation for her services[234] - Ms. Harding's compensation includes $10,000 per month as CFO, $15,000 per year as a director, and an additional $500 hourly fee for extra services[234][267] - The Sponsor, directors, and other executive officers are reimbursed for out-of-pocket expenses incurred on the company's behalf[234] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters As of March 31, 2023, directors and executive officers beneficially owned 97.7% of outstanding ordinary shares, with Novator Capital Sponsor Ltd. and Shravin Mittal as largest owners Beneficial Ownership Summary | Name of Beneficial Owner | Approximate Percentage of Outstanding Ordinary Shares | | :--- | :--- | | Novator Capital Sponsor Ltd. | 68.7% | | Shravin Mittal | 24.0% | | All directors and executive officers as a group | 97.7% | - Ownership percentages are based on 8,998,910 ordinary shares outstanding as of March 31, 2023[222] Certain Relationships and Related Transactions, and Director Independence The company engaged in related-party transactions with its Sponsor, including Founder Shares, private placement securities, and working capital loans up to $12 million, with certain directors deemed independent - The Sponsor purchased 5,750,000 Class B ordinary shares (Founder Shares) for $25,000[243] - The Sponsor and certain directors purchased 4,266,667 Private Placement Warrants at $1.50 each and 3,500,000 private units at $10.00 each[245][246] - A promissory note with the Sponsor allows borrowing up to $4,000,000, potentially increasing to $12,000,000 if operating costs exceed available funds[253][271] - The board determined that Shravin Mittal, Sangeeta Desai, and Michael Edelstein are 'independent directors' under Nasdaq standards[290] Principal Accountant Fees and Services Marcum LLP, the principal accountant, received $242,579 in audit fees for 2022 and $138,586 for 2021, with no other service fees Principal Accountant Fees | Fee Type | 2022 ($) | 2021 ($) | | :--- | :--- | :--- | | Audit Fees | $242,579 | $138,586 | | Audit-Related Fees | $0 | $0 | | Tax Fees | $0 | $0 | | All Other Fees | $0 | $0 | PART IV Exhibits, Financial Statement Schedules This section lists financial statements, schedules, and exhibits filed with the Form 10-K, including the Better merger agreement and other material contracts - This section contains the index to the company's financial statements and a list of all exhibits filed with the report[280][296] Form 10-K Summary This item is not applicable, and no summary is provided in the report - Not applicable[319] Financial Statements Report of Independent Registered Public Accounting Firm Marcum LLP issued an unqualified opinion on the financial statements, with an explanatory paragraph on going concern due to the September 30, 2023, liquidation date - The auditor, Marcum LLP, issued an unqualified opinion on the financial statements[325] - The audit report expresses substantial doubt about the Company's ability to continue as a going concern due to the mandatory liquidation date of September 30, 2023[305] Consolidated Financial Statements As of December 31, 2022, total assets were $282.7 million and liabilities $15.5 million, with 2022 net income of $8.7 million driven by a $12.9 million warrant fair value gain Balance Sheet Summary | Balance Sheet (As of Dec 31) | 2022 ($) | 2021 ($) | | :--- | :--- | :--- | | Cash held in Trust Account | $282,284,619 | $278,022,397 | | Total Assets | $282,703,802 | $279,089,672 | | Warrant liability | $472,512 | $13,340,717 | | Total Liabilities | $15,496,897 | $28,940,751 | | Total Shareholders' Equity | $20,578,418 | $7,146,051 | Statement of Operations Summary | Statement of Operations (Year Ended Dec 31) | 2022 ($) | 2021 ($) | | :--- | :--- | :--- | | Loss from operations | ($8,577,543) | ($8,120,280) | | Change in fair value of warrants | $12,868,205 | $1,576,196 | | Net Income (loss) | $8,735,542 | ($6,527,175) | Notes to Financial Statements Notes detail the company's SPAC organization, September 30, 2023, business combination deadline, going concern issues, accounting policies, related-party transactions, commitments, and subsequent events - The company has until September 30, 2023, to consummate a Business Combination, raising substantial doubt about its ability to continue as a going concern (Note 1)[1] - Warrants are accounted for as derivative liabilities at fair value, with changes recognized in the statement of operations (Note 2)[110][111] - The Sponsor purchased Founder Shares for $25,000 and provided working capital loans, with $2,812,395 outstanding as of December 31, 2022 (Note 5)[596][626] - Barclays waived its entitlement to a deferred underwriting fee of approximately $8.5 million upon its resignation (Note 6)[609][134] - Subsequent to year-end, the company extended its combination deadline to September 30, 2023, and public shareholders redeemed 24,087,689 shares for approximately $263.1 million (Note 9)[655][121]