Beard Energy Transition Acquisition (BRD) - 2023 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements Unaudited condensed consolidated financial statements for Q1 2023 and FY 2022, detailing balance sheets, operations, equity changes, cash flows, and accounting policies Condensed Consolidated Balance Sheets | Metric | March 31, 2023 (Unaudited) | December 31, 2022 | | :----- | :------------------------- | :---------------- | | Cash | $495,088 | $1,076,578 | | Total Current Assets | $810,409 | $1,403,838 | | Investments held in Trust Account | $240,468,343 | $237,947,675 | | Total Assets | $241,278,752 | $239,351,513 | | Total Current Liabilities | $2,094,318 | $1,434,679 | | Deferred Underwriting Fee Payable | $8,050,000 | $8,050,000 | | Total Liabilities | $10,144,318 | $9,484,679 | | Total Stockholders' Deficit | $(9,333,909) | $(8,080,842) | Condensed Consolidated Statements of Operations | Metric | Three Months ended March 31, 2023 | Three Months ended March 31, 2022 | | :----- | :-------------------------------- | :-------------------------------- | | Operating and formation costs | $684,227 | $369,028 | | Franchise tax | $50,000 | $50,000 | | Loss from operations | $(734,227) | $(419,028) | | Interest and dividend income on investments held in Trust Account | $2,520,667 | $15,144 | | Income (loss) before income taxes | $1,786,440 | $(403,884) | | Income tax expense | $(518,840) | $0 | | Net income (loss) | $1,267,600 | $(403,884) | | Net income (loss) attributable to Beard Energy Transition Acquisition Corp. | $1,267,531 | $(403,862) | | Basic and diluted net income (loss) per share, Class A common stock | $0.07 | $(0.01) | | Basic and diluted net loss per share, Class V common stock | $(0.04) | $(0.01) | Condensed Consolidated Statements of Changes in Stockholders' Deficit | Metric | Balance – December 31, 2022 | Balance – March 31, 2023 | | :----- | :-------------------------- | :----------------------- | | Redeemable Class A Common Stock Amount | $237,947,676 | $240,468,343 | | Class V Common Stock Amount | $575 | $575 | | Accumulated Deficit | $(8,001,245) | $(9,254,381) | | Noncontrolling Interest in Subsidiary | $(80,172) | $(80,103) | | Total Stockholders' Deficit | $(8,080,842) | $(9,333,909) | | Net income (loss) | $1,267,600 | $(403,884) | | Subsequent accretion of Class A common stock subject to redemption | $2,520,667 | $15,144 | Condensed Consolidated Statements of Cash Flows | Metric | Three Months ended March 31, 2023 | Three Months ended March 31, 2022 | | :----- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(581,120) | $(206,870) | | Net cash used in financing activities | $(370) | $(11) | | Net Change in Cash | $(581,490) | $(206,881) | | Cash - End of period | $495,088 | $1,525,893 | | Supplemental disclosures of non-cash investing and financing activities: Subsequent accretion of Class A common stock subject to redemption | $2,520,667 | $15,144 | Notes to Condensed Consolidated Financial Statements Detailed explanations of organization, accounting policies, IPO, related party transactions, warrants, equity, commitments, income tax, and fair value measurements NOTE 1. Description of Organization and Business Operations - The Company, Beard Energy Transition Acquisition Corp., was incorporated on February 8, 2021, as a blank check company to effect a business combination; it earns non-operating income from interest on IPO proceeds until a business combination is completed[8] - The Initial Public Offering (IPO) was consummated on November 29, 2021, generating gross proceeds of $230,000,000 from 23,000,000 units, including the over-allotment option, and simultaneously sold 12,225,000 Private Placement Warrants for $12,225,000[8][165] - The Company has 18 months (or 21 months, if extended) from the IPO closing to complete a Business Combination, with failure resulting in redemption of Public Shares and liquidation[11] NOTE 2. Summary of Significant Accounting Policies Summarizes key accounting policies for consolidation, estimates, cash, investments, offering costs, warrants, equity, income taxes, and fair value measurements Liquidity, Capital Resources, and Going Concern - As of March 31, 2023, the Company had a working capital deficit of $1,283,909 and cash of $495,088 in its operating bank account[198] - Cash held outside the Trust Account is insufficient to operate until May 29, 2023, the deadline for a Business Combination, raising substantial doubt about the Company's ability to continue as a going concern[198] - Management plans to address liquidity through a Business Combination and expects access to Working Capital Loans, though there's no current commitment for additional capital[170][198] Principles of Consolidation and Financial Statement Presentation - The condensed consolidated financial statements are prepared in U.S. GAAP, conforming to SEC rules for interim reporting, and include the accounts of the Company and its majority-owned operating subsidiary, Opco, after eliminating intercompany transactions[199] Use of Estimates - Financial statement preparation requires management to make estimates and assumptions, particularly for the initial valuation of Public Warrants, Private Placement Warrants, and Class A common stock subject to redemption[200][202] Cash and Cash Equivalents - The Company considers short-term investments with original maturities of three months or less to be cash and cash equivalents, with no cash equivalents held as of March 31, 2023, and December 31, 2022[18] Investments Held in Trust Account - Assets in the Trust Account consist solely of U.S. government securities or money market funds investing in U.S. government securities, with maturities of 185 days or less, and are presented at fair value[173] Offering Costs associated with the Initial Public Offering - Offering costs totaled $13,308,754, comprising $4,600,000 in cash underwriting fees, $8,050,000 in deferred underwriting fees, and $658,754 in other costs[20] - These costs were recorded as a reduction of temporary equity ($12,512,144) and permanent equity ($796,610)[20] Warrants (Accounting Policy) - Warrants are classified as either equity or liability based on ASC 480 and ASC 815 guidance, considering if they are freestanding, meet liability definitions, and satisfy equity classification requirements, with Public and Private Placement Warrants being equity-classified[203] Concentration of Credit Risk - The Company's credit risk concentration is in a cash account that may exceed FDIC insurance limits ($250,000), but management believes the risk is not significant due to no historical losses[44] Net Income (Loss) Per Common Share (Accounting Policy) - Net income (loss) per common share is calculated by dividing net income (loss) by the weighted-average common shares outstanding, with warrants not included in diluted EPS calculation as their exercise is contingent on future events[22] - Remeasurement of Class A common stock accretion to redemption value is treated as dividends paid for EPS calculation[22] - As of March 31, 2023, and December 31, 2022, no Founder Shares were subject to forfeiture, and no dilutive securities existed, making diluted EPS equal to basic EPS[177] Financial Instruments (Fair Value) - The fair value of the Company's financial assets and liabilities approximates their carrying amounts due to their short-term nature[207] Fair Value Measurement (Hierarchy) - ASC 820 establishes a fair value hierarchy (Level 1, 2, 3) based on input observability, where Level 1 uses unadjusted quoted prices in active markets, Level 2 uses observable inputs other than quoted prices, and Level 3 uses unobservable inputs requiring significant judgment[48][179] Class A Common Stock Subject to Possible Redemption (Accounting Policy) - Class A common stock with redemption features not solely within the Company's control is classified outside permanent equity at redemption value, with changes reflected in accumulated deficit[25][209] - On March 31, 2023, a $2,520,667 adjustment was recorded to present redeemable Class A common stock at redemption value, reflected in accumulated deficit[209] Income Taxes (Accounting Policy) - The Company uses the asset and liability method (ASC 740) for income taxes, recognizing deferred tax assets and liabilities for temporary differences, with valuation allowances established when necessary[180] - No unrecognized tax benefits or accrued interest/penalties were present as of March 31, 2023, and the Company is subject to income tax examinations since inception[27] Recent Accounting Pronouncements - Management does not believe any recently issued, but not yet effective, accounting standards would materially affect the condensed consolidated financial statements if currently adopted[51] NOTE 3. Initial Public Offering - The IPO was declared effective on November 23, 2021, and consummated on November 29, 2021, issuing 23,000,000 units for $230,000,000, with each unit including one Class A common stock share and one-half of one redeemable Public Warrant[28] NOTE 4. Related Party Transactions Details transactions and agreements with related parties, including the Sponsor and its affiliates, concerning founder shares, private placement warrants, indemnity, administrative support, and working capital loans Founder Shares and Sponsor Shares - Founder Shares consist of Class B Units of Opco and corresponding Class V common stock, exchangeable for Class A common stock post-Business Combination, while Sponsor Shares are Class A common stock and Class A Units of Opco, also exchangeable[52] - Initial Stockholders agreed to a lock-up period, not to transfer Founder or Sponsor Shares until one year after a Business Combination, with exceptions for certain stock price thresholds or liquidation events[54] - The 750,000 Founder Shares previously subject to forfeiture were no longer subject to forfeiture due to the underwriter's over-allotment option being exercised in full[52] Private Placement Warrants (Related Party) - The Company sold 12,225,000 Private Placement Warrants to the Sponsor at $1.00 each, generating $12,225,000, with proceeds added to the Trust Account[215] - If a Business Combination is not completed within the Combination Period, these warrants will expire worthless, and their proceeds will fund the redemption of Public Shares[215] Indemnity - The Sponsor is liable for claims by third parties that reduce Trust Account funds below $10.20 per Public Share (or less, if trust assets reduce value), net of taxes, unless the third party waived rights to Trust Account monies[31] - The Company seeks waivers from vendors and service providers to reduce the likelihood of the Sponsor needing to indemnify the Trust Account[57] Promissory Note - Related Party - The Sponsor loaned the Company up to $300,000 via a non-interest bearing promissory note to cover IPO expenses, which was fully repaid on November 30, 2021, with no balance outstanding as of March 31, 2023, and December 31, 2022[218][107] Advance from Related Party - The Company has an agreement to reimburse an affiliate of the Sponsor up to $25,000 per month for administrative support, ceasing upon completion of a Business Combination[33] - Expenses incurred and paid under this agreement were $50,001 for both the three months ended March 31, 2023, and March 31, 2022[33] Administrative Support Agreement - The Sponsor, officers, directors, or their affiliates are reimbursed for out-of-pocket expenses related to identifying target businesses and due diligence, with no cap on reimbursement[58] - For the three months ended March 31, 2023, $1,408 was paid by affiliate employees for operational expenses, and $353 was repaid to them; for the same period in 2022, $198 was paid and $209 repaid[58] Working Capital Loans - The Sponsor or affiliates may loan funds for transaction costs or working capital ("Working Capital Loans"), repayable from Trust Account proceeds if a Business Combination closes, or from outside funds otherwise[60] - Up to $1,500,000 of Working Capital Loans may be convertible into warrants identical to Private Placement Warrants at $1.00 per warrant, at the lender's discretion[60] - No balance was outstanding under Working Capital Loans as of March 31, 2023, and December 31, 2022[60] NOTE 5. Warrants - Public Warrants become exercisable 30 days post-Business Combination, allowing purchase of Class A common stock at $11.50 per share, expiring five years from Business Combination completion[222] - The Company may redeem Public Warrants for $0.01 each if Class A common stock price exceeds $18.00 for 20 trading days within a 30-day period, provided a registration statement is effective or cashless exercise is elected[222] - Private Placement Warrants are substantially identical to Public Warrants but are non-redeemable by the Company and may be exercised for cash or on a "cashless basis" by the Sponsor or permitted transferees[38] NOTE 6. Stockholders' Deficit Details the components of stockholders' deficit, including authorized and outstanding shares of preferred stock, Class A common stock, Class V common stock, and Class A/B Units of Opco, along with their rights and conversion features Preferred Stock - The Company is authorized to issue 1,000,000 shares of preferred stock ($0.0001 par value), but no shares were issued or outstanding as of March 31, 2023, and December 31, 2022[63] Class A Common Stock - The Company is authorized to issue 200,000,000 shares of Class A common stock ($0.0001 par value); as of March 31, 2023, and December 31, 2022, 23,001,250 shares were issued and outstanding, all subject to possible redemption[63] Class V Common Stock - The Company is authorized to issue 20,000,000 shares of Class V common stock ($0.0001 par value); as of March 31, 2023, and December 31, 2022, 5,751,250 shares were issued and outstanding[63] - Class V common stockholders and Class A common stockholders vote together as a single class on most matters[63] Class A and Class B Units issued by Opco - Class B Units of Opco are profits interest only units with no initial value, converting to Class A Units of Opco on a one-for-one basis upon a Business Combination[226] - Holders of Class A Units of Opco (excluding the Company) can exchange them (and corresponding Class V common stock) for Class A common stock or cash, at the Company's option, post-Business Combination[226] Registration and Stockholder Rights Agreement - Holders of Founder Shares, Sponsor Shares, Private Placement Warrants, and Working Capital Loan warrants have registration rights, allowing them to demand registration for resale of these securities[227] - The Company bears the expenses for filing such registration statements[227] NOTE 7. Commitments and Contingencies Outlines the Company's commitments and contingencies, specifically detailing the underwriting agreement terms, including cash and deferred underwriting commissions Underwriting Agreement - The underwriter received a cash underwriting discount of $4,600,000 (2% of gross proceeds) and is entitled to a deferred underwriting commission of $8,050,000 (3.5% of gross proceeds) held in the Trust Account, payable upon completion of an initial Business Combination[42] - The underwriter waived rights to the deferred commission if a Business Combination is not completed within the Combination Period, in which case the funds would be available for Public Share redemption[196] NOTE 8. Income Tax - The Company's effective tax rate was 29% for the three months ended March 31, 2023, and 0.0% for the same period in 2022, differing from the 21% statutory rate primarily due to a full valuation allowance on deferred tax assets[95] - The Company uses a discrete effective tax rate method for interim reporting due to uncertainty in estimating annual pretax earnings[95] NOTE 9. Fair Value Measurements | Description | Value (March 31, 2023) | Level 1 | Level 2 | Level 3 | | :---------- | :--------------------- | :------ | :------ | :------ | | Investments held in Trust Account: U.S. Treasury Securities Money Market Funds | $240,468,343 | $240,468,343 | $— | $— | | Description | Amount at Fair Value (December 31, 2022) | Level 1 | Level 2 | Level 3 | | Investments held in Trust Account: U.S. Treasury Securities Money Market Funds | $237,947,675 | $237,947,675 | $— | $— | - Assets held in the Trust Account are solely U.S. government securities or money market funds investing in them, generally having a readily determinable fair value and classified as Level 1 measurements[96] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's perspective on the Company's financial condition and operational results, including forward-looking statements, overview, liquidity, related party transactions, warrants, off-balance sheet arrangements, contractual obligations, critical accounting policies, and recent accounting standards Cautionary Note Regarding Forward-Looking Statements - The report contains forward-looking statements about future events, including business combinations and financing, which are subject to known and unknown risks and uncertainties[70] - The Company disclaims any obligation to update or revise forward-looking statements unless required by applicable securities law[70] Overview - Beard Energy Transition Acquisition Corp. is a blank check company formed on February 8, 2021, to effect a business combination, and has a non-binding letter of intent with a private company[233] - The Company has not engaged in operations or generated revenues to date, with activities focused on organizational tasks, IPO preparation, and searching for a business combination, earning non-operating income from interest on cash and cash equivalents[73] - Issuance of additional shares or debt could dilute equity, subordinate rights, delay change of control, or adversely affect market prices, and significant debt could lead to default or limit financial flexibility[99][72] Results of Operations | Metric | Three Months ended March 31, 2023 | Three Months ended March 31, 2022 | | :----- | :-------------------------------- | :-------------------------------- | | Net income (loss) | $1,267,600 | $(403,862) | | Interest income on investments held in trust account | $2,520,667 | $15,144 | | Operating and formation costs | $684,227 | $369,028 | | Income tax expense | $518,840 | $0 | | Franchise tax expense | $50,000 | $50,000 | - Net income for Q1 2023 was $1,267,600, primarily from $2,520,667 in interest income, offset by $684,227 in operating costs and $518,840 in income tax expense, representing a significant improvement from a net loss of $403,862 in Q1 2022[235] Liquidity, Capital Resources and Going Concern | Metric | March 31, 2023 | December 31, 2022 | | :----- | :------------- | :---------------- | | Cash | $495,088 | $1,076,578 | | Current Liabilities | $2,094,318 | $1,434,679 | | Deferred Underwriting Compensation | $8,050,000 | $8,050,000 | - Net cash used in operating activities was $581,120 for Q1 2023, primarily due to operational, income, and franchise taxes, compared to $206,870 for Q1 2022[102][75] - The Company's cash outside the trust account ($495,088 as of March 31, 2023) is insufficient to operate until May 29, 2023, raising substantial doubt about its ability to continue as a going concern[104][120] - A special meeting is scheduled for May 25, 2023, to vote on extending the business combination deadline from 18/21 months to 25 months, with the Sponsor potentially depositing $100,000 monthly into the Trust Account if the extension is approved[77][80] Related Party Transactions - The Company reimburses an affiliate of the Sponsor up to $25,000 monthly for administrative support, with expenses incurred and paid totaling $50,001 for both Q1 2023 and Q1 2022[105] - The Sponsor, officers, and directors are reimbursed for out-of-pocket expenses related to identifying target businesses, with no cap, and payments for operational expenses by affiliate employees were $1,408 (Q1 2023) and $200 (Q1 2022)[78] - Working Capital Loans from the Sponsor or affiliates may be used to finance transaction costs, with up to $1,500,000 convertible into warrants, and no outstanding balance as of March 31, 2023[107] Private Placement Warrants - The Sponsor purchased 12,225,000 private placement warrants for $12,225,000, exercisable at $11.50 per share for Class A common stock[81] - These warrants are non-redeemable and exercisable for cash or on a cashless basis as long as held by the Sponsor or permitted transferees, and are generally not transferable until 30 days after a business combination[81] Off-Balance Sheet Arrangements - The Company had no off-balance sheet arrangements as of March 31, 2023, and December 31, 2022[83] Contractual Obligations - Holders of founder shares, Sponsor shares, private placement warrants, and working capital loan warrants are entitled to registration rights, requiring the Company to register these securities for resale[110] - The Company will bear the expenses incurred in connection with filing such registration statements[110] Critical Accounting Policies Highlights accounting policies requiring significant management judgment and estimation, specifically regarding warrant classification, redeemable Class A common stock, and net income (loss) per common share calculation Warrants (Critical Accounting Policy) - Warrants are classified as equity or liability based on ASC 480 and ASC 815, requiring professional judgment at issuance and each quarter-end, with Public and private placement warrants being equity-classified[85] Class A Common Stock Subject to Redemption (Critical Accounting Policy) - Class A common stock with redemption features not solely controlled by the Company is classified outside permanent equity at redemption value, with changes recognized in accumulated deficit[114] Net Income (Loss) Per Share of Common Stock (Critical Accounting Policy) - Net income (loss) per common share is calculated using weighted-average shares outstanding, warrants are excluded from diluted EPS due to contingent exercise, and accretion to redemption value of Class A common stock is treated as dividends for EPS[87] Recent Accounting Standards - Management does not believe any recently issued, but not yet effective, accounting standards would materially affect the condensed consolidated financial statements[88] JOBS Act - The Company qualifies as an "emerging growth company" under the JOBS Act, allowing it to delay adoption of new accounting standards and benefit from relaxed reporting requirements, such as exemption from Section 404 attestation and certain compensation disclosures[115] Item 3. Quantitative and Qualitative Disclosures About Market Risk The Company is a smaller reporting company and is not required to provide the information typically required by this item, as per Item 305(e) of Regulation S-K - As a smaller reporting company, the Company is exempt from providing quantitative and qualitative disclosures about market risk under Item 305(e) of Regulation S-K[116] Item 4. Controls and Procedures Details the Company's disclosure controls and procedures and internal control over financial reporting, confirming their effectiveness as of March 31, 2023, and noting no material changes in internal control during the quarter Disclosure Controls and Procedures - As of March 31, 2023, the CEO and CFO evaluated the effectiveness of disclosure controls and procedures and concluded they were effective[117] Internal Control over Financial Reporting - There has been no material change in the Company's internal control over financial reporting during the most recently completed fiscal quarter[129] PART II – OTHER INFORMATION Item 1A. Risk Factors Refers to risk factors discussed in the Company's Annual Report on Form 10-K for the year ended December 31, 2022, and highlights substantial doubt about the Company's ability to continue as a going concern - The Company's financial condition raises substantial doubt about its ability to continue as a "going concern" if a Business Combination is not consummated within one year from the financial statements' issuance date[120] - Management plans to address the going concern uncertainty through a Business Combination and expects the Sponsor to provide Working Capital Loans for liquidity, though there's no assurance of success or additional capital availability[93] - The Company may maintain Trust Account funds in an interest-bearing demand deposit account, which could reduce interest income available for taxes, dissolution expenses, or public stockholder distributions[131] Item 1. Legal Proceedings There is no material litigation, arbitration, or governmental proceeding currently pending against the Company or its management team - No material litigation, arbitration, or governmental proceedings are currently pending against the Company or its management[119] Item 2. Recent Sales of Securities; Use of Proceeds from Registered Offerings This section states "None," indicating no recent sales of securities or use of proceeds from registered offerings to report - No recent sales of securities or use of proceeds from registered offerings to report[135] Item 3. Defaults Upon Senior Securities This section states "None," indicating no defaults upon senior securities to report - No defaults upon senior securities to report[136] Item 4. Mine Safety Disclosures This section states "Not applicable," indicating that mine safety disclosures are not relevant to the Company's operations - Mine safety disclosures are not applicable to the Company[137] Item 5. Other Information This section states "None," indicating no other information to report - No other information to report[138] Item 6. Exhibits. Lists all exhibits filed with the Form 10-Q, including various corporate documents, warrant agreements, and certifications, many of which are incorporated by reference from previous SEC filings | Exhibit Number | Description | | :------------- | :---------- | | 3.1 | Certificate of Incorporation of the Registrant | | 3.3 | Amended and Restated Certificate of Incorporation of Beard Energy Transition Acquisition Corp. | | 4.5 | Private Warrant Agreement, dated November 23, 2021 | | 4.6 | Public Warrant Agreement, dated November 23, 2021 | | 31.1 | Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a). | | 31.2 | Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a). | | 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). | SIGNATURE - The report was signed by Sarah James, Chief Financial Officer and Chief Accounting Officer, on May 9, 2023[236]